Analog Devices Inc. (NASDAQ:ADI)

The financial ratios over the periods analyzed reveal several notable trends in the company's operational efficiency and working capital management.

Inventory Turnover

The inventory turnover ratio fluctuated, starting at 3.14 and declining to a low of 2.33 in the following year. It then recovered to 3.2 but subsequently displayed a downward trend, ending at 2.56. This pattern suggests variability in inventory management efficiency, with a general decline after the peak year, indicating slower inventory movement in the most recent periods.

Receivables Turnover

This ratio dipped significantly from 7.6 to 5.02 initially, then improved to 6.67 and further increased to a peak of 8.37. However, it subsequently decreased to 7.05 before rising slightly to 7.67. Overall, the receivables turnover demonstrates some volatility but maintains a relatively strong collection performance in later years, implying improved credit control and faster collection cycles in the mid-term periods.

Payables Turnover

The payables turnover followed a somewhat similar pattern to receivables turnover but with smaller amplitude. Starting at 8.42, it dropped to 6.3, then recovered to 7.7 and peaked at 8.98. It then declined to 8.3 and 7.81 in the final periods. This suggests the company initially slowed payments to suppliers but then accelerated payment frequency before moderating again, reflecting strategic management of payables.

Working Capital Turnover

The working capital turnover ratio showed pronounced volatility. It began at 4.86, dropped to 2.81, surged dramatically to 10.4, and then fell back to 3.78 and 2.85. The sharp spike indicates a period of highly efficient use of working capital, but the subsequent steep decline points to challenges or changes in working capital utilization efficiency.

Average Inventory Processing Period

The inventory processing period ranged from 114 to 157 days, with the highest duration recorded in the second year. After initial increases and decreases, the period generally lengthened again to 142 days in the most recent year. This trend corresponds to the declining inventory turnover, implying longer holding periods and potentially slower inventory movement recently.

Average Receivable Collection Period

The average time to collect receivables decreased from 73 days to 44 days after an initial rise, then increased moderately to 52 days, and returned to 48 days in the final year. These fluctuations align with changes in receivables turnover, reflecting variability in customer payment patterns but a tendency toward improved collection efficiency in certain years.

Operating Cycle

The operating cycle extended significantly from 164 days to a peak of 230 days, then shortened to 169 days before gradually increasing again, ending at 190 days. This indicates fluctuating overall operational efficiency, impacted mainly by changes in the inventory processing and receivables collection periods.

Average Payables Payment Period

The payables payment period increased from 43 days to 58 days, then decreased to 41 days, and slightly rose again to 47 days in the final year. The initial increase followed by a decrease suggests a strategic shift in payment policies, likely balancing between preserving cash and maintaining supplier relationships.

Cash Conversion Cycle

The cash conversion cycle mirrored the operating cycle closely, starting at 121 days, extending to 172 days, then reducing to 122 days before rising gradually to 143 days. This reflects the combined effects of receivables collection, inventory management, and payables payment, indicating periods of both efficient and prolonged cash flow conversion.

Overall, the data highlights variability and cyclical changes in the company’s working capital management metrics. While some periods show strong improvements in asset turnover and operating efficiency, other years exhibit declines, suggesting fluctuating operational conditions and potential areas for process optimization. The company appears to manage payables strategically but faces challenges in maintaining consistent inventory and receivables turnover rates over time.

The financial data reveals notable fluctuations and trends in cost of sales, inventories, and inventory turnover over the analyzed periods.

Cost of Sales

The cost of sales displays a rising trend from 2020 through 2022, increasing significantly from approximately 1.91 billion USD to about 4.48 billion USD. This sharp rise is followed by a slight decline in 2023 to roughly 4.43 billion USD, then further decreasing in 2024 to approximately 4.05 billion USD. However, it climbed again in 2025 to around 4.25 billion USD. Overall, this indicates substantial growth in cost of sales over the first three years, a marginal decrease subsequently, and a mild recovery in the final year.

Inventories

Inventories have similarly trended upward, starting near 608 million USD in 2020, doubling to approximately 1.20 billion USD in 2021, and continuing to grow to nearly 1.65 billion USD by 2023. In 2024, inventories declined to about 1.45 billion USD but increased again in 2025 to approximately 1.66 billion USD, the highest level recorded. This pattern suggests an overall increase in inventory holdings with some variability, particularly a temporary reduction in 2024.

