Amazon.com Inc. (NASDAQ:AMZN)

An analysis of short-term operating activity ratios reveals several noteworthy trends between 2021 and 2025. Inventory management appears generally efficient, while receivables and payables demonstrate more fluctuating patterns. Working capital utilization shows significant variation over the period, and the cash conversion cycle consistently indicates a negative value, suggesting efficient liquidity management.

Inventory Management

Inventory turnover exhibited a generally increasing trend from 8.34 in 2021 to 9.54 in 2024, before slightly decreasing to 9.30 in 2025. This suggests improving efficiency in converting inventory into sales for most of the period. Correspondingly, the average inventory processing period decreased from 44 days in 2021 to 38 days in 2024, then increased slightly to 39 days in 2025, reinforcing the observation of efficient inventory management.

Receivables Management

Receivables turnover decreased from 23.26 in 2021 to 16.86 in 2023, indicating a lengthening of the time it takes to collect receivables. A slight recovery to 18.60 in 2024 was followed by a further decrease to 17.75 in 2025. This trend is mirrored in the average receivable collection period, which increased from 16 days in 2021 to 22 days in 2023, then decreased to 20 days in 2024 and increased again to 21 days in 2025. These changes suggest a potential weakening in the company’s ability to efficiently collect payments from customers.

Payables Management

Payables turnover remained relatively stable between 3.46 and 3.63 from 2021 to 2023, then decreased to 2.92 in 2025. This indicates a lengthening in the time taken to pay suppliers. The average payables payment period increased from 105 days in 2021 to 125 days in 2025, confirming this trend. This could be a strategic decision to preserve cash, but should be monitored for potential impacts on supplier relationships.

Working Capital & Cash Conversion

Working capital turnover experienced substantial fluctuation. It was unavailable for 2022, but increased dramatically from 24.33 in 2021 to 77.32 in 2023, then decreased to 55.79 in 2024 and 64.72 in 2025. This suggests significant changes in the efficiency of working capital utilization. The operating cycle remained relatively stable around 60-62 days, with a slight decrease to 58 days in 2024, before returning to 60 days in 2025. The cash conversion cycle consistently remained negative, ranging from -45 days in 2021 to -65 days in 2025, indicating the company effectively manages its short-term cash flow and converts its operating cycle into a cash inflow before needing to pay its suppliers.

The cost of sales exhibited a consistent upward trend over the five-year period, increasing from US$272,344 million in 2021 to US$356,414 million in 2025. Inventories also generally increased, though with some fluctuation, rising from US$32,640 million in 2021 to US$38,325 million in 2025. Despite the increase in inventory levels, the inventory turnover ratio demonstrated an overall positive trend, indicating improving efficiency in managing inventory.

Inventory Turnover

The inventory turnover ratio increased from 8.34 in 2021 to 9.54 in 2024, representing a notable improvement in the speed at which inventory is sold. This suggests enhanced operational efficiency and effective inventory management practices. A slight decrease to 9.30 was observed in 2025, but the ratio remained significantly higher than the 2021 level. The consistent increase from 2021 to 2024 indicates a growing ability to convert inventory into sales. The minor decline in 2025 warrants further investigation, but does not negate the overall positive trend.

The relationship between cost of sales and inventory turnover suggests that the company has been able to effectively manage inventory levels while simultaneously increasing sales volume. The increase in inventories in 2025 did not proportionally decrease the inventory turnover ratio, indicating that the increased inventory was likely associated with anticipated demand or strategic stocking, rather than slow-moving or obsolete items.

Overall, the observed trends suggest a strengthening of the company’s operational efficiency regarding inventory management. The continued monitoring of the inventory turnover ratio, alongside cost of sales and inventory levels, will be crucial to maintaining this positive trajectory.

The receivables turnover ratio exhibits a declining trend over the observed period, though with some fluctuation. Net sales demonstrate consistent growth annually, while customer receivables, net, also increased, but at a varying rate. This interplay impacts the efficiency with which the company converts its receivables into cash.

