Trane Technologies plc (TT)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Inventory turnover	1.91	1.46	1.35	1.68	9.28
Receivables turnover	6.41	5.89	5.67	5.72	5.54
Payables turnover	1.75	1.55	1.29	1.44	7.26
Working capital turnover	15.62	21.34	22.75	8.08	4.75

Trane Technologies plc's activity ratios provide insights into the efficiency of its operations in managing inventory, receivables, payables, and working capital.

1. Inventory Turnover: The inventory turnover ratio has decreased steadily from 9.28 in 2020 to 1.91 in 2024. This suggests that Trane Technologies is holding onto its inventory for a longer period, which could indicate overstocking or potential issues with sales and production planning.

2. Receivables Turnover: Trane's receivables turnover has shown a generally increasing trend, from 5.54 in 2020 to 6.41 in 2024. This indicates that the company is collecting its accounts receivable more quickly over the years, which is a positive sign of effective credit management.

3. Payables Turnover: The payables turnover ratio has fluctuated but remained relatively low, indicating that Trane Technologies takes a longer time to pay its suppliers. This could be a strategic move to manage cash flows or negotiate better payment terms with vendors.

4. Working Capital Turnover: Trane's working capital turnover has fluctuated significantly over the years, peaking in 2022 at 22.75 and then declining to 15.62 in 2024. This indicates that the company is generating revenue efficiently in relation to its working capital, but the downward trend in recent years may warrant a closer look at how efficiently working capital is being utilized.

Overall, Trane Technologies plc's activity ratios suggest areas where operational efficiencies could be improved, such as inventory management and working capital utilization. Analyzing these ratios over time can help identify trends and areas for further investigation and potential improvement.

Average number of days

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Days of inventory on hand (DOH)	days	191.33	249.89	270.10	217.42	39.33
Days of sales outstanding (DSO)	days	56.93	61.94	64.43	63.83	65.90
Number of days of payables	days	208.45	235.15	283.35	253.85	50.27

Trane Technologies plc's activity ratios provide insights into the efficiency of the company in managing its assets and operations.

1. Days of Inventory on Hand (DOH):
- Trane's DOH has shown a significant increase over the years, from 39.33 days in December 2020 to 191.33 days in December 2024. This indicates that the company is holding inventory for a longer period, which may tie up capital and increase storage costs. Management should focus on optimizing inventory levels to improve efficiency.

2. Days of Sales Outstanding (DSO):
- Trane's DSO has been relatively stable, decreasing from 65.90 days in December 2020 to 56.93 days in December 2024. A lower DSO suggests that the company is collecting receivables more quickly, improving cash flow and liquidity. This efficient collection process reflects positively on the company's credit management practices.

3. Number of Days of Payables:
- Trane's number of days of payables has fluctuated over the years, ranging from 50.27 days in December 2020 to 283.35 days in December 2022. A higher number of days of payables may indicate that the company is taking longer to pay its suppliers, potentially straining relationships. However, a longer payment period can also provide Trane with working capital advantages and cash flow flexibility if managed effectively.

Overall, Trane Technologies plc should focus on optimizing its inventory levels, maintaining efficient receivables collection, and effectively managing payables to enhance its operational efficiency and financial performance.

Long-term

	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Fixed asset turnover	9.79	9.83	10.25	9.93	9.04
Total asset turnover	0.98	0.90	0.87	0.77	0.67

Trane Technologies plc's long-term activity ratios show a positive trend over the past five years. The fixed asset turnover ratio has been increasing steadily from 9.04 in 2020 to 9.79 in 2024. This indicates that the company is generating more revenue relative to its investment in fixed assets, which is a positive sign of operational efficiency.

Similarly, the total asset turnover ratio has also been increasing from 0.67 in 2020 to 0.98 in 2024. This shows that Trane Technologies plc is efficiently utilizing its total assets to generate revenue. The increasing total asset turnover ratio indicates that the company is becoming more effective in generating sales from its overall asset base.

Overall, the improvement in both fixed asset turnover and total asset turnover ratios suggests that Trane Technologies plc is effectively managing its assets to drive revenue growth and operational efficiency in the long term.