Thermo Fisher Scientific Inc (TMO)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	2.20	2.03	1.97	2.15	2.35
Receivables turnover	5.04	5.45	4.76	5.52	5.69
Payables turnover	3.90	3.39	3.46	3.98	4.13
Working capital turnover	3.92	5.38	5.68	2.72	4.34

Thermo Fisher Scientific Inc.'s activity ratios provide insight into the efficiency with which the company manages its assets and liabilities.

- Inventory turnover: The inventory turnover ratio indicates how many times during the year the company sells and replaces its inventory. Thermo Fisher's inventory turnover has been improving over the years, indicating that the company is managing its inventory more efficiently.

- Receivables turnover: This ratio measures how many times a company collects its accounts receivable during a period. Thermo Fisher's receivables turnover has been relatively stable over the years, suggesting that the company is efficient in collecting its receivables.

- Payables turnover: The payables turnover ratio shows how quickly a company pays its suppliers. Thermo Fisher's payables turnover has increased over time, indicating that the company is taking longer to pay its suppliers, which could imply better cash management or stronger bargaining power.

- Working capital turnover: This ratio reflects how effectively a company uses its working capital to generate sales. Thermo Fisher's working capital turnover has fluctuated over the years, with a significant increase in 2021, possibly due to changes in the company's operating cycle or management of working capital.

Overall, Thermo Fisher Scientific Inc. has shown a generally positive trend in its activity ratios, reflecting improvements in managing its assets and liabilities efficiently to drive revenue generation.

Average number of days

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	165.87	179.51	185.72	170.05	155.25
Days of sales outstanding (DSO)	days	72.45	66.98	76.76	66.13	64.18
Number of days of payables	days	93.63	107.72	105.42	91.80	88.45

The activity ratios of Thermo Fisher Scientific Inc. provide insights into the efficiency of its operations and management of working capital.

1. Days of Inventory on Hand (DOH): This ratio indicates the average number of days it takes for the company to sell its inventory. A decreasing trend in DOH from 94.19 days in 2021 to 72.10 days in 2023 suggests that Thermo Fisher Scientific has been managing its inventory more effectively, potentially by streamlining production processes or improving inventory turnover.

2. Days of Sales Outstanding (DSO): DSO reflects the average number of days it takes for the company to collect payments from its customers. The fluctuation in DSO over the years, with a peak in 2021 at 74.25 days and a decrease to 70.02 days in 2023, indicates that the company may have implemented more efficient credit policies or improved collection procedures.

3. Number of Days of Payables: This ratio represents the average number of days it takes for the company to pay its suppliers. The decreasing trend in the number of days of payables, from 53.46 days in 2021 to 40.70 days in 2023, suggests that Thermo Fisher Scientific has been managing its payables more efficiently, potentially by negotiating favorable payment terms or improving cash flow management.

Overall, the improving trends in Days of Inventory on Hand and Number of Days of Payables, along with the relatively stable Days of Sales Outstanding, indicate that Thermo Fisher Scientific has been enhancing its operational efficiency and working capital management in recent years.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	4.38	4.77	4.55	5.36	5.21
Total asset turnover	0.42	0.46	0.40	0.46	0.42

Thermo Fisher Scientific Inc.'s long-term activity ratios, specifically the fixed asset turnover and total asset turnover, provide insights into the company's efficiency in utilizing its assets to generate sales.

The fixed asset turnover ratio has exhibited a declining trend from 2019 to 2023, indicating that the company is generating fewer sales relative to its investment in fixed assets over time. This may suggest that Thermo Fisher Scientific Inc. is becoming less efficient in using its long-term assets, such as property, plant, and equipment, to generate revenue. However, the ratio remains relatively high, indicating that the company is still effectively generating sales from its fixed assets.

On the other hand, the total asset turnover ratio shows a fluctuating pattern over the same period. The ratio measures how well the company is utilizing all its assets to generate revenue. Despite the fluctuations, the ratio remains relatively low, indicating that Thermo Fisher Scientific Inc. may not be efficiently utilizing its total assets to generate sales compared to its industry peers or historical performance.

In conclusion, the analysis of Thermo Fisher Scientific Inc.'s long-term activity ratios suggests that the company may need to focus on improving its efficiency in utilizing both fixed assets and total assets to generate higher sales and improve profitability in the long term.