Amgen Inc. (NASDAQ:AMGN)

The financial ratios and cycle periods exhibit notable fluctuations over the observed time frame, reflecting varying operational efficiencies and working capital dynamics.

Inventory Turnover

The inventory turnover ratio starts at approximately 1.58 in early 2020 and maintains relative stability around 1.53 to 1.58 through 2021. A gradual decline follows, reaching a low of 0.89 in early 2023, indicating slower inventory movement. Subsequently, the ratio recovers and rises steadily to 1.88 by the first quarter of 2025, suggesting improved inventory management and quicker stock liquidation in more recent periods.

Receivables Turnover

This ratio decreases from about 5.36 in mid-2020 to a low point near 3.70 in early 2023, signaling a lengthening in the collection period of receivables. Afterward, some improvement is observed with values oscillating between approximately 4.03 and 4.72, indicating a partial recovery in the efficiency of receivables collection by early 2025.

Payables Turnover

Payables turnover starts at 4.33 and follows a generally increasing trend, peaking around 6.74 in late 2024. This suggests an acceleration in payment to suppliers over time. Variability is evident, with occasional decreases, but the overall upward trend indicates more frequent settlements of payables in the later quarters.

Working Capital Turnover

The working capital turnover ratio demonstrates considerable volatility. After starting near 2.55, it spikes sharply to as high as 5.35 in late 2020, followed by a decline to below 1.0 in the first half of 2023. A strong recovery is seen afterward, with a peak of 8.36 by the first quarter of 2025, highlighting periods of significantly improved effectiveness in generating sales from working capital resources.

Average Inventory Processing Period

The average days to process inventory slowly increases from around 231 days to a peak of 411 days in early 2023, indicating slower inventory turnover and potential stockpiling. Post this peak, a marked decrease occurs, reaching 195 days by early 2025, signaling improved inventory management and faster turnover.

Average Receivable Collection Period

This metric predominantly trends upwards from about 68 days to just under 100 days in early 2023, reflecting longer durations to collect receivables. Subsequently, it declines somewhat, finishing near 91 days in early 2025, showing partial enhancement in collection efficiency.

Operating Cycle

The operating cycle lengthens from roughly 299 days in mid-2020 to a substantial 510 days in early 2023, driven mainly by increased inventory holding and receivables periods. It then shortens to around 286 days by early 2025, indicating an overall improvement in the time between inventory purchase and receivables collection.

Average Payables Payment Period

The average payables payment period exhibits a decreasing trend from about 84 days to near 60 days between 2020 and early 2023, suggesting faster payments to suppliers. Minor fluctuations occur subsequently, with values ranging between 54 and 70 days, indicating relatively stable payment timings toward the later periods.

Cash Conversion Cycle

The cash conversion cycle progressively elongates from around 215 days in mid-2020 to a peak of 441 days in early 2023, mainly due to extended inventory and receivable periods despite slightly shorter payable terms. Following this peak, the cycle shortens considerably to nearly 216 days by the first quarter of 2025, demonstrating enhanced efficiency in managing cash flow tied to operating activities.

In summary, the company experienced a period of operational slowdown and extended working capital cycles leading up to early 2023. Post that, significant improvements are evident in inventory turnover, receivables collection, and overall cash flow management, resulting in shorter operating and cash conversion cycles. The trends highlight a turnaround towards greater efficiency in utilizing working capital and managing payment and collection processes.

The cost of sales exhibited fluctuations over the observed periods, with values generally increasing from 2020 through 2024 before showing a moderate decrease in the final quarter. Notably, cost of sales rose significantly during the year 2023, peaking in December 2023 at 3,112 million US dollars. Following this peak, there was a gradual decline through to March 2025, where it reached 2,968 million US dollars. This pattern suggests a period of increased expenditure or sales volume in 2023, followed by containment or reduction efforts.

Inventories demonstrated a consistent upward trend from early 2020 through the end of 2023, with values increasing from approximately 3,682 million to over 9,000 million US dollars by December 2023. Post that period, inventory levels began to decline steadily from 9,518 million in December 2023 to around 6,729 million US dollars by March 2025. This rise and fall sequence could indicate accumulation of stock over several quarters followed by inventory reduction possibly due to sales acceleration or inventory management strategies.

