Cisco Systems Inc. (NASDAQ:CSCO)

Inventory Turnover

The inventory turnover ratio shows a consistent declining trend over the six-year period, dropping from 13.91 in 2019 to 5.63 in 2024. This indicates a gradual reduction in inventory efficiency, with inventory being sold and replaced more slowly each year.

Receivables Turnover

The receivables turnover ratio generally decreased from 9.45 in 2019 to 7.79 in 2022, suggesting slower collection of receivables during that time. However, there was a notable increase to 9.74 in 2023 before slightly declining again to 8.05 in 2024, reflecting some fluctuations in collection effectiveness.

Payables Turnover

The payables turnover ratio declined from 9.34 in 2019 to 7.59 in 2021, indicating slower payment to suppliers. Then, it increased to 9.19 by 2023 before a moderate decrease to 8.24 in 2024. This variable pattern suggests changes in payment strategies or supplier terms.

Working Capital Turnover

Working capital turnover experienced a drop from 3.24 in 2019 to 2.7 in 2020, followed by a recovery and growth to 4.73 in 2023. Data for 2024 is missing. This overall upward movement from 2020 suggests improved efficiency in utilizing working capital to generate sales over recent years.

Average Inventory Processing Period

The average inventory processing period lengthened significantly from 26 days in 2019 to 65 days in 2024, more than doubling over the period. This aligns with the declining inventory turnover, confirming slower inventory movement and potential buildup of stock.

Average Receivable Collection Period

The receivable collection period increased from 39 days in 2019 to a high of 47 days in 2022, indicating longer time to collect payments. It then improved to 37 days in 2023 but rose again to 45 days in 2024, suggesting some instability in collection efficiency.

Operating Cycle

The operating cycle extended steadily from 65 days in 2019 to 110 days in 2024, reflecting longer combined periods for inventory holding and receivable collection. This could point to less efficient overall operations or changes in sales and credit policies.

Average Payables Payment Period

The average period to pay suppliers increased from 39 days in 2019 to a peak of 48 days in 2021, then declined to 40 days in 2023 before rising slightly to 44 days in 2024. This suggests some variability in the company's payment timing to creditors.

Cash Conversion Cycle

The cash conversion cycle showed an upward trend from 26 days in 2019 to 66 days in 2024. This increase indicates that the company takes longer to convert its investments in inventory and receivables back into cash, reflecting a potential strain on liquidity or more extended operating processes.

Cost of Sales

The cost of sales demonstrates a fluctuating trend over the observed period. It decreased from 19,238 million USD in mid-2019 to 17,618 million USD in mid-2020, indicating a potential improvement in cost management or a reduction in sales volume. Following this, the cost of sales increased steadily to 21,245 million USD by mid-2023, before declining again to 18,975 million USD in mid-2024. This variability suggests changing dynamics in production or procurement costs, sales activity, or product mix.

Inventories

Inventories have shown a significant and consistent increase from 1,383 million USD in mid-2019 to 3,373 million USD in mid-2024. The inventory levels more than doubled within this period, with the most pronounced growth occurring between mid-2021 and mid-2023. Such an increase in inventories may indicate either stockpiling in anticipation of higher demand, potential overstocking, or changes in inventory management policies.

Inventory Turnover Ratio

The inventory turnover ratio exhibits a declining trend over the years, dropping from 13.91 times in mid-2019 to 5.63 times in mid-2024. This reduction implies that the company is turning over its inventory less frequently. The notable decrease could be a consequence of rising inventory levels outpacing sales or slower sales velocity. A lower turnover ratio may highlight inefficiencies in inventory utilization or changes in product sales cycles.

Revenue Trends

The revenue displayed a fluctuating pattern over the six-year period. After starting at approximately $51.9 billion in mid-2019, it declined to around $49.3 billion in mid-2020. The following two years saw modest growth, reaching about $51.6 billion in mid-2022, followed by a substantial increase to nearly $57.0 billion in mid-2023. However, the most recent figure in mid-2024 shows a notable decrease to approximately $53.8 billion, indicating some volatility in annual revenue performance.

Accounts Receivable, Net of Allowance

The net accounts receivable values showed an overall upward trend, starting at roughly $5.5 billion in mid-2019 and gradually increasing each year, reaching about $6.7 billion by mid-2024. Despite some fluctuations, the receivables balance generally grew, which may suggest either increased sales on credit terms or changes in credit policies.

Receivables Turnover Ratio

The receivables turnover ratio declined from 9.45 in mid-2019 to 7.79 in mid-2022, indicating a gradual slowdown in the rate at which receivables were converted into cash during that period. A significant improvement was observed in mid-2023 with the ratio rising sharply to 9.74. However, this was followed by another decline to 8.05 in mid-2024. This pattern suggests fluctuating efficiency in managing receivables and collecting cash from customers.