Receivables Turnover Trend

The receivables turnover ratio decreased from 23.26 in 2021 to 19.32 in 2022, representing a notable decline. This trend continued into 2023, with the ratio falling to 16.86. A slight increase was observed in 2024, with the ratio reaching 18.60, but it decreased again in 2025 to 17.75. This suggests a lengthening of the collection period for customer receivables.

Sales and Receivables Relationship

Net sales increased from US$469,822 million in 2021 to US$716,924 million in 2025, indicating strong revenue growth. Customer receivables, net, also increased over the same period, rising from US$20,200 million to US$40,400 million. However, the growth in receivables did not consistently align with the growth in sales, contributing to the observed decline in the receivables turnover ratio.

Implications of the Trend

The decreasing receivables turnover ratio could indicate a relaxation of credit terms offered to customers, a less effective collection process, or a shift in the customer base towards those with longer payment cycles. While increased sales are positive, the slower conversion of receivables into cash could potentially impact the company’s short-term liquidity and cash flow. The slight recovery in 2024 suggests possible mitigation efforts, but the subsequent decline in 2025 warrants further investigation.

Continued monitoring of this ratio, alongside related metrics such as days sales outstanding, is recommended to fully understand the underlying drivers and potential implications for the company’s financial performance.

The accounts payable turnover ratio exhibits a fluctuating pattern over the five-year period. Initially, the ratio increased, then stabilized, and finally decreased. This suggests evolving dynamics in the company’s payment practices and supplier relationships.

Payables Turnover Trend

The payables turnover ratio increased from 3.46 in 2021 to 3.63 in 2022, indicating a more efficient use of trade credit during that period. This could be attributed to improved inventory management, faster sales cycles, or proactive negotiation of payment terms with suppliers. The ratio remained relatively stable in 2023 at 3.59, suggesting the efficiency gains were sustained. However, a slight decrease to 3.46 was observed in 2024, potentially due to increased purchasing volume or a deliberate strategy to extend payment terms. A more pronounced decline to 2.92 in 2025 indicates a significant slowdown in the rate at which the company pays its suppliers.

Concurrent with the payables turnover trend, accounts payable consistently increased throughout the period. The cost of sales also increased year-over-year. The combination of rising payables and a decreasing turnover ratio in the later years suggests the company is taking longer to settle its obligations, potentially leveraging supplier credit to manage cash flow or taking advantage of extended payment terms. The substantial increase in accounts payable in 2025, coupled with the lowest payables turnover ratio, warrants further investigation.

Accounts Payable and Cost of Sales Relationship

The cost of sales increased from US$272,344 million in 2021 to US$356,414 million in 2025, reflecting overall business growth. Accounts payable mirrored this trend, rising from US$78,664 million to US$121,909 million over the same period. While an increase in both is expected with growth, the decreasing payables turnover suggests that the growth in payables is outpacing the growth in cost of sales, indicating a lengthening of the payment cycle.

The observed decrease in the payables turnover ratio in 2025 is the most significant trend. This could be a strategic decision to optimize working capital, but it also carries the risk of potentially strained supplier relationships if payment terms become excessively extended. Monitoring this ratio closely in future periods is recommended.

The analysis of short-term operating activity reveals fluctuating working capital levels and a corresponding variability in working capital turnover. A significant shift in working capital is observed over the analyzed period, impacting the efficiency with which current assets and current liabilities are utilized to generate sales.

Working Capital

Working capital experienced a substantial decrease from US$19,314 million in 2021 to a negative value of US$8,602 million in 2022. This indicates a potential liquidity concern or a strategic shift in financing practices during that year. A recovery to US$7,434 million occurred in 2023, followed by further increases to US$11,436 million in 2024 and US$11,078 million in 2025. The values from 2023 to 2025 suggest a stabilization of working capital levels.

Net Sales

Net sales demonstrate a consistent upward trend throughout the period. Sales increased from US$469,822 million in 2021 to US$716,924 million in 2025, representing substantial growth over the five-year period. This growth is relatively consistent year-over-year, indicating strong revenue generation capabilities.