Inventory Turnover Ratio

The inventory turnover ratio demonstrates variability without a clear long-term trend. It fell from 3.14 in 2020 to 2.33 in 2021, improved sharply to 3.2 in 2022, then decreased again to 2.7 in 2023. Subsequent values show slight fluctuations: 2.79 in 2024 and 2.56 in 2025. These movements imply fluctuating efficiency in managing inventory relative to cost of sales, with turnover generally lower in the latter years compared to the earliest year in the series.

In summary, the data suggests that the company experienced significant growth in cost of sales and inventories over the initial years, indicative of expanding operations or sales volume. Inventory turnover, however, fluctuated throughout the period, potentially reflecting changes in inventory management efficiency or demand variability. The decline in inventory turnover ratios towards the end of the period might warrant further examination to understand its implications on working capital and operational performance.

The financial data reveals significant fluctuations in key metrics over the analyzed periods.

Revenue

Revenue shows a marked increase from 5,603,056 thousand in the first period to a peak of 12,013,953 thousand in the third period, reflecting strong growth. However, there is a slight plateau between the third and fourth periods, followed by a notable decrease in the fifth period to 9,427,157 thousand. The most recent period indicates a recovery with revenue rising again to 11,019,707 thousand, though still below the peak value observed previously.

Accounts Receivable Less Allowances

The accounts receivable balance demonstrates an overall upward trend from 737,536 thousand initially to 1,800,462 thousand in the third period, indicating increased outstanding customer balances. It somewhat decreases in the fourth and fifth periods to 1,469,734 thousand and 1,336,331 thousand, respectively, before rising again slightly in the final period to 1,436,075 thousand. These fluctuations suggest varying collection patterns or sales mix changes.

Receivables Turnover

Receivables turnover ratio experiences variability across the periods. It starts at 7.6, decreases sharply to 5.02 in the second period, then rebounds to 6.67 and peaks at 8.37 in the fourth period. After that, it declines to 7.05 and then rises again to 7.67. This oscillation indicates fluctuations in the company's efficiency in collecting receivables, with the highest efficiency in the fourth period and the lowest in the second.

Overall, the analysis points to dynamic revenue performance with intermittent declines and recoveries. The accounts receivable levels and turnover ratios reflect changes in working capital management and collection effectiveness across the observed periods. These trends suggest attentive monitoring of receivables and revenue generation is essential for sustaining financial stability.

Cost of Sales

The cost of sales exhibits a notable increasing trend from 2020 through 2022, rising significantly from approximately 1.91 billion USD to over 4.48 billion USD. Following this peak, there is a slight decline in 2023 to around 4.43 billion USD and a further decrease in 2024 to roughly 4.05 billion USD. However, the cost of sales increases again in 2025 reaching approximately 4.25 billion USD. This fluctuation indicates a period of rapid growth followed by normalization and moderate recovery.

Accounts Payable

Accounts payable increased substantially from about 227 million USD in 2020 to 582 million USD in 2022. After this rise, it declined in 2023 to roughly 493 million USD and remained relatively stable in 2024 at around 487 million USD. In 2025, accounts payable again rose, reaching approximately 544 million USD. This pattern suggests an initial expansion in credit usage toward suppliers or purchase deferrals, followed by a period of reduction and subsequent moderate increase.

Payables Turnover Ratio

The payables turnover ratio, which indicates how frequently the company pays off its suppliers, showed a decline from 8.42 in 2020 to 6.3 in 2021, suggesting slower payments or increased credit terms. It then increased to 7.7 in 2022 and peaked at 8.98 in 2023, indicating quicker payment cycles. Afterward, the ratio decreased to 8.3 in 2024 and further to 7.81 in 2025, reflecting a slight moderation in payment speed. Overall, the ratio fluctuates but remains relatively high, signaling generally efficient payables management with some year-to-year variability.

Working Capital

The working capital exhibited significant fluctuation over the observed periods. It increased markedly from approximately $1.15 billion in 2020 to a peak of about $2.6 billion in 2021. Subsequently, it decreased slightly in 2022 and more substantially in 2023, reaching around $1.18 billion, before rising again sharply in 2024 and 2025 to $2.5 billion and $3.9 billion, respectively. This pattern suggests variability in the company's short-term liquidity and operational efficiency across the years.

