Analysis of Long-term (Investment) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Long-term Activity Ratios (Summary)
Illinois Tool Works Inc., long-term (investment) 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).
The analysis of investment activity ratios between 2017 and 2021 reveals a general pattern of stability characterized by a notable decline in efficiency during 2020, followed by a partial recovery in 2021.
- Net Fixed Asset Turnover
- Efficiency in utilizing net fixed assets remained relatively consistent between 8.05 and 8.25 from 2017 to 2019. A significant contraction occurred in 2020, with the ratio falling to 7.08, reflecting a decrease in the revenue generated per unit of net fixed assets. By 2021, the ratio recovered to 7.99, nearly returning to the levels observed prior to 2020.
- Net Fixed Asset Turnover Including Right-of-Use Assets
- A divergent trend is observed when operating lease right-of-use assets are incorporated. Although this ratio mirrored standard fixed asset turnover in 2017 and 2018, it experienced a steady decline starting in 2019 (7.29) and reaching a low of 6.31 in 2020. The recovery to 7.12 in 2021 remains significantly below the 2017-2018 baseline, suggesting a structural increase in the recognized asset base.
- Total Asset Turnover
- Overall asset efficiency peaked in 2018 at 0.99 before trending downward to 0.81 in 2020. The subsequent increase to 0.90 in 2021 indicates a recovery in the ability to generate sales from the total asset base, although efficiency has not yet returned to the 2018 peak.
- Equity Turnover
- The utilization of shareholder equity showed a strong upward trajectory from 2017 (3.12) to a peak in 2019 (4.66). This was followed by a correction in 2020 to 3.95 and relative stability in 2021 at 3.99. The sustained higher levels compared to 2017 indicate a general improvement in the efficiency of equity in driving revenue over the five-year period.
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Net Fixed Asset Turnover
Illinois Tool Works Inc., net fixed asset 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) | ||||||
| Operating revenue | 14,455) | 12,574) | 14,109) | 14,768) | 14,314) | |
| Net plant and equipment | 1,809) | 1,777) | 1,729) | 1,791) | 1,778) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover1 | 7.99 | 7.08 | 8.16 | 8.25 | 8.05 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover, Competitors2 | ||||||
| Boeing Co. | 5.70 | — | — | — | — | |
| Caterpillar Inc. | 3.99 | — | — | — | — | |
| Eaton Corp. plc | 6.41 | — | — | — | — | |
| GE Aerospace | 5.47 | — | — | — | — | |
| Honeywell International Inc. | 6.18 | — | — | — | — | |
| Lockheed Martin Corp. | 8.83 | — | — | — | — | |
| RTX Corp. | 4.30 | — | — | — | — | |
| Net Fixed Asset Turnover, Sector | ||||||
| Capital Goods | 5.46 | — | — | — | — | |
| Net Fixed Asset Turnover, Industry | ||||||
| Industrials | 2.72 | — | — | — | — | |
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
Net fixed asset turnover = Operating revenue ÷ Net plant and equipment
= 14,455 ÷ 1,809 = 7.99
2 Click competitor name to see calculations.
The analysis of net fixed asset turnover from 2017 to 2021 reveals a consistently high level of asset utilization efficiency, punctuated by a notable cyclical decline in 2020 followed by a recovery in 2021.
- Operating Revenue Trends
- Operating revenue exhibited volatility over the period, increasing from $14,314 million in 2017 to a peak of $14,768 million in 2018. A subsequent downward trend led to a minimum of $12,574 million in 2020, before rebounding to $14,455 million by the end of 2021.
- Fixed Asset Base Stability
- Net plant and equipment remained remarkably stable throughout the five-year window, maintaining a tight range between $1,729 million and $1,809 million. This stability indicates a controlled approach to capital expenditure, with the asset base remaining nearly constant regardless of revenue fluctuations.
- Net Fixed Asset Turnover Performance
- The turnover ratio mirrored the movement of operating revenue due to the static nature of the fixed asset base. The ratio remained strong between 2017 and 2019, reaching a peak of 8.25 in 2018. A contraction to 7.08 occurred in 2020, directly correlating with the decrease in revenue. By 2021, efficiency recovered to 7.99, signaling a return to historical performance levels as revenue streams normalized.