Working Capital Turnover

The working capital turnover ratio exhibits considerable fluctuation. A value of 24.33 was recorded in 2021. The ratio was not calculated for 2022, likely due to the negative working capital position. A significant increase to 77.32 was observed in 2023, coinciding with the recovery in working capital and continued sales growth. The ratio decreased to 55.79 in 2024 and then increased to 64.72 in 2025. The increase in 2023 suggests improved efficiency in utilizing working capital to generate sales, while the subsequent fluctuations may be attributable to changes in the timing of working capital investments and sales patterns. The values in 2024 and 2025 remain substantially higher than the 2021 value, indicating an overall improvement in working capital management despite the fluctuations.

In summary, while net sales consistently increased, working capital experienced a period of significant volatility. The working capital turnover ratio reflects this volatility, demonstrating a substantial improvement in 2023 followed by moderate fluctuations. The company appears to have regained control of its working capital position and is generally utilizing it more efficiently to generate sales compared to 2021.

The analysis reveals a generally positive trend in short-term operating activity, specifically concerning inventory management, over the five-year period. Inventory turnover demonstrates consistent improvement, while the average inventory processing period exhibits a corresponding decrease, suggesting increasing efficiency in converting inventory into sales.

Inventory Turnover

Inventory turnover increased from 8.34 in 2021 to 9.54 in 2024, indicating a growing ability to sell inventory. While a slight decrease to 9.30 is observed in 2025, the value remains higher than the initial value in 2021. This suggests improved sales relative to inventory levels, potentially due to effective inventory control or increased demand.

Average Inventory Processing Period

The average inventory processing period decreased from 44 days in 2021 to 38 days in 2024. This signifies a reduction in the time inventory is held before being sold, which is a positive indicator of operational efficiency. A slight increase to 39 days is noted in 2025, but the period remains relatively short and efficient compared to the 2021 baseline.

The concurrent trends in both ratios suggest a strengthening relationship between inventory investment and sales generation. The slight fluctuations in 2025 do not appear to significantly alter the overall positive trajectory observed throughout the period. Continued monitoring of these ratios is recommended to ensure sustained efficiency and identify any potential emerging issues.

The average receivable collection period exhibited an increasing trend between 2021 and 2023, followed by a slight decrease and stabilization in the subsequent two years. This suggests a lengthening in the time required to collect payments from customers initially, with some improvement more recently.

Average Receivable Collection Period

In 2021, the average receivable collection period stood at 16 days. This figure increased to 19 days in 2022 and further to 22 days in 2023, indicating a progressively slower collection of receivables. A modest reduction was observed in 2024, with the period decreasing to 20 days. This trend continued with a collection period of 21 days in 2025, suggesting a leveling off after the earlier increase.

The receivables turnover ratio, while not the primary focus, provides context. A decreasing receivables turnover ratio from 23.26 in 2021 to 16.86 in 2023 aligns with the increasing collection period, reinforcing the observation of slower collections. The ratio experienced a slight recovery to 18.60 in 2024 and 17.75 in 2025, mirroring the stabilization in the average collection period.

The initial increase in the average collection period could be attributable to several factors, including changes in credit policies, customer payment behavior, or the mix of customers. The recent stabilization suggests that any implemented strategies to address the lengthening collection period may be having a limited effect, or that the factors driving the initial increase have stabilized.

The operating cycle exhibited a generally stable pattern over the five-year period, with some fluctuations observed in its component parts. Overall, the company demonstrates a consistent ability to convert its investments in inventory and receivables into cash, though minor shifts in efficiency are apparent.

Average Inventory Processing Period

A slight downward trend is observed in the average inventory processing period, decreasing from 44 days in 2021 to 38 days in 2024. This suggests increasing efficiency in managing inventory levels and potentially faster inventory turnover. However, a slight increase to 39 days is noted in 2025, indicating a possible stabilization or minor reversal of this trend.

Average Receivable Collection Period

The average receivable collection period shows an increasing trend from 16 days in 2021 to 22 days in 2023. This indicates a lengthening of the time required to collect payments from customers. A decrease to 20 days in 2024 and a further increase to 21 days in 2025 suggests some volatility in collection efficiency, but remains elevated compared to the 2021 level.

Operating Cycle

The operating cycle remained relatively consistent between 60 and 62 days from 2021 to 2023. A decrease to 58 days in 2024 reflects the combined effect of a shorter inventory processing period and a slightly shorter receivable collection period. The operating cycle then returned to 60 days in 2025, aligning with the 2021-2023 levels, suggesting a stabilization after the 2024 improvement. The overall trend indicates a generally efficient, though fluctuating, conversion of inventory into cash.

The interplay between inventory management and receivable collection significantly influences the overall operating cycle. While improvements in inventory processing were evident, the lengthening of the receivable collection period partially offset these gains. Continued monitoring of these ratios is recommended to identify any emerging trends and potential areas for operational improvement.

The average payables payment period exhibited a generally increasing trend over the five-year period examined. While fluctuations occurred, the overall movement suggests a lengthening in the time taken to settle obligations to suppliers. This is supported by the concurrent trend in payables turnover, which demonstrates a decreasing rate.

Payables Turnover

Payables turnover decreased from 3.46 in 2021 to 2.92 in 2025. A slight increase was observed from 2021 to 2022 (3.63), followed by a relatively stable period between 2022 and 2023 (3.59). A further decrease to 3.46 occurred in 2024 before a more substantial decline to 2.92 in 2025. This indicates a diminishing efficiency in managing and paying off supplier invoices over time.

Average Payables Payment Period

The average payables payment period initially decreased from 105 days in 2021 to 101 days in 2022. It then remained relatively stable at 102 days in 2023 and increased slightly to 106 days in 2024. A more pronounced increase was observed in 2025, reaching 125 days. This lengthening payment period correlates inversely with the payables turnover ratio, suggesting a slower rate of payment to suppliers.

Overall Trend

The combined trends suggest a shift in payment practices. The decreasing payables turnover and increasing average payment period indicate that the entity is taking longer to pay its suppliers. This could be due to a variety of factors, including negotiating extended payment terms with suppliers, changes in working capital management strategies, or potentially, a tightening of liquidity. Further investigation would be required to determine the underlying causes of these changes.

The short-term operating activity of the company, as measured by key ratios, demonstrates a consistent pattern over the five-year period. Specifically, the average inventory processing period, average receivable collection period, average payables payment period, and resulting cash conversion cycle exhibit distinct trends worthy of note.

Average Inventory Processing Period

The average inventory processing period shows a slight, generally downward trend, decreasing from 44 days in 2021 to 38 days in 2024. A minor increase to 39 days is observed in 2025. This suggests increasing efficiency in managing inventory levels over the period, with a slight reversal in the most recent year.

Average Receivable Collection Period

The average receivable collection period exhibits an increasing trend from 16 days in 2021 to 22 days in 2023. The period then decreased to 20 days in 2024 and further to 21 days in 2025. This indicates a lengthening, then shortening, of the time required to collect payments from customers, potentially reflecting changes in credit policies or customer payment behavior.

Average Payables Payment Period

The average payables payment period generally increased over the period, rising from 105 days in 2021 to 125 days in 2025. There were minor fluctuations within this overall upward trend, with a slight decrease from 105 to 101 days between 2021 and 2022, and a further increase to 106 days in 2024. This suggests the company is taking longer to pay its suppliers.

Cash Conversion Cycle

The cash conversion cycle remained negative throughout the period, indicating the company effectively converts its investments in inventory and other resources into cash before needing to pay its suppliers. The cycle deepened from -45 days in 2021 to -65 days in 2025. This suggests an increasing efficiency in managing working capital, allowing the company to operate with a shorter cash cycle. The most significant change occurred between 2024 and 2025, with a decrease from -48 to -65 days.

Overall, the trends suggest the company is becoming more efficient in its inventory management and working capital utilization, as evidenced by the decreasing inventory processing period and increasingly negative cash conversion cycle. The fluctuations in the receivable collection period and the increasing payables payment period warrant further investigation to understand their underlying causes and potential impacts.