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)
Northrop Grumman Corp., long-term (investment) activity ratios
Based on: 10-K (reporting date: 2022-12-31), 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).
The analysis of the annual financial ratios reveals several notable trends over the five-year period from 2018 to 2022. The metrics observed include net fixed asset turnover (with and without inclusion of operating lease right-of-use assets), total asset turnover, and equity turnover.
- Net Fixed Asset Turnover
- This ratio showed an initial increase from 4.72 in 2018 to a peak of 5.2 in 2020, suggesting improved efficiency in using fixed assets to generate sales during this timeframe. However, it declined to 4.52 in 2021 and further to 4.16 in 2022, indicating a reduction in the effectiveness of fixed assets in revenue generation in the latest years.
- Net Fixed Asset Turnover (Including Operating Lease, Right-of-Use Asset)
- When accounting for operating lease assets, the turnover ratio started at the same level as without these leases in 2018 at 4.72, but then exhibited a consistent decline each year to 3.45 in 2022. This downward trend is more pronounced than the standard net fixed asset turnover measure, implying that the inclusion of leased assets reveals a diminishing efficiency in asset utilization over time.
- Total Asset Turnover
- This ratio demonstrates slight but steady improvement over the period, moving from 0.80 in 2018 to 0.84 in both 2021 and 2022. The gradual increase suggests a modest enhancement in the company's ability to generate sales from its total asset base, reflecting potentially more effective overall asset management.
- Equity Turnover
- Equity turnover presented a contrasting pattern, increasing from 3.68 in 2018 to 3.84 in 2019 but declining notably thereafter to 2.39 by 2022. This decline suggests the company is generating less sales per dollar of equity, which may indicate higher equity levels not matched by proportional sales growth or less efficient utilization of equity capital in recent years.
In summary, asset turnover ratios exhibit mixed performance with an initial improvement followed by decline in fixed asset efficiency, while total asset turnover shows steady slight gains in operational efficiency. Equity turnover’s downward trend points to reduced sales generation relative to equity invested, highlighting potential concerns regarding capital utilization effectiveness.
Net Fixed Asset Turnover
Northrop Grumman Corp., net fixed asset turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Sales | 36,602) | 35,667) | 36,799) | 33,841) | 30,095) | |
| Property, plant and equipment, net of accumulated depreciation | 8,800) | 7,894) | 7,071) | 6,912) | 6,372) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover1 | 4.16 | 4.52 | 5.20 | 4.90 | 4.72 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover, Competitors2 | ||||||
| Boeing Co. | 6.31 | 5.70 | 4.92 | — | — | |
| Caterpillar Inc. | 4.70 | 3.99 | 3.15 | — | — | |
| Eaton Corp. plc | 6.59 | 6.41 | 6.02 | — | — | |
| GE Aerospace | 5.96 | 5.47 | 1.75 | — | — | |
| Honeywell International Inc. | 6.48 | 6.18 | 5.86 | — | — | |
| Lockheed Martin Corp. | 8.27 | 8.83 | 9.07 | — | — | |
| RTX Corp. | 4.42 | 4.30 | 3.78 | — | — | |
| Net Fixed Asset Turnover, Sector | ||||||
| Capital Goods | 5.79 | 5.46 | 3.55 | — | — | |
| Net Fixed Asset Turnover, Industry | ||||||
| Industrials | 2.94 | 2.72 | 2.17 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Net fixed asset turnover = Sales ÷ Property, plant and equipment, net of accumulated depreciation
= 36,602 ÷ 8,800 = 4.16
2 Click competitor name to see calculations.
The annual financial data reveals several noteworthy trends across the five-year period. Sales demonstrated an overall upward trajectory, rising from $30,095 million in 2018 to $36,602 million in 2022, despite a slight dip in 2021. The peak sales performance was observed in 2020, reaching $36,799 million, before experiencing a moderate decline and subsequent recovery.
In terms of property, plant, and equipment (PP&E), net of accumulated depreciation, a consistent increase was apparent year over year. The value grew from $6,372 million in 2018 to $8,800 million in 2022, indicating ongoing capital investment or asset acquisition, which suggests a focus on expanding or upgrading fixed assets.
