Broadcom Inc. (NASDAQ:AVGO)

The analysis of the financial ratios over the observed periods reveals distinct patterns in operational efficiency and liquidity management.

Inventory Turnover

The inventory turnover ratio exhibits a general declining trend from a high of 11.57 to a low around 5.77 over several periods before showing a recovery reaching above 10 in the latest quarters. This pattern suggests a period of slowing inventory movement followed by improvements in inventory management efficiency.

Receivables Turnover

The receivables turnover ratio fluctuates, initially decreasing but then increasing sharply to peaks above 13 before dipping and stabilizing around 10-12. This indicates periods of both accelerating and decelerating collections, reflecting changes in credit policies or customer payment behaviors.

Payables Turnover

The payables turnover ratio shows variability with no clear linear trend, oscillating between approximately 8 and 15. Peaks near 15 suggest periods of rapid payment to suppliers, whereas dips imply extended payment terms, indicative of active management of accounts payable to optimize cash flow.

Working Capital Turnover

The working capital turnover ratio demonstrates considerable volatility, with generally low values around 2-4 in many periods, then spikes notably to extraordinary values such as 64.48 and an exceptionally high 681.61 in two respective quarters. These outliers likely indicate one-time events or accounting adjustments affecting working capital utilization.

Average Inventory Processing Period (Days)

The average inventory days trend upward from the low 30s to the lower 60s, implying a lengthening of the time inventory remains before sale. This increase suggests either slower inventory movement or changes in inventory composition over time.

Average Receivable Collection Period (Days)

The receivable collection period generally decreases from over 50 days down to around 30-35 days, signifying improved efficiency in collecting receivables and potentially better cash flow management.

Operating Cycle (Days)

The operating cycle shows slight fluctuations with values mostly in the 70 to 90-day range but spikes up to 102 days in one period. This variability reflects the combined effects of changes in inventory and receivables trends, impacting overall cash conversion speed.

Average Payables Payment Period (Days)

The payables payment period displays general fluctuations, mostly between 24 and 44 days, with no sustained trend upward or downward. This suggests consistent payment practices with some periods of strategic extension or acceleration of payments.

Cash Conversion Cycle (Days)

The cash conversion cycle generally remains within a 33 to 66-day range but shows notable spikes up to 69 days and a peak of 59 days. The trend mirrors the interaction of inventory, receivables, and payables periods affecting the efficiency in converting investments into cash flows.

Overall, the data illustrate periods of both operational strain and recovery in working capital management. Recent quarters indicate some improvement in inventory turnover and receivables collection periods, contributing to more efficient cash conversion cycles. However, the anomalously high spikes in working capital turnover ratio warrant further investigation to understand underlying causes and ensure sustainable financial practices.

The financial data indicates variations in cost of revenue, inventory levels, and inventory turnover ratios over the examined periods.

Cost of Revenue

The cost of revenue demonstrates fluctuations throughout the periods. Initially, it shows moderate oscillations around the 2,400 to 2,700 million US$ range from early 2019 up to early 2023. From the beginning of 2024 onward, there is a noticeable increase, with values rising sharply to over 4,500 million US$ in February 2024 and maintaining levels above 4,700 million US$ in subsequent quarters. This trend suggests higher expenses related to goods or services sold in the more recent quarters, indicating possible scaling of operations, increased production costs, or shifts in product mix.

Inventory

Inventory levels exhibit a general upward trend across the observed timeframe. Starting from approximately 1,074 million US$ in early 2019, inventories increase almost consistently, reaching levels exceeding 1,900 million US$ by early 2023. Minor fluctuations are observed, but the overall direction is upward, which could reflect accumulation of raw materials, work in progress, or finished goods. Notably, although inventory remains elevated, there is some variability in mid-2024 figures, suggesting adjustments in stock management or supply chain factors.

