Texas Instruments Incorporated (TXN)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	2.08	2.27	3.12	2.66	2.61
Receivables turnover	9.80	10.57	10.78	10.23	13.39
Payables turnover	10.38	7.35	10.45	12.51	13.45
Working capital turnover	1.48	1.81	1.65	1.84	2.17

Texas Instruments Inc.'s activity ratios provide insights into how efficiently the company manages its inventory, receivables, payables, and working capital.

1. Inventory turnover: The inventory turnover ratio indicates how many times a company sells and replaces its inventory during a period. Texas Instruments Inc.'s inventory turnover has been relatively stable over the past five years, ranging from 1.63 to 3.12. A lower ratio may suggest excess inventory or slow-moving products, while a higher ratio indicates efficient inventory management.

2. Receivables turnover: The receivables turnover ratio reflects how quickly a company collects payments from customers. Texas Instruments Inc.'s receivables turnover has ranged from 9.80 to 13.39 over the past five years, showing consistent collection efficiency. A higher ratio implies effective credit policies and timely collections.

3. Payables turnover: The payables turnover ratio measures how quickly a company pays its suppliers. Texas Instruments Inc.'s payables turnover has fluctuated between 7.35 and 13.45, with a decreasing trend in recent years. A lower ratio may indicate extended payment terms with suppliers, while a higher ratio suggests prompt payment practices.

4. Working capital turnover: The working capital turnover ratio evaluates how efficiently a company utilizes its working capital to generate sales. Texas Instruments Inc.'s working capital turnover has declined from 2.17 to 1.48 over the five-year period, indicating a reduced efficiency in converting working capital into sales. A higher ratio typically indicates better working capital management.

Overall, while Texas Instruments Inc. has maintained relatively healthy activity ratios, there are areas such as inventory turnover and working capital turnover that might benefit from further analysis and potential improvements to enhance operational efficiency.

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	175.33	160.83	116.81	137.44	139.94
Days of sales outstanding (DSO)	days	37.25	34.54	33.85	35.69	27.26
Number of days of payables	days	35.16	49.64	34.92	29.17	27.14

To analyze Texas Instruments Inc.'s activity ratios, we will look at three key metrics: Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables.

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows an increasing level of inventory holding period over the years, indicating that Texas Instruments Inc. is holding inventory for a longer duration before it is sold.
- This could suggest potential issues with inventory management efficiency or demand forecasting, which may lead to higher carrying costs and potential obsolescence risks.

2. Days of Sales Outstanding (DSO):
- The DSO ratio reflects how quickly the company collects payment from its customers. A lower DSO is generally preferable, as it indicates quicker collection of accounts receivable.
- Texas Instruments Inc. has seen fluctuations in DSO over the years, with a slight increase in 2023 compared to the previous year. This could imply a slight delay in collecting payments from customers, potentially impacting cash flow.

3. Number of Days of Payables:
- This ratio represents the number of days it takes for a company to pay its suppliers. A higher number of days indicates that the company takes longer to settle its payables.
- Texas Instruments Inc. has experienced a fluctuating trend in the number of days of payables, with an increase in 2023 compared to the previous year. A longer payment period could signal improved liquidity management or potential strain on supplier relationships.

In summary, the analysis of Texas Instruments Inc.'s activity ratios suggests potential challenges in inventory management efficiency and cash conversion cycle optimization. Monitoring and addressing these trends could help enhance operational effectiveness and working capital management for the company in the future.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	1.75	2.91	3.57	4.42	4.35
Total asset turnover	0.54	0.74	0.74	0.75	0.80

Texas Instruments 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 revenue. The fixed asset turnover ratio has shown a declining trend over the past five years, decreasing from 4.35 in 2019 to 1.75 in 2023. This indicates that the company is generating less revenue from its fixed assets over time, which could suggest potential inefficiencies in asset utilization or aging of fixed assets.

On the other hand, the total asset turnover ratio has also declined from 0.80 in 2019 to 0.54 in 2023. This decline indicates that the company is generating less revenue relative to its total assets, which could be a sign of decreasing efficiency in overall asset utilization. A lower total asset turnover ratio may indicate that the company is facing challenges in generating sales from its total asset base or that its asset base has grown faster than its revenue.

Overall, the declining trends in both fixed asset turnover and total asset turnover ratios for Texas Instruments Inc. suggest potential concerns about the company's efficiency in generating sales from its assets. Further analysis and investigation into the reasons behind these declining ratios would be necessary to identify any underlying issues and potential areas for improvement.