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)
Reynolds American Inc., long-term (investment) activity ratios
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
The analysis of financial turnover ratios over the five-year period reveals notable fluctuations and trends.
- Net Fixed Asset Turnover
- This ratio shows a general decline from 11.79 in 2012 to a low of 10.05 in 2014, indicating a reduction in the efficiency with which the company used its fixed assets to generate sales during this period. However, there is a subsequent recovery in 2015 and 2016, reaching 11.86 and then rising further to 12.5, suggesting improved utilization of fixed assets in the latter years.
- Total Asset Turnover
- There is a relatively stable performance from 2012 through 2014, with a slight increase from 0.74 to 0.8. This suggests steady efficiency in using total assets to generate revenue. However, a sharp decline occurs in 2015, dropping to 0.28, and remains low in 2016 at 0.33. This significant decrease indicates a marked reduction in asset efficiency during the last two years, which may suggest issues such as asset growth outpacing revenue or operational inefficiencies.
- Equity Turnover
- The equity turnover ratio remains fairly consistent between 2.32 and 2.67 from 2012 to 2014, implying stable use of shareholders' equity to generate revenue. Similar to total asset turnover, a sharp decline is observed in 2015 to 0.82 and further to 0.78 in 2016, signaling reduced efficiency in leveraging equity for sales generation in these years.
Overall, while net fixed asset turnover shows initial weakness followed by recovery, both total asset turnover and equity turnover exhibit a strong decline after 2014, reflecting potential challenges in asset and equity utilization that may warrant further investigation. The divergent behavior between fixed asset turnover and the broader asset and equity turnovers suggests that non-fixed assets or other equity-related factors could be impacting overall efficiency negatively in the latter period.
Net Fixed Asset Turnover
Reynolds American Inc., net fixed asset turnover calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales, includes excise taxes | 16,846) | 14,884) | 12,096) | 11,966) | 12,227) | |
| Property, plant and equipment, net | 1,348) | 1,255) | 1,203) | 1,074) | 1,037) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover1 | 12.50 | 11.86 | 10.05 | 11.14 | 11.79 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover, Competitors2 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 2016 Calculation
Net fixed asset turnover = Net sales, includes excise taxes ÷ Property, plant and equipment, net
= 16,846 ÷ 1,348 = 12.50
2 Click competitor name to see calculations.
- Net Sales
- Net sales, including excise taxes, exhibit a generally increasing trend over the five-year period. Starting at 12,227 million USD in 2012, there is a slight decline in 2013 to 11,966 million USD, followed by a marginal recovery to 12,096 million USD in 2014. From 2014 onwards, net sales increase more substantially, reaching 14,884 million USD in 2015 and peaking at 16,846 million USD in 2016. This suggests enhanced sales performance and potential market expansion or price increases in the later years.
- Property, Plant and Equipment, Net
- The net value of property, plant, and equipment steadily rises throughout the period under review. Beginning at 1,037 million USD in 2012, it grows progressively each year to 1,074 million USD in 2013, 1,203 million USD in 2014, 1,255 million USD in 2015, and finally 1,348 million USD in 2016. This consistent increase might indicate ongoing investments in fixed assets, possibly to support production capacity expansion or modernization efforts.
- Net Fixed Asset Turnover Ratio
- The net fixed asset turnover ratio shows some fluctuation but overall improvement by the end of the period. Initially, the ratio declines from 11.79 in 2012 to 11.14 in 2013 and further to 10.05 in 2014, which may reflect decreased efficiency in utilizing fixed assets during those years. Subsequently, a rebound occurs with the ratio climbing to 11.86 in 2015 and reaching 12.5 in 2016, surpassing the initial level in 2012. This progression indicates improved efficiency in generating sales from fixed assets, possibly as a result of better asset management or increased sales volume relative to asset base.
