Xylem Inc (XYL)

Short-term

Turnover ratios

Xylem Inc's activity ratios provide insights into the efficiency of its inventory management, accounts receivable collection, accounts payable payments, and overall working capital utilization.

The inventory turnover ratio has fluctuated over the past five years, with a slight decrease in 2022 and 2023 compared to the previous years. This ratio indicates that Xylem Inc is turning over its inventory approximately 4.30 to 5.94 times a year. A higher inventory turnover ratio suggests more efficient management of inventory levels and potentially quicker sales cycles.

Similarly, the receivables turnover ratio has shown variability but generally remained relatively stable over the years, ranging from 4.55 to 5.45. This ratio reflects how many times a company collects its accounts receivable during a period. A high receivables turnover ratio implies that Xylem Inc is efficient in collecting outstanding payments from customers.

The payables turnover ratio has also been consistent over the years, ranging from 4.76 to 5.37, indicating that Xylem Inc is making payments to its suppliers approximately 4.76 to 5.37 times per year. A higher payables turnover ratio suggests that the company efficiently manages its accounts payable by paying its suppliers promptly.

The working capital turnover ratio has varied significantly over the five-year period, with a notable increase in 2019 and a subsequent decrease in 2021. This ratio measures how effectively Xylem Inc utilizes its working capital to generate sales. A higher working capital turnover ratio indicates more efficient utilization of resources in generating revenue.

Overall, Xylem Inc's activity ratios suggest that the company has been relatively effective in managing its inventory, accounts receivable, accounts payable, and working capital, albeit with some fluctuations observed in the working capital turnover ratio. Future analysis could focus on identifying the reasons behind these fluctuations and assessing their impact on the company's overall operational efficiency.

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Average number of days

Activity ratios measure how efficiently a company is managing its resources, specifically focusing on the management of its assets and liabilities. In the case of Xylem Inc, we will analyze the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables over the past five years.

Starting with the Days of Inventory on Hand (DOH), Xylem Inc's inventory turnover has shown fluctuations over the years. In 2023, the DOH decreased to 79.96 days from 84.83 days in 2022, indicating that the company is holding less inventory on hand, which could be a positive sign of efficient inventory management. However, compared to 2019 and 2020, the DOH has increased, suggesting a longer time to convert inventory into sales during these years.

Moving on to the Days of Sales Outstanding (DSO), which measures how long it takes for the company to collect its accounts receivable, Xylem Inc's DSO has also varied. The DSO increased in 2023 to 80.15 days from 72.44 days in 2022, indicating a longer collection period. The company experienced lower DSO in 2021 compared to 2020, showing an improvement in collecting sales from customers during that period.

Lastly, looking at the Number of Days of Payables, which represents how long it takes for the company to pay its suppliers, Xylem Inc has maintained a relatively stable number of days of payables over the years. The number of days of payables was 76.03 days in 2023, slightly lower than 76.76 days in 2022, indicating that the company is managing its payables efficiently without significant fluctuations.

Overall, Xylem Inc's activity ratios suggest a mixed performance in managing its assets and liabilities. While the company has shown improvements in some areas like inventory management, there are also fluctuations observed in other areas like accounts receivable collection. It is essential for Xylem Inc to focus on maintaining efficient working capital management to support its overall financial health and performance.

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Long-term

The fixed asset turnover ratio measures how effectively a company is utilizing its fixed assets to generate sales. A higher fixed asset turnover indicates better efficiency in using fixed assets to generate revenue.

Xylem Inc's fixed asset turnover has been decreasing over the past five years, from 8.77 in 2019 to 6.30 in 2023. This could suggest that the company's fixed assets are being utilized less efficiently to generate sales during this period. However, it is important to note that a higher fixed asset turnover ratio in one year compared to another may not always indicate better performance, as industry norms and business strategies can also influence this ratio.

The total asset turnover ratio measures how efficiently a company is using its total assets to generate revenue. A higher total asset turnover ratio indicates better efficiency in generating sales from all assets.

Xylem Inc's total asset turnover has also shown a decreasing trend from 0.69 in 2019 to 0.46 in 2023. This suggests that the company may be experiencing challenges in generating sales compared to the level of assets it holds.

Overall, the decreasing trends in both fixed asset turnover and total asset turnover ratios for Xylem Inc indicate a potential decrease in efficiency in utilizing its assets to generate revenue over the past five years. Further analysis and comparison with industry standards would provide a better understanding of Xylem Inc's performance in this regard.