Analysis of Short-term (Operating) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Short-term Activity Ratios (Summary)
Kraft Foods Group Inc., short-term (operating) activity ratios
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
The financial ratios indicate distinct trends in operational efficiency and working capital management over the three-year period.
- Inventory Turnover
- There is a consistent improvement, with the ratio increasing from 6.48 in 2012 to 7.53 in 2014. This suggests that inventory was managed more efficiently, with goods being sold and replaced at a faster rate each year.
- Receivables Turnover
- The turnover ratio rose slightly from 16.84 in 2012 to 17.38 in 2013, indicating a marginal improvement in collecting receivables. However, it declined slightly to 16.86 in 2014, returning close to the initial level, which signals stable but not significantly enhanced collection efficiency.
- Payables Turnover
- This ratio experienced some fluctuation, decreasing from 8.03 in 2012 to 7.36 in 2013, before rising to 8.69 in 2014. The initial decline suggests slower payment to suppliers in 2013, followed by a faster payment cycle in 2014.
- Working Capital Turnover
- The ratio shows a marked increase from 15.07 in 2012 to 12.16 in 2013, which actually represents a slight decline, but then surges dramatically to 1011.39 in 2014. The anomaly in 2014 indicates either a significant reduction in working capital or an operational change that vastly affected turnover, warranting further investigation due to the unusually high figure.
- Average Inventory Processing Period
- There is a steady decrease from 56 days in 2012 to 48 days in 2014, consistent with the inventory turnover trend. This reduction shows improved inventory management and faster movement of stock.
- Average Receivable Collection Period
- The period decreased slightly from 22 days in 2012 to 21 days in 2013, before returning to 22 days in 2014. This stability suggests consistent credit and collection policies over the three years.
- Operating Cycle
- The operating cycle decreased from 78 days in 2012 to 70 days in 2014, reflecting overall improved efficiency in managing both inventory and receivables, reducing the time taken to convert resources into cash.
- Average Payables Payment Period
- The payment period increased from 45 days in 2012 to 50 days in 2013, indicating delayed payments to suppliers, but then reduced to 42 days in 2014, suggesting a quicker turnaround in settling payables that year.
- Cash Conversion Cycle
- The cycle shortened from 33 days in 2012 to 23 days in 2013, demonstrating more efficient working capital management, though it lengthened slightly to 28 days in 2014. Despite this increase, the overall trend still points toward improved cash flow management compared to 2012.
Turnover Ratios
Average No. Days
Inventory Turnover
Kraft Foods Group Inc., inventory turnover calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Cost of sales | 13,360) | 11,395) | 12,499) | |
| Inventories | 1,775) | 1,616) | 1,928) | |
| Short-term Activity Ratio | ||||
| Inventory turnover1 | 7.53 | 7.05 | 6.48 | |
| Benchmarks | ||||
| Inventory Turnover, Competitors2 | ||||
| lululemon athletica inc. | — | — | — | |
| Nike Inc. | — | — | — | |
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
Inventory turnover = Cost of sales ÷ Inventories
= 13,360 ÷ 1,775 = 7.53
2 Click competitor name to see calculations.
The annual financial data reveals several notable trends during the three-year period ending in 2014. The cost of sales exhibited a fluctuating pattern, initially decreasing from 12,499 million US dollars in 2012 to 11,395 million US dollars in 2013, followed by a significant increase to 13,360 million US dollars in 2014. This rise in cost of sales in the final year may indicate increased production costs or changes in sales volume.
Inventories showed a continuous decline from 1,928 million US dollars in 2012 to 1,616 million US dollars in 2013, before rising again to 1,775 million US dollars in 2014. This movement suggests a reduction in stock held during the second year, possibly due to improved inventory management or sales acceleration, with a modest build-up of inventory in the third year.
The inventory turnover ratio demonstrated a consistent upward trend across the period, increasing from 6.48 in 2012 to 7.05 in 2013 and further to 7.53 in 2014. This indicates an improvement in the efficiency of inventory management and the speed at which inventory was converted into sales. The rising turnover ratio, coupled with fluctuating inventory levels, suggests a stronger focus on optimizing inventory relative to sales activity.
Overall, the data points to a dynamic operating environment characterized by variations in cost structure and inventory levels, alongside improvements in inventory utilization efficiency over the observed period.
