Analysis of Short-term (Operating) Activity Ratios
Quarterly Data
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
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- Statement of Comprehensive Income
- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Return on Equity (ROE) since 2015
- Price to Earnings (P/E) since 2015
- Analysis of Revenues
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Short-term Activity Ratios (Summary)
PayPal Holdings Inc., short-term (operating) activity ratios (quarterly data)
Based on: 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
- Receivables Turnover
- The receivables turnover ratio shows a declining trend over the analyzed period. Starting at 38.86 in early 2019, it peaks slightly in mid-2020 at around 44.33 but then steadily decreases to 29.03 by the first quarter of 2023. This indicates a gradual slowdown in the frequency with which receivables are collected, suggesting a longer duration for converting credit sales into cash.
- Payables Turnover
- The payables turnover ratio fluctuates significantly, with notable volatility over the quarters. The metric rises from 70.33 in early 2019 to a peak of 237.31 in late 2022, with several sharp increases and decreases throughout the period. This pattern suggests changes in the company's payment practices to suppliers, with a trend towards faster payment cycles especially evident in the last year of the data.
- Working Capital Turnover
- Working capital turnover demonstrates a moderate upward trend. Initially around 2.54 in early 2019, the ratio briefly dips below 1.5 towards the end of 2019 but then climbs steadily, reaching a high of 3.07 in early 2022 before stabilizing around 2.22 in early 2023. This indicates improving efficiency in generating sales from working capital, although the decline in the final quarters suggests some loss of momentum.
- Average Receivable Collection Period
- The average collection period remains relatively stable, averaging roughly between 8 and 13 days, but shows a gradual increase over time. Starting at 9 days in early 2019, it slowly extends to around 13 days by early 2023, which aligns with the decreasing receivables turnover and points to a lengthening of the time customers take to pay their receivables.
- Average Payables Payment Period
- The average payable payment period reveals a slight downward trend. Initially fluctuating between 4 and 5 days in early 2019, it steadily decreases to about 2 days by early 2023. This pattern indicates the company is paying its suppliers more quickly over time, consistent with the increasing payables turnover ratio.
Turnover Ratios
Average No. Days
Receivables Turnover
PayPal Holdings Inc., receivables turnover calculation (quarterly data)
| Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Net revenues | |||||||||||||||||||||||
| Accounts receivable, net | |||||||||||||||||||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Receivables turnover1 | |||||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||||
| Receivables Turnover, Competitors2 | |||||||||||||||||||||||
| Adobe Inc. | |||||||||||||||||||||||
| AppLovin Corp. | |||||||||||||||||||||||
| Cadence Design Systems Inc. | |||||||||||||||||||||||
| CrowdStrike Holdings Inc. | |||||||||||||||||||||||
| Datadog Inc. | |||||||||||||||||||||||
| International Business Machines Corp. | |||||||||||||||||||||||
| Intuit Inc. | |||||||||||||||||||||||
| Microsoft Corp. | |||||||||||||||||||||||
| Oracle Corp. | |||||||||||||||||||||||
| Palantir Technologies Inc. | |||||||||||||||||||||||
| Palo Alto Networks Inc. | |||||||||||||||||||||||
| Salesforce Inc. | |||||||||||||||||||||||
| ServiceNow Inc. | |||||||||||||||||||||||
| Synopsys Inc. | |||||||||||||||||||||||
| Workday Inc. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q1 2023 Calculation
Receivables turnover
= (Net revenuesQ1 2023
+ Net revenuesQ4 2022
+ Net revenuesQ3 2022
+ Net revenuesQ2 2022)
÷ Accounts receivable, net
= ( + + + )
÷ =
2 Click competitor name to see calculations.
- Net Revenues
- The net revenues exhibit a general upward trend over the period analyzed. Starting from US$4,128 million in the first quarter of 2019, revenues increased steadily, reaching a peak of US$7,383 million by the fourth quarter of 2022. There is some fluctuation observed, particularly a dip in the first quarter of 2020 to US$4,618 million, likely reflecting external challenges during that period. However, rapid recovery and consistent growth followed, with revenues remaining above US$6,000 million from the first quarter of 2021 onwards. The most recent quarter reported, the first quarter of 2023, shows a slight decrease to US$7,040 million compared to the prior quarter but remains significantly higher than earlier years.
- Accounts Receivable, Net
- Accounts receivable increased steadily throughout the period, rising from US$409 million in early 2019 to US$967 million in the first quarter of 2023. This growth suggests an expansion in credit sales or a lengthening collection period. The increase appears consistent without sudden spikes, indicating a controlled build-up aligned with revenue growth. The largest quarterly increment occurred around the end of 2020, coinciding with increased net revenues, implying increased customer credit balances concurrent with sales.