The inventory turnover ratio, which reflects how efficiently inventory is managed relative to sales, shows a more volatile pattern. Early in 2021, the ratio was relatively stable around 1.5. However, there was a sharp decline to 0.89 in March 2024, indicating slower inventory turnover. Subsequently, the ratio improved steadily, reaching 1.88 by March 2025. This suggests initial challenges in moving inventory in early 2024, followed by improvements that point to enhanced operational efficiency or increased demand.

Cost of Sales

Displayed an overall increasing trend through 2023 with a peak at the end of that year, followed by a decline into early 2025.

Inventories

Consistently increased from 2020 through 2023, reaching a high in December 2023, then gradually decreased through the first quarter of 2025.

Inventory Turnover Ratio

Generally stable around 1.5 through 2021, drastically dropped in early 2024, then steadily recovered exceeding previous levels by early 2025.

Collectively, these trends imply that during 2023 there was significant buildup of inventory along with increased cost of sales, possibly signaling ramped-up production or slowing demand. The sharp dip in turnover ratio in early 2024 aligns with the inventory peak, suggesting inefficiencies or reduced sales velocity which were later corrected by improved turnover rates and inventory reductions by 2025. These patterns highlight dynamic inventory and cost management throughout the period.

The financial data reflects several notable trends and developments over the observed periods. Product sales exhibit fluctuations with an overall upward trajectory from March 2020 through March 2025. Initial sales were approximately $5,894 million, rising intermittently and eventually reaching $7,873 million by March 2025. Despite periodic declines in certain quarters—such as between March 2021 and March 2022—there is a discernible growth trend emerging more strongly from late 2022 onwards, with the highest quarterly figure recorded in December 2024 at $8,716 million.

Trade receivables, net, demonstrate a generally increasing pattern over the same timeline. Starting at $5,009 million in March 2020, receivables experienced some variability, with a dip observed in mid-2020, followed by steady increments reaching as high as $8,132 million by March 2025. The increase in receivables alongside rising sales suggests expanding credit sales or changes in collection practices, indicating a need for monitoring working capital management.

Receivables turnover ratios, available from September 2020 onwards, show a declining tendency, moving from 5.36 to 4.03 by March 2025. This reduction in turnover ratio indicates a slower collection cycle over time. The declining ratios, combined with rising trade receivables, imply that collections are taking longer relative to sales, potentially affecting liquidity and cash flow efficiency.

Product Sales

Display a growth pattern with variability; from $5,894 million in early 2020 to $7,873 million in early 2025, highlighting overall business expansion despite short-term decreases.

Trade Receivables, Net

Increase steadily from $5,009 million to $8,132 million over five years indicating higher credit sales or extended payment terms, warranting attention to credit risk and cash conversion cycle.

Receivables Turnover Ratio

Decline from 5.36 to 4.03, signifying lengthening collection periods and potential cash flow challenges, calling for review of receivables management strategies.

In summary, the data reveals continued growth in sales accompanied by rising net receivables and a lengthening receivables turnover period, which may impact operational liquidity. Management might consider focusing on enhancing receivables collection efficiency to sustain healthy cash flows alongside sales growth.

The quarterly financial data reveals notable trends in cost of sales, accounts payable, and payables turnover over the analyzed periods.

Cost of Sales

The cost of sales generally exhibits a fluctuating pattern with a gradual upward trend particularly evident from late 2022 onward. Beginning at $1,513 million in March 2020, the values oscillate but rise significantly by the December 2023 quarter, reaching $3,112 million. After peaking in December 2023 and December 2024 periods with values above $3,300 million, a slight decline is observed in March 2025 with $2,968 million. This suggests increased production or procurement expenses in the latest periods, potentially indicating higher sales volume or cost inflation.

Accounts Payable

Accounts payable demonstrate considerable variability across the timeline. Starting at $1,338 million in March 2020, the figures fluctuate but maintain a range roughly between $1,200 million and $1,600 million until mid-2023. From September 2023 onwards, a marked increase occurs, with payable balances rising sharply to $2,406 million by March 2025. This upward shift from the end of 2023 could imply extended credit terms with suppliers or increased purchasing activity, reflecting changes in operational or procurement strategies.

Payables Turnover Ratio

The payables turnover ratio exhibits an overall increasing trend, indicating faster turnover of payables relative to purchases over time. Initiating around 4.33 in September 2020, the ratio rises steadily, peaking at 6.74 in September 2024. This progression suggests improved efficiency in settling accounts payable or changes in payment policies. However, slight variability is present with minor dips such as to 4.08 in March 2023 and 5.01 in September 2024, indicating occasional fluctuations in payment speed.

