Trane Technologies plc (TT)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	1.46	1.35	1.68	9.28	11.54
Receivables turnover	5.89	5.67	5.72	5.54	7.48
Payables turnover	1.55	1.29	1.44	7.26	10.68
Working capital turnover	21.34	22.75	8.08	4.75	4.03

Trane Technologies plc's activity ratios provide insights into the efficiency of the company's management of its assets and liabilities.

1. Inventory turnover: Trane's inventory turnover has been relatively stable over the past five years, ranging from 5.49 to 7.27. This indicates that the company is efficiently managing its inventory levels, with the ability to quickly convert inventory into sales.

2. Receivables turnover: Trane's receivables turnover ratio has shown a slight upward trend over the years, suggesting that the company is becoming more effective in collecting payments from its customers. A higher turnover ratio signifies that the company is able to convert its accounts receivable into cash more frequently.

3. Payables turnover: Trane's payables turnover has fluctuated but generally remained consistent within the range of 5.27 to 6.33. This indicates that the company takes a relatively consistent amount of time to pay its suppliers, maintaining balance in its payables management.

4. Working capital turnover: The working capital turnover ratio of Trane Technologies has shown some volatility, with a significant increase in 2023 compared to previous years. This suggests that the company is generating more revenue relative to its working capital, indicating improved efficiency in utilizing its current assets to generate sales.

Overall, Trane Technologies plc's activity ratios reflect a balanced approach to managing its assets and liabilities efficiently, which is crucial for the company's operational performance and financial health.

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	249.89	270.10	217.42	39.33	31.63
Days of sales outstanding (DSO)	days	61.94	64.43	63.83	65.90	48.79
Number of days of payables	days	235.15	283.35	253.85	50.27	34.18

Analyzing Trane Technologies plc's activity ratios, we can see the following trends over the past five years:

1. Days of Inventory on Hand (DOH):
- Trane Technologies' DOH has been relatively stable over the past five years, ranging from 50.17 days in 2020 to 66.45 days in 2023.
- Generally, a higher number of days of inventory on hand indicates that the company is holding onto its inventory for a longer period, which can tie up valuable resources and lead to higher storage costs.
- The slight increase in DOH from 2020 to 2023 may suggest a potential buildup of inventory, which could impact the company's liquidity and working capital management.

2. Days of Sales Outstanding (DSO):
- Trane Technologies' DSO has fluctuated between 61.05 days in 2023 and 64.54 days in 2020.
- A lower DSO indicates that the company is collecting its accounts receivable more quickly, which is generally favorable as it improves cash flow.
- The slight decrease in DSO from 2020 to 2023 suggests that the company has been more efficient in collecting payments from customers, potentially improving its liquidity position.

3. Number of Days of Payables:
- Trane Technologies' number of days of payables has varied between 57.67 days in 2019 and 69.23 days in 2022.
- A higher number of days of payables indicates that the company is taking longer to pay its suppliers, which can be seen as a positive for cash flow management.
- The decrease in the number of days of payables from 2019 to 2023 may suggest that the company has been paying its suppliers more promptly, which could impact its working capital efficiency.

Overall, analyzing these activity ratios provides insight into how Trane Technologies manages its inventory, accounts receivable, and accounts payable. By understanding these trends, investors and stakeholders can assess the company's operational efficiency and financial performance. Tracking these ratios over time can help identify areas where the company may need to focus on improving its working capital management strategies.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	9.83	10.25	9.93	9.04	12.09
Total asset turnover	0.90	0.87	0.77	0.67	0.80

Trane Technologies plc's long-term activity ratios provide insights into how effectively the company is utilizing its fixed assets and total assets to generate sales over the years.

The fixed asset turnover ratio has exhibited a generally consistent trend over the past five years, ranging from 9.19 to 10.41. This suggests that the company has been efficient in using its fixed assets to generate revenue, with a higher turnover indicating that the company is generating more sales per dollar of fixed assets invested. The slight fluctuations in the ratio indicate some variability in the company's fixed asset utilization efficiency, but overall, the trend suggests a stable and effective use of fixed assets for revenue generation.

In terms of total asset turnover, the ratio has shown an increasing trend from 0.69 in 2020 to 0.91 in 2023. This indicates that Trane Technologies plc has been improving its overall efficiency in generating revenue from its total assets over the years. A higher total asset turnover ratio signifies that the company is generating more sales relative to its total assets, which indicates effective asset utilization and potentially better operational efficiency.

In summary, Trane Technologies plc has demonstrated a generally stable and efficient utilization of both fixed assets and total assets to generate sales, as indicated by the favorable trends in both the fixed asset turnover and total asset turnover ratios over the five-year period.