Overall Insights

While revenue showed some instability, with a recent decline after a peak, accounts receivable consistently increased, potentially cushioning revenue volatility. The fluctuations in receivables turnover suggest periods of both strengthening and weakening in collections efficiency. The combination of these trends highlights a dynamic financial environment with variable operational effectiveness related to credit sales and cash collections during the analyzed timeframe.

The analysis of the financial data reveals several trends in cost of sales, accounts payable, and payables turnover ratios over the period spanning from July 2019 to July 2024.

Cost of Sales

The cost of sales shows fluctuations throughout the years. Initially, it decreased from 19,238 million US dollars in July 2019 to 17,618 million in July 2020. This decline was followed by a modest increase to 17,924 million in July 2021. In the subsequent years, cost of sales increased further to reach a peak of 21,245 million in July 2023. However, by July 2024, it decreased again to 18,975 million. The pattern indicates variability possibly influenced by changes in operational activities, market conditions, or cost management strategies.

Accounts Payable

Accounts payable exhibits a general upward trajectory over the analyzed time frame. Starting at 2,059 million US dollars in July 2019, it steadily increased each year except for a slight decline between July 2022 (2,281 million) and July 2024 (2,304 million). The gradual rise in accounts payable suggests potentially extended credit terms from suppliers or heightened purchasing activities.

Payables Turnover Ratio

The payables turnover ratio, which measures how quickly the company pays off its suppliers, shows variability with an overall moderate downward trend over the years. It started high at 9.34 in July 2019, decreased to a low of 7.59 in July 2021, then increased again to 9.19 by July 2023 before declining to 8.24 in July 2024. These fluctuations indicate changes in payment policies or cash management practices, with a relative slowing in turnover in some periods and acceleration in others.

Overall, the data suggests that the company experienced dynamic fluctuations in its cost structures and supplier payment patterns. The cost of sales and accounts payable figures do not move perfectly in tandem, hinting at separate underlying factors influencing each metric. The fluctuations in payables turnover ratio support the interpretation of varying payment timing strategies over time.

Working Capital

The company's working capital experienced fluctuations over the analyzed period, starting at 16,043 million US dollars in mid-2019, peaking at 18,242 million in mid-2020, and then steadily declining through mid-2022 and mid-2023 to 12,039 million. A significant decline is noted in the most recent period, mid-2024, where working capital turned negative to -3,722 million. This indicates a potential deterioration in short-term liquidity and operational efficiency.

Revenue

Revenue showed moderate volatility, beginning at 51,904 million US dollars in mid-2019, dipping to 49,301 million in mid-2020, followed by a slight recovery and growth over the next two years to reach a peak of 56,998 million in mid-2023. However, revenue decreased in the latest period, mid-2024, falling to 53,803 million. Overall, revenue trends suggest resilience with periods of growth interrupted by occasional declines.

Working Capital Turnover

The working capital turnover ratio demonstrated an overall upward trend from 3.24 in mid-2019 to 4.73 in mid-2023, indicating increasing efficiency in using working capital to generate revenue. The ratio rose consistently each year, suggesting improved operational performance and asset management. Data for mid-2024 is not available, preventing current period analysis.

Summary of Trends

Despite revenue showing relative stability with some growth, the sharp deterioration in working capital in the latest period signals potential liquidity concerns. The historically increasing working capital turnover ratio reflects strong management of working capital resources up to 2023, but the recent negative working capital could undermine this efficiency. Attention to current asset and liability management is warranted to ensure ongoing operational stability.

Inventory Turnover

The inventory turnover ratio shows a clear downward trend over the six-year period. Starting at 13.91 in 2019, the ratio slightly decreased to 13.74 in 2020 but exhibited a more pronounced decline in subsequent years, reaching 11.5 in 2021 and dropping significantly to 7.52 in 2022. This decline continued with ratios of 5.83 in 2023 and 5.63 in 2024. This pattern indicates a slowing rate at which inventory is sold and replaced annually.

Average Inventory Processing Period

Corresponding to the decline in inventory turnover, the average inventory processing period has steadily increased. Beginning at 26 days in 2019, it increased by one day to 27 in 2020, followed by a rise to 32 days in 2021. In 2022, there was a marked increase to 49 days, continuing sharply to 63 days in 2023 and slightly further to 65 days in 2024. This extension in days aligns with the observed reduction in inventory turnover, signaling that the company is taking longer to process and sell its inventory over time.

Overall Insight

The inverse relationship between the inventory turnover ratio and the average inventory processing period is evident. The declining inventory turnover coupled with the increasing processing period suggests a potential slowdown in sales velocity or changes in inventory management practices. This may indicate either a buildup of inventory relative to sales or challenges in moving products as quickly as in previous years. Such trends could impact working capital efficiency and may warrant further investigation into underlying causes and strategic responses.

Receivables Turnover

The receivables turnover ratio demonstrates a fluctuating trend over the analyzed period. Beginning at 9.45 in July 2019, it gradually declined to a low of 7.79 by July 2022, indicating a decreasing efficiency in collecting receivables during that time. Afterwards, there was a notable improvement in July 2023, with the ratio rising sharply to 9.74, followed by a decline to 8.05 in July 2024. This variability suggests changes in credit policies or collection effectiveness over the years.

