Amazon.com Inc. (NASDAQ:AMZN)

The short-term operating activity ratios exhibit varied trends over the observed period. Inventory turnover generally increased, while payables turnover decreased. Working capital turnover demonstrated significant fluctuations. Analysis of the average processing and payment periods reveals changes in the efficiency of inventory management and supplier relationships.

Inventory Turnover

Inventory turnover displayed an overall increasing trend, rising from 7.90 to 9.30. While fluctuations occurred throughout the period, the latter half of the observation period showed consistently higher turnover rates, peaking at 9.94 before settling at 9.30. This suggests improving efficiency in managing and selling inventory.

Payables Turnover

Payables turnover generally decreased over the period, moving from 4.03 to 2.92. This indicates a lengthening of the time it takes to pay suppliers. The most significant decline occurred in the latter part of the observation period, suggesting a potential shift in payment strategies or a weakening of supplier relationships. There were some quarterly variations, but the overall direction is downward.

Working Capital Turnover

Working capital turnover experienced substantial volatility. It was not reported for the initial periods, but began at 77.32 and fluctuated significantly, reaching a high of 413.97 before decreasing to 64.72. This suggests considerable changes in the relationship between revenue and working capital, potentially linked to shifts in business strategy, seasonal factors, or external economic conditions. The extreme value observed in one quarter warrants further investigation.

Average Inventory Processing Period

The average inventory processing period generally decreased, moving from 46 days to 39 days. This aligns with the increasing inventory turnover, indicating a faster conversion of inventory into sales. Fluctuations were minimal, suggesting a relatively stable inventory management process, with a slight improvement over time.

Average Payables Payment Period

The average payables payment period increased substantially, rising from 91 days to 125 days. This corresponds with the decreasing payables turnover and suggests a lengthening of the time taken to settle obligations with suppliers. The increase was particularly pronounced in the later quarters, potentially indicating a deliberate strategy to manage cash flow or difficulties in maintaining favorable payment terms.

In summary, the company appears to be becoming more efficient in managing its inventory, while simultaneously extending its payment terms to suppliers. The significant fluctuations in working capital turnover require further scrutiny to understand the underlying drivers. The lengthening of the payables payment period could have implications for supplier relationships and should be monitored closely.

The inventory turnover ratio exhibits fluctuations over the observed period, generally indicating changes in the efficiency of inventory management. An initial decline is followed by a period of relative stability and then an upward trend, with some subsequent moderation.

Overall Trend

The inventory turnover ratio began at 7.90 in the first quarter of 2022. It decreased to 7.30 in the second quarter before recovering to 7.80 and 8.40 in the subsequent quarters of 2022. The ratio continued to increase in the first quarter of 2023, reaching 8.49. A slight decrease to 8.01 was observed in the second quarter of 2023, followed by increases to 8.41 and 9.15 by the end of 2023. The ratio peaked at 9.94 in the first quarter of 2024, then moderated to 9.21 and 8.86 in the following two quarters. It rose again to 9.54 in the fourth quarter of 2024, before decreasing to 9.22 and 8.27 in the first two quarters of 2025. The ratio showed a slight recovery to 8.32 in the third quarter of 2025, and then increased to 9.30 in the final quarter.

Short-Term Fluctuations

Quarterly changes demonstrate variability. The most significant increase occurred between the fourth quarter of 2023 and the first quarter of 2024, moving from 9.15 to 9.94. A notable decrease was observed between the second and third quarters of 2025, falling from 8.27 to 8.32. These fluctuations suggest potential seasonality or responsiveness to specific promotional activities or shifts in demand.

Recent Performance

The most recent data indicates a ratio of 9.30 in the fourth quarter of 2025. This represents an increase from the previous quarter and is higher than the ratio observed in the same quarter of the prior year (8.40). This suggests a potential improvement in inventory management efficiency or a change in sales patterns towards the end of the period.

Relationship to Cost of Sales and Inventory Levels

The increases in inventory turnover generally coincide with increases in cost of sales, suggesting higher sales volumes. However, the fluctuations in the ratio are not solely driven by cost of sales, as inventory levels also play a role. For example, the increase in the ratio from 8.41 to 9.15 (Sep 30, 2023 to Dec 31, 2023) occurred alongside a substantial increase in cost of sales, but also a decrease in inventory levels. The decrease in the ratio from 9.54 to 9.22 (Dec 31, 2024 to Mar 31, 2025) occurred alongside an increase in inventory levels.

The accounts payable turnover ratio exhibits fluctuations over the observed period, generally trending downwards. Initial values indicate a relatively stable turnover, followed by a period of decline, and a more pronounced decrease towards the end of the analyzed timeframe.

Overall Trend

The accounts payable turnover ratio demonstrates a general decreasing trend from approximately 4.03 in the first quarter of 2022 to 2.92 in the final quarter of 2025. This suggests a lengthening of the time it takes the company to pay its suppliers.

Initial Period (Mar 31, 2022 – Dec 31, 2022)

The ratio begins at 4.03 and experiences a slight decrease to 3.63 over this period. While there are quarterly variations, the values remain within a relatively narrow range, indicating consistent, though slightly diminishing, efficiency in managing accounts payable.

Transitional Phase (Mar 31, 2023 – Dec 31, 2023)

A continuation of the downward trend is observed, with the ratio declining from 4.34 to 3.59. This period shows a more noticeable decrease compared to the initial phase, potentially indicating a shift in payment terms or supplier relationships.

