Alphabet Inc. (NASDAQ:GOOG)

An analysis of short-term operating activity ratios reveals fluctuating performance over the five-year period. Generally, the company demonstrates a consistent ability to convert receivables into cash, manage its payables, and utilize working capital, though variations exist. Several ratios exhibit notable shifts, particularly in the later years of the observed period.

Receivables Turnover

The receivables turnover ratio remained relatively stable, fluctuating between 6.41 and 7.03. A slight increase was observed from 2021 to 2022, followed by a decrease in 2023, a minor recovery in 2024, and a return to the 2023 level in 2025. This suggests consistent, though not improving, efficiency in collecting receivables.

Payables Turnover

The payables turnover ratio experienced more significant volatility. It increased substantially from 2021 to 2022, indicating a faster rate of paying suppliers. However, it then decreased in 2023 and remained relatively stable through 2024 before declining further in 2025. This suggests a potential shift in supplier relationships or payment terms, culminating in a slower rate of paying suppliers by the end of the period.

Working Capital Turnover

The working capital turnover ratio demonstrated a clear upward trend from 2021 to 2024, increasing from 2.08 to 4.69. This indicates a growing efficiency in utilizing working capital to generate sales. However, the ratio decreased to 3.90 in 2025, suggesting a potential slowdown in this efficiency. The overall trend indicates improved working capital management, though the final year shows a possible reversal.

Average Receivable Collection Period

The average receivable collection period remained consistently within a narrow range, fluctuating between 52 and 57 days. A slight decrease was observed from 2021 to 2022, followed by a return to the 2021 level and stability through 2024, and a slight increase in 2025. This indicates a stable credit and collection policy.

Average Payables Payment Period

The average payables payment period decreased from 2021 to 2022, indicating faster payments to suppliers. It then increased in 2023 and remained stable in 2024 before increasing again in 2025 to 27 days. This mirrors the trend observed in the payables turnover ratio and suggests a lengthening of the time taken to settle obligations to suppliers.

In summary, the company generally maintains consistent performance in receivables management. However, payables management and working capital utilization demonstrate more pronounced fluctuations, with a potential shift towards slower payments to suppliers and a slight decrease in working capital efficiency in the most recent year.

The receivables turnover ratio exhibits a generally stable pattern over the five-year period, with minor fluctuations. Revenues demonstrate a consistent upward trend, while accounts receivable, net, also increased throughout the period, though not at the same rate as revenues.

Receivables Turnover

The receivables turnover ratio began at 6.55 in 2021, increased to 7.03 in 2022, then decreased to 6.41 in 2023. A slight recovery to 6.69 was observed in 2024, followed by a return to 6.41 in 2025. This suggests a relatively consistent efficiency in collecting receivables, with a peak in 2022 and a slight decline in the most recent two years.

Revenue Trend

Revenues increased from US$257,637 million in 2021 to US$402,836 million in 2025, representing a substantial overall growth. The year-over-year increases were consistently positive, indicating strong sales performance.

Accounts Receivable Trend

Accounts receivable, net, increased from US$39,304 million in 2021 to US$62,886 million in 2025. While increasing, the growth in accounts receivable was less pronounced than the growth in revenues, which is reflected in the relatively stable receivables turnover ratio.

The combination of increasing revenues and accounts receivable, coupled with a stable receivables turnover ratio, suggests that the company is effectively managing its credit and collection processes despite its growth. The slight decrease in the ratio in 2023 and 2025 warrants continued monitoring to ensure collection efficiency does not deteriorate further.

The accounts payable activity demonstrates fluctuating performance over the five-year period. Cost of revenues consistently increased, while accounts payable and the resulting payables turnover exhibited more varied movements.

Cost of Revenues

Cost of revenues increased steadily from US$110,939 million in 2021 to US$162,535 million in 2025. This indicates a consistent expansion in the company’s operational scale and associated costs.

Accounts Payable

Accounts payable decreased from US$6,037 million in 2021 to US$5,128 million in 2022, suggesting improved efficiency in managing supplier payments or a reduction in purchasing activity. However, it subsequently increased to US$7,493 million in 2023 and further to US$12,200 million in 2025. This rise could be attributed to increased purchasing to support growing revenues, extended payment terms negotiated with suppliers, or a combination of both. The most substantial increase occurred between 2024 and 2025.