Inventory Turnover

The inventory turnover ratio reveals a declining pattern from early 2019 through late 2022, dropping from around 11.5 times to approximately 5.8 times. This indicates that the company was selling and replenishing inventory less frequently over time, possibly signifying slower sales velocity, buildup of stock, or less efficient inventory management. However, starting in early 2023, the ratio improves notably, climbing back to over 10 times by the last quarters of 2024. This rebound implies increased efficiency, better sales performance relative to inventory, or enhanced inventory controls.

In summary, while cost of revenue increased significantly in 2024, inventory levels grew steadily over the period but were managed more effectively in recent quarters as demonstrated by the improving inventory turnover ratio. These patterns suggest operational adjustments with an emphasis on improving inventory efficiency in the context of rising costs tied to revenue generation.

Net Revenue

Over the analyzed periods, net revenue demonstrates a generally upward trajectory, increasing from approximately $5.8 billion in early 2019 to over $15 billion by mid-2025. Notably, there is a gradual increase observed from 2019 through 2020, with a more significant acceleration in growth starting in 2021. The revenue peaks multiple times, particularly in the last reported periods, indicating strong sales momentum. Minor fluctuations are observed around 2023, but the overall trend remains positive without significant declines.

Trade Accounts Receivable, Net

The trade accounts receivable show a more volatile pattern compared to net revenue. Between early 2019 and late 2020, these receivables decreased substantially from around $3.7 billion to below $2.3 billion, indicating improved collections or a change in credit policies. However, beginning in 2021, accounts receivable rise again, varying between approximately $2.5 billion and $3.2 billion, before seeing a sharp increase to nearly $5.6 billion by mid-2025. This sharp increase coincides with rapid revenue growth and may suggest extended credit terms or slower collections in the most recent periods.

Receivables Turnover Ratio

The receivables turnover ratio, which measures the efficiency of collecting receivables, exhibits variability across periods. Early data is missing, but from mid-2019 onward, turnover ratios range from about 6.2 to 13.3 times per year. A rising trend in turnover is evident through 2019 and 2020, with peak efficiency observed around late 2020 and mid-2021, reaching over 13 times. Subsequently, the turnover ratio dips around 2023, reflecting reduced collection efficiency or increased receivables, before rebounding moderately toward 2025. Notably, despite increases in receivables levels, turnover remains relatively strong in recent reporting periods, suggesting maintained collection efforts amid growing sales.

Summary Insights

The data reflects a company experiencing robust revenue growth over the multi-year span, with net revenue rising aggressively in recent years. Trade accounts receivable management shows periods of both tightening and relaxation; a significant reduction in receivables during 2019-2020 and increasing receivables from 2021 onward likely reflects shifting credit and collection dynamics linked to revenue expansion. The receivables turnover ratio generally supports this interpretation, with periods of high efficiency interspersed with some moderation in collection pace. These patterns suggest evolving working capital management approaches in response to business growth and market conditions, with attention needed on receivables levels to sustain liquidity.

Cost of Revenue

The cost of revenue fluctuated over the reported periods, starting at 2,581 million US dollars in February 2019 and demonstrating moderate variability until late 2022. From early 2023 onwards, a notable increase is observed, peaking at 5,052 million US dollars in November 2024 before slightly declining to 4,807 million US dollars by May 2025. This upward trend in cost of revenue during the later periods indicates rising expenses associated with generating sales, which could be attributed to increased sales volume, inflationary pressures, or changes in cost structure.

Accounts Payable

Accounts payable showed a varying pattern with initial values around 700 to 1,200 million US dollars within the early periods. There were several fluctuations throughout the timeline, with substantial increases seen towards the end of the dataset, reaching up to 1,905 million US dollars in October 2024 before dropping to 1,297 million US dollars by May 2025. The significant rise in accounts payable in the later quarters may suggest extended payment terms or increased purchases on credit, which could impact the company's short-term liquidity position.

