Cisco Systems Inc. (NASDAQ:CSCO)

The financial data reveals notable trends in the company's operational efficiency and liquidity management over multiple quarters.

Inventory Turnover

The inventory turnover ratio shows a consistent downward trend, decreasing from 13.25 to 5.97 over the observed periods. This indicates that the company is turning over its inventory less frequently, which may suggest slower sales or increased stock levels. Correspondingly, the average inventory processing period has increased from 28 days to around 61 days, confirming slower inventory movement.

Receivables Turnover

The receivables turnover ratio fluctuates between 8.45 and 12.08, without a clear directional trend. This variability indicates inconsistent efficiency in collecting receivables. The average receivable collection period aligns with this, showing fluctuations between 30 and 45 days, implying periodic changes in credit policies or collection effectiveness.

Payables Turnover

The payables turnover ratio generally rises, moving from 7.53 to peaks over 10 before stabilizing between 7.86 and 9.93. This suggests the company is turning over payables more rapidly at times but also exhibits variability. The average payables payment period correspondingly decreases from 48 days to as low as 33 days, indicating a tendency to pay suppliers faster in certain periods, although it later increases again.

Working Capital Turnover

The working capital turnover ratio experiences increases in early periods, peaking around 5.08, but data becomes incomplete in later periods. This initial rise suggests improved efficiency in utilizing working capital to generate sales.

Operating Cycle

The operating cycle lengthens from 58 days to peaks around 110 days, reflecting a combination of longer inventory holding and receivable collection periods. This increase indicates a lengthening in the company's overall cash-to-cash cycle, potentially impacting liquidity.

Cash Conversion Cycle

The cash conversion cycle shows a clear lengthening trend, increasing from 10 days to values exceeding 60 days. This pattern suggests that the company takes longer to convert its investments in inventory and receivables back into cash, possibly indicating tighter liquidity conditions or extended operational processes.

Overall, the company appears to be experiencing slower inventory turnover and longer operating and cash conversion cycles, which may affect liquidity and operational efficiency. Receivables and payables turnover show variability, reflecting changes in credit management and supplier payment practices. These observations suggest areas for potential improvement in asset utilization and cash flow management.

The quarterly financial data for Cisco Systems Inc. reveals several notable trends in the cost of sales, inventories, and inventory turnover ratios over the analyzed period.

Cost of Sales

The cost of sales exhibits fluctuations with periods of increase and decrease throughout the timeline. Starting at 4,348 million USD in late 2020, it experiences an overall increasing trend until reaching a peak around mid-2023 at roughly 5,455 million USD. Following this peak, there is a noticeable decline toward early 2024, reaching approximately 4,429 million USD. Subsequently, the costs rise again toward late 2025, peaking near 5,393 million USD before a slight decline at the end. This pattern suggests periods of varying production or sales volumes, with costs generally trending upward but showing some volatility.

Inventories

Inventory levels consistently increase over the entire period. Starting from around 1,303 million USD, inventories increase steadily, surpassing 3,000 million USD by early 2023 and continuing upward to approximately 3,395 million USD by late 2025. Although minor fluctuations are present, the overall trajectory indicates accumulation of inventory assets, which may reflect strategic stocking or slower turnover in some periods.

Inventory Turnover Ratio

The inventory turnover ratio shows a clear downward trend over most of the period examined. Initially, turnover is relatively high at 13.25, indicating robust sales relative to inventory. However, this ratio declines steadily to around 5.83 by mid-2023. After this low point, a slight recovery is observed, with ratios rising modestly but remaining near six times turnover toward the end of the dataset. The decrease in turnover ratio, inversely related to rising inventories, may point to reduced efficiency in inventory management or changes in demand patterns.

In summary, the data suggests that while cost of sales has overall increased with periodic fluctuations, inventory levels have risen substantially, causing a decrease in inventory turnover ratios. This combination may indicate increasing stockholding relative to sales, possibly reflecting changes in supply chain management, demand forecasts, or product mix strategy over the reported periods.

Revenue Trends

Over the period examined, revenue exhibited a generally positive trajectory with some fluctuations. Starting at approximately $11.9 billion in late 2020, revenue increased steadily, peaking around $15.2 billion in mid-2023. Following this peak, a decline is evident, with revenue dropping to about $12.8 billion by early 2024 before recovering again towards the end of the timeframe, reaching nearly $14.9 billion by late 2025. This pattern suggests cyclicality or seasonality impacting revenue alongside overall growth, with intermittent contractions.