Examining the net fixed asset turnover ratio, which measures sales generated per unit of fixed assets, a mixed pattern emerges. This ratio increased initially, from 4.72 in 2018 to a high of 5.2 in 2020, reflecting improved efficiency or better utilization of fixed assets. However, post-2020, the ratio declined to 4.16 by 2022, signaling a reduction in asset turnover efficiency. This decline could imply that the recent increases in fixed assets have not yet translated proportionally into higher sales, or perhaps sales growth has plateaued relative to asset growth.
- Sales Trend
- Increased overall with a peak in 2020, slight decline in 2021, followed by recovery in 2022.
- Property, Plant and Equipment (Net)
- Consistent growth indicating investment in fixed assets throughout the period.
- Net Fixed Asset Turnover Ratio
- Improved until 2020 then declined through 2022, suggesting decreased efficiency in generating sales from fixed assets in recent years.
Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
Northrop Grumman Corp., net fixed asset turnover (including operating lease, right-of-use asset) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Sales | 36,602) | 35,667) | 36,799) | 33,841) | 30,095) | |
| Property, plant and equipment, net of accumulated depreciation | 8,800) | 7,894) | 7,071) | 6,912) | 6,372) | |
| Operating lease right-of-use assets | 1,811) | 1,655) | 1,533) | 1,511) | —) | |
| Property, plant and equipment, net of accumulated depreciation (including operating lease, right-of-use asset) | 10,611) | 9,549) | 8,604) | 8,423) | 6,372) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset)1 | 3.45 | 3.74 | 4.28 | 4.02 | 4.72 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Competitors2 | ||||||
| Boeing Co. | 5.55 | 5.04 | 4.45 | — | — | |
| Caterpillar Inc. | 4.49 | 3.79 | 3.00 | — | — | |
| Eaton Corp. plc | 5.58 | 5.60 | 5.26 | — | — | |
| GE Aerospace | 5.08 | 4.55 | 1.63 | — | — | |
| Honeywell International Inc. | 5.58 | 5.28 | 5.15 | — | — | |
| Lockheed Martin Corp. | 7.27 | 7.54 | 7.96 | — | — | |
| RTX Corp. | 3.95 | 3.80 | 3.36 | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Sector | ||||||
| Capital Goods | 5.13 | 4.80 | 3.25 | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Industry | ||||||
| Industrials | 2.54 | 2.34 | 1.92 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Net fixed asset turnover (including operating lease, right-of-use asset) = Sales ÷ Property, plant and equipment, net of accumulated depreciation (including operating lease, right-of-use asset)
= 36,602 ÷ 10,611 = 3.45
2 Click competitor name to see calculations.
The financial data over the five-year period exhibits several notable trends and insights regarding sales, property, plant and equipment, and asset utilization efficiency.
- Sales
- Sales figures show a consistent upward trajectory from 30,095 million US dollars in 2018 to 36,602 million US dollars in 2022. Although there is a minor dip in 2021 to 35,667 million, the overall trend depicts growth, with a compound increase over the five years, reflecting sustained revenue expansion.
- Property, Plant and Equipment (Net of Accumulated Depreciation, Including Operating Lease and Right-of-Use Asset)
- Investments in property, plant, and equipment progressively increased throughout the period, rising from 6,372 million US dollars in 2018 to 10,611 million US dollars in 2022. This steady increase suggests ongoing capital expenditure and asset base expansion, possibly aimed at supporting operational capacity or modernization efforts.
- Net Fixed Asset Turnover (Including Operating Lease, Right-of-Use Asset)
- The ratio of net fixed asset turnover, which measures how effectively the company utilizes its fixed assets to generate sales, demonstrates a declining trend. Starting at 4.72 in 2018, it decreases to 3.45 by 2022. This indicates that while both sales and asset base grew, sales growth did not keep pace proportionally with the asset increases, leading to lower efficiency in utilizing fixed assets to generate revenue.
