Broadcom Inc. (NASDAQ:AVGO)

Inventory Turnover

The inventory turnover ratio exhibited a declining trend from 11.57 in 2019 to a low of 5.77 in 2022, indicating slower inventory movement. However, it recovered significantly to 10.83 by 2024, suggesting improved inventory management.

Receivables Turnover

The receivables turnover ratio increased sharply from 6.93 in 2019 to a peak of 13.25 in 2021, reflecting faster collection of receivables. Subsequently, it stabilized around 11.2 to 11.7 through 2024, maintaining relatively efficient receivables management.

Payables Turnover

Payables turnover fluctuated over the years, starting at 11.83 in 2019, dipping to 9.2 in 2023, and rising again to 11.47 in 2024. This pattern indicates variability in the speed of settling payables, with no clear long-term trend but a recovery in the latest period.

Working Capital Turnover

Working capital turnover showed a sharp decline from 7.49 in 2019 to around 2.66 in 2021 and 2023, signaling reduced efficiency in generating sales from working capital. Notably, there was a significant surge to 17.8 in 2024, implying a drastic improvement in working capital utilization.

Average Inventory Processing Period

The average inventory processing period increased steadily from 32 days in 2019 to a peak of 63 days in 2022 and remained elevated through 2023. A marked improvement occurred in 2024, dropping back to 34 days, corresponding with the inventory turnover recovery.

Average Receivable Collection Period

This metric decreased significantly from 53 days in 2019 to 28 days in 2021, indicating faster collection. It then stabilized around 31 to 33 days in subsequent years, reflecting consistent receivables management.

Operating Cycle

The operating cycle shortened from 85 days in 2019 to 70 days in 2020, then fluctuated between 73 and 96 days until 2023. A notable reduction to 65 days in 2024 reflects improved overall operational efficiency.

Average Payables Payment Period

The payables payment period varied, initially declining from 31 days in 2019 to 29 days in 2020, then increasing to 40 days in 2023 before decreasing again to 32 days in 2024. This variability indicates changes in payment policies or cash management strategies.

Cash Conversion Cycle

The cash conversion cycle showed a decreasing trend from 54 days in 2019 to 36 days in 2021, indicating improved cash flow management. It rose again to 63 days in 2022 before declining sharply to 33 days in 2024, signifying enhanced liquidity and operational efficiency in the most recent period.

The analysis of the financial data reveals several notable trends regarding cost of revenue, inventory levels, and inventory turnover ratio over the examined periods.

Cost of Revenue

The cost of revenue shows a generally increasing trend from 2019 to 2024. The cost rose gradually from $10,114 million in 2019 to $11,129 million in 2023, indicating a period of steady growth in costs associated with generating revenue. However, a pronounced increase occurred in 2024, where the cost surged sharply to $19,065 million. This significant rise may indicate expanded operations, increased production costs, or changes in pricing strategies affecting cost structures.

Inventory Levels

Inventory levels rose consistently from $874 million in 2019 to a peak of $1,925 million in 2022, reflecting a buildup of stock possibly tied to higher demand forecasts or supply chain adjustments. After 2022, inventory slightly decreased, falling to $1,898 million in 2023 and further to $1,760 million in 2024. This decline suggests improved inventory management or a response to changing market conditions resulting in less stock held.

Inventory Turnover Ratio

The inventory turnover ratio declined substantially from 11.57 in 2019 to 5.77 in 2022, indicating a slowdown in how quickly inventory was sold or used. This decrease corresponds with the increasing inventory levels, suggesting potential challenges in clearing stock or slower sales velocity during those years. The ratio stabilized slightly in 2023 at 5.86 before rebounding sharply to 10.83 in 2024, nearly reaching the initial 2019 levels. The improvement in 2024 implies a more efficient inventory management or an increase in sales relative to inventory, enhancing asset utilization.

The financial data shows a consistent upward trend in net revenue over the examined periods, indicating strong growth. Starting from US$ 22,597 million in 2019, the revenue increased gradually each year, reaching US$ 35,819 million by 2023, followed by a significant jump to US$ 51,574 million in 2024. This marked increase in 2024 suggests a substantial expansion in business activities or successful revenue-generating initiatives.

Trade accounts receivable, net, experienced fluctuations during the period. Initially, the value declined from US$ 3,259 million in 2019 to a low of US$ 2,071 million in 2021, then rose to US$ 3,154 million by 2023 and further increased to US$ 4,416 million in 2024. This pattern indicates some variability in credit sales or collection efficiency, with a recovery and growth in receivables in the latter years aligned with revenue increases.

Receivables turnover ratio, which measures the efficiency in collecting receivables, improved significantly from 6.93 in 2019 to a peak of 13.25 in 2021, signaling enhanced collection performance and possibly stricter credit policies. After 2021, the ratio decreased somewhat to about 11.22-11.68 range but remained higher than the initial value in 2019, reflecting sustained effective receivables management despite the growth in outstanding receivables.