Payables Turnover Ratio

The payables turnover ratio, which measures how quickly a company pays off its suppliers, showed considerable variability. It was relatively high in some quarters, such as 15.27 and 14.92, indicating quicker payments, while lower ratios were observed at other times, such as 8.33 and 8.56, reflecting slower payment cycles. The fluctuations imply inconsistency in payment practices or changing negotiation terms with vendors over time. In the most recent quarters, an increase to 14.92 suggests more prompt payment behavior.

Overall Insights

The analysis reveals a general increase in the cost of revenue and accounts payable toward the later periods, possibly tied to business growth or inflation. The payables turnover ratio's fluctuating nature highlights shifts in payment policies or supplier relationships. The sharp rise in cost of revenue and accounts payable around 2023 and 2024 indicates significant operational changes or expansion. These trends suggest that while the business may be growing, attention to managing expenses and supplier payments is crucial for maintaining financial stability.

Working Capital

The working capital exhibits significant fluctuations over the observed quarters. Initially, it shows a general upward trend from early 2019 through the end of 2020, increasing from approximately 2,255 million USD to a peak of around 11,452 million USD in the fourth quarter of 2022. Following this peak, working capital declines sharply, dropping to very low levels in 2024, reaching as low as 80 million USD and 726 million USD in some quarters, before slightly rebounding towards mid-2025. This suggests variability in short-term asset and liabilities management, with periods of both strong liquidity and significant tightening.

Net Revenue

Net revenue shows a steady and consistent upward trajectory throughout the full period. Starting from roughly 5,789 million USD in early 2019, the revenue grows almost every quarter without major setbacks, culminating at approximately 15,004 million USD by mid-2025. This steady revenue growth indicates strong sales performance and market demand over the years, reflecting positive business expansion and possibly successful product penetration or pricing strategies.

Working Capital Turnover

The working capital turnover ratio, available from mid-2019 onwards, largely moves inversely relative to working capital levels. The ratio starts high at 7.49 in mid-2019 and then declines progressively, fluctuating mostly between 2.5 and 4.0 through 2023, indicating more moderate efficiency in using working capital to generate revenue during this time. Notably, in 2024, this ratio spikes dramatically to extraordinarily high values such as 64.48, 681.61, and 36.01, coinciding with the periods when working capital is near its lowest recorded levels. This reflects an anomalously high revenue generation relative to a very low working capital base, possibly signaling an unusual operational or accounting event during those quarters.

Overall Insights

The data reveals a strong and consistent increase in net revenue, demonstrating sustained business growth. Working capital management appears less stable, with notable peaks and troughs, suggesting episodic variations in liquidity or working capital requirements. The sharp spikes in working capital turnover ratio in 2024 correspond with sudden drops in working capital, highlighting periods where revenue was maintained or increased despite low capital reserves. This pattern might suggest increased operational efficiency, changes in payment cycles, or extraordinary transactions affecting their current assets and liabilities.

The inventory turnover ratio exhibits a discernible downward trend from early 2020 through late 2022, declining from 11.57 to a low of approximately 5.77 by the end of 2022. This reduction indicates a slower rate of inventory turnover, suggesting increasing inventory levels relative to sales or slower sales velocity during that period. Beginning in early 2023, the turnover ratio stabilizes and subsequently improves, rising to 10.83 by late 2024 before experiencing a slight decline to 9.59 by mid-2025.

Conversely, the average inventory processing period, measured in number of days, moves inversely to the inventory turnover ratio as expected. From early 2020 where it was about 32 days, it steadily increases to a peak of approximately 63 days by late 2022, reflecting longer durations to process inventory. This elongation implies potential challenges in inventory management or weaker sales leading to accumulation of stock.

Starting in early 2023, the average inventory processing period begins to decrease, dropping from around 61 days to the mid-30s by mid-2025. This reduction in processing days corresponds with the improvement in inventory turnover, indicating more efficient inventory handling or stronger sales enabling quicker inventory movement.