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Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
Illinois Tool Works Inc., net fixed asset turnover (including operating lease, right-of-use asset) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating revenue | 14,455) | 12,574) | 14,109) | 14,768) | 14,314) | |
| Net plant and equipment | 1,809) | 1,777) | 1,729) | 1,791) | 1,778) | |
| Operating lease right-of-use assets | 222) | 216) | 206) | —) | —) | |
| Net plant and equipment (including operating lease, right-of-use asset) | 2,031) | 1,993) | 1,935) | 1,791) | 1,778) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset)1 | 7.12 | 6.31 | 7.29 | 8.25 | 8.05 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Competitors2 | ||||||
| Boeing Co. | 5.04 | — | — | — | — | |
| Caterpillar Inc. | 3.79 | — | — | — | — | |
| Eaton Corp. plc | 5.60 | — | — | — | — | |
| GE Aerospace | 4.55 | — | — | — | — | |
| Honeywell International Inc. | 5.28 | — | — | — | — | |
| Lockheed Martin Corp. | 7.54 | — | — | — | — | |
| RTX Corp. | 3.80 | — | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Sector | ||||||
| Capital Goods | 4.80 | — | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Industry | ||||||
| Industrials | 2.34 | — | — | — | — | |
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
Net fixed asset turnover (including operating lease, right-of-use asset) = Operating revenue ÷ Net plant and equipment (including operating lease, right-of-use asset)
= 14,455 ÷ 2,031 = 7.12
2 Click competitor name to see calculations.
The analysis of long-term investment activity reveals a period of fluctuation in asset efficiency between 2017 and 2021. While a consistent strategy of increasing the fixed asset base was maintained, the resulting turnover ratio was heavily influenced by volatility in operating revenues.
- Operating Revenue Performance
- Operating revenue exhibited a non-linear trend, peaking in 2018 at 14,768 million US$ before experiencing a contraction. A significant decline occurred in 2020, reaching a five-year low of 12,574 million US$, followed by a strong recovery to 14,455 million US$ in 2021.
- Net Fixed Asset Expansion
- Net plant and equipment, including right-of-use assets, demonstrated steady year-over-year growth. The asset base increased from 1,778 million US$ in 2017 to 2,031 million US$ in 2021, representing a continuous commitment to infrastructure and capacity expansion regardless of short-term revenue fluctuations.
- Net Fixed Asset Turnover Efficiency
- The net fixed asset turnover ratio peaked at 8.25 in 2018, indicating high efficiency in utilizing fixed assets to generate revenue. A downward trend followed, with the ratio reaching a minimum of 6.31 in 2020. This compression was driven by the dual impact of declining operating revenues and a growing asset base. By 2021, the ratio improved to 7.12, reflecting a recovery in asset productivity as revenues returned to near 2017 levels.
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Total Asset Turnover
Illinois Tool Works Inc., total asset 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) | ||||||
| Operating revenue | 14,455) | 12,574) | 14,109) | 14,768) | 14,314) | |
| Total assets | 16,077) | 15,612) | 15,068) | 14,870) | 16,780) | |
| Long-term Activity Ratio | ||||||
| Total asset turnover1 | 0.90 | 0.81 | 0.94 | 0.99 | 0.85 | |
| Benchmarks | ||||||
| Total Asset Turnover, Competitors2 | ||||||
| Boeing Co. | 0.45 | — | — | — | — | |
| Caterpillar Inc. | 0.58 | — | — | — | — | |
| Eaton Corp. plc | 0.58 | — | — | — | — | |
| GE Aerospace | 0.36 | — | — | — | — | |
| Honeywell International Inc. | 0.53 | — | — | — | — | |
| Lockheed Martin Corp. | 1.32 | — | — | — | — | |
| RTX Corp. | 0.40 | — | — | — | — | |
| Total Asset Turnover, Sector | ||||||
| Capital Goods | 0.50 | — | — | — | — | |
| Total Asset Turnover, Industry | ||||||
| Industrials | 0.58 | — | — | — | — | |
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
Total asset turnover = Operating revenue ÷ Total assets
= 14,455 ÷ 16,077 = 0.90
2 Click competitor name to see calculations.
The efficiency of asset utilization over the five-year period from 2017 to 2021 exhibits a cyclical pattern, characterized by a peak in 2018, a significant contraction in 2020, and a subsequent recovery in 2021. The fluctuations in the total asset turnover ratio are closely linked to the volatility of operating revenues and shifts in the total asset base.
