Analysis of Short-term (Operating) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Short-term Activity Ratios (Summary)
3M Co., short-term (operating) activity ratios
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
- Inventory Turnover
- The inventory turnover ratio exhibits moderate fluctuations over the analyzed period. It started at 3.97 in 2017, declined slightly to 3.82 in 2018, peaked at 4.15 in 2019, then decreased consecutively to 3.92 in 2020 and 3.77 in 2021. This trend suggests some variability in how efficiently inventory is managed, with the highest turnover occurring in 2019 and a gradual decline thereafter.
- Receivables Turnover
- Receivables turnover shows a consistent upward trend, increasing steadily from 6.45 in 2017 to 7.59 in 2021. This implies improved efficiency in collecting receivables over time, indicating a possible tightening of credit policies or enhanced collection efforts.
- Payables Turnover
- The payables turnover ratio declines steadily from 8.23 in 2017 to 6.28 in 2021. This indicates that the company is taking longer to pay its suppliers, which may be a strategic move to optimize cash flow or could point to potential liquidity constraints.
- Working Capital Turnover
- Working capital turnover shows irregular movement. It increased slightly from 4.8 in 2017 to 5.07 in 2018, surged sharply to 8.57 in 2019, then dropped significantly to 4.58 in 2020 before rising again to 5.55 in 2021. The spike in 2019 suggests an unusual improvement in utilizing working capital, but the volatility afterward indicates inconsistent working capital management.
- Average Inventory Processing Period
- The average inventory processing period experienced minor fluctuations but trended upward over the period. Starting at 92 days in 2017, it increased to 97 days by 2021, with a low point of 88 days in 2019. A longer processing period, particularly in later years, may signal slower inventory movement or a shift towards maintaining higher stock levels.
- Average Receivable Collection Period
- There is a clear downward trend in the average receivable collection period, decreasing from 57 days in 2017 to 48 days in 2021. This supports the earlier observation of increasing receivables turnover, indicating faster collection of customer payments.
- Operating Cycle
- The operating cycle remains relatively stable with slight fluctuations between 142 and 152 days. It started at 149 days in 2017, peaked at 152 days in 2018, and settled at 145 days in 2021, reflecting stable overall efficiency in the management of inventory and receivables combined.
- Average Payables Payment Period
- The average payables payment period has increased steadily from 44 days in 2017 to 58 days in 2021. This pattern corresponds with the declining payables turnover and emphasizes the company’s increased duration in settling its obligations to suppliers over the years.
- Cash Conversion Cycle
- The cash conversion cycle shows a consistent decrease from 105 days in 2017 to 87 days in 2021. The reduction indicates improved efficiency in the overall cycle of converting resource inputs into cash flows, primarily driven by faster receivable collections and a balanced interplay of inventory and payables management.
Turnover Ratios
Average No. Days
Inventory Turnover
3M Co., inventory turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cost of sales | 18,795) | 16,605) | 17,136) | 16,682) | 16,001) | |
| Inventories | 4,985) | 4,239) | 4,134) | 4,366) | 4,034) | |
| Short-term Activity Ratio | ||||||
| Inventory turnover1 | 3.77 | 3.92 | 4.15 | 3.82 | 3.97 | |
| Benchmarks | ||||||
| Inventory Turnover, Competitors2 | ||||||
| Boeing Co. | 0.75 | 0.78 | — | — | — | |
| Caterpillar Inc. | 2.53 | 2.55 | — | — | — | |
| Eaton Corp. plc | 4.48 | 5.88 | — | — | — | |
| GE Aerospace | 3.40 | 3.80 | — | — | — | |
| Honeywell International Inc. | 4.29 | 4.94 | — | — | — | |
| Lockheed Martin Corp. | 19.45 | 16.01 | — | — | — | |
| RTX Corp. | 5.65 | 5.11 | — | — | — | |
| Inventory Turnover, Sector | ||||||
| Capital Goods | 2.28 | 2.28 | — | — | — | |
| Inventory Turnover, Industry | ||||||
| Industrials | 4.03 | 3.71 | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Inventory turnover = Cost of sales ÷ Inventories
= 18,795 ÷ 4,985 = 3.77
2 Click competitor name to see calculations.
- Cost of Sales
- Cost of sales exhibited an overall upward trend from 2017 to 2021, increasing from 16,001 million USD in 2017 to 18,795 million USD in 2021. There was a slight dip recorded in 2020, decreasing to 16,605 million USD from the previous year’s 17,136 million USD, before rising sharply in 2021.
- Inventories
- Inventories maintained a generally increasing pattern during the period, starting at 4,034 million USD in 2017 and reaching 4,985 million USD in 2021. A minor reduction occurred in 2019 compared to 2018; however, inventories rebounded subsequently and peaked in 2021.
- Inventory Turnover Ratio
- The inventory turnover ratio fluctuated moderately, beginning at 3.97 in 2017 and declining to 3.77 in 2021, indicating a slight decrease in the efficiency of inventory management or sales relative to inventory held. The ratio experienced its highest point in 2019 at 4.15 and its lowest point in 2021.
Receivables Turnover
3M Co., receivables turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | 35,355) | 32,184) | 32,136) | 32,765) | 31,657) | |
| Accounts receivable, net of allowances | 4,660) | 4,705) | 4,791) | 5,020) | 4,911) | |
| Short-term Activity Ratio | ||||||
| Receivables turnover1 | 7.59 | 6.84 | 6.71 | 6.53 | 6.45 | |
| Benchmarks | ||||||
| Receivables Turnover, Competitors2 | ||||||
| Boeing Co. | 23.58 | 29.75 | — | — | — | |
| Caterpillar Inc. | 5.68 | 5.33 | — | — | — | |
| Eaton Corp. plc | 5.95 | 6.15 | — | — | — | |
| GE Aerospace | 4.55 | 4.37 | — | — | — | |
| Honeywell International Inc. | 5.04 | 4.78 | — | — | — | |
| Lockheed Martin Corp. | 34.15 | 33.06 | — | — | — | |
| RTX Corp. | 6.66 | 6.11 | — | — | — | |
| Receivables Turnover, Sector | ||||||
| Capital Goods | 7.57 | 7.30 | — | — | — | |
| Receivables Turnover, Industry | ||||||
| Industrials | 7.76 | 7.57 | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Receivables turnover = Net sales ÷ Accounts receivable, net of allowances
= 35,355 ÷ 4,660 = 7.59
2 Click competitor name to see calculations.
- Net Sales
- Net sales exhibited a generally upward trend from 2017 through 2021. The figures increased from $31,657 million in 2017 to $35,355 million in 2021, with a slight dip observed in 2019 and 2020 when sales hovered around $32,100 million. The growth in 2021 represents a significant recovery and expansion compared to previous years.
- Accounts Receivable, Net of Allowances
- The net accounts receivable showed a modest decline over the analyzed period. Starting at $4,911 million in 2017, the value slightly increased to $5,020 million in 2018 but thereafter consistently decreased to $4,660 million by 2021. This trend suggests improving efficiency in managing receivables or changes in credit policies.
- Receivables Turnover Ratio
- The receivables turnover ratio improved steadily from 6.45 in 2017 to 7.59 in 2021. This increase indicates that the company became more effective in collecting its receivables over time, turning over receivables more frequently, and potentially shortening the collection period.
- Summary of Trends and Insights
- Overall, the data reflects positive operational improvements. Despite minor fluctuations, net sales grew substantially by 2021, suggesting increased market demand or successful sales strategies. At the same time, the reduction in accounts receivable alongside the rising receivables turnover ratio indicates enhanced credit management and cash collection efficiency. The alignment of these trends points to strengthened liquidity and revenue generation capabilities.
Payables Turnover
3M Co., payables turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cost of sales | 18,795) | 16,605) | 17,136) | 16,682) | 16,001) | |
| Accounts payable | 2,994) | 2,561) | 2,228) | 2,266) | 1,945) | |
| Short-term Activity Ratio | ||||||
| Payables turnover1 | 6.28 | 6.48 | 7.69 | 7.36 | 8.23 | |
| Benchmarks | ||||||
| Payables Turnover, Competitors2 | ||||||
| Boeing Co. | 6.40 | 4.94 | — | — | — | |
| Caterpillar Inc. | 4.36 | 4.75 | — | — | — | |
| Eaton Corp. plc | 4.75 | 6.24 | — | — | — | |
| GE Aerospace | 3.32 | 3.67 | — | — | — | |
| Honeywell International Inc. | 3.40 | 3.86 | — | — | — | |
| Lockheed Martin Corp. | 74.34 | 64.48 | — | — | — | |
| RTX Corp. | 5.93 | 5.56 | — | — | — | |
| Payables Turnover, Sector | ||||||
| Capital Goods | 5.60 | 5.54 | — | — | — | |
| Payables Turnover, Industry | ||||||
| Industrials | 7.81 | 7.49 | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Payables turnover = Cost of sales ÷ Accounts payable
= 18,795 ÷ 2,994 = 6.28
2 Click competitor name to see calculations.
- Cost of Sales
- The cost of sales exhibited a generally increasing trend over the five-year period. Starting at US$16,001 million in 2017, it rose steadily each year except for a slight decline in 2020 where it decreased to US$16,605 million from US$17,136 million in 2019. The highest value was recorded in 2021 at US$18,795 million, indicating a substantial increase compared to the beginning of the period.
- Accounts Payable
- Accounts payable showed a consistent upward trajectory throughout the period. Beginning at US$1,945 million in 2017, it increased each year, reaching US$2,994 million by 2021. This represents a significant rise over the five years, suggesting growing short-term obligations to suppliers or creditors.
- Payables Turnover Ratio
- The payables turnover ratio demonstrated a downward trend. Starting at 8.23 in 2017, it decreased to 6.28 by 2021. This decline indicates that the company was taking longer to pay its suppliers over time, which could reflect changes in payment terms, cash management strategies, or supplier relationships. The most notable decreases occurred between 2019 and 2020, and continued into 2021.
Working Capital Turnover
3M Co., working capital turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | 15,403) | 14,982) | 12,971) | 13,709) | 14,277) | |
| Less: Current liabilities | 9,035) | 7,948) | 9,222) | 7,244) | 7,687) | |
| Working capital | 6,368) | 7,034) | 3,749) | 6,465) | 6,590) | |
| Net sales | 35,355) | 32,184) | 32,136) | 32,765) | 31,657) | |
| Short-term Activity Ratio | ||||||
| Working capital turnover1 | 5.55 | 4.58 | 8.57 | 5.07 | 4.80 | |
| Benchmarks | ||||||
| Working Capital Turnover, Competitors2 | ||||||
| Boeing Co. | 2.34 | 1.69 | — | — | — | |
| Caterpillar Inc. | 3.54 | 2.84 | — | — | — | |
| Eaton Corp. plc | 65.65 | 5.42 | — | — | — | |
| GE Aerospace | 4.94 | 2.26 | — | — | — | |
| Honeywell International Inc. | 5.86 | 3.64 | — | — | — | |
| Lockheed Martin Corp. | 11.52 | 12.01 | — | — | — | |
| RTX Corp. | 9.75 | 7.52 | — | — | — | |
| Working Capital Turnover, Sector | ||||||
| Capital Goods | 5.01 | 3.24 | — | — | — | |
| Working Capital Turnover, Industry | ||||||
| Industrials | 6.90 | 4.52 | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Working capital turnover = Net sales ÷ Working capital
= 35,355 ÷ 6,368 = 5.55
2 Click competitor name to see calculations.
- Working Capital
- Working capital exhibited fluctuations over the observed period. Starting at 6,590 million US dollars in 2017, it slightly decreased to 6,465 million in 2018. A significant decline occurred in 2019, dropping to 3,749 million, followed by a sharp recovery to 7,034 million in 2020. In 2021, working capital decreased again to 6,368 million. These variations indicate inconsistency in the short-term financial assets relative to liabilities over time.
- Net Sales
- Net sales showed a generally upward trend across the periods. Beginning at 31,657 million US dollars in 2017, net sales increased to 32,765 million in 2018. A slight decrease was observed in 2019, with sales at 32,136 million, followed by a very modest increase in 2020 to 32,184 million. In 2021, net sales rose more substantially to 35,355 million, indicating growth in revenue generation towards the end of the period.
- Working Capital Turnover Ratio
- The working capital turnover ratio, which measures efficiency in using working capital to generate sales, displayed variability. It started at 4.8 in 2017 and increased to 5.07 in 2018. A notable spike to 8.57 occurred in 2019, corresponding to the significant drop in working capital that year. However, the ratio dropped sharply to 4.58 in 2020 and then increased moderately to 5.55 in 2021. The high ratio in 2019 suggests elevated efficiency due to lowered working capital, but this was not sustained in subsequent years.
Average Inventory Processing Period
3M Co., average inventory processing period calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Inventory turnover | 3.77 | 3.92 | 4.15 | 3.82 | 3.97 | |
| Short-term Activity Ratio (no. days) | ||||||
| Average inventory processing period1 | 97 | 93 | 88 | 96 | 92 | |
| Benchmarks (no. days) | ||||||
| Average Inventory Processing Period, Competitors2 | ||||||
| Boeing Co. | 486 | 467 | — | — | — | |
| Caterpillar Inc. | 144 | 143 | — | — | — | |
| Eaton Corp. plc | 82 | 62 | — | — | — | |
| GE Aerospace | 107 | 96 | — | — | — | |
| Honeywell International Inc. | 85 | 74 | — | — | — | |
| Lockheed Martin Corp. | 19 | 23 | — | — | — | |
| RTX Corp. | 65 | 71 | — | — | — | |
| Average Inventory Processing Period, Sector | ||||||
| Capital Goods | 160 | 160 | — | — | — | |
| Average Inventory Processing Period, Industry | ||||||
| Industrials | 91 | 99 | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 3.77 = 97
2 Click competitor name to see calculations.
The data presents two key financial metrics related to inventory management over a five-year period.
- Inventory Turnover Ratio
- The inventory turnover ratio exhibited some fluctuations, starting at 3.97 in 2017 and decreasing slightly to 3.82 in 2018. It then increased to 4.15 in 2019, indicating a higher frequency of inventory turnover during that year, before declining again in the subsequent years to 3.92 in 2020 and further to 3.77 in 2021. Overall, the trend reflects variability with a modest downward movement towards the end of the period.
- Average Inventory Processing Period (Days)
- This metric shows an inverse relationship to the inventory turnover ratio, as expected. The average inventory processing period was 92 days in 2017, increased slightly to 96 days in 2018, decreased notably to 88 days in 2019—which aligns with the peak in turnover ratio—then rose to 93 days in 2020, and further increased to 97 days in 2021. This suggests that the company generally required more time to process its inventory toward the latter years, implying slower inventory movement and potentially higher holding costs.
In summary, the inventory turnover and processing period reveal a pattern of initially varying efficiency in inventory management, with a peak operational efficiency around 2019, followed by a gradual decline in turnover and increase in processing duration through 2021. This could indicate challenges in inventory management or changes in business conditions impacting inventory flow in recent years.
Average Receivable Collection Period
3M Co., average receivable collection period calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Receivables turnover | 7.59 | 6.84 | 6.71 | 6.53 | 6.45 | |
| Short-term Activity Ratio (no. days) | ||||||
| Average receivable collection period1 | 48 | 53 | 54 | 56 | 57 | |
| Benchmarks (no. days) | ||||||
| Average Receivable Collection Period, Competitors2 | ||||||
| Boeing Co. | 15 | 12 | — | — | — | |
| Caterpillar Inc. | 64 | 68 | — | — | — | |
| Eaton Corp. plc | 61 | 59 | — | — | — | |
| GE Aerospace | 80 | 83 | — | — | — | |
| Honeywell International Inc. | 72 | 76 | — | — | — | |
| Lockheed Martin Corp. | 11 | 11 | — | — | — | |
| RTX Corp. | 55 | 60 | — | — | — | |
| Average Receivable Collection Period, Sector | ||||||
| Capital Goods | 48 | 50 | — | — | — | |
| Average Receivable Collection Period, Industry | ||||||
| Industrials | 47 | 48 | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 7.59 = 48
2 Click competitor name to see calculations.
The financial data reveals a consistent improvement in the management of receivables over the analyzed period. This is demonstrated by the upward trend in the receivables turnover ratio, which increased steadily from 6.45 in 2017 to 7.59 in 2021.
Correspondingly, the average receivable collection period has decreased over the years, moving from 57 days in 2017 down to 48 days by the end of 2021. This downward trend indicates acceleration in the collection of receivables, enhancing liquidity and reducing the cash conversion cycle.
Overall, these trends suggest that the company has become more efficient in collecting its receivables, possibly reflecting improved credit policies, enhanced collection processes, or a combination of both. The alignment between increasing turnover and decreasing collection period underscores strengthening operational efficiency in managing accounts receivable.
- Receivables turnover ratio
- Increased consistently from 6.45 to 7.59 between 2017 and 2021, indicating higher efficiency in collecting receivables.
- Average receivable collection period
- Decreased from 57 days in 2017 to 48 days in 2021, showing faster collection times and improved cash flow management.
Operating Cycle
3M Co., operating cycle calculation, comparison to benchmarks
No. days
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Average inventory processing period | 97 | 93 | 88 | 96 | 92 | |
| Average receivable collection period | 48 | 53 | 54 | 56 | 57 | |
| Short-term Activity Ratio | ||||||
| Operating cycle1 | 145 | 146 | 142 | 152 | 149 | |
| Benchmarks | ||||||
| Operating Cycle, Competitors2 | ||||||
| Boeing Co. | 501 | 479 | — | — | — | |
| Caterpillar Inc. | 208 | 211 | — | — | — | |
| Eaton Corp. plc | 143 | 121 | — | — | — | |
| GE Aerospace | 187 | 179 | — | — | — | |
| Honeywell International Inc. | 157 | 150 | — | — | — | |
| Lockheed Martin Corp. | 30 | 34 | — | — | — | |
| RTX Corp. | 120 | 131 | — | — | — | |
| Operating Cycle, Sector | ||||||
| Capital Goods | 208 | 210 | — | — | — | |
| Operating Cycle, Industry | ||||||
| Industrials | 138 | 147 | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= 97 + 48 = 145
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period exhibited some fluctuation over the analyzed timeframe. It initially increased from 92 days in 2017 to 96 days in 2018, indicating a longer duration to process inventory. This was followed by a decrease to 88 days in 2019, suggesting an improvement in inventory turnover efficiency. However, the period lengthened again to 93 days in 2020 and further to 97 days in 2021, reaching the highest point within the observed years, which may imply challenges in managing inventory or shifting demand dynamics.
- Average Receivable Collection Period
- The average receivable collection period demonstrated a consistent downward trend through the years. Starting at 57 days in 2017, the period gradually decreased each subsequent year, reaching 48 days by 2021. This improvement reflects enhanced efficiency in collecting receivables and potentially better credit management policies, resulting in faster cash inflows from customers.
- Operating Cycle
- The operating cycle, which combines the inventory processing and receivable collection periods, showed modest variability. It slightly increased from 149 days in 2017 to 152 days in 2018 before declining to 142 days in 2019. Subsequently, it rose to 146 days in 2020 and marginally decreased to 145 days in 2021. These movements suggest that while there were improvements in receivables collection, fluctuations in inventory processing had a notable impact on the overall operating cycle duration.
Average Payables Payment Period
3M Co., average payables payment period calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Payables turnover | 6.28 | 6.48 | 7.69 | 7.36 | 8.23 | |
| Short-term Activity Ratio (no. days) | ||||||
| Average payables payment period1 | 58 | 56 | 47 | 50 | 44 | |
| Benchmarks (no. days) | ||||||
| Average Payables Payment Period, Competitors2 | ||||||
| Boeing Co. | 57 | 74 | — | — | — | |
| Caterpillar Inc. | 84 | 77 | — | — | — | |
| Eaton Corp. plc | 77 | 58 | — | — | — | |
| GE Aerospace | 110 | 100 | — | — | — | |
| Honeywell International Inc. | 107 | 95 | — | — | — | |
| Lockheed Martin Corp. | 5 | 6 | — | — | — | |
| RTX Corp. | 62 | 66 | — | — | — | |
| Average Payables Payment Period, Sector | ||||||
| Capital Goods | 65 | 66 | — | — | — | |
| Average Payables Payment Period, Industry | ||||||
| Industrials | 47 | 49 | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ 6.28 = 58
2 Click competitor name to see calculations.
- Payables Turnover
- The payables turnover ratio demonstrates a declining trend over the analyzed periods. It decreased from 8.23 in 2017 to 6.28 in 2021, indicating a reduction in the frequency with which the company pays off its suppliers annually. This suggests that the company is taking longer to settle its outstanding payables, potentially as a management strategy to optimize cash flow or due to changes in supplier terms or operational dynamics.
- Average Payables Payment Period
- Corresponding to the decline in payables turnover, the average payables payment period increased steadily from 44 days in 2017 to 58 days in 2021. This indicates that on average, the company is taking more time to pay its suppliers. The increase in payment period might reflect deliberate working capital management decisions or evolving negotiating power with creditors, resulting in extended payment terms.
- Overall Interpretation
- The inverse relationship between payables turnover and the average payment period is consistent and expected, as longer payment periods result in fewer turnovers within a year. This trend suggests a strategic shift towards lengthening payment cycles. While this can support liquidity, it may impact supplier relationships if extended payment terms are not mutually agreed upon.
Cash Conversion Cycle
3M Co., cash conversion cycle calculation, comparison to benchmarks
No. days
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Average inventory processing period | 97 | 93 | 88 | 96 | 92 | |
| Average receivable collection period | 48 | 53 | 54 | 56 | 57 | |
| Average payables payment period | 58 | 56 | 47 | 50 | 44 | |
| Short-term Activity Ratio | ||||||
| Cash conversion cycle1 | 87 | 90 | 95 | 102 | 105 | |
| Benchmarks | ||||||
| Cash Conversion Cycle, Competitors2 | ||||||
| Boeing Co. | 444 | 405 | — | — | — | |
| Caterpillar Inc. | 124 | 134 | — | — | — | |
| Eaton Corp. plc | 66 | 63 | — | — | — | |
| GE Aerospace | 77 | 79 | — | — | — | |
| Honeywell International Inc. | 50 | 55 | — | — | — | |
| Lockheed Martin Corp. | 25 | 28 | — | — | — | |
| RTX Corp. | 58 | 65 | — | — | — | |
| Cash Conversion Cycle, Sector | ||||||
| Capital Goods | 143 | 144 | — | — | — | |
| Cash Conversion Cycle, Industry | ||||||
| Industrials | 91 | 98 | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= 97 + 48 – 58 = 87
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period exhibited fluctuations over the five-year span, initially increasing from 92 days in 2017 to 96 days in 2018, then decreasing to 88 days in 2019. Subsequently, the period rose again to 93 days in 2020 and reached 97 days by 2021. This pattern suggests variability in inventory management efficiency, with a tendency toward longer holding periods in more recent years.
- Average Receivable Collection Period
- The average receivable collection period showed a consistent decline from 57 days in 2017 to 48 days in 2021. The steady reduction over the years indicates an improvement in the company's ability to collect receivables more quickly, enhancing cash inflows and potentially reducing credit risk.
- Average Payables Payment Period
- The average payables payment period increased from 44 days in 2017 to 58 days in 2021, with some variation in between. Particularly notable is the jump from 47 days in 2019 to 56 days in 2020, followed by a further increase to 58 days in 2021. This suggests a lengthening of the company's payment terms or utilization of supplier credit, which can aid in preserving cash reserves.
- Cash Conversion Cycle
- The cash conversion cycle demonstrated a downward trend, decreasing from 105 days in 2017 to 87 days in 2021. This improvement implies a more efficient management of working capital, as the company shortened the time between cash outflows and inflows. The decrease aligns with the reduction in receivables collection period and the increase in payables payment period, despite fluctuations in inventory processing duration.