Analysis of Long-term (Investment) Activity Ratios
Quarterly Data
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 (quarterly data)
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
The analysis of the quarterly financial ratios indicates several notable trends over the observed periods.
- Net Fixed Asset Turnover
- This ratio demonstrates a gradual decline from 11.71 at the beginning of 2013 to 10.05 by the end of 2014, indicating a decreasing rate of sales generated per unit of fixed assets during this period. However, from 2015 onwards, there is a marked recovery and upward trend, with the ratio peaking at 13.02 in the third quarter of 2016 before slightly decreasing to 12.42 by March 2017. This suggests improved efficiency in utilizing fixed assets to generate sales in the later periods.
- Total Asset Turnover
- The total asset turnover ratio remained relatively stable around the 0.72 to 0.80 range through the end of 2014, reflecting consistent overall asset utilization to generate revenue. However, a substantial drop is observed starting in the first quarter of 2015, falling sharply to values near 0.23 and maintaining a low level in subsequent quarters, only gradually improving to around 0.32 by early 2017. This significant decline suggests a deterioration in the ability to use total assets effectively in generating revenue during these years, with only a modest recovery noted towards the end.
- Equity Turnover
- Equity turnover remains steady around 2.37 to 2.67 from 2013 through the end of 2014, which points to a consistent relationship between sales and shareholders' equity during this period. Similar to total asset turnover, equity turnover declines sharply in 2015, reaching low points near 0.68 to 0.82, followed by slight fluctuations and stabilization around 0.78 by early 2017. This pattern indicates a reduction in sales generated per unit of equity, signifying less efficient use of shareholders’ investment during the mid-period, with some improvement yet not returning to prior levels.
In summary, while the net fixed asset turnover ratio shows resilience and recovery post-2014, both total asset turnover and equity turnover ratios experience a significant decrease starting in 2015, suggesting challenges in overall asset and equity utilization during that timeframe. The partial recovery in these turnover ratios toward the end of the observed periods indicates an ongoing effort or improvement in operational efficiency.
Net Fixed Asset Turnover
Reynolds American Inc., net fixed asset turnover calculation (quarterly data)
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Net sales, includes excise taxes | 3,931) | 4,254) | 4,330) | 4,315) | 3,947) | 4,216) | 4,381) | 3,390) | 2,897) | 3,024) | 3,202) | 3,089) | 2,781) | 2,959) | 3,107) | 3,162) | 2,738) | ||||||
| Property, plant and equipment, net of accumulated depreciation | 1,355) | 1,348) | 1,310) | 1,295) | 1,269) | 1,255) | 1,218) | 1,298) | 1,202) | 1,203) | 1,198) | 1,177) | 1,131) | 1,074) | 1,049) | 1,027) | 1,034) | ||||||
| Long-term Activity Ratio | |||||||||||||||||||||||
| Net fixed asset turnover1 | 12.42 | 12.50 | 12.83 | 13.02 | 12.56 | 11.86 | 11.24 | 9.64 | 10.16 | 10.05 | 10.04 | 10.14 | 10.62 | 11.14 | 11.50 | 11.75 | 11.71 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Net Fixed Asset Turnover, Competitors2 | |||||||||||||||||||||||
| Coca-Cola Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| PepsiCo Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Net fixed asset turnover
= (Net sales, includes excise taxesQ1 2017
+ Net sales, includes excise taxesQ4 2016
+ Net sales, includes excise taxesQ3 2016
+ Net sales, includes excise taxesQ2 2016)
÷ Property, plant and equipment, net of accumulated depreciation
= (3,931 + 4,254 + 4,330 + 4,315)
÷ 1,355 = 12.42
2 Click competitor name to see calculations.
The quarterly financial data reveals distinct trends in net sales, fixed assets, and asset utilization over the examined periods. Net sales, inclusive of excise taxes, show variability with an overall oscillating pattern. Initial quarters display moderate sales volumes, followed by a notable surge around late 2015, peaking in the third quarter of that year. This peak is subsequently followed by a gradual decline through to early 2017, indicating possible cyclical demand or pricing adjustments impacting revenue.
The net value of property, plant, and equipment (PP&E), after accumulated depreciation, exhibits a generally upward trend, reflecting continued investment or capital expenditure over time. The incremental increases are steady, with occasional periods of stabilization. This pattern suggests ongoing efforts to maintain or expand production capacity or upgrade fixed assets.