Total Asset Turnover
Northrop Grumman Corp., total asset turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Sales | 36,602) | 35,667) | 36,799) | 33,841) | 30,095) | |
| Total assets | 43,755) | 42,579) | 44,469) | 41,089) | 37,653) | |
| Long-term Activity Ratio | ||||||
| Total asset turnover1 | 0.84 | 0.84 | 0.83 | 0.82 | 0.80 | |
| Benchmarks | ||||||
| Total Asset Turnover, Competitors2 | ||||||
| Boeing Co. | 0.49 | 0.45 | 0.38 | — | — | |
| Caterpillar Inc. | 0.69 | 0.58 | 0.50 | — | — | |
| Eaton Corp. plc | 0.59 | 0.58 | 0.56 | — | — | |
| GE Aerospace | 0.39 | 0.36 | 0.29 | — | — | |
| Honeywell International Inc. | 0.57 | 0.53 | 0.51 | — | — | |
| Lockheed Martin Corp. | 1.25 | 1.32 | 1.29 | — | — | |
| RTX Corp. | 0.42 | 0.40 | 0.35 | — | — | |
| Total Asset Turnover, Sector | ||||||
| Capital Goods | 0.54 | 0.50 | 0.43 | — | — | |
| Total Asset Turnover, Industry | ||||||
| Industrials | 0.66 | 0.58 | 0.50 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Total asset turnover = Sales ÷ Total assets
= 36,602 ÷ 43,755 = 0.84
2 Click competitor name to see calculations.
- Sales Trends
- Sales demonstrated a general upward trajectory over the five-year period, increasing from US$30,095 million in 2018 to US$36,602 million in 2022. There was consistent growth each year except for a slight dip in 2021, where sales decreased marginally from US$36,799 million in 2020 to US$35,667 million before rising again in 2022.
- Total Assets Trends
- Total assets also followed an increasing trend, rising steadily from US$37,653 million in 2018 to US$43,755 million in 2022. Notably, there was a peak in total assets in 2020 at US$44,469 million, followed by a minor decline in 2021, and a subsequent moderate recovery in 2022.
- Total Asset Turnover Analysis
- The total asset turnover ratio showed gradual improvement over the period, increasing from 0.8 in 2018 to 0.84 in both 2021 and 2022. This suggests a progressive enhancement in the efficiency with which assets were utilized to generate sales despite fluctuations in both sales and total assets.
- Overall Observations
- The data indicates a positive overall growth in sales and total assets with minor temporary setbacks in 2021. The consistent improvement in asset turnover ratio highlights increased operational efficiency in leveraging assets to produce revenue. This combination suggests balanced growth accompanied by enhanced asset management performance over the observed period.
Equity Turnover
Northrop Grumman Corp., equity turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Sales | 36,602) | 35,667) | 36,799) | 33,841) | 30,095) | |
| Shareholders’ equity | 15,312) | 12,926) | 10,579) | 8,819) | 8,187) | |
| Long-term Activity Ratio | ||||||
| Equity turnover1 | 2.39 | 2.76 | 3.48 | 3.84 | 3.68 | |
| Benchmarks | ||||||
| Equity Turnover, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 3.57 | 2.92 | 2.55 | — | — | |
| Eaton Corp. plc | 1.22 | 1.20 | 1.20 | — | — | |
| GE Aerospace | 2.02 | 1.76 | 2.05 | — | — | |
| Honeywell International Inc. | 2.12 | 1.85 | 1.86 | — | — | |
| Lockheed Martin Corp. | 7.12 | 6.12 | 10.87 | — | — | |
| RTX Corp. | 0.92 | 0.88 | 0.78 | — | — | |
| Equity Turnover, Sector | ||||||
| Capital Goods | 2.54 | 2.28 | 2.39 | — | — | |
| Equity Turnover, Industry | ||||||
| Industrials | 3.06 | 2.63 | 2.75 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 2022 Calculation
Equity turnover = Sales ÷ Shareholders’ equity
= 36,602 ÷ 15,312 = 2.39
2 Click competitor name to see calculations.
The financial data reveals several noteworthy trends over the five-year period.
- Sales
- Sales experienced a general upward trend from 2018 to 2022, increasing from $30,095 million in 2018 to $36,602 million in 2022. There was consistent growth each year except for a slight decrease in 2021 where sales dipped marginally compared to 2020.
- Shareholders’ Equity
- Shareholders’ equity showed a steady and significant increase throughout the period. It rose from $8,187 million in 2018 to $15,312 million in 2022, reflecting a strengthening equity base indicative of retained earnings growth or capital injections.
- Equity Turnover
- The equity turnover ratio declined over the years, falling from 3.68 in 2018 to 2.39 in 2022. This trend suggests that the company generated fewer sales per dollar of equity each year, which could be a result of the faster growth in equity relative to sales or changing operational efficiency.
In summary, the data illustrates stable sales growth accompanied by a substantial increase in shareholders' equity, while the efficiency in using equity to generate sales has decreased. This may warrant further investigation into operational leverage or capital structure changes affecting asset utilization.