Accelerated Decline (Mar 31, 2024 – Dec 31, 2025)

The rate of decline accelerates significantly during this period. The ratio decreases from 4.24 to 2.92. This substantial decrease suggests a considerable lengthening in the time taken to settle accounts payable, potentially due to strategic decisions to preserve cash flow, or changes in negotiating power with suppliers. The most significant drop occurs between September 30, 2025 and December 31, 2025.

Relationship to Cost of Sales

While both cost of sales and accounts payable generally increase over the period, the increase in accounts payable is not keeping pace with the increase in cost of sales. This disparity contributes to the observed decline in the payables turnover ratio. The cost of sales increased by approximately 83% from March 31, 2022 to December 31, 2025, while accounts payable increased by approximately 78% over the same period.

In summary, the accounts payable turnover ratio indicates a consistent, and increasingly pronounced, trend of slower payments to suppliers. Further investigation into the underlying causes of this trend, such as changes in payment terms, supplier negotiations, or cash management strategies, would be beneficial.

The working capital turnover ratio exhibits significant fluctuations throughout the observed period. Initially, the ratio is unavailable for the first three quarters of 2022. A substantial increase is then noted in the fourth quarter of 2022, reaching 77.32, before declining in the subsequent quarters.

Overall Trend

The ratio demonstrates considerable volatility. While there are periods of increase, particularly in the first quarter of 2025, the overall trend is not consistently upward or downward. The ratio appears to be sensitive to changes in both net sales and working capital levels.

2022-2023 Performance

Following the initial value of 77.32 in December 2022, the ratio decreased to 53.59 and 39.93 in the first and second quarters of 2023, respectively. A slight recovery to 43.32 is observed in the third quarter of 2023, followed by a further increase to 55.79 in the fourth quarter of 2023. This suggests a potential stabilization, albeit at a lower level than the peak observed in late 2022.

2024-2025 Performance

The ratio continues to fluctuate in 2024, moving from 76.74 in the first quarter to 148.93 in the second quarter of 2025. This represents the highest value recorded during the analyzed period. However, the ratio then declines sharply to 64.72 by the end of 2025. This dramatic increase and subsequent decrease warrant further investigation into the underlying drivers of net sales and working capital during these periods.

Working Capital Influence

The observed fluctuations in the working capital turnover ratio correlate with the changes in working capital. Negative working capital values in the earlier periods likely contribute to the initially unavailable ratio calculations. As working capital transitions to positive values, the ratio becomes calculable and exhibits significant swings. The substantial increase in the ratio in the second quarter of 2025 is likely driven by a combination of increased net sales and a relatively small increase in working capital.

In conclusion, the working capital turnover ratio demonstrates a dynamic pattern, influenced by both sales activity and working capital management. The significant volatility observed suggests a need for ongoing monitoring and analysis to understand the factors driving these fluctuations and their potential impact on operational efficiency.

The average inventory processing period demonstrates a generally decreasing trend over the observed timeframe, with some quarterly fluctuations. Initially, the period stood at 46 days in March 2022, and exhibited variability before establishing a more consistent pattern of reduction in later periods.

Overall Trend

From March 2022 through December 2025, the average inventory processing period generally declined. The period began at 46 days and concluded at 39 days, representing a reduction of 7 days over the entire period. This suggests increasing efficiency in managing inventory.

Short-Term Fluctuations

While the overall trend is downward, the period experienced quarterly variations. An increase from 46 days in March 2022 to 50 days in June 2022 was followed by a decrease to 43 days by December 2022. Similar fluctuations were observed in 2023 and 2024, indicating potential seasonal or operational influences on inventory processing times.

Recent Performance

The period remained relatively stable between 40 and 44 days from March 2023 through September 2025. The final reported value of 39 days in December 2025 represents the lowest point in the observed period, suggesting continued optimization of inventory management practices.

Correlation with Inventory Turnover

The observed trend in the average inventory processing period aligns with the trend in inventory turnover. As inventory turnover increased, the average processing period decreased, indicating an inverse relationship. Higher turnover rates generally correspond to shorter processing times, suggesting efficient inventory flow.

The consistent reduction in the average inventory processing period, coupled with increasing inventory turnover, suggests improved operational efficiency in managing inventory levels. The fluctuations observed throughout the period warrant further investigation to identify the underlying causes and potential areas for further optimization.

The average payables payment period exhibited fluctuations over the observed period, spanning from March 31, 2022, to December 31, 2025. An initial increase is noted, followed by periods of relative stability and subsequent lengthening of the payment period.

Overall Trend

From March 31, 2022, to December 31, 2025, the average payables payment period generally increased. While there were quarterly variations, the period concluded significantly higher than where it began, rising from 91 days to 125 days.

Initial Phase (Mar 31, 2022 – Dec 31, 2022)

The period began at 91 days and increased to 93 days in the subsequent quarter. A decrease to 86 days was observed, followed by a notable increase to 101 days by the end of 2022. This suggests some initial volatility in payment practices during this timeframe.

Stabilization and Subsequent Increase (Mar 31, 2023 – Sep 30, 2024)

The first half of 2023 showed relative stability, fluctuating between 84 and 88 days. However, a gradual increase was then observed, moving from 88 days to 96 days by September 30, 2024. This indicates a potential shift towards extended payment terms or slower payment processing.

Accelerated Lengthening (Dec 31, 2024 – Dec 31, 2025)

The final quarters witnessed a more pronounced lengthening of the payment period. It increased from 106 days to 112 days, and then to 125 days by December 31, 2025. This represents the most significant increase within the observed period and suggests a deliberate or unavoidable extension of payment timelines.

The observed trend in the average payables payment period warrants further investigation to determine the underlying causes. Factors such as changes in supplier relationships, internal payment policies, or cash flow management strategies could be contributing to these fluctuations.