Net fixed asset turnover, which measures the efficiency of utilizing fixed assets to generate sales, shows a declining trend from early 2013 through 2014, indicating a reduction in efficiency during this timeframe. However, from 2015 onwards, there is a progressive improvement in turnover ratios, with the metric surpassing initial levels by 2016. This improvement implies enhanced operational efficiency or better asset management practices in later periods.
- Net Sales
- Fluctuate notably across quarters, with a significant sales peak around Q3 2015 followed by a gradual decrease towards Q1 2017.
- Property, Plant and Equipment (Net)
- Displays a consistent upward trajectory, indicative of ongoing capital investments and asset base growth.
- Net Fixed Asset Turnover
- Declines initially between 2013 and 2014, reflecting decreased asset efficiency, but recovers and improves progressively from 2015 onward, suggesting optimized utilization of fixed assets.
In summary, while net sales experience cyclical fluctuations with a notable peak, the company steadily increases its fixed asset base and succeeds in improving asset turnover in recent periods. This combination points to potential strategic investment in capacity and a focus on enhancing asset productivity despite variable sales performance.
Total Asset Turnover
Reynolds American Inc., total asset turnover calculation (quarterly data)
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Net sales, includes excise taxes | 3,931) | 4,254) | 4,330) | 4,315) | 3,947) | 4,216) | 4,381) | 3,390) | 2,897) | 3,024) | 3,202) | 3,089) | 2,781) | 2,959) | 3,107) | 3,162) | 2,738) | ||||||
| Total assets | 51,959) | 51,095) | 51,792) | 51,772) | 54,408) | 53,224) | 53,774) | 54,558) | 15,850) | 15,196) | 15,332) | 15,301) | 15,799) | 15,402) | 16,592) | 15,532) | 16,778) | ||||||
| Long-term Activity Ratio | |||||||||||||||||||||||
| Total asset turnover1 | 0.32 | 0.33 | 0.32 | 0.33 | 0.29 | 0.28 | 0.25 | 0.23 | 0.77 | 0.80 | 0.78 | 0.78 | 0.76 | 0.78 | 0.73 | 0.78 | 0.72 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Total Asset Turnover, Competitors2 | |||||||||||||||||||||||
| Coca-Cola Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| PepsiCo Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Total asset turnover
= (Net sales, includes excise taxesQ1 2017
+ Net sales, includes excise taxesQ4 2016
+ Net sales, includes excise taxesQ3 2016
+ Net sales, includes excise taxesQ2 2016)
÷ Total assets
= (3,931 + 4,254 + 4,330 + 4,315)
÷ 51,959 = 0.32
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals several notable trends across net sales, total assets, and total asset turnover over the observed periods.
- Net Sales
- Net sales, expressed in US$ millions, exhibited fluctuations throughout the examined quarters. Initially, net sales showed moderate variability around an average range between approximately 2700 million and 3200 million from early 2013 through late 2014. Starting in early 2015, a significant increase occurred, with sales peaking at 4381 million in the third quarter of 2015. Following this peak, net sales stabilized at higher levels than previous years but displayed a slight downward trend from late 2015 to early 2017, declining to 3931 million by the first quarter of 2017. This pattern suggests an episode of strong sales growth during 2015, likely supported by favorable market factors or operational changes, before a moderate reduction in subsequent quarters.
- Total Assets
- Total assets, also measured in US$ millions, initially ranged between about 15100 million and 16800 million up to the end of 2014, showing relative stability with minor fluctuations. Beginning in early 2015, a sharp and substantial increase is observed, with total assets rising abruptly to over 54000 million and remaining nearly constant through early 2017. This substantial jump indicates a likely significant acquisition, investment, or revaluation event that drastically expanded the asset base, maintaining a high level without notable decline in the following quarters.
- Total Asset Turnover
- The total asset turnover ratio, indicating the efficiency in utilizing assets to generate sales, demonstrates two distinct phases. Prior to 2015, the ratio consistently fluctuated between approximately 0.72 and 0.80, indicating relatively stable asset utilization efficiency. However, commencing in 2015, there is a marked drop in the turnover ratio to the range of 0.23 to 0.33, reflecting diminished efficiency. This decline aligns with the sudden surge in total assets, which did not correspond with an immediate proportionate increase in sales. While the asset base expanded fivefold, sales growth was comparatively modest, leading to reduced turnover figures. Towards the end of the period evaluated, the ratio slightly recovers but remains significantly below earlier levels, suggesting an ongoing adjustment phase in asset utilization post-expansion.
