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)
General Dynamics Corp., long-term (investment) activity ratios
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
The analysis of investment activity ratios between 2015 and 2019 reveals a gradual decline in overall asset efficiency, contrasted by relative stability in equity utilization and a significant accounting-driven shift in fixed asset reporting during the final year.
- Total Asset Turnover
- A consistent downward trajectory is observed in total asset turnover, which decreased from 0.98 in 2015 to a low of 0.80 in 2018, before marginally improving to 0.81 in 2019. This trend indicates a reduction in the efficiency with which the total asset base is utilized to generate revenue over the five-year period.
- Net Fixed Asset Utilization
- Standard net fixed asset turnover remained relatively robust, fluctuating between 9.08 in 2015 and 8.32 in 2018, before recovering to 8.79 in 2019. However, a significant divergence is noted in the ratio including right-of-use assets, which dropped sharply to 6.66 in 2019. This disparity suggests a substantial increase in recognized operating lease assets during the final year, which lowered the overall turnover efficiency of the expanded fixed asset base.
- Equity Turnover
- Equity turnover exhibited moderate volatility but remained within a narrow range, starting at 2.93 in 2015 and peaking at 3.08 in 2018. The ratio ended the period at 2.90 in 2019, suggesting that the company's ability to generate sales relative to shareholder equity remained stable despite the decline in total asset turnover.
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Net Fixed Asset Turnover
General Dynamics Corp., net fixed asset turnover calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Revenue | 39,350) | 36,193) | 30,973) | 31,353) | 31,469) | |
| Property, plant and equipment, net | 4,475) | 4,348) | 3,517) | 3,467) | 3,466) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover1 | 8.79 | 8.32 | 8.81 | 9.04 | 9.08 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Net fixed asset turnover = Revenue ÷ Property, plant and equipment, net
= 39,350 ÷ 4,475 = 8.79
2 Click competitor name to see calculations.
Between 2015 and 2019, revenue exhibited a period of relative stability followed by a phase of accelerated growth. From 2015 to 2017, revenue remained consistent at approximately 31 billion USD. A significant upward shift occurred in 2018, with revenue increasing to 36.19 billion USD, and further expanding to 39.35 billion USD by the end of 2019. During the same timeframe, net property, plant, and equipment remained stable until 2018, when a substantial capital investment increased the asset base to 4.35 billion USD, reaching 4.48 billion USD in 2019.
- Net Fixed Asset Turnover Trajectory
- A gradual decline in the net fixed asset turnover ratio is observed from 2015 to 2018, falling from 9.08 to 8.32. This trend indicates that the increase in fixed asset investments during 2018 outpaced the growth in revenue, resulting in a temporary reduction in the efficiency of asset utilization.
- Operational Efficiency Recovery
- The ratio recovered to 8.79 in 2019, signaling an improvement in the ability to generate sales from the expanded asset base. This reversal suggests that the revenue gains achieved in the final year of the period more than compensated for the incremental increase in net property, plant, and equipment.
- Correlation Between Investment and Revenue
- The data suggests a strategic expansion of fixed assets in 2018 that initially pressured the turnover ratio. However, the subsequent revenue growth in 2019 indicates that these investments were effectively leveraged to drive higher top-line performance.
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Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
General Dynamics Corp., net fixed asset turnover (including operating lease, right-of-use asset) calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Revenue | 39,350) | 36,193) | 30,973) | 31,353) | 31,469) | |
| Property, plant and equipment, net | 4,475) | 4,348) | 3,517) | 3,467) | 3,466) | |
| Right-of-use (ROU) assets, operating leases (included in Noncurrent other assets) | 1,432) | —) | —) | —) | —) | |
| Property, plant and equipment, net (including operating lease, right-of-use asset) | 5,907) | 4,348) | 3,517) | 3,467) | 3,466) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset)1 | 6.66 | 8.32 | 8.81 | 9.04 | 9.08 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Net fixed asset turnover (including operating lease, right-of-use asset) = Revenue ÷ Property, plant and equipment, net (including operating lease, right-of-use asset)
= 39,350 ÷ 5,907 = 6.66
2 Click competitor name to see calculations.
The analysis of investment activity from 2015 to 2019 reveals a consistent decline in the efficiency of fixed asset utilization. While revenue experienced significant growth in the latter part of the period, the acceleration in capital investment outpaced these gains, resulting in a diminished net fixed asset turnover ratio.
- Revenue Trends
- Revenue remained relatively stagnant between 2015 and 2017, fluctuating slightly around the 31 billion dollar mark. However, a period of robust growth occurred starting in 2018, with revenue increasing to 36.19 billion dollars, and continuing upward to 39.35 billion dollars by the end of 2019.
- Net Fixed Asset Expansion
- Net property, plant, and equipment, including right-of-use assets, showed minimal movement from 2015 to 2017. A significant shift occurred in 2018, with assets rising to 4.35 billion dollars, followed by a sharp increase to 5.91 billion dollars in 2019. This represents a substantial expansion of the fixed asset base in the final two years of the analyzed period.
- Net Fixed Asset Turnover Interpretation
- The net fixed asset turnover ratio declined steadily from 9.08 in 2015 to 6.66 in 2019. The most pronounced drop occurred between 2018 and 2019, coinciding with the rapid increase in net fixed assets. This downward trend indicates that for every dollar invested in fixed assets, the company generated progressively less revenue over time. The divergence suggests that the increase in asset capacity has not yet translated into a proportional increase in top-line revenue.
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Total Asset Turnover
General Dynamics Corp., total asset turnover calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Revenue | 39,350) | 36,193) | 30,973) | 31,353) | 31,469) | |
| Total assets | 48,841) | 45,408) | 35,046) | 32,872) | 31,997) | |
| Long-term Activity Ratio | ||||||
| Total asset turnover1 | 0.81 | 0.80 | 0.88 | 0.95 | 0.98 | |
| Benchmarks | ||||||
| Total Asset Turnover, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Total asset turnover = Revenue ÷ Total assets
= 39,350 ÷ 48,841 = 0.81
2 Click competitor name to see calculations.
The total asset turnover ratio exhibits a consistent downward trajectory over the analyzed five-year period, decreasing from 0.98 in 2015 to 0.81 by 2019. This trend indicates a decline in the efficiency with which assets are utilized to generate revenue, as the growth in the asset base has outpaced the growth in top-line earnings.
- Revenue Performance
- Revenue remained relatively stagnant between 2015 and 2017, fluctuating slightly around the 31 billion USD mark. However, a significant acceleration occurred starting in 2018, with revenue rising to 36.19 billion USD and continuing upward to 39.35 billion USD in 2019. This represents a substantial increase in sales volume in the latter part of the period.
- Asset Base Expansion
- Total assets grew steadily from 2015 to 2017, moving from approximately 32 billion USD to 35 billion USD. A sharp increase is observed in 2018, where assets jumped to 45.41 billion USD, further increasing to 48.84 billion USD in 2019. The magnitude of asset growth in 2018 and 2019 exceeds the corresponding growth in revenue.
- Asset Turnover Efficiency
- The asset turnover ratio declined annually from 2015 to 2018, falling from 0.98 to 0.80. While there was a marginal recovery to 0.81 in 2019, the overall trend confirms that the company is generating fewer dollars of revenue for every dollar invested in assets. The most pronounced drop occurred between 2017 and 2018, coinciding with the period of most rapid asset expansion.
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Equity Turnover
General Dynamics Corp., equity turnover calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Revenue | 39,350) | 36,193) | 30,973) | 31,353) | 31,469) | |
| Shareholders’ equity | 13,577) | 11,732) | 11,435) | 10,976) | 10,738) | |
| Long-term Activity Ratio | ||||||
| Equity turnover1 | 2.90 | 3.08 | 2.71 | 2.86 | 2.93 | |
| Benchmarks | ||||||
| Equity Turnover, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Equity turnover = Revenue ÷ Shareholders’ equity
= 39,350 ÷ 13,577 = 2.90
2 Click competitor name to see calculations.
The analysis of equity turnover from 2015 to 2019 reveals a period of fluctuation in operational efficiency relative to the company's equity base. While both revenue and shareholders' equity trended upward over the long term, the relationship between these two metrics shifted, resulting in a non-linear progression of the equity turnover ratio.
- Revenue and Equity Trajectories
- Revenue experienced a marginal decline between 2015 and 2017, moving from 31,469 million USD to 30,973 million USD, before entering a phase of significant growth that culminated in 39,350 million USD by 2019. In contrast, shareholders' equity demonstrated a steady and uninterrupted increase throughout the period, rising from 10,738 million USD in 2015 to 13,577 million USD in 2019.
- Equity Turnover Ratio Dynamics
- The equity turnover ratio exhibited a downward trend during the first three years, falling from 2.93 in 2015 to a low of 2.71 in 2017. This decline was a direct result of stagnant revenue paired with a growing equity base. A sharp reversal occurred in 2018, with the ratio peaking at 3.08 due to a substantial increase in revenue that significantly outpaced equity growth. By 2019, the ratio moderated to 2.90 as the growth in shareholders' equity accelerated.
- Efficiency and Utilization Insights
- The fluctuations in the ratio indicate varying levels of efficiency in utilizing shareholder investments to generate sales. The peak observed in 2018 represents the highest point of asset utilization within the analyzed period. The subsequent slight decline in 2019 suggests that the increase in the capital base has outpaced the immediate growth in revenue, leading to a marginal reduction in the turnover efficiency.
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