Revenue

Revenue showed a general upward trend from 2020 through 2023, starting at roughly $5.6 billion and peaking at approximately $12.3 billion in 2023. However, a noticeable decline occurred in 2024, with revenue dropping to around $9.4 billion, followed by a partial recovery to approximately $11.0 billion in 2025. This indicates periods of growth interrupted by a setback and subsequent recovery.

Working Capital Turnover

The working capital turnover ratio varied significantly across the periods. It started at 4.86 in 2020, fell to its lowest at 2.81 in 2021, rebounded to 4.81 in 2022, then surged dramatically to 10.4 in 2023. This large increase suggests improved efficiency in using working capital to generate revenue in 2023. However, the ratio declined again in 2024 and 2025, settling at 3.78 and 2.85, respectively, indicating a reduction in this efficiency over the most recent years.

Overall Analysis

The trends in working capital and revenue reveal a complex financial environment with periods of both expansion and contraction. The dramatic rise in working capital turnover in 2023 stands out, coinciding with peak revenue, suggesting a year of exceptional operational efficiency. Nevertheless, the subsequent years show a reversion to lower turnover ratios, despite an increase in working capital. This could reflect changes in inventory management, receivables, or payables, affecting liquidity and revenue generation dynamics. The revenue dip in 2024 followed by recovery indicates possible external or internal factors impacting sales, with the company regaining momentum by 2025.

Inventory Turnover

The inventory turnover ratio exhibits fluctuations over the analyzed periods. It started at 3.14 in 2020, then declined notably to 2.33 in 2021. This was followed by a recovery to 3.2 in 2022 before decreasing again in subsequent years to 2.7 in 2023, 2.79 in 2024, and finally 2.56 in 2025. The overall trend suggests variability in how efficiently inventory is being managed, with a peak in 2022 but a general decline after that, indicating potential challenges in maintaining optimal inventory sales velocity.

Average Inventory Processing Period

The average inventory processing period, measured in days, shows an inverse pattern relative to inventory turnover. The number of days increased substantially from 116 in 2020 to 157 in 2021, indicating slower inventory movement. It improved markedly in 2022 by shortening to 114 days, reflecting faster inventory processing at that point. However, the period lengthened again over the subsequent years—135 days in 2023, 131 days in 2024, and 142 days in 2025—suggesting a trend towards longer inventory holding times in recent years.

Combined Insight

The opposing movements in inventory turnover and average inventory processing period align with expected operational relationships, where higher turnover corresponds to shorter inventory periods and vice versa. The data indicates operational inconsistencies in managing inventory efficiently over the six-year span. After a period of improvement around 2022, the company appears to face increasing inventory holding durations and reduced turnover in the last three years, which may impact working capital efficiency and cost management.

Receivables Turnover

The receivables turnover ratio exhibited fluctuations over the periods analyzed. Initially, it declined from 7.6 in 2020 to 5.02 in 2021, indicating a slower collection of receivables during that year. Subsequently, the ratio improved significantly to 6.67 in 2022 and further increased to 8.37 in 2023, suggesting enhanced efficiency in collecting receivables during these periods. However, the ratio slightly declined to 7.05 in 2024 but rose again to 7.67 in 2025, indicating some variability but overall maintaining a relatively strong turnover rate.

Average Receivable Collection Period

The average receivable collection period showed an inverse pattern relative to the receivables turnover. It lengthened considerably from 48 days in 2020 to 73 days in 2021, reflecting slower collections and potentially increased credit risk or relaxed credit terms. After this peak, the collection period shortened markedly to 55 days in 2022 and further to 44 days in 2023, indicating improved collection processes or tighter credit management. The period then increased to 52 days in 2024 before declining back to 48 days in 2025, suggesting a return to the earlier level with minor fluctuations in collection efficiency.

Overall Observations

The data indicate a temporary deterioration in receivables management around 2021, followed by a notable recovery in subsequent years. The trends in both ratios suggest that after experiencing slower collections, efforts to enhance receivable turnover were effective, leading to improved liquidity and working capital management. The fluctuations in the latter years may reflect adjustments in credit policies or external market conditions influencing customer payment behavior.

The analysis of the presented financial data reveals several notable trends in the company's operational efficiency over the examined periods.

Average Inventory Processing Period

This metric exhibits variability across the years, starting at 116 days and reaching a peak of 157 days in the subsequent period. After this peak, it decreased to 114 days but then gradually increased again, ending at 142 days. This indicates fluctuations in inventory turnover, suggesting possible changes in inventory management or demand patterns.