Net Revenue

Demonstrates strong year-over-year growth, with a notable surge in 2024.

Trade Accounts Receivable, Net

Displays an initial decline followed by a recovery and growth, suggesting variation in credit sales or collection practices correlated with revenue trends.

Receivables Turnover Ratio

Indicates improved collection efficiency early on, with a slight decrease while maintaining higher efficiency compared to the starting period.

The financial data over the reviewed periods reveals notable trends in Broadcom Inc.'s cost of revenue, accounts payable, and payables turnover ratio.

Cost of Revenue

The cost of revenue demonstrates a generally increasing trend from 2019 through 2024. Starting at $10,114 million in 2019, it experienced a steady rise to $11,129 million by 2023. A significant jump is observed in the latest period, reaching $19,065 million in 2024. This sharp increase may indicate heightened production costs, expansion activities, or changes in product mix during the most recent year.

Accounts Payable

Accounts payable shows variability but generally trends upward over the period analyzed. Beginning at $855 million in 2019, the value fluctuated moderately before increasing to $1,662 million in 2024. The growth in payables aligns with the rise in cost of revenue, suggesting increased purchasing activity or extended payment terms. The yearly changes include a dip in 2020 followed by recovery and growth, with notable increases in the most recent years.

Payables Turnover Ratio

The payables turnover ratio, which measures how frequently a company pays off its suppliers, displays some volatility across the periods. Starting at 11.83 in 2019, the ratio peaked at 12.41 in 2020, indicating faster payment cycles. Subsequently, it declined to a low of 9.2 in 2023, suggesting slower payments or extended credit terms. In 2024, the ratio rebounded to 11.47, indicating an acceleration in payment frequency again. These fluctuations may reflect changes in payment policy, supplier negotiations, or cash flow management strategies.

Overall, the data indicates an expanding scale of operations accompanied by increasing costs and payable balances. The payables turnover ratio's variability suggests adaptive payment practices in response to operational or market conditions. The pronounced increase in cost of revenue and accounts payable in the latest year merits further investigation to understand underlying drivers and potential impacts on cash flow and supplier relationships.

Working Capital

The working capital exhibited an overall increasing trend from 2019 to 2023, rising from 3,018 million USD in 2019 to a peak of 13,442 million USD in 2023. However, in 2024, there is a significant decline to 2,898 million USD, which contrasts sharply with the upward trajectory observed in the previous years.

Net Revenue

Net revenue consistently increased throughout the entire period under review, moving from 22,597 million USD in 2019 to 51,574 million USD in 2024. This steady growth indicates expanding sales or business volume with a particularly noticeable jump from 35,819 million USD in 2023 to 51,574 million USD in 2024.

Working Capital Turnover Ratio

The working capital turnover ratio shows a declining trend from 7.49 in 2019 to 2.66 in 2021, remaining relatively stable through 2023 before jumping dramatically to 17.8 in 2024. This ratio measures the efficiency in utilizing working capital to generate revenue. The initial decline suggests a decrease in efficiency or an increase in working capital relative to revenue, while the sharp rise in 2024 correlates with the steep drop in working capital and significant increase in revenue, indicating a sudden improvement in turnover efficiency.

General Observations

The data reflects a company growing its net revenue steadily over the years while managing its working capital with varying efficiency. The notable outlier in 2024, with sharply reduced working capital and elevated turnover ratio alongside increased revenue, may imply a strategic shift in capital management or operational changes that significantly altered liquidity dynamics and asset utilization.

Inventory Turnover

The inventory turnover ratio demonstrates a notable decline from 11.57 in 2019 to a low of 5.77 in 2022, indicating a decreasing frequency with which inventory is sold and replaced over this period. However, there is an observable recovery to 10.83 by 2024, suggesting an improvement in inventory management or sales velocity in the latest period.

Average Inventory Processing Period

The average inventory processing period moves inversely to the inventory turnover ratio, increasing steadily from 32 days in 2019 to a peak of 63 days in 2022. This trend points to a lengthening time inventory is held before sale, implying slower inventory movement. By 2024, the processing period decreases to 34 days, aligning with the restoration in inventory turnover and reflecting enhanced operational efficiency.

Summary

Overall, the data reveal a period of declining inventory efficiency between 2019 and 2022, characterized by reduced turnover rates and increasing inventory holding periods. This trend reverses after 2022, with significant improvements in both metrics by 2024, indicating a successful response to previous inefficiencies or changing market conditions. The synchronization of these two measures underscores the close relationship between turnover rates and inventory holding duration.