Average Receivable Collection Period

The average receivable collection period, expressed in days, inversely mirrors the turnover ratio trends. Initially increasing from 39 days in July 2019 to a peak of 47 days in July 2022, this reflects a lengthening of the time required to collect receivables. A significant improvement occurred in July 2023, reducing the period to 37 days, indicating faster collections. However, it increased again to 45 days by July 2024, suggesting some deterioration in collection efficiency.

Overall Analysis

The data indicate a general weakening in receivables management efficiency from 2019 through 2022, with slower collections and lower turnover. The temporary recovery in 2023 suggests corrective actions or improved market conditions that facilitated quicker collections. The subsequent decline in 2024 highlights ongoing volatility in this aspect of working capital management, signaling a need for continued focus on collection processes to stabilize performance.

Inventory Processing Period

The average inventory processing period has shown a consistent upward trend over the analyzed years. Beginning at 26 days in 2019, this metric increased gradually to 27 days in 2020 and 32 days in 2021, followed by a more pronounced rise to 49 days in 2022. The trend continued, reaching 63 days in 2023 and 65 days in 2024. This suggests a lengthening duration in the time required to process inventory, which may impact inventory management efficiency.

Receivable Collection Period

The average receivable collection period experienced moderate fluctuations over the years. Starting at 39 days in 2019, it increased slightly to 41 days in 2020 and 42 days in 2021. There was a notable rise in 2022 to 47 days, which was followed by a decline to 37 days in 2023, indicating improved collection efficiency that year. However, in 2024, it increased again to 45 days. This variability suggests inconsistent performance in managing accounts receivable.

Operating Cycle

The operating cycle, representing the total duration between inventory acquisition and cash collection, has generally extended across the period reviewed. It grew from 65 days in 2019 to 68 days in 2020, then to 74 days in 2021. A marked increase was observed in 2022 to 96 days, followed by further increases to 100 days in 2023 and 110 days in 2024. This lengthening operating cycle indicates a slower conversion of resources into cash, which could affect liquidity and operational efficiency.

Payables Turnover

The payables turnover ratio shows a fluctuating trend over the observed periods. It began at a higher value of 9.34 in July 2019, decreased steadily to a low of 7.59 by July 2021, indicating slower payment to suppliers during this time. Subsequently, the ratio improved to 8.47 in July 2022 and further increased to 9.19 in July 2023, suggesting a quicker settling of payables. However, the ratio declined again to 8.24 by July 2024, reflecting a slight slowdown relative to the previous year.

Average Payables Payment Period

The average payables payment period, expressed in number of days, exhibits an inverse relationship to the payables turnover ratio over the same time frame. Starting from 39 days in July 2019, this period extended to a peak of 48 days in July 2021, consistent with the lowest payables turnover experienced then. Following this peak, the payment period shortened to 43 days in July 2022 and further contracted to 40 days in July 2023, signaling improved payment efficiency. By July 2024, however, the period expanded to 44 days, indicating a marginal delay in settling payables compared to the year prior.

Overall Insights

The data indicates that the company experienced a period of slower payment to suppliers between 2020 and 2021, as evidenced by the decreasing payables turnover ratio and increasing payment period. The subsequent recovery suggests efforts toward improved payment practices, with quicker payables turnover and reduced payment days up to mid-2023. The slight reversal in 2024 implies some easing in payment tempo, warranting monitoring to assess any continuing trend. These variations may reflect changing liquidity management strategies or operational adjustments in supplier relationships during the reviewed years.

Inventory Processing Period

The average inventory processing period shows a clear upward trend, increasing from 26 days in 2019 to 65 days in 2024. The rise is notably sharp from 2020 onwards, with the period more than doubling between 2019 and 2024, indicating longer holding times for inventory over the years.

Receivable Collection Period

The average receivable collection period exhibits some fluctuations. It increased gradually from 39 days in 2019 to 47 days in 2022, then saw a decline to 37 days in 2023, followed by a rebound to 45 days in 2024. Overall, the receivable collection period remains relatively stable with moderate variability around the 40 to 47-day range.

Payables Payment Period

The average payables payment period increased steadily from 39 days in 2019 to a peak of 48 days in 2021. It then decreased to 40 days by 2023, before a slight increase to 44 days in 2024. This indicates some fluctuation in payment terms, with a tendency to extend payment periods initially, followed by efforts to shorten them more recently.

Cash Conversion Cycle

The cash conversion cycle has grown significantly from 26 days in 2019 to 66 days in 2024. A dip occurred in 2020, dropping to 22 days, but from 2021 onwards there is a noticeable upward trend. The sharp increase after 2021 corresponds with the rising inventory period and changed receivables and payables periods, suggesting an overall slower turnover rate and longer cycle to convert resources back into cash.