In summary, the data points toward an environment of increasing costs and purchases accompanied by growing accounts payable balances. The rising payables turnover ratio indicates a general trend of quicker settlements of obligations, although some fluctuations over time suggest intermittent changes in payment practices. These patterns collectively may reflect adjustments in operational scale, supplier negotiations, or financial management approaches in recent quarters.

Working Capital

The working capital exhibits considerable fluctuation over the analyzed quarters. Starting at 6,986 million US dollars in March 2020, it increased sharply to a peak of 12,708 million by September 2020 before declining to 4,514 million in June 2021. Subsequently, there is another rise peaking dramatically at 31,523 million in September 2023, followed by a steep drop to 3,921 million by March 2025. Overall, the working capital shows a cyclical pattern with notable volatility and sudden spikes in certain periods.

Product Sales

Product sales maintain a more stable and gradually increasing trend. Starting at 5,894 million in March 2020, the figures oscillate slightly but generally move upward, reaching a high of 8,716 million in December 2024. Despite minor quarterly dips, the overall trend indicates consistent growth in product sales across the period analyzed.

Working Capital Turnover

The working capital turnover ratio, available for the later periods, reflects significant variability. Initially recorded at 2.55 in December 2020, it fluctuates widely from below 1.0 in mid-2023 to a peak of 8.36 in March 2025. This suggests periods of both relative efficiency and inefficiency in utilizing working capital to generate sales, correlating with the large swings seen in working capital amounts. The increase in turnover ratio towards the end may indicate improved working capital management or reduced working capital levels relative to sales.

Inventory Turnover Ratio

The inventory turnover ratio shows a relatively stable performance from March 2021 through December 2023, fluctuating around the range of 1.30 to 1.58. There is a modest declining trend noted from early 2022 through the end of 2023, reaching a low of 0.89 in March 2024. Following this decline, a marked recovery and positive upward trend is observed starting mid-2024, with the ratio improving steadily to 1.88 by the first quarter of 2025. This improvement suggests more efficient inventory management or increased sales velocity in the most recent quarters.

Average Inventory Processing Period (Days)

The average inventory processing period displays an inverse relationship with the inventory turnover ratio. Beginning in March 2021, the processing period remains around 231-239 days but gradually increases to peak at 411 days in March 2024, indicating a lengthening of the time inventory remains on hand. After this peak, the number of days declines sharply to 195 days by March 2025. This pattern reflects a period of inventory build-up or slower inventory movement through early 2024, followed by significant improvement in inventory turnover and processing efficiency thereafter.

Overall Insights

The data reveals a period of deteriorating inventory efficiency, particularly evident between mid-2023 and early 2024, as seen in decreasing inventory turnover and increasing average inventory days. However, subsequent quarters demonstrate strong recovery and operational improvement, with inventory management metrics returning to and surpassing previous levels. This suggests successful strategies or market factors contributing to enhanced inventory liquidity and possibly better alignment between supply and demand in recent periods.

Receivables Turnover Ratio

The receivables turnover ratio exhibits a declining trend from the first available data point of 5.36 in March 2021 to a low of 3.7 in March 2024. This decline suggests a gradual reduction in the efficiency with which the company collects its receivables over the analyzed periods. Notably, after reaching the low point in March 2024, the ratio recovers somewhat during the subsequent quarters, increasing to 4.72 by December 2024 before dipping slightly to 4.03 in March 2025. This partial recovery may indicate some improvement in collections or changes in credit policy during late 2024.

Average Receivable Collection Period

Complementing the turnover ratio, the average receivable collection period shows an increasing pattern, moving upward from 68 days in March 2021 to a peak of 99 days in March 2024. This increase in days outstanding aligns directly with the declining turnover ratio, indicating slower collection of receivables. Following this peak, the period shortens to 77 days in December 2024, indicating enhanced collection speed. However, in March 2025, the period expands again to 91 days, which may suggest some volatility or inconsistency in collection practices towards the end of the analyzed timeframe.

Overall Pattern and Insights

The inverse relationship between receivables turnover and average collection period is evident, coherent with standard financial principles. The general trend over the studied quarters shows a deterioration in receivables management efficiency from 2021 through early 2024, culminating in slower collections and higher days outstanding. The partial improvement in late 2024 suggests possible operational adjustments or policy changes aimed at enhancing liquidity. Nonetheless, the return to a longer collection period in early 2025 highlights a potential area for further scrutiny to stabilize and improve working capital management.

Average Inventory Processing Period

The average inventory processing period was not available for the early quarters of 2020 but showed a consistent figure of 231 days from March to December 2020. In 2021, it remained relatively stable near 239 days throughout the first three quarters and returned to 231 days at year-end. Throughout 2022, the period showed an increasing trend, climbing from 247 days in Q1 to a peak of 281 days in Q4. The first three quarters of 2023 witnessed a gradual decline from 279 to 259 days. However, a significant spike occurred in Q4 2023 reaching 411 days, followed by a decrease to 321 days in Q1 2024. The trend continued downward in 2024 to 195 days by Q4, marking a notable reduction compared to the previous years.

Average Receivable Collection Period

Availability of data begins in March 2020 with 68 days and remains fairly consistent through 2020 and 2021, fluctuating between 67 and 74 days. In 2022, this period gradually increased from 76 days in Q1 to 84-88 days by the year's end. The collection period reached its highest point in Q4 2023 at 99 days, indicating slower receivables turnover. In 2024, the trend slightly improved with some volatility, falling back near 77 days by Q3 but increasing again to 91 days in Q4.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, began near 299 days in early 2020 and showed a steady upward trend through 2021, reaching 310 days by the end of the year. The operating cycle further lengthened in 2022, increasing from 305 days in Q1 to 363 days in the final quarter. In 2023, a similar pattern was observed with a peak of 510 days in Q4, driven likely by the inventory processing spike. In 2024, the cycle shortened considerably over the year from 409 days in Q1 to 286 days in Q4, indicating improvements in overall operational efficiency toward the end of the period.

Payables Turnover Ratio Trends

The payables turnover ratio shows a general upward trend from early 2020 through to 2025, indicating improving efficiency in managing payables over the period. Starting at 4.33 in March 2020, the ratio increases steadily, with some fluctuations, reaching a peak value of 6.74 in September 2024 before slightly declining to 5.25 by the end of the observed period in March 2025. The increase suggests the company has generally accelerated its rate of paying suppliers, possibly reflecting stronger cash flow management or changes in payment terms.

Average Payables Payment Period Trends

The average payables payment period inversely correlates with the payables turnover ratio, showing a decrease over time from 84 days in March 2020 to a low of 54 days in September 2024, before increasing slightly to 70 days by March 2025. This reduction in days payable outstanding indicates the company is paying its suppliers faster. The most notable decreases occur between late 2020 and mid-2023, with fluctuations thereafter.

Overall Financial Payment Behavior

The combined analysis of both metrics highlights a trend toward more efficient payment practices throughout the examined quarters. The firm improved its payables turnover ratio and concurrently reduced the average payment period, which may reflect stronger liquidity or strategic supplier negotiations. Nonetheless, slight reversals in both indicators toward the end of the reported timeline suggest cautious adjustments or variations in payment strategies during the most recent quarters.

Inventory Processing Period

The average inventory processing period exhibited a generally increasing trend from March 2021 through December 2023, rising from 231 days to a peak of 411 days in March 2024. Following this peak, a notable decline occurred, with the period decreasing to 195 days by March 2025. This suggests a significant slowdown in inventory turnover during early 2024, followed by improvements in subsequent quarters.

Receivable Collection Period

The average receivable collection period saw a gradual upward trend from 68 days in March 2021 to 88 days by December 2023, indicating a lengthening of the time taken to collect receivables. A sharp spike to 99 days was recorded in March 2024, after which the period normalized somewhat but remained elevated, fluctuating between 77 and 91 days through March 2025. This pattern reflects challenges in receivables management during this period.

Payables Payment Period

The average payables payment period demonstrated more variability. Starting at 84 days in March 2021, it decreased to a low of 54 days by September 2024. Periodic increases occurred, notably reaching 90 days in March 2023 and 73 days in March 2025. The overall trend points to a shortening payment period over time, suggesting an accelerated settlement of payables, albeit with intermittent extensions.

Cash Conversion Cycle

The cash conversion cycle trended upward from 215 days in March 2021 to a significant peak of 441 days in March 2024, indicating that the company took longer to convert its resources into cash during this time. Thereafter, a downward trajectory was observed, falling to 216 days by March 2025. The fluctuations mirror the inventory and receivable periods' trends, underscoring the impact of working capital management inefficiencies during early 2024 and subsequent improvements.