Waste Management Inc (WM)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 87.12 | 88.56 | 98.11 | 91.58 | 107.35 |
| Receivables turnover | 6.93 | 7.01 | 6.81 | 5.60 | 7.65 |
| Payables turnover | 8.82 | 8.22 | 9.63 | 10.13 | 10.68 |
| Working capital turnover | — | — | — | — | 4.87 |
Activity ratios help assess how efficiently a company is managing its resources and generating revenue.
1. Inventory turnover: Waste Management, Inc. converts its inventory into sales rapidly, with a consistently high inventory turnover ratio over the past five years. This indicates effective inventory management and a quick turnaround of inventory into revenue.
2. Receivables turnover: The company's receivables turnover has been relatively stable over the years, showing how quickly it collects outstanding receivables from customers. Waste Management, Inc. is collecting its accounts receivable efficiently, maintaining a healthy cash flow cycle.
3. Payables turnover: Waste Management, Inc. is efficient in managing its payables, indicated by a consistent payables turnover ratio. The company is paying its suppliers within a reasonable timeframe and effectively managing its working capital.
4. Working capital turnover: The absence of data for the working capital turnover in recent years makes it challenging to evaluate how well Waste Management, Inc. is using its working capital to generate sales. However, in 2019, the company had a working capital turnover ratio of 5.04, suggesting that it generated $5.04 in revenue for every dollar of working capital invested.
Overall, Waste Management, Inc. demonstrates strong efficiency in managing its inventory, receivables, and payables, which is essential for maintaining a healthy cash flow and optimizing operational performance.
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 | 4.19 | 4.12 | 3.72 | 3.99 | 3.40 |
| Days of sales outstanding (DSO) | days | 52.70 | 52.06 | 53.57 | 65.15 | 47.71 |
| Number of days of payables | days | 41.39 | 44.38 | 37.89 | 36.03 | 34.16 |
For Waste Management, Inc., the activity ratios provide insights into how efficiently the company manages its inventory, collects receivables, and pays its suppliers.
1. Days of Inventory on Hand (DOH):
- The trend in DOH over the past five years shows fluctuations, ranging from 4.07 days in 2019 to 5.01 days in 2023. This ratio indicates the number of days it takes for the company to sell its inventory. A lower DOH reflects efficient inventory management, but the recent increase in 2023 may suggest possible challenges in managing inventory levels effectively.
2. Days of Sales Outstanding (DSO):
- DSO measures how long it takes for the company to collect its accounts receivable. Waste Management's DSO has ranged from 50.99 days in 2022 to 62.94 days in 2020. A lower DSO value is preferable as it indicates faster collection of receivables. The increase in DSO in 2020 followed by a slight decrease in recent years might indicate a need to monitor and improve the efficiency of the company's credit policies and collection processes.
3. Number of Days of Payables:
- The trend in the number of days of payables also fluctuates, with values ranging from 40.94 days in 2019 to 52.43 days in 2022. This ratio reflects how long it takes for the company to pay its suppliers. An increase in this ratio may suggest that Waste Management is taking longer to settle its payables. However, the recent decrease in 2023 compared to the previous year could indicate improved payment terms with suppliers.
In summary, Waste Management, Inc. should focus on balancing its inventory levels, enhancing its accounts receivable collection processes, and managing supplier payments effectively to optimize its activity ratios and improve overall operational efficiency.
See also:
Waste Management Inc Short-term (Operating) Activity Ratios
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 0.50 | 0.52 | 0.50 | 0.44 | 1.16 |
| Total asset turnover | 0.61 | 0.62 | 0.60 | 0.50 | 0.54 |
The fixed asset turnover ratio measures how efficiently Waste Management, Inc. is utilizing its fixed assets to generate sales. A higher ratio generally indicates better efficiency in using fixed assets to generate revenue. Over the past five years, the company's fixed asset turnover has been relatively stable, ranging from 1.08 to 1.25. This indicates that Waste Management has been able to consistently generate revenue using its fixed assets.
On the other hand, the total asset turnover ratio reflects the company's ability to generate sales from all its assets, both fixed and current. A higher total asset turnover ratio suggests that Waste Management is more efficient in generating revenue from its total asset base. The company's total asset turnover ratio has also shown consistency over the years, ranging from 0.52 to 0.63. This indicates that Waste Management has been able to effectively utilize its total assets to generate sales.
Overall, Waste Management, Inc.'s long-term activity ratios suggest that the company has been relatively efficient in using both fixed and total assets to generate sales over the past five years. The stability in these ratios indicates a consistent ability to generate revenue from its asset base.