Receivables Turnover
Kraft Foods Group Inc., receivables turnover calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Net revenues | 18,205) | 18,218) | 18,339) | |
| Receivables, net of allowances | 1,080) | 1,048) | 1,089) | |
| Short-term Activity Ratio | ||||
| Receivables turnover1 | 16.86 | 17.38 | 16.84 | |
| Benchmarks | ||||
| Receivables Turnover, Competitors2 | ||||
| lululemon athletica inc. | — | — | — | |
| Nike Inc. | — | — | — | |
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
Receivables turnover = Net revenues ÷ Receivables, net of allowances
= 18,205 ÷ 1,080 = 16.86
2 Click competitor name to see calculations.
The financial data reveals several notable trends in the company's performance over the three-year period from 2012 to 2014.
- Net Revenues
- Net revenues demonstrated slight fluctuations but remained relatively stable overall. The revenue amounted to 18,339 million US dollars in 2012 and exhibited a marginal decline in 2013 to 18,218 million, maintaining a similar level in 2014 at 18,205 million. This suggests a plateau in revenue generation without significant growth or contraction over the observed period.
- Receivables, Net of Allowances
- The net receivables showed some variation, beginning at 1,089 million US dollars in 2012, dipping to 1,048 million in 2013, and then rising again to 1,080 million in 2014. This movement indicates minor fluctuations in the amounts owed to the company, which may reflect changes in credit policies or collection efficiency.
- Receivables Turnover Ratio
- The receivables turnover ratio, which measures the efficiency in collecting receivables, remained relatively stable with slight variations. The ratio increased from 16.84 in 2012 to 17.38 in 2013, indicating a modest improvement in collection speed or efficiency. However, it declined in 2014 to 16.86, returning approximately to the 2012 level. Overall, the turnover ratio suggests consistent effectiveness in managing accounts receivable with minor year-to-year fluctuations.
Payables Turnover
Kraft Foods Group Inc., payables turnover calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Cost of sales | 13,360) | 11,395) | 12,499) | |
| Accounts payable | 1,537) | 1,548) | 1,556) | |
| Short-term Activity Ratio | ||||
| Payables turnover1 | 8.69 | 7.36 | 8.03 | |
| Benchmarks | ||||
| Payables Turnover, Competitors2 | ||||
| lululemon athletica inc. | — | — | — | |
| Nike Inc. | — | — | — | |
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
Payables turnover = Cost of sales ÷ Accounts payable
= 13,360 ÷ 1,537 = 8.69
2 Click competitor name to see calculations.
- Cost of Sales
- The cost of sales initially decreased from $12,499 million in 2012 to $11,395 million in 2013, indicating a reduction in the direct costs associated with producing goods sold. However, in 2014, this figure rose substantially to $13,360 million, surpassing the 2012 level and suggesting an increase in operational expenses or higher production volumes during that year.
- Accounts Payable
- The accounts payable balance showed a slight but consistent decline over the three-year period. It decreased marginally from $1,556 million in 2012 to $1,548 million in 2013, and further to $1,537 million in 2014. This steady downward trend may indicate improved payment cycles or changes in purchasing practices.
- Payables Turnover Ratio
- The payables turnover ratio decreased from 8.03 in 2012 to 7.36 in 2013, signaling a slower rate of payment to suppliers during that period. In 2014, the ratio increased notably to 8.69, indicating a faster payment turnover compared to both preceding years. This fluctuation suggests varying management of payables and cash flow timing across the years.
Working Capital Turnover
Kraft Foods Group Inc., working capital turnover calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Current assets | 4,791) | 4,908) | 4,823) | |
| Less: Current liabilities | 4,773) | 3,410) | 3,606) | |
| Working capital | 18) | 1,498) | 1,217) | |
| Net revenues | 18,205) | 18,218) | 18,339) | |
| Short-term Activity Ratio | ||||
| Working capital turnover1 | 1,011.39 | 12.16 | 15.07 | |
| Benchmarks | ||||
| Working Capital Turnover, Competitors2 | ||||
| lululemon athletica inc. | — | — | — | |
| Nike Inc. | — | — | — | |
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
Working capital turnover = Net revenues ÷ Working capital
= 18,205 ÷ 18 = 1,011.39
2 Click competitor name to see calculations.
The financial data indicates a significant fluctuation in working capital over the three-year period. Initially, the working capital shows a substantial increase from 1217 million USD in 2012 to 1498 million USD in 2013. However, it dramatically declines to 18 million USD by the end of 2014. This sharp contraction in working capital suggests a possible change in the management of current assets and liabilities, which may affect the company’s short-term liquidity position.
Net revenues remain relatively stable across the years, demonstrating minimal variation. In 2012, net revenues were approximately 18,339 million USD, slightly decreasing to 18,218 million USD in 2013 and further slightly declining to 18,205 million USD in 2014. This stability points to consistent sales performance, with no significant growth or reduction over the reported periods.