Payables Turnover

Payables turnover initially increased from 18.38 in 2021 to 24.61 in 2022, coinciding with the decrease in accounts payable and the increase in cost of revenues. This suggests the company was efficiently utilizing its credit terms with suppliers. The ratio then decreased to 17.79 in 2023 and 18.32 in 2024, before falling to 13.32 in 2025. This decline in payables turnover, particularly in the most recent year, indicates the company is taking longer to pay its suppliers, potentially due to the significant increase in accounts payable relative to cost of revenues. This could be a strategic decision to manage cash flow, but should be monitored for potential impacts on supplier relationships.

Overall, the increasing cost of revenues is consistent with growth, but the fluctuating accounts payable and declining payables turnover in the later years warrant further investigation to understand the underlying drivers and potential implications for the company’s financial health and supplier relations.

The working capital turnover ratio demonstrates a generally increasing trend over the five-year period, although with some fluctuation. This indicates evolving efficiency in how the company utilizes its working capital to generate revenue.

Working Capital

Working capital decreased from US$123,889 million in 2021 to US$95,495 million in 2022, and continued a downward trajectory, reaching US$74,589 million in 2024. A subsequent increase to US$103,293 million is observed in 2025. These fluctuations suggest changes in the company’s short-term asset and liability management.

Revenues

Revenues consistently increased throughout the period, rising from US$257,637 million in 2021 to US$402,836 million in 2025. This consistent growth provides the context for evaluating the efficiency with which working capital is employed.

Working Capital Turnover

The working capital turnover ratio increased from 2.08 in 2021 to 2.96 in 2022, indicating improved efficiency in utilizing working capital to generate sales. This positive trend continued, reaching 3.43 in 2023 and a peak of 4.69 in 2024. The ratio decreased slightly to 3.90 in 2025, though it remains significantly higher than the 2021 level. The increase suggests the company became more effective at managing its current assets and liabilities in relation to its revenue generation, particularly between 2022 and 2024. The slight decrease in 2025, despite continued revenue growth, may warrant further investigation to understand the underlying causes.

Overall, the trend in the working capital turnover ratio suggests increasing operational efficiency. The company appears to be generating more revenue with each dollar of working capital, although the most recent year shows a slight moderation of this trend.

The average receivable collection period exhibited relative stability over the five-year period, with fluctuations within a narrow range. While some variation is present, no strong or consistent upward or downward trend is apparent.

Average Receivable Collection Period

The average receivable collection period decreased from 56 days in 2021 to 52 days in 2022, representing a four-day improvement in the speed of collecting receivables. This was followed by a slight increase to 57 days in 2023. The period then decreased again to 55 days in 2024 before stabilizing at 57 days in 2025. The overall range throughout the period was six days, from a low of 52 to a high of 57 days.

The observed fluctuations in the average collection period appear to correlate inversely with the receivables turnover ratio, though the relationship is not perfectly consistent. A decrease in the collection period generally coincides with an increase in the turnover ratio, and vice versa. This suggests that changes in the efficiency of collecting receivables are influencing the rate at which receivables are converted into cash.

The consistency of the average collection period around the 55-57 day mark suggests effective credit and collection policies are generally in place. However, the slight variations warrant continued monitoring to identify potential underlying causes and ensure optimal cash flow management.

The average payables payment period exhibited fluctuations over the five-year period. Initially, a decrease was observed, followed by periods of stability and then an increase. The payables turnover ratio, conversely, showed an inverse relationship to the payment period, decreasing in most years.

Average Payables Payment Period

The average payables payment period decreased from 20 days in 2021 to 15 days in 2022, indicating a faster rate of payment to suppliers. It then increased to 21 days in 2023, remaining at 20 days in 2024, before rising to 27 days in 2025. This final increase suggests a lengthening of the time taken to settle obligations to suppliers.

Payables Turnover

Payables turnover decreased from 18.38 in 2021 to 17.79 in 2023, with a temporary increase to 24.61 in 2022. It then stabilized at 18.32 in 2024 before declining to 13.32 in 2025. This downward trend in payables turnover aligns with the increasing average payables payment period in the later years, suggesting a slower rate at which the company is paying off its suppliers.

Relationship between Ratios

An inverse relationship is apparent between the average payables payment period and the payables turnover ratio. As the payment period increased, the payables turnover ratio generally decreased, and vice versa. This is expected, as a longer payment period implies a slower turnover of payables, and a shorter payment period implies a faster turnover.

The increase in the average payables payment period in 2025, coupled with the corresponding decrease in payables turnover, warrants further investigation. Potential reasons could include changes in supplier terms, a deliberate strategy to manage cash flow, or potential difficulties in meeting payment obligations.