Overall, the data reveals a period of declining inventory efficiency and lengthening processing times during 2020 to 2022, followed by a recovery phase in 2023 onward where efficiency improves and inventory is processed more rapidly. The fluctuations suggest the company experienced some disruptions or market challenges impacting inventory management in the earlier period, with strategic or operational measures potentially restoring effectiveness in subsequent years.

Inventory Turnover Ratio

Declined from ~11.57 (early 2020) to ~5.77 (late 2022), then increased to ~10.83 (late 2024) before a slight decline.

Average Inventory Processing Period

Increased from ~32 days (early 2020) to ~63 days (late 2022), then decreased to mid-30s by mid-2025.

Interpretation

Initial inventory turnover deterioration followed by improvement; inverse trends confirm slower inventory movement and longer holding periods during 2020-2022, with recovery in subsequent periods.

The receivables turnover ratio demonstrates a generally upward trajectory from February 2019 through May 2025, with some fluctuations. Initially, from early 2019, data begins in February 2020, where the ratio starts at 6.93 and experiences minor declines and increases, reaching a peak of 13.25 in January 2022. Post this peak, the ratio shows a downward adjustment and subsequent stabilization mostly between 10 and 12 until mid-2023. However, a notable decline appears around the first half of 2024, where the ratio dips sharply below 8 before recovering to values exceeding 10 by November 2024 and maintaining them thereafter.

Correspondingly, the average receivable collection period, expressed in days, inversely mirrors the trend of the receivables turnover ratio. The number of days starts at 53 in February 2020, indicating a relatively longer collection period, which decreases steadily to a low of 28 days in January 2022. This reduction signifies improved efficiency in collections. However, after this low point, the collection period increases moderately to the mid-30s by mid-2023, earlier rising back to 38 days in May 2022, revealing somewhat slower collections. Entering 2024, a sharp increase to 47 days coincides with the dip in turnover ratio, reflecting a temporary inefficiency in receivables management. By late 2024 and into 2025, the collection period decreases again to around 31-36 days, suggesting recovery in collection processes.

Receivables Turnover Ratio

Exhibits an overall increasing trend from just under 7 in early 2020 to peaks above 13 in early 2022, followed by fluctuations within a moderately high range of 10 to 12 through 2023, and a significant momentary decline in early 2024 before partial recovery.

Average Receivable Collection Period

Displays a consistent decline from above 50 days to below 30 days by early 2022, indicating improved performance. This is followed by slight increases to the mid-30-day range, with a pronounced spike to 47 days in early 2024, and a subsequent return to the low to mid-30 days region by 2025.

In summary, the receivables management shows an improving trend over the period, with receivables being collected more rapidly up to early 2022 and generally maintained at efficient levels thereafter. The temporary setbacks observed around early 2024 suggest an episode of reduced collection efficiency, but the subsequent improvements indicate corrective measures or return to prior efficiency levels.

The analysis of the quarterly financial data highlights notable trends in the inventory processing period, receivable collection period, and the overall operating cycle over the observed timeframe.

Average Inventory Processing Period

The inventory processing period displays an overall increasing trend from early 2020 through early 2023. Initially recorded around the low 30s in number of days, it gradually rises to a peak in the early 60s days by January 2023. Subsequent quarters show a marked reduction, with the inventory period decreasing sharply from 62 days in February 2024 to the high 30s days by mid-2025. This suggests a significant improvement in inventory turnover efficiency towards the end of the period analyzed.

Average Receivable Collection Period

The receivable collection period trends are more variable but generally indicate a modest decline over the full timespan. Starting near the mid-50s days in early 2020, the period decreases toward the high 20s and low 30s range in 2021 and early 2022. Despite some fluctuations, including a brief spike to the upper 40s in early 2024, the receivable collection period remains relatively stable in the mid-30s days in the final recorded quarters. This stability points toward consistent management of receivables in recent periods.

Operating Cycle

The operating cycle initially shows a rising trend, moving from roughly 85 days to peaks near or above 90 days between 2021 and early 2023. Thereafter, there is a notable decline, dropping to around 65 days in mid-2024, followed by a slight increase again up to mid-70s days by mid-2025. The operating cycle's fluctuations largely correspond to changes observed in inventory processing with receivables contributing to less pronounced variability. The recent reductions imply enhanced overall operational efficiency.

In summary, the data indicate a period of increasing inventory holding times through early 2023 followed by marked improvement. Receivables collection periods remain comparatively stable with minor volatility. As a result, the operating cycle shows an initial lengthening trend followed by a contraction, culminating in more efficient operational management evidenced in the latest quarters.

Payables Turnover

The payables turnover ratio exhibits significant fluctuations over the observed periods. Initially, values began at 11.83 and then experienced a downward trend, reaching a low point near 8.33. Following this, the ratio rebounded, with periodic increases and decreases spanning the quarters, notably peaking at 15.27 during one period. Towards the latter periods, the ratio again showed volatility with a general tendency to oscillate between approximately 9 and 15. This variation indicates changes in the frequency with which the company is settling its payables, reflecting possible adjustments in payment policies, supplier terms, or cash management strategies over time.

Average Payables Payment Period

The average number of days taken to pay payables shows a complementary pattern to the payables turnover ratio, as expected. Starting at 31 days, the payment period increased up to 44 days, indicating slower payments during certain periods. Subsequent quarters saw a reduction in days, dropping down to as low as 24 days, before rising again to values around the mid-to-high 30s. The payment period then decreased in the most recent quarters back to 24 days. These changes suggest a varying approach to managing accounts payable, with intervals of extended payment periods potentially utilized to preserve cash or negotiate better terms, followed by periods of accelerated payments to suppliers.

Overall Insights

There is an inverse relationship evident between the payables turnover ratio and the average payables payment period, consistent with standard financial principles. Periods with high payables turnover correspond to shorter payment periods, while lower turnover corresponds to longer payment cycles. The observed oscillations could be indicative of operational adjustments in liquidity management, possibly influenced by market conditions or internal strategic decisions. Notably, the spikes and troughs in both metrics point to dynamic cash flow management throughout the timeframe assessed.

Average Inventory Processing Period

The average inventory processing period shows a clear upward trend over the analyzed quarters. Starting from 32 days in early 2020, the period gradually extends, peaking at 63 days around early 2023. After reaching this high, there is a slight decline and some fluctuation, with periods of 55, 45, and 41 days recorded in 2024, before slightly increasing to 38 days again by mid-2025. This pattern suggests a lengthening timeframe for inventory turnover initially, followed by some improvement in efficiency in more recent periods.

Average Receivable Collection Period

The average receivable collection period demonstrated a generally decreasing trend from early 2020 to mid-2021, dropping from 53 days to approximately 28 days. This indicates an improvement in collection efficiency. Around mid-2021 onward, the period experiences minor fluctuations, generally stabilizing between 30 and 38 days, with a short-lived spike to 47 days in early 2024. This suggests periodic challenges in receivables collection but overall maintenance of improved collection speed compared to the earlier period.

Average Payables Payment Period

The average payables payment period has shown noticeable variability over the quarters. Beginning at 31 days early in 2020, it rose to a peak of 44 days mid-2020, then fluctuated between the high 20s and high 30s for most of the following periods. In early 2023, the payment period decreased sharply to 24 days but later increased again, reaching 40-43 days in early 2024 before declining to 24 days by mid-2025. This irregular pattern implies shifts in payment policies or supplier negotiations impacting the tempo of payables settlement.

Cash Conversion Cycle

The cash conversion cycle follows a pattern broadly consistent with the combined behavior of inventory processing, receivables, and payables periods. It ranged from about 54 to 66 days between early 2020 and early 2023, demonstrating an increasing trend that peaked in 2022. Following this peak, there is a perceptible improvement with declines to the mid-30 days range in 2024, but this is accompanied by a rebound to 50 days in mid-2025. Overall, the cash conversion cycle reflects periods of elongation of cash tied up in operations, followed by phases of enhanced liquidity management.