Average Receivable Collection Period

The average time taken to collect receivables has shown considerable variation. It increased from 48 days to 73 days initially, indicating a slower collection process. Subsequently, it shortened significantly to 44 days but later trended slightly upward, closing at 48 days. Overall, this suggests some challenges in receivables collections followed by improvements and stabilization.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, reflects overall operational efficiency. It increased sharply from 164 to 230 days after the first period, implying reduced operational efficiency. Although it declined to 169 days afterward, it showed a slight upward trend in the following years, ultimately reaching 190 days. This indicates that while the company made efforts to improve, the operating cycle remains longer than in earlier periods, which could impact cash flow and working capital management.

In summary, the company's operational metrics reveal a pattern of initial decline in efficiency followed by attempts at stabilization. The fluctuating inventory processing times and receivable collections contribute to a generally extended operating cycle, which may warrant further investigation to optimize working capital and improve cash conversion.

The analysis of the accounts payable management over the reported years reveals several notable trends. The payables turnover ratio, which indicates how many times a company pays off its suppliers within a year, has experienced fluctuations. Initially, there is a decline from 8.42 to 6.3 between 2020 and 2021, followed by a recovery to 7.7 in 2022. Subsequently, the turnover ratio improves further to 8.98 in 2023, before slightly decreasing to 8.3 and 7.81 in the following two years. This pattern suggests variability in the frequency of payment settlements but generally maintains an upward momentum post-2021.

Corresponding to the payables turnover trends is the average payables payment period, expressed in days. This metric inversely relates to the turnover ratio, reflecting the average duration the company takes to pay its suppliers. The data shows a considerable increase from 43 days in 2020 to 58 days in 2021, indicating a slowdown in payment speed. However, the payment period then reduces to 47 days in 2022 and further decreases to a low of 41 days in 2023, signaling quicker payments. In the subsequent years, the payment period lengthens slightly to 44 and then 47 days.

Overall, the metrics demonstrate a period of extended payment timelines in 2021, followed by an improvement in 2022 and 2023 with faster payments. Despite minor reversals in the last two years, the company maintains a relatively efficient payment cycle close to earlier levels. These variations could reflect shifts in working capital management strategies or reactions to external economic factors influencing cash flow and supplier negotiations.

Inventory Processing Period

The average inventory processing period exhibited variability over the analyzed years. It increased notably from 116 days in 2020 to a peak of 157 days in 2021, indicating a slower turnover of inventory during that year. Subsequently, it declined to 114 days in 2022, showing improved inventory management or faster sales. However, following 2022, the period experienced an upward trend again, rising to 135 days in 2023 and reaching 142 days by 2025, suggesting some challenges or strategic changes influencing inventory holding times.

Receivable Collection Period

The average receivable collection period fluctuated throughout the periods but generally showed efforts toward efficiency. It started at 48 days in 2020, increased significantly to 73 days in 2021, which could indicate slower customer payments or extended credit terms. This metric improved markedly in 2022 to 55 days and further to 44 days in 2023, the lowest in the timeline, reflecting better collection processes. In the last two periods, 2024 and 2025, the periods slightly increased to 52 and 48 days respectively, signaling a partial reversal but remaining close to the initial 2020 figure.

Payables Payment Period

The payables payment period generally followed a declining trend from 2020 to 2023, indicating quicker payments to suppliers or tighter cash management. Starting at 43 days in 2020, it increased in 2021 to 58 days, which may reflect longer payment terms negotiated or cash conservation efforts. Then, it decreased to 47 days in 2022 and further to 41 days in 2023. In subsequent years, the period rose somewhat to 44 days in 2024 and 47 days in 2025, suggesting a modest extension in payment timing after the previous reductions.

Cash Conversion Cycle

The cash conversion cycle (CCC) tracked the overall efficiency of working capital management and exhibited considerable variation. The CCC expanded sharply from 121 days in 2020 to 172 days in 2021, influenced by increases in inventory and receivables periods coupled with longer payables. It then contracted notably to 122 days in 2022, signaling enhanced operational efficiency. From 2022 onwards, the cycle gradually lengthened again over the final years, rising to 138 days in 2023 and reaching 143 days by 2025. This indicates a trend toward slower cash turnover, potentially impacted by longer inventory holding and receivables periods, which may warrant monitoring for liquidity implications.