- Receivables Turnover
- Receivables turnover demonstrates a declining trend over the timeframe. Beginning with a high ratio of 38.86 in the first quarter of 2019, indicating efficient collection of receivables, the ratio steadily decreased to 29.03 by the first quarter of 2023. This downward trend suggests that the company is taking longer to collect its receivables, potentially reflecting relaxed credit terms or slower payment by customers. The decline is gradual but consistent, with no sudden reversals, implying a structural change in receivables management or customer payment behavior.
- Overall Insights
- The company’s net revenues have grown substantially over the analyzed period, reflecting successful business expansion or increased market demand. However, the rise in accounts receivable alongside the declining receivables turnover ratio signals a potential increase in credit risk or cash flow timing challenges. The steady build in receivables without a proportional increase in turnover efficiency could warrant closer monitoring of collection practices and credit policies to ensure liquidity is maintained as sales grow.
Payables Turnover
PayPal Holdings Inc., payables turnover calculation (quarterly data)
| Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Net revenues | |||||||||||||||||||||||
| Accounts payable | |||||||||||||||||||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Payables turnover1 | |||||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||||
| Payables Turnover, Competitors2 | |||||||||||||||||||||||
| Accenture PLC | |||||||||||||||||||||||
| Adobe Inc. | |||||||||||||||||||||||
| AppLovin Corp. | |||||||||||||||||||||||
| CrowdStrike Holdings Inc. | |||||||||||||||||||||||
| Datadog Inc. | |||||||||||||||||||||||
| International Business Machines Corp. | |||||||||||||||||||||||
| Intuit Inc. | |||||||||||||||||||||||
| Microsoft Corp. | |||||||||||||||||||||||
| Oracle Corp. | |||||||||||||||||||||||
| Palantir Technologies Inc. | |||||||||||||||||||||||
| Palo Alto Networks Inc. | |||||||||||||||||||||||
| ServiceNow Inc. | |||||||||||||||||||||||
| Workday Inc. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q1 2023 Calculation
Payables turnover
= (Net revenuesQ1 2023
+ Net revenuesQ4 2022
+ Net revenuesQ3 2022
+ Net revenuesQ2 2022)
÷ Accounts payable
= ( + + + )
÷ =
2 Click competitor name to see calculations.
- Net Revenues
- Net revenues demonstrated a generally upward trajectory from the first quarter of 2019 through the first quarter of 2023. Starting at $4,128 million in March 2019, revenues showed steady growth with some fluctuations, reaching a peak of $7,383 million in December 2022 before slightly decreasing to $7,040 million in March 2023. Overall, this trend reflects a significant expansion of the company's revenue base over the observed period, with notable acceleration in growth rates during the latter half of 2020 and into 2021 and 2022.
- Accounts Payable
- Accounts payable values exhibited variability without a clear directional trend. The figures fluctuated between $114 million and $260 million across the quarters, ending at $142 million in March 2023, near the lower end of the historical range. Peaks were observed intermittently, suggesting occasional changes in supplier payment cycles or operational adjustments, but no sustained increase or decrease is apparent over time.
- Payables Turnover Ratio
- The payables turnover ratio showed considerable volatility, with values ranging from about 70 to 237. There was a marked increase beginning in late 2019, peaking in September 2022 at approximately 237, denoting a substantially faster rate of paying off suppliers relative to accounts payable. After the peak, the ratio slightly declined but remained elevated near 198 in March 2023. This pattern indicates an improvement in the efficiency of managing payables, potentially reflecting stronger cash flow management or renegotiated payment terms with suppliers.
- Summary Insights
- The overall increase in net revenues highlights strong business growth, while the fluctuating accounts payable figures suggest variable operational or purchasing activity. The substantial rise in payables turnover ratio indicates that the company has enhanced its payment efficiency over the period. This improvement may have implications for supplier relations and working capital utilization. Together, these trends suggest a company expanding its operations while managing its liabilities more effectively, balancing growth with liquidity considerations.
Working Capital Turnover
PayPal Holdings Inc., working capital turnover calculation (quarterly data)
| Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Current assets | |||||||||||||||||||||||
| Less: Current liabilities | |||||||||||||||||||||||
| Working capital | |||||||||||||||||||||||
| Net revenues | |||||||||||||||||||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Working capital turnover1 | |||||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||||
| Working Capital Turnover, Competitors2 | |||||||||||||||||||||||
| Accenture PLC | |||||||||||||||||||||||
| Adobe Inc. | |||||||||||||||||||||||
| AppLovin Corp. | |||||||||||||||||||||||
| Cadence Design Systems Inc. | |||||||||||||||||||||||
| CrowdStrike Holdings Inc. | |||||||||||||||||||||||
| Datadog Inc. | |||||||||||||||||||||||
| International Business Machines Corp. | |||||||||||||||||||||||
| Intuit Inc. | |||||||||||||||||||||||
| Microsoft Corp. | |||||||||||||||||||||||
| Oracle Corp. | |||||||||||||||||||||||
| Palantir Technologies Inc. | |||||||||||||||||||||||
| Palo Alto Networks Inc. | |||||||||||||||||||||||
| Salesforce Inc. | |||||||||||||||||||||||
| ServiceNow Inc. | |||||||||||||||||||||||
| Synopsys Inc. | |||||||||||||||||||||||
| Workday Inc. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q1 2023 Calculation
Working capital turnover
= (Net revenuesQ1 2023
+ Net revenuesQ4 2022
+ Net revenuesQ3 2022
+ Net revenuesQ2 2022)
÷ Working capital
= ( + + + )