The working capital turnover ratio shows notable volatility. It decreased from 15.07 in 2012 to 12.16 in 2013, indicating a slower turnover of working capital relative to sales. Interestingly, this ratio escalates dramatically to 1011.39 in 2014, which is an outlier and likely influenced by the drastic reduction in working capital recorded in that year. Such an extreme value suggests an abnormal operational situation or potential reporting anomaly, as it implies an extraordinarily high turnover of working capital against net revenues.
- Working Capital
- Increased initially then suffered a steep decline in 2014.
- Net Revenues
- Remained stable with very slight decreases over the years.
- Working Capital Turnover
- Decreased from 2012 to 2013, followed by an abnormal surge in 2014 due to the sharp drop in working capital.
Overall, the data reveals stability in sales but significant volatility in liquidity management as evidenced by the changes in working capital and its turnover ratio. The unusual figures in 2014 warrant further investigation to understand the underlying causes and assess potential impacts on financial health and operational efficiency.
Average Inventory Processing Period
Kraft Foods Group Inc., average inventory processing period calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data | ||||
| Inventory turnover | 7.53 | 7.05 | 6.48 | |
| Short-term Activity Ratio (no. days) | ||||
| Average inventory processing period1 | 48 | 52 | 56 | |
| Benchmarks (no. days) | ||||
| Average Inventory Processing Period, Competitors2 | ||||
| lululemon athletica inc. | — | — | — | |
| Nike Inc. | — | — | — | |
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 7.53 = 48
2 Click competitor name to see calculations.
Analysis of the inventory management performance over the three consecutive years reveals a consistent improvement trend.
- Inventory turnover ratio:
- The inventory turnover ratio exhibits a steady increase from 6.48 in 2012 to 7.05 in 2013, and further to 7.53 in 2014. This upward trend indicates enhanced efficiency in converting inventory into sales, suggesting better inventory management and potentially increased sales velocity over the period.
- Average inventory processing period:
- The average inventory processing period shows a corresponding decrease from 56 days in 2012 to 52 days in 2013, and then to 48 days in 2014. This reduction in days aligns with the rising inventory turnover ratio, reflecting a shorter duration for inventory to be held before being sold, which can lead to lower holding costs and reduced risk of obsolescence.
Overall, the data points to improved operational efficiency regarding inventory management. The company appears to have accelerated its inventory cycle, likely contributing positively to working capital management and cost control.
Average Receivable Collection Period
Kraft Foods Group Inc., average receivable collection period calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data | ||||
| Receivables turnover | 16.86 | 17.38 | 16.84 | |
| Short-term Activity Ratio (no. days) | ||||
| Average receivable collection period1 | 22 | 21 | 22 | |
| Benchmarks (no. days) | ||||
| Average Receivable Collection Period, Competitors2 | ||||
| lululemon athletica inc. | — | — | — | |
| Nike Inc. | — | — | — | |
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 16.86 = 22
2 Click competitor name to see calculations.
The analysis of the provided financial data reveals a stable pattern in the company's receivables management over the three-year period ending in 2014.
- Receivables Turnover Ratio
- This ratio remained relatively consistent, with values of 16.84 in 2012, increasing moderately to 17.38 in 2013, and then slightly decreasing to 16.86 in 2014. The slight fluctuation suggests that the company's effectiveness in collecting receivables did not undergo significant changes during this period.
- Average Receivable Collection Period
- The average collection period maintained a stable range, at 22 days in 2012, improving marginally to 21 days in 2013, before returning to 22 days in 2014. This indicates that the time taken to collect receivables remained fairly constant, reflecting consistent credit and collection policies.
Overall, the minor variations in both metrics imply steady receivables management practices without significant deterioration or improvement in credit collection efficiency over the examined years.
Operating Cycle
Kraft Foods Group Inc., operating cycle calculation, comparison to benchmarks
No. days
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data | ||||
| Average inventory processing period | 48 | 52 | 56 | |
| Average receivable collection period | 22 | 21 | 22 | |
| Short-term Activity Ratio | ||||
| Operating cycle1 | 70 | 73 | 78 | |
| Benchmarks | ||||
| Operating Cycle, Competitors2 | ||||
| lululemon athletica inc. | — | — | — | |
| Nike Inc. | — | — | — | |
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= 48 + 22 = 70
2 Click competitor name to see calculations.
The analysis of the provided financial data reveals a consistent improvement in the efficiency of inventory management over the observed three-year period. The average inventory processing period decreased steadily from 56 days in 2012 to 52 days in 2013, and further to 48 days in 2014. This declining trend indicates a more rapid turnover of inventory, which can enhance liquidity and reduce holding costs.
Regarding accounts receivable, the average receivable collection period remained relatively stable, fluctuating slightly but maintaining a range close to 21-22 days. This stability suggests consistent efficiency in the collection process, with no significant acceleration or delay in cash inflows from customers during the time frame.
The operating cycle, which combines the inventory processing period and the receivable collection period, demonstrated a downward trend from 78 days in 2012 to 73 days in 2013, and further to 70 days in 2014. This reduction in the operating cycle reflects an overall enhancement in working capital management, likely contributing to improved cash flow and operational efficiency.
- Inventory Management
- Steady improvement, as shown by a decline in the average inventory processing period from 56 to 48 days over three years.
- Receivables Management
- Relatively stable average receivable collection period, fluctuating minimally between 21 and 22 days.
- Operating Cycle
- Decreased from 78 to 70 days, indicating overall better efficiency in managing inventory and receivables combined.
Average Payables Payment Period
Kraft Foods Group Inc., average payables payment period calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data | ||||
| Payables turnover | 8.69 | 7.36 | 8.03 | |
| Short-term Activity Ratio (no. days) | ||||
| Average payables payment period1 | 42 | 50 | 45 | |
| Benchmarks (no. days) | ||||
| Average Payables Payment Period, Competitors2 | ||||
| lululemon athletica inc. | — | — | — | |
| Nike Inc. | — | — | — | |
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ 8.69 = 42
2 Click competitor name to see calculations.
The analysis of the payables turnover and average payables payment period over the three-year span reveals notable fluctuations and shifts in payment practices.
- Payables Turnover
- The payables turnover ratio reflects the frequency at which the company settles its accounts payable within each fiscal year. Starting at 8.03 in the year ending December 29, 2012, the ratio declined to 7.36 in 2013, suggesting a slower rate of payment to suppliers during that year. However, in 2014, this ratio increased significantly to 8.69, surpassing the initial 2012 figure and indicating an acceleration in the payment cycle.
- Average Payables Payment Period
- The average payables payment period, measured in days, complements the turnover ratio findings. It increased from 45 days in 2012 to 50 days in 2013, further signifying an extension of payment time to creditors in 2013. Conversely, the period decreased notably to 42 days in 2014, reflecting a commitment to pay suppliers more promptly compared to prior periods.
- Overall Trends and Implications
- During the observed period, there is a clear pattern of an initial slowdown in payables management in 2013, as indicated by both a decrease in turnover and an increase in payment period. The subsequent reversal in 2014 suggests a strategic effort to improve cash outflow efficiency and possibly strengthen supplier relationships by accelerating payments. This dynamic may also impact the company's working capital management and indicate a response to changing operational or market conditions.
Cash Conversion Cycle
Kraft Foods Group Inc., cash conversion cycle calculation, comparison to benchmarks
No. days
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data | ||||
| Average inventory processing period | 48 | 52 | 56 | |
| Average receivable collection period | 22 | 21 | 22 | |
| Average payables payment period | 42 | 50 | 45 | |
| Short-term Activity Ratio | ||||
| Cash conversion cycle1 | 28 | 23 | 33 | |
| Benchmarks | ||||
| Cash Conversion Cycle, Competitors2 | ||||
| lululemon athletica inc. | — | — | — | |
| Nike Inc. | — | — | — | |
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= 48 + 22 – 42 = 28
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period exhibited a consistent downward trend over the three years. It decreased from 56 days in 2012 to 52 days in 2013, and further to 48 days in 2014. This indicates an improvement in inventory turnover, suggesting more efficient inventory management and quicker movement of stock.
- Average Receivable Collection Period
- The average receivable collection period remained relatively stable during this period. It slightly declined from 22 days in 2012 to 21 days in 2013 but returned to 22 days in 2014. This stability suggests that the company maintained consistent credit and collection policies with minimal changes in customer payment behavior.
- Average Payables Payment Period
- The average payables payment period showed variability over the years. It increased from 45 days in 2012 to 50 days in 2013, indicating a longer time taken to pay suppliers, potentially reflecting extended credit terms or cash management strategies. However, in 2014, it decreased noticeably to 42 days, suggesting a shift towards quicker payment of obligations.
- Cash Conversion Cycle
- The cash conversion cycle improved significantly from 33 days in 2012 to 23 days in 2013, demonstrating enhanced efficiency in managing the time between outlay and recovery of cash. However, in 2014, it slightly increased to 28 days, indicating a modest decline in operational efficiency compared to the previous year, though still better than in 2012.