Accounts Receivable (Net of Allowance) Movements

The accounts receivable balance shows volatility throughout the reported quarters, ranging roughly from $3.98 billion to $6.7 billion. Notably, periods of sharp increase, such as the rise to about $6.7 billion in mid-2024 and again in late 2025, correspond with some of the revenue contraction phases, indicating a possible delay in collections or extended credit terms during those times. Conversely, periods of reduction in receivables often align with revenue increases, reflecting potentially improved collection efficiency or tighter credit management.

Receivables Turnover Ratio Analysis

The receivables turnover ratio fluctuates significantly in inverse relation to accounts receivable levels, varying between approximately 7.8 and 12.1 times per year. Higher turnover ratios, such as those near 12, indicate more efficient collection periods and occur during times when accounts receivable values are lower. Conversely, the turnover ratio dips towards values near 8 during quarters with elevated receivables, implying slower collections or relaxed credit policies. The pattern of turnover ratios corresponds with the cyclicality observed in both revenue and receivables, signaling that the company's credit and collections environment changes over time.

Interrelationship Between Metrics

An analysis of the three key metrics reveals a dynamic interplay. Revenue growth phases tend to coincide with relatively stable or declining accounts receivable and higher turnover ratios, suggesting effective cash collection practices that support the revenue expansion. Periods of revenue slowdown or decline are often accompanied by rising accounts receivable balances and lower turnover ratios, indicative of challenged collection effectiveness or adjustments in credit terms. This interrelationship underscores the importance of receivables management in the company’s overall financial health and operational efficiency.

Summary

The financial data displays a pattern of overall revenue growth with interim contractions, mirrored by fluctuations in accounts receivable levels and receivables turnover ratios. Efficient receivables management aligns with revenue expansion periods and contributes to stronger turnover ratios. Conversely, periods of stress in revenue are accompanied by increased receivables and diminished turnover, highlighting potential risks in working capital management. Continuous monitoring of these metrics will be critical to sustaining financial performance and liquidity.

The financial data reveals several noteworthy trends and fluctuations over the observed periods.

Cost of Sales

The cost of sales displays a generally fluctuating pattern with periods of increase and decline. Starting from approximately 4,348 million USD, it experienced a slight downward movement in early 2021 but rose again mid-2021, reaching peak values near 5,455 million USD in late 2023. Thereafter, it declined notably into early 2024 before demonstrating variability, including a secondary peak near 5,393 million USD by mid-2025. The data points to cyclical variation, possibly reflecting changing demand, pricing, or supply chain factors affecting production costs.

Accounts Payable

Accounts payable exhibited fluctuations around a mean range but with no clear long-term directional trend. Starting at roughly 2,294 million USD in late 2020, the amount decreased to a low around 1,848 million USD in early 2024, then generally increased again toward 2,528 million USD by mid-2025 before slightly decreasing toward the latest measurement. This variation suggests changes in vendor payment timing or credit terms, possibly linked to operational adjustments or strategic cash management.

Payables Turnover Ratio

The payables turnover ratio showed a pattern of increase from an initial value of approximately 7.53 up to peaks exceeding 11.0 during early 2024, followed by a decline toward values near 7.86 to 8.55 more recently. This ratio measures how many times accounts payable are paid off in a period and is inversely related to the average payment period. The peak indicates more rapid payments to suppliers around early 2024, while the more recent decrease suggests slower payment cycles or extended payables durations.

In summary, the data indicates a cost of sales pattern with cyclical peaks and troughs, accounts payable that vary but tend toward recovery after a dip, and a payables turnover ratio that rose sharply and then moderated. The interplay of these metrics may reflect operational shifts, changes in supplier relationships, or broader market dynamics influencing procurement and payment strategies over the timeframe analyzed.

The financial data illustrates several notable trends in the company's operational efficiency and liquidity over multiple quarterly periods from 2020 through 2025.

Working Capital

Working capital displays significant volatility across the observed periods. Initially, it fluctuates within a positive range from approximately $12.8 billion to $16.6 billion between late 2020 and early 2024. However, from early 2024 onward, there is a marked decline, with working capital values turning negative and reaching lows near -$5.3 billion in late 2024. This shift into negative territory suggests increasing short-term liquidity challenges or changes in current assets and liabilities structure that merit further investigation.

Revenue

Revenue demonstrates a generally upward trajectory across the entire timeframe. Starting near $11.9 billion in late 2020, revenue gradually increases to a peak above $15.2 billion by mid-2023, followed by some fluctuations but maintaining overall growth. By late 2025, revenue reaches approximately $14.9 billion, indicating sustained business expansion and potentially effective market strategy despite some short-term variations.