In summary, the company experienced a substantial expansion of its asset base around early 2015, accompanied by increased sales that, while elevated, did not keep pace proportionally with assets. This imbalance resulted in a decreased asset turnover rate, implying challenges or strategic changes in asset deployment and operational efficiency. The period preceding the expansion was characterized by relatively steady sales and asset metrics, with consistent asset efficiency. The post-expansion period reflects the impact of significant capital adjustments on financial performance metrics, highlighting a phase of integration or adaptation.
Equity Turnover
Reynolds American Inc., equity turnover calculation (quarterly data)
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Net sales, includes excise taxes | 3,931) | 4,254) | 4,330) | 4,315) | 3,947) | 4,216) | 4,381) | 3,390) | 2,897) | 3,024) | 3,202) | 3,089) | 2,781) | 2,959) | 3,107) | 3,162) | 2,738) | ||||||
| Shareholders’ equity | 21,706) | 21,711) | 21,544) | 21,400) | 21,163) | 18,252) | 18,477) | 18,326) | 4,519) | 4,522) | 4,993) | 4,895) | 5,013) | 5,167) | 5,080) | 5,096) | 5,118) | ||||||
| Long-term Activity Ratio | |||||||||||||||||||||||
| Equity turnover1 | 0.78 | 0.78 | 0.78 | 0.79 | 0.75 | 0.82 | 0.74 | 0.68 | 2.70 | 2.67 | 2.41 | 2.44 | 2.40 | 2.32 | 2.37 | 2.37 | 2.37 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Equity Turnover, Competitors2 | |||||||||||||||||||||||
| Coca-Cola Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| PepsiCo Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Equity turnover
= (Net sales, includes excise taxesQ1 2017
+ Net sales, includes excise taxesQ4 2016
+ Net sales, includes excise taxesQ3 2016
+ Net sales, includes excise taxesQ2 2016)
÷ Shareholders’ equity
= (3,931 + 4,254 + 4,330 + 4,315)
÷ 21,706 = 0.78
2 Click competitor name to see calculations.
- Net Sales
- Net sales, including excise taxes, experienced fluctuations across the periods. From March 2013 to December 2013, sales showed minor variability but remained close to an average range between 2700 and 3200 million US dollars. In 2014, net sales generally increased slightly across most quarters, peaking around September 2014, followed by a moderate decline toward the end of the year.
- The period from March 2015 to December 2015 saw notable growth, with a significant increase peaking in the third quarter of 2015, reaching over 4300 million US dollars. However, subsequent quarters in 2016 demonstrated some volatility, with sales fluctuating around 3900 to 4300 million US dollars before slightly decreasing by the first quarter of 2017.
- Shareholders’ Equity
- Shareholders’ equity was relatively stable between March 2013 and December 2014, hovering around 4500 to 5100 million US dollars with a slight downward trend toward the end of 2014. A significant shift occurred starting in March 2015, where equity values sharply increased, reaching above 18,000 million US dollars.
- This elevated level of equity was sustained through 2015 and the subsequent years until March 2017, with moderate incremental gains noted each quarter. The substantial jump in equity during 2015 suggests a major change in the company’s capital structure or an extraordinary event affecting the equity base.
- Equity Turnover
- Equity turnover ratios prior to 2015 consistently ranged from approximately 2.3 to 2.7, indicating a relatively stable relationship between net sales and shareholders’ equity during this period. However, from March 2015 onward, there was a marked decline in equity turnover, dropping sharply to below 1.0.
- This decline in equity turnover corresponds with the earlier noted substantial increase in shareholders’ equity, while net sales did not increase proportionally. The lower turnover ratio during 2015-2017 indicates that sales were generated less efficiently relative to the equity base during this period compared to prior years.
- Summary of Trends and Insights
- The data reflects a period of stability in sales and equity with relatively consistent equity turnover ratios between 2013 and early 2014. A pronounced structural change took place starting in 2015, with a surge in shareholders’ equity and a corresponding decrease in equity turnover ratios despite fluctuating but generally higher sales volumes.
- These dynamics may imply significant capital infusion or accounting changes affecting equity, which were not matched by proportional sales growth, leading to reduced efficiency in using equity to generate revenue. This developing pattern suggests that the company’s financial leverage and operational efficiency underwent substantial change, warranting further investigation into the underlying causes and their impact on long-term performance.