Total Asset Turnover
Reynolds American Inc., total asset turnover calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales, includes excise taxes | 16,846) | 14,884) | 12,096) | 11,966) | 12,227) | |
| Total assets | 51,095) | 53,224) | 15,196) | 15,402) | 16,557) | |
| Long-term Activity Ratio | ||||||
| Total asset turnover1 | 0.33 | 0.28 | 0.80 | 0.78 | 0.74 | |
| Benchmarks | ||||||
| Total Asset Turnover, Competitors2 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 2016 Calculation
Total asset turnover = Net sales, includes excise taxes ÷ Total assets
= 16,846 ÷ 51,095 = 0.33
2 Click competitor name to see calculations.
The financial data reveals several notable trends over the five-year period from 2012 to 2016.
- Net Sales
- Net sales showed a generally increasing trend throughout the period. Starting at $12,227 million in 2012, sales decreased slightly to $11,966 million in 2013 but then rose modestly to $12,096 million in 2014. A significant increase occurred thereafter, with net sales reaching $14,884 million in 2015 and further climbing to $16,846 million in 2016. This reflects robust growth in revenue, particularly in the last two years.
- Total Assets
- Total assets exhibited a distinct pattern. Initially, assets declined from $16,557 million in 2012 to $15,402 million in 2013, continuing to fall slightly to $15,196 million in 2014. However, there was a dramatic increase to $53,224 million in 2015, which slightly decreased to $51,095 million in 2016. The sharp rise in total assets between 2014 and 2015 suggests a major acquisition or capital investment during that period, substantially expanding the asset base.
- Total Asset Turnover
- The total asset turnover ratio, which measures the efficiency in using assets to generate sales, initially improved from 0.74 in 2012 to 0.78 in 2013, and further to 0.80 in 2014. This indicates increasing operational efficiency in the use of assets during this timeframe. However, this trend reversed in 2015 and 2016 as the ratio dropped sharply to 0.28 and then rose slightly to 0.33, respectively. The decline is likely connected to the significant asset base expansion, diluting turnover as asset growth outpaced the rise in sales.
Overall, the company experienced solid sales growth, especially in the last two years, accompanied by a major increase in total assets around 2015. While asset utilization was initially improving, it fell considerably after the asset base expanded, suggesting a period where asset integration or optimization was needed to restore efficiency.
Equity Turnover
Reynolds American Inc., equity turnover calculation, comparison to benchmarks
| Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales, includes excise taxes | 16,846) | 14,884) | 12,096) | 11,966) | 12,227) | |
| Shareholders’ equity | 21,711) | 18,252) | 4,522) | 5,167) | 5,257) | |
| Long-term Activity Ratio | ||||||
| Equity turnover1 | 0.78 | 0.82 | 2.67 | 2.32 | 2.33 | |
| Benchmarks | ||||||
| Equity Turnover, Competitors2 | ||||||
| Coca-Cola Co. | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
1 2016 Calculation
Equity turnover = Net sales, includes excise taxes ÷ Shareholders’ equity
= 16,846 ÷ 21,711 = 0.78
2 Click competitor name to see calculations.
- Net Sales
- Net sales demonstrated a generally upward trend over the five-year period. Starting at US$12,227 million in 2012, there was a slight dip in 2013 to US$11,966 million, followed by a marginal recovery in 2014 to US$12,096 million. A significant increase was observed in 2015, with net sales rising sharply to US$14,884 million and continuing this upward trajectory to reach US$16,846 million in 2016. This pattern indicates robust growth in revenue during the latter part of the period.
- Shareholders' Equity
- Shareholders’ equity experienced a declining trend from 2012 through 2014, decreasing from US$5,257 million to US$4,522 million. However, a notable reversal occurred in 2015 when equity surged dramatically to US$18,252 million and increased further to US$21,711 million in 2016. This substantial growth in equity during the two most recent years suggests significant changes, potentially reflecting new equity issuance, retained earnings accumulation, or other capital structure adjustments.
- Equity Turnover Ratio
- The equity turnover ratio, which measures the efficiency in using shareholders' equity to generate sales, was relatively stable around 2.3 in 2012 and 2013 and slightly increased to 2.67 in 2014. In 2015 and 2016, this ratio dropped sharply to 0.82 and 0.78 respectively, indicating a significant decline in sales generated per unit of equity. This change aligns with the large increase in shareholders’ equity observed during these years, suggesting that equity grew faster than net sales, reducing turnover efficiency.