Working Capital Turnover

The working capital turnover ratio exhibits an improving trend from 3.00 in late 2020 to a peak of about 5.08 in early 2024. This rising ratio indicates enhanced operational efficiency, reflecting that the company is generating more revenue per unit of working capital. However, data for turnover ratios post-early 2024 is absent, coinciding with the period where working capital turns negative, which could imply calculation difficulties or deteriorating operational liquidity management in later periods.

In summary, the company’s revenue growth over the periods indicates positive market performance and increasing sales. Conversely, the dramatic deterioration in working capital into negative levels in 2024 and afterward signals potential liquidity risks or operational challenges requiring careful attention. The improvement in working capital turnover up to early 2024 suggests good use of short-term assets to drive sales before liquidity conditions worsened.

Inventory Turnover Ratio

The inventory turnover ratio exhibits a general declining trend from October 2020 through the mid-2025 period. Starting at a high of 13.25 in October 2020, the ratio steadily decreases, reaching a low of 5.63 in July 2024. Although there are minor fluctuations and a few slight rebounds, such as increases around October 2023 and early 2025, the overall pattern indicates a reduced frequency of inventory being sold and replaced over the periods analyzed.

Average Inventory Processing Period

Conversely, the average inventory processing period, expressed in number of days, shows an increasing trend over the same timeframe. Beginning at 28 days in October 2020, the duration expands consistently, peaking at 65 days in July 2024. This trend generally mirrors the decline in inventory turnover. The data indicates that inventory remains in stock for longer periods before sale or processing, with some marginal decreases after mid-2024 but generally remaining higher than earlier periods.

Relationship Between Metrics

The inverse relationship between inventory turnover and average inventory processing period is evident, reflecting typical inventory management dynamics: as turnover decreases, inventory holding periods lengthen. This points to a potential reduction in inventory velocity and possibly hints at changes in sales patterns, supply chain efficiency, or demand fluctuations affecting stock movement.

Implications

These trends suggest the company is experiencing slower inventory movement compared to earlier quarters. The lengthening processing period could indicate challenges in clearing stock or shifts in product demand. Management might need to investigate contributing factors such as supply chain constraints, changes in sales strategy, or market conditions to optimize inventory levels and enhance turnover rates.

The analysis of the receivables turnover and the average receivable collection period over multiple quarters reveals several notable trends and fluctuations in the company’s receivables management efficiency.

Receivables Turnover Ratio

The receivables turnover ratio exhibits considerable variability throughout the observed period. Initially, there is a decline from 12.08 to 8.64 within the first four quarters, indicating a reduced efficiency in collecting receivables. After this decline, the ratio fluctuates moderately, generally ranging between approximately 7.79 and 12.01. Significant peaks occur around October 2023 at 12.01 and again in October 2025 at 11.95, suggesting periods where the company improved its collection operations. Periods of lower turnover, such as 7.79 in July 2022 and 8.05 in July 2024, highlight intervals of slower receivable collections.

Average Receivable Collection Period (Days)

The average collection period inversely mirrors the turnover ratio with some expected timing shifts. Starting from 30 days, it rises to a high around 47 days in July 2022, coinciding with the lowest turnover ratio. Fluctuations continue with values mostly ranging between 30 to 45 days, suggesting inconsistent collection efficiencies across quarters. The shortest collection durations, around 30 days, appear periodically, notably in October 2020, October 2023, and April 2025, aligning with higher turnover ratios. Conversely, elevated collection periods above 40 days indicate slower conversion of receivables into cash, which could impact cash flow management during those intervals.

Overall Interpretation

The data reflects a cyclical pattern of receivables management, with alternating periods of efficient and less efficient collections. These oscillations might be influenced by seasonal business cycles, changes in credit policies, or external market conditions. The company at times achieves rapid turnover and prompt collections, but there are also episodes where receivables are collected more slowly, increasing the average collection period. This variability suggests room for improving consistency in receivables management to enhance cash flow predictability and reduce the risk of extended credit terms.

Average Inventory Processing Period

The average inventory processing period exhibited a general upward trajectory from October 2020 through July 2024. Beginning at 28 days, it gradually increased, reaching a peak of 65 days in July 2024. Following this peak, there was a slight reduction and subsequent fluctuations, with the period settling around 61 days by October 2025. This trend indicates a lengthening time for inventory to be processed, which may suggest changes in inventory management efficiency or supply chain dynamics over the reviewed intervals.