÷ =
2 Click competitor name to see calculations.
- Working Capital
- The working capital showed an overall increasing trend from the beginning of 2019 to early 2021, rising from 6,256 million USD in March 2019 to 12,435 million USD in September 2021. After reaching this peak, there was a noticeable decline reaching the lowest value of 8,415 million USD in March 2022. Subsequently, it resumed an upward trajectory, ending at 12,651 million USD in March 2023. This suggests fluctuations in short-term financial health, reflecting either changes in current assets or liabilities during various economic cycles.
- Net Revenues
- Net revenues consistently increased over the period, starting at 4,128 million USD in March 2019 and growing to a peak of 7,383 million USD in December 2022. There were minor decreases noticed in some quarters, such as from December 2022 to March 2023, where revenues slightly dropped to 7,040 million USD. Overall, the upward movement indicates expanding business operations or higher sales volume and suggests robust growth over the analyzed periods.
- Working Capital Turnover Ratio
- The working capital turnover ratio exhibited volatility with an initial decline from 2.54 in March 2019 to a low of 1.49 in September 2019, followed by gradual recovery through 2020. A significant increase was observed reaching 2.66 in December 2021, indicating improved efficiency in using working capital to generate revenues. This ratio peaked at 3.07 in March 2022 before slightly decreasing but stabilizing around 2.22 by March 2023. The fluctuations suggest changing operational efficiency, with periods of both strengthening and weakening capacity to convert working capital into sales.
- Summary of Insights
- The data reveals that working capital and net revenues generally trend upwards but with intermittent variability likely influenced by market or internal operational factors. The working capital turnover ratio’s fluctuations imply phases of differing efficiency levels in managing working capital relative to revenue generation. The peak turnover ratio coincides with the lowest working capital values, which may indicate an increased focus on efficient capital use during times of tighter liquidity. Overall, despite short-term variances, the company demonstrates strong revenue growth and adaptive working capital management.
Average Receivable Collection Period
PayPal Holdings Inc., average receivable collection period calculation (quarterly data)
| Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||||||||||||
| Receivables turnover | |||||||||||||||||||||||
| Short-term Activity Ratio (no. days) | |||||||||||||||||||||||
| Average receivable collection period1 | |||||||||||||||||||||||
| Benchmarks (no. days) | |||||||||||||||||||||||
| Average Receivable Collection Period, Competitors2 | |||||||||||||||||||||||
| Adobe Inc. | |||||||||||||||||||||||
| AppLovin Corp. | |||||||||||||||||||||||
| Cadence Design Systems Inc. | |||||||||||||||||||||||
| CrowdStrike Holdings Inc. | |||||||||||||||||||||||
| Datadog Inc. | |||||||||||||||||||||||
| International Business Machines Corp. | |||||||||||||||||||||||
| Intuit Inc. | |||||||||||||||||||||||
| Microsoft Corp. | |||||||||||||||||||||||
| Oracle Corp. | |||||||||||||||||||||||
| Palantir Technologies Inc. | |||||||||||||||||||||||
| Palo Alto Networks Inc. | |||||||||||||||||||||||
| Salesforce Inc. | |||||||||||||||||||||||
| ServiceNow Inc. | |||||||||||||||||||||||
| Synopsys Inc. | |||||||||||||||||||||||
| Workday Inc. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q1 2023 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ =
2 Click competitor name to see calculations.
- Receivables Turnover Ratio
- The receivables turnover ratio showed a general decreasing trend over the analyzed period. Starting at 38.86 in the first quarter of 2019, it peaked slightly at 44.33 in the first quarter of 2020 but has since declined steadily, reaching 29.03 by the first quarter of 2023. This decline indicates that the company is collecting its receivables less frequently, suggesting potential changes in credit policies or customer payment behavior affecting liquidity.
- Average Receivable Collection Period
- The average receivable collection period exhibits an inverse trend to the receivables turnover ratio. It began at 9 days in early 2019 and initially fluctuated between 8 and 10 days through 2020. Starting in 2021, the period extended progressively from 11 to 13 days by the first quarter of 2023. This incremental increase signifies that the company is taking more time to collect payments from customers, which could imply a loosening of credit terms or slower customer payments.
- