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)
Ecolab Inc., 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 displayed a generally positive trend from 2017 to 2019, increasing from 5.12 to 5.79. However, it subsequently declined in 2020 and 2021, returning close to its initial level at 5.11. This suggests the company improved inventory management efficiency until 2019 but experienced some challenges in the following years.
- Receivables Turnover
- Receivables turnover remained relatively stable throughout the five-year period, fluctuating narrowly between 5.14 and 5.51. This stability indicates a consistent effectiveness in collecting receivables over time, with only a slight decline observed in the later years.
- Payables Turnover
- Payables turnover increased steadily from 6.29 in 2017 to a peak of 6.87 in 2018, followed by a slight decrease thereafter, falling to 5.5 by 2021. This pattern suggests the company initially accelerated payments to suppliers but has extended payment durations more recently.
- Working Capital Turnover
- Working capital turnover showed considerable volatility. It peaked in 2018 at 14.79, dropped in 2019 to 12.44, and sharply declined to 5.4 in 2020 before rebounding to 11.23 in 2021. This suggests fluctuations in the efficiency with which working capital was utilized to generate sales, with a notable dip in 2020 potentially reflecting operational disruptions.
- Average Inventory Processing Period
- The average inventory processing period decreased from 71 days in 2017 to 63 days in 2019, indicating improved inventory turnover speed, before rising back to 71 days by 2021, implying a return to slower inventory processing in recent years.
- Average Receivable Collection Period
- This metric remained relatively stable, beginning at 68 days in 2017 and gradually increasing to 71 days by 2021. The slight upward trend indicates a minor increase in the time taken to collect receivables, which could impact cash flow.
- Operating Cycle
- The operating cycle shortened from 139 days in 2017 to 131 days in 2018 and 2019, reflecting improved operational efficiency during this period. However, it extended again in 2020 and 2021 to 138 and 142 days respectively, indicating a slower overall operational process.
- Average Payables Payment Period
- The average payables payment period showed a decreasing trend through 2018 and 2019, moving from 58 days in 2017 to 53 and 54 days. This reversed from 2020 onward, increasing to 61 days and then to 66 days by 2021. The increase suggests the company delayed payments to suppliers in recent years.
- Cash Conversion Cycle
- The cash conversion cycle declined from 81 days in 2017 to 77 days by 2019 and remained relatively steady through 2020 and 2021 at approximately 76-77 days. This stability suggests consistent management of the time between cash outflows and inflows despite fluctuations in other components of the working capital cycle.
Turnover Ratios
Average No. Days
Inventory Turnover
Ecolab Inc., 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 thousands) | ||||||
| Cost of sales, including special charges | 7,615,800) | 6,905,800) | 8,723,400) | 8,625,900) | 7,405,100) | |
| Inventories | 1,491,800) | 1,285,200) | 1,505,600) | 1,546,400) | 1,445,900) | |
| Short-term Activity Ratio | ||||||
| Inventory turnover1 | 5.11 | 5.37 | 5.79 | 5.58 | 5.12 | |
| Benchmarks | ||||||
| Inventory Turnover, Competitors2 | ||||||
| Linde plc | 10.12 | 8.90 | — | — | — | |
| Sherwin-Williams Co. | 5.92 | 5.37 | — | — | — | |
| Inventory Turnover, Sector | ||||||
| Chemicals | 7.91 | 7.09 | — | — | — | |
| Inventory Turnover, Industry | ||||||
| Materials | 5.27 | 4.94 | — | — | — | |
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, including special charges ÷ Inventories
= 7,615,800 ÷ 1,491,800 = 5.11
2 Click competitor name to see calculations.
- Cost of Sales, Including Special Charges
- Over the five-year period, the cost of sales exhibited notable fluctuations. From 2017 to 2019, there was a consistent upward trend, increasing from 7,405,100 thousand US dollars to 8,723,400 thousand US dollars. However, in 2020, a significant decline occurred, bringing the cost down to 6,905,800 thousand US dollars, likely reflecting operational adjustments or market conditions during that year. In 2021, the cost partially recovered, rising again to 7,615,800 thousand US dollars but not reaching the previous peak observed in 2019.
- Inventories
- Inventory levels showed moderate variability. From 2017 to 2018, inventories increased from 1,445,900 thousand US dollars to 1,546,400 thousand US dollars. A slight decline was observed in 2019 and 2020, with values falling to 1,505,600 thousand US dollars and 1,285,200 thousand US dollars respectively. By the end of 2021, inventories rose again to 1,491,800 thousand US dollars, nearly recovering to prior levels.
- Inventory Turnover Ratio
- The inventory turnover ratio demonstrated a generally stable pattern with modest fluctuations. It increased from 5.12 in 2017 to a peak of 5.79 in 2019, indicating more efficient inventory management or faster inventory movement during that period. Subsequently, the ratio decreased to 5.37 in 2020 and further to 5.11 in 2021, suggesting a slight reduction in inventory turnover efficiency toward the end of the period analyzed.
Receivables Turnover
Ecolab Inc., 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 thousands) | ||||||
| Net sales | 12,733,100) | 11,790,200) | 14,906,300) | 14,668,200) | 13,838,300) | |
| Accounts receivable, net | 2,478,400) | 2,273,800) | 2,796,500) | 2,662,500) | 2,574,100) | |
| Short-term Activity Ratio | ||||||
| Receivables turnover1 | 5.14 | 5.19 | 5.33 | 5.51 | 5.38 | |
| Benchmarks | ||||||
| Receivables Turnover, Competitors2 | ||||||
| Linde plc | 6.84 | 6.54 | — | — | — | |
| Sherwin-Williams Co. | 8.48 | 8.84 | — | — | — | |
| Receivables Turnover, Sector | ||||||
| Chemicals | 7.41 | 7.30 | — | — | — | |
| Receivables Turnover, Industry | ||||||
| Materials | 9.18 | 8.38 | — | — | — | |
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
= 12,733,100 ÷ 2,478,400 = 5.14
2 Click competitor name to see calculations.
The financial data reveals several trends over the five-year period from 2017 to 2021. Net sales initially increased from 13,838,300 thousand USD in 2017 to a peak of 14,906,300 thousand USD in 2019, followed by a significant decline to 11,790,200 thousand USD in 2020. In 2021, net sales partially recovered to 12,733,100 thousand USD, though still below the pre-2020 levels.
Accounts receivable, net, displayed a generally increasing pattern from 2,574,100 thousand USD in 2017 to 2,796,500 thousand USD in 2019, consistent with the sales growth observed. However, accounts receivable then decreased in 2020 to 2,273,800 thousand USD, reflecting the reduced sales volume during that year, before rising again to 2,478,400 thousand USD in 2021, mirroring the partial recovery in sales.
The receivables turnover ratio shows a gradual decline over the years, starting at 5.38 in 2017 and decreasing to 5.14 in 2021. This downward trend indicates a slight reduction in the efficiency of collecting receivables over the period. The ratio fell steadily year over year, with the most notable decrease occurring between 2019 (5.33) and 2021 (5.14), coinciding with the sales contraction and recovery phase.
- Net Sales
- Increase from 2017 to 2019, peak at 14,906,300 thousand USD.
- Significant decline in 2020 to 11,790,200 thousand USD.
- Partial recovery in 2021 to 12,733,100 thousand USD but below 2019 levels.
- Accounts Receivable, Net
- Growth from 2,574,100 thousand USD in 2017 to 2,796,500 thousand USD in 2019.
- Decrease in 2020 to 2,273,800 thousand USD aligned with sales decline.
- Increase again in 2021 to 2,478,400 thousand USD corresponding with sales recovery.
- Receivables Turnover Ratio
- Gradual decline from 5.38 in 2017 to 5.14 in 2021.
- Indicates a slight deterioration in collection efficiency over the period.
Payables Turnover
Ecolab Inc., 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 thousands) | ||||||
| Cost of sales, including special charges | 7,615,800) | 6,905,800) | 8,723,400) | 8,625,900) | 7,405,100) | |
| Accounts payable | 1,384,200) | 1,160,600) | 1,284,300) | 1,255,600) | 1,177,100) | |
| Short-term Activity Ratio | ||||||
| Payables turnover1 | 5.50 | 5.95 | 6.79 | 6.87 | 6.29 | |
| Benchmarks | ||||||
| Payables Turnover, Competitors2 | ||||||
| Linde plc | 5.01 | 4.97 | — | — | — | |
| Sherwin-Williams Co. | 4.74 | 4.57 | — | — | — | |
| Payables Turnover, Sector | ||||||
| Chemicals | 4.90 | 4.81 | — | — | — | |
| Payables Turnover, Industry | ||||||
| Materials | 5.41 | 5.49 | — | — | — | |
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, including special charges ÷ Accounts payable
= 7,615,800 ÷ 1,384,200 = 5.50
2 Click competitor name to see calculations.
- Cost of Sales, Including Special Charges
- The cost of sales showed a general upward trend from 2017 to 2019, increasing from 7,405,100 thousand USD to 8,723,400 thousand USD. However, in 2020, there was a notable decline to 6,905,800 thousand USD, which could suggest operational adjustments or a response to external market conditions. This value increased again in 2021 to 7,615,800 thousand USD, indicating some recovery but still below the peak observed in 2019.
- Accounts Payable
- Accounts payable experienced fluctuations over the five-year period. It rose steadily from 1,177,100 thousand USD in 2017 to 1,284,300 thousand USD in 2019, then decreased in 2020 to 1,160,600 thousand USD, followed by a significant increase to 1,384,200 thousand USD in 2021. This variability may reflect changes in procurement practices or payment terms, with the 2021 rise suggesting potentially extended payment periods or increased purchases on credit.
- Payables Turnover
- The payables turnover ratio generally declined over the period analyzed, starting at 6.29 in 2017 and slightly increasing to 6.87 in 2018, followed by a gradual decrease to 6.79 in 2019. More pronounced declines occurred in 2020 and 2021, dropping to 5.95 and 5.5 respectively. This downward trend suggests slower payments to suppliers or extended credit terms over time, especially notable in the last two years.
Working Capital Turnover
Ecolab Inc., 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 thousands) | ||||||
| Current assets | 4,687,100) | 5,117,400) | 4,828,400) | 4,677,700) | 4,596,400) | |
| Less: Current liabilities | 3,553,200) | 2,932,200) | 3,630,600) | 3,685,600) | 3,431,800) | |
| Working capital | 1,133,900) | 2,185,200) | 1,197,800) | 992,100) | 1,164,600) | |
| Net sales | 12,733,100) | 11,790,200) | 14,906,300) | 14,668,200) | 13,838,300) | |
| Short-term Activity Ratio | ||||||
| Working capital turnover1 | 11.23 | 5.40 | 12.44 | 14.79 | 11.88 | |
| Benchmarks | ||||||
| Working Capital Turnover, Competitors2 | ||||||
| Linde plc | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | |
| Working Capital Turnover, Sector | ||||||
| Chemicals | — | — | — | — | — | |
| Working Capital Turnover, Industry | ||||||
| Materials | 15.37 | 19.50 | — | — | — | |
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
= 12,733,100 ÷ 1,133,900 = 11.23
2 Click competitor name to see calculations.
- Working Capital
- The working capital demonstrated fluctuations over the five-year period. Beginning at 1,164,600 thousand US dollars in 2017, there was a decline in 2018 to 992,100 thousand US dollars. This was followed by an increase to 1,197,800 thousand US dollars in 2019. A significant rise occurred in 2020, reaching 2,185,200 thousand US dollars, after which the working capital decreased considerably to 1,133,900 thousand US dollars in 2021.
- Net Sales
- Net sales showed a general upward trend from 2017 to 2019, starting at 13,838,300 thousand US dollars and rising steadily to 14,906,300 thousand US dollars in 2019. However, there was a noteworthy decline in 2020, dropping to 11,790,200 thousand US dollars, likely reflecting external factors impacting sales. Sales partially recovered in 2021 to 12,733,100 thousand US dollars but did not return to pre-2020 levels.
- Working Capital Turnover
- The working capital turnover ratio, representing the relationship between net sales and working capital, experienced variability across the years. It increased from 11.88 in 2017 to a peak of 14.79 in 2018, suggesting increased efficiency in using working capital for sales generation. The ratio declined to 12.44 in 2019, followed by a sharp drop to 5.4 in 2020, likely reflecting the combined impact of increased working capital and decreased net sales during that year. In 2021, the ratio improved to 11.23, indicating a partial recovery in operational efficiency.
Average Inventory Processing Period
Ecolab Inc., 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 | 5.11 | 5.37 | 5.79 | 5.58 | 5.12 | |
| Short-term Activity Ratio (no. days) | ||||||
| Average inventory processing period1 | 71 | 68 | 63 | 65 | 71 | |
| Benchmarks (no. days) | ||||||
| Average Inventory Processing Period, Competitors2 | ||||||
| Linde plc | 36 | 41 | — | — | — | |
| Sherwin-Williams Co. | 62 | 68 | — | — | — | |
| Average Inventory Processing Period, Sector | ||||||
| Chemicals | 46 | 51 | — | — | — | |
| Average Inventory Processing Period, Industry | ||||||
| Materials | 69 | 74 | — | — | — | |
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 ÷ 5.11 = 71
2 Click competitor name to see calculations.
- Inventory Turnover
- The inventory turnover ratio exhibited an overall fluctuating trend from 2017 through 2021. It increased from 5.12 in 2017 to a peak of 5.79 in 2019, indicating an improvement in the efficiency of inventory management during this period. However, the ratio declined to 5.37 in 2020 and further to 5.11 in 2021, nearly returning to the initial level observed in 2017. This decrease suggests a reduction in the frequency of inventory cycles in the most recent years.
- Average Inventory Processing Period
- The average inventory processing period, measured in number of days, moved inversely to the inventory turnover ratio, consistent with expectations. It decreased from 71 days in 2017 to 63 days in 2019, corresponding with the increase in turnover and indicating faster inventory processing during this timeframe. Subsequently, the processing period increased again to 68 days in 2020 and returned to 71 days in 2021. This trend reflects a slowdown in inventory movement, aligning with the decline observed in the inventory turnover ratio.
- Overall Analysis
- The data reveals a cyclical pattern in inventory management efficiency over the five-year period. Improvements occurred up to 2019, characterized by more efficient inventory turnover and reduced processing times. However, beginning in 2020, efficiency deteriorated, possibly due to external factors affecting operations. By 2021, the performance indicators for inventory turnover and processing period had reverted to levels comparable to those in 2017, suggesting challenges in sustaining the improvements achieved in earlier years.
Average Receivable Collection Period
Ecolab Inc., 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 | 5.14 | 5.19 | 5.33 | 5.51 | 5.38 | |
| Short-term Activity Ratio (no. days) | ||||||
| Average receivable collection period1 | 71 | 70 | 68 | 66 | 68 | |
| Benchmarks (no. days) | ||||||
| Average Receivable Collection Period, Competitors2 | ||||||
| Linde plc | 53 | 56 | — | — | — | |
| Sherwin-Williams Co. | 43 | 41 | — | — | — | |
| Average Receivable Collection Period, Sector | ||||||
| Chemicals | 49 | 50 | — | — | — | |
| Average Receivable Collection Period, Industry | ||||||
| Materials | 40 | 44 | — | — | — | |
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 ÷ 5.14 = 71
2 Click competitor name to see calculations.
- Receivables Turnover
- The receivables turnover ratio exhibited a slight decline over the observed period. Starting from 5.38 in 2017, it increased marginally to 5.51 in 2018 but then decreased steadily each year to reach 5.14 by 2021. This indicates a gradual weakening in the company's efficiency in collecting receivables over time.
- Average Receivable Collection Period
- The average receivable collection period shows an inverse trend to the receivables turnover ratio. It decreased from 68 days in 2017 to 66 days in 2018, suggesting faster collection during that year. However, from 2018 onwards, it increased consistently to 71 days by 2021. This increasing trend implies the company is taking longer to collect its receivables each year after 2018.
- Overall Insights
- The data suggests that the company’s ability to convert receivables into cash has weakened slightly over the five-year period. The decreasing receivables turnover ratio paired with the lengthening collection period may indicate a potential relaxation in credit policies or challenges in the collection process. Continuous monitoring would be advisable to manage working capital effectively.
Operating Cycle
Ecolab Inc., 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 | 71 | 68 | 63 | 65 | 71 | |
| Average receivable collection period | 71 | 70 | 68 | 66 | 68 | |
| Short-term Activity Ratio | ||||||
| Operating cycle1 | 142 | 138 | 131 | 131 | 139 | |
| Benchmarks | ||||||
| Operating Cycle, Competitors2 | ||||||
| Linde plc | 89 | 97 | — | — | — | |
| Sherwin-Williams Co. | 105 | 109 | — | — | — | |
| Operating Cycle, Sector | ||||||
| Chemicals | 95 | 101 | — | — | — | |
| Operating Cycle, Industry | ||||||
| Materials | 109 | 118 | — | — | — | |
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
= 71 + 71 = 142
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period shows a fluctuating trend over the five-year span. Initially, it decreased from 71 days in 2017 to 65 days in 2018, continuing to slightly decrease to 63 days in 2019. However, this downward trend reversed in 2020 when the period increased to 68 days and returned to the initial value of 71 days in 2021. This suggests variations in inventory turnover efficiency, with improvements observed in the middle years followed by a return to earlier levels.
- Average Receivable Collection Period
- The average receivable collection period gradually lengthened over the observed period. Starting at 68 days in 2017, it marginally decreased to 66 days in 2018 but then increased consistently each subsequent year, reaching 71 days by 2021. This indicates a slight decline in the speed of collecting receivables, reflecting potential shifts in credit management or customer payment behavior.
- Operating Cycle
- The operating cycle closely follows the combined trends of the inventory processing and receivable collection periods. It experienced a decrease from 139 days in 2017 to 131 days in both 2018 and 2019. Subsequently, the cycle extended again to 138 days in 2020 and further to 142 days in 2021. This pattern indicates initial efficiency gains followed by a lengthening operating cycle, potentially signaling slower overall asset conversion into cash over the latter years.
Average Payables Payment Period
Ecolab Inc., 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 | 5.50 | 5.95 | 6.79 | 6.87 | 6.29 | |
| Short-term Activity Ratio (no. days) | ||||||
| Average payables payment period1 | 66 | 61 | 54 | 53 | 58 | |
| Benchmarks (no. days) | ||||||
| Average Payables Payment Period, Competitors2 | ||||||
| Linde plc | 73 | 73 | — | — | — | |
| Sherwin-Williams Co. | 77 | 80 | — | — | — | |
| Average Payables Payment Period, Sector | ||||||
| Chemicals | 74 | 76 | — | — | — | |
| Average Payables Payment Period, Industry | ||||||
| Materials | 67 | 66 | — | — | — | |
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 ÷ 5.50 = 66
2 Click competitor name to see calculations.
- Payables Turnover
- The payables turnover ratio exhibited an overall declining trend from 2017 through 2021. Beginning at 6.29 in 2017, the ratio increased slightly to 6.87 in 2018, indicating a faster rate of payment to suppliers during that year. However, from 2018 onward, the ratio decreased steadily each year, reaching 5.5 by 2021. This downward trend suggests a progressively slower payment cycle to suppliers over the period examined.
- Average Payables Payment Period
- The average payables payment period, expressed in days, showed an inverse pattern to the payables turnover ratio, reflecting increasing durations over the years. Starting at 58 days in 2017, the payment period shortened to 53 days in 2018, consistent with the increased turnover ratio that year. Subsequently, the payment period extended annually, rising to 54 days in 2019, 61 days in 2020, and reaching 66 days in 2021. This indicates a lengthening in the time taken by the company to settle its payables, potentially reflecting changes in payment policies, supplier terms, or cash management strategies.
Cash Conversion Cycle
Ecolab Inc., 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 | 71 | 68 | 63 | 65 | 71 | |
| Average receivable collection period | 71 | 70 | 68 | 66 | 68 | |
| Average payables payment period | 66 | 61 | 54 | 53 | 58 | |
| Short-term Activity Ratio | ||||||
| Cash conversion cycle1 | 76 | 77 | 77 | 78 | 81 | |
| Benchmarks | ||||||
| Cash Conversion Cycle, Competitors2 | ||||||
| Linde plc | 16 | 24 | — | — | — | |
| Sherwin-Williams Co. | 28 | 29 | — | — | — | |
| Cash Conversion Cycle, Sector | ||||||
| Chemicals | 21 | 25 | — | — | — | |
| Cash Conversion Cycle, Industry | ||||||
| Materials | 42 | 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
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= 71 + 71 – 66 = 76
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period showed a decreasing trend from 71 days in 2017 to a low of 63 days in 2019, indicating improved inventory turnover. However, this trend reversed in subsequent years, increasing to 68 days in 2020 and returning to 71 days by 2021, suggesting a slowdown in inventory processing efficiency.
- Average Receivable Collection Period
- The average receivable collection period fluctuated slightly over the years, starting at 68 days in 2017, dipping to 66 days in 2018, then rising steadily to 71 days by 2021. This gradual increase implies a lengthening in the time taken to collect receivables, potentially affecting liquidity.
- Average Payables Payment Period
- The average payables payment period exhibited a general upward trend, beginning at 58 days in 2017 and extending to 66 days by 2021. This indicates that the company took longer to pay its suppliers over time, which could be a strategic approach to manage cash flow or reflect changes in payment terms.
- Cash Conversion Cycle
- The cash conversion cycle displayed relative stability, decreasing from 81 days in 2017 to 76 days in 2021. Despite fluctuations in its components, the overall cycle shortened slightly, which may indicate marginal improvement in the company's efficiency in managing working capital over the period.