- Operating Revenue Trends
- Revenue demonstrated stability between 2017 and 2019, followed by a sharp decline to 12,574 million US$ in 2020. A strong recovery occurred in 2021, with revenues rising to 14,455 million US$, effectively returning to 2017 levels.
- Total Asset Evolution
- A notable reduction in the asset base occurred between 2017 and 2018, where total assets decreased from 16,780 million US$ to 14,870 million US$. Following this contraction, assets grew steadily each year, reaching 16,077 million US$ by the end of 2021.
- Total Asset Turnover Analysis
- The asset turnover ratio increased from 0.85 in 2017 to a peak of 0.99 in 2018, driven by the combination of rising revenues and a reduced asset base. This efficiency declined over the next two years, reaching a low of 0.81 in 2020, which coincided with the period of lowest operating revenue and a growing asset base. By 2021, the ratio improved to 0.90, reflecting a rebound in revenue generation relative to the invested assets.
The observed data indicates that while the company experienced a temporary decline in asset productivity during the 2020 fiscal year, the recovery in 2021 suggests a return to normalized operational efficiency. The overall trend highlights a sensitivity in turnover ratios to revenue volatility, particularly when the asset base is expanding.
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Equity Turnover
Illinois Tool Works Inc., equity 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) | ||||||
| Operating revenue | 14,455) | 12,574) | 14,109) | 14,768) | 14,314) | |
| Stockholders’ equity attributable to ITW | 3,625) | 3,181) | 3,026) | 3,254) | 4,585) | |
| Long-term Activity Ratio | ||||||
| Equity turnover1 | 3.99 | 3.95 | 4.66 | 4.54 | 3.12 | |
| Benchmarks | ||||||
| Equity Turnover, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.92 | — | — | — | — | |
| Eaton Corp. plc | 1.20 | — | — | — | — | |
| GE Aerospace | 1.76 | — | — | — | — | |
| Honeywell International Inc. | 1.85 | — | — | — | — | |
| Lockheed Martin Corp. | 6.12 | — | — | — | — | |
| RTX Corp. | 0.88 | — | — | — | — | |
| Equity Turnover, Sector | ||||||
| Capital Goods | 2.28 | — | — | — | — | |
| Equity Turnover, Industry | ||||||
| Industrials | 2.63 | — | — | — | — | |
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
Equity turnover = Operating revenue ÷ Stockholders’ equity attributable to ITW
= 14,455 ÷ 3,625 = 3.99
2 Click competitor name to see calculations.
The equity turnover ratio experienced significant volatility between 2017 and 2021, characterized by a sharp initial increase followed by a period of correction and stabilization.
- Equity Turnover Trend
- The ratio rose from 3.12 in 2017 to a peak of 4.66 in 2019. This indicates a period of increased revenue generation efficiency relative to the equity base. However, a decline occurred in 2020, with the ratio falling to 3.95, before stabilizing at 3.99 by the end of 2021.
- Operating Revenue Performance
- Revenue remained relatively stable between 2017 and 2019, with values fluctuating between US$ 14.1 billion and US$ 14.8 billion. A notable contraction is observed in 2020, where revenue decreased to US$ 12.57 billion, followed by a recovery to US$ 14.46 billion in 2021.
- Stockholders' Equity Dynamics
- A significant reduction in stockholders' equity occurred between 2017 and 2018, dropping from US$ 4.59 billion to US$ 3.25 billion. Equity reached its lowest point in 2019 at US$ 3.03 billion before initiating a gradual upward trend, ending the period at US$ 3.63 billion in 2021.
- Correlation Analysis
- The increase in equity turnover during 2018 and 2019 was primarily driven by the substantial contraction of the equity base rather than growth in operating revenue. The subsequent decline in the turnover ratio in 2020 was the result of a simultaneous decrease in revenue and a slight increase in equity, reflecting a temporary reduction in the efficiency of equity utilization during that fiscal year.
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