Receivables Turnover

The receivables turnover ratio exhibited a significant upward trend from 6.93 in the fiscal year ending November 3, 2019, escalating sharply to 13.25 by October 31, 2021. Following this peak, the ratio experienced a slight decline to 11.22 in 2022 but subsequently stabilized and demonstrated modest increases, reaching 11.68 by November 3, 2024. This pattern suggests an overall improvement in the efficiency of collecting receivables, with a peak in 2021 followed by moderate fluctuations and a maintained relatively high turnover efficiency in recent years.

Average Receivable Collection Period

The average collection period for receivables showed a consistent decrease over the entire period analyzed, dropping from 53 days in 2019 to 31 days in 2024. This decline was especially notable in the early years, with the period contracting sharply to 28 days by 2021. Although a slight increase occurred in 2022 to 33 days, the trend resumed downward afterward. The overall reduction in days indicates an improvement in the company's ability to convert receivables into cash more quickly, which complements the trends observed in the receivables turnover ratio.

Relationship Between Receivables Turnover and Collection Period

The inverse correlation between receivables turnover and the average collection period is clearly evident. As the receivables turnover ratio increased, the average number of days to collect receivables decreased, signaling improved efficiency in managing accounts receivable. These trends collectively imply enhanced cash flow management and potentially better credit control policies implemented by the company over the years.

Average Inventory Processing Period

The average inventory processing period shows a fluctuating trend over the analyzed years. Initially, there was a gradual increase from 32 days in 2019 to a peak of 63 days in 2022. This was followed by a slight decrease to 62 days in 2023, and a notable reduction to 34 days by 2024. This pattern suggests that the company experienced a longer duration to process inventory around 2022-2023 but improved efficiency significantly in the latest year.

Average Receivable Collection Period

The average receivable collection period exhibited a consistent decline over the period under review. Starting at 53 days in 2019, it decreased substantially to 35 days in 2020, then continued to decline more gradually to 31 days by 2024. This improvement indicates enhanced effectiveness in collecting receivables, reducing the cash conversion cycle and potentially improving liquidity.

Operating Cycle

The operating cycle displayed moderate variability, initially decreasing from 85 days in 2019 to 70 days in 2020, which aligns with improved receivable collection. It slightly increased to 73 days in 2021 before rising sharply to 96 days in 2022, mirroring the peak in inventory processing duration. It marginally decreased to 94 days in 2023 and then declined significantly to 65 days by 2024. The operating cycle's reduction in the final year suggests notable operational efficiencies, driven by improved inventory turnover and receivables management.

The analysis of the payables turnover ratio and average payables payment period over the six-year period reveals notable fluctuations. The payables turnover ratio started at 11.83 in 2019, experienced a slight increase to 12.41 in 2020, indicating a faster payment cycle, then declined significantly to 9.77 in 2021. This decline suggests slower payments to suppliers during that year. Subsequently, the ratio improved to 11.13 in 2022, dropped again to 9.2 in 2023, and rose sharply to 11.47 in 2024.

These fluctuations in the turnover ratio are inversely mirrored by changes in the average payables payment period. The payment period decreased from 31 days in 2019 to 29 days in 2020, reflecting quicker payments, but then increased sharply to 37 days in 2021, indicating slower payment practices. It then decreased to 33 days in 2022, rose again significantly to 40 days in 2023, and finally dropped back to 32 days in 2024.

The alternating pattern between payables turnover and average payment days suggests variability in payment policies or cash management strategies. Periods with lower turnover ratios and longer payment periods may indicate extended payment terms or cash preservation efforts, while periods with higher turnover ratios and shorter payment days could reflect more efficient or expedited payments to suppliers. The data for 2023 shows the longest payment period and the lowest payables turnover, implying a strategic extension of payables, followed by a reversion towards quicker payment in 2024.

Average Inventory Processing Period

The average inventory processing period showed a notable increase from 32 days in 2019 to a peak of 63 days in 2022, indicating a lengthening time to convert inventory into sales. However, it subsequently decreased sharply to 34 days by 2024, suggesting a significant improvement in inventory management efficiency in the most recent period.

Average Receivable Collection Period

This period gradually declined from 53 days in 2019 to 28 days in 2021, reflecting faster collection of receivables. Although there was a minor increase in 2022 to 33 days and slight fluctuations afterward, the period stabilized around 31 days by 2024, maintaining a relatively efficient collections process.

Average Payables Payment Period

The average payables payment period experienced fluctuations, starting at 31 days in 2019, decreasing to 29 days in 2020, rising again to 40 days in 2023, before falling back to 32 days in 2024. These variations suggest changes in payment policies or supplier negotiations, with a generally longer payment period noted between 2021 and 2023 compared to earlier years.

Cash Conversion Cycle

The cash conversion cycle decreased significantly from 54 days in 2019 to 36 days in 2021, implying greater operating efficiency. However, it spiked to 63 days in 2022 before declining again to 33 days by 2024. This volatility highlights periods of varying operational effectiveness, with the latest figure indicating an improvement and possibly optimized working capital management.