Average Receivable Collection Period

The average receivable collection period showed notable variability throughout the analyzed timeframe. Starting at 30 days in late 2020, it rose to a high of 47 days in July 2022. Thereafter, the collection period generally decreased, with intermittent fluctuations, settling at 31 days by October 2025. The variations suggest episodic shifts in credit policies, customer payment behavior, or collection effectiveness, resulting in periods of longer credit extension followed by attempts to improve receivable turnover.

Operating Cycle

The operating cycle experienced an overall increasing trend from 58 days in October 2020 to a peak of 110 days in July 2024. This increasing trend reflects the cumulative effect of longer inventory processing and receivable collection periods, indicating a lengthening cash conversion cycle. Following the peak, the operating cycle declined somewhat but remained elevated relative to the starting point, ending at 92 days in October 2025. The lengthening of the operating cycle highlights potential challenges in working capital management during this period.

Summary Insights

The analysis of the three key operational metrics reveals an overall expansion in the duration required to convert inventory and receivables into cash. This lengthening of the operating cycle points to slower movement through the production and sales processes and extended credit terms or slower collections. Such developments warrant close attention to optimize inventory turnover and receivable management to maintain liquidity and operational efficiency.

Payables Turnover Ratio

The payables turnover ratio exhibited considerable fluctuations over the observed periods. It started at 7.53 and increased sharply to 9.22 early on, before experiencing variability between 7.22 and 9.00 in the subsequent quarters. After a period of relative steadiness around the 8.3 to 8.7 range, the ratio peaked at 11.08, signaling an accelerated rate of paying off suppliers. Following this peak, there was a decline with some oscillation, settling between 7.86 and 9.93 in the later periods.

Average Payables Payment Period (Days)

The average payables payment period generally moved inversely to the payables turnover ratio, which is consistent with expectations. Initially, the company took 48 days on average to pay its suppliers, which decreased to a low of 33 days at one point, indicating faster payment. Subsequently, the payment period rose again, reaching up to 46 days. This fluctuation suggests alternating shifts in the company’s cash management and supplier payment policies over time.

Overall Insights

The trends indicate that the company's payment behavior towards suppliers has varied significantly across the quarters. The periods of higher payables turnover ratio correspond to quicker payments as reflected in the lower average payment days, demonstrating improved liquidity or a strategic shift to settle payables faster. Conversely, periods of lower turnover and longer payment days might reflect tighter cash management or extended credit terms with suppliers. This cyclic pattern reveals a dynamic approach to managing payables, likely influenced by operational or market conditions.

Average Inventory Processing Period

The average inventory processing period demonstrates a clear upward trend over the observed timeframe, increasing from 28 days in October 2020 to a peak of 65 days by July 2024. After peaking, it shows some fluctuations but remains elevated, ending at 61 days in October 2025. This suggests that the company is holding inventory for longer periods, which may indicate slower inventory turnover or a strategic decision to maintain higher stock levels.

Average Receivable Collection Period

The average receivable collection period exhibits significant variability across quarters, fluctuating between 30 and 45 days. Initial collection periods around 30-33 days increased to peaks of 45 days (January 2024), followed by decreases and further fluctuations thereafter. This inconsistency could reflect varying credit policies, customer payment behaviors, or operational adjustments impacting cash inflows.

Average Payables Payment Period

The average payables payment period generally shows a declining trend, decreasing from 48 days in October 2020 to lows around 33-36 days (early 2024). Thereafter, it slightly increased and fluctuated in the range of 37 to 46 days through October 2025. This pattern suggests the company initially shortened its payment cycles, potentially to improve supplier relations or take advantage of early payment discounts, then relaxed payment terms moderately over the later periods.

Cash Conversion Cycle

The cash conversion cycle exhibits a rising trend from 10 days in October 2020 to a peak of 66 days in July 2024, indicating a longer duration between cash outflows and inflows. Despite some fluctuations, it remains elevated above 40 days for the majority of the later periods, ending at 48 days in October 2025. The increasing cash conversion cycle is consistent with the lengthening of the inventory processing and receivable collection periods, while shorter payment periods partially offset this effect.

Summary of Insights

The overall financial efficiency related to working capital management has decreased over the examined periods, as evidenced by the lengthening cash conversion cycle. The increase in inventory holding time and the variability in receivable collection indicate potential challenges in managing asset liquidity. Although the company initially reduced the payment period to suppliers, this was followed by a relaxation, suggesting attempts to balance supplier relationships with cash flow needs. Monitoring these trends is essential as prolonged cash conversion cycles can increase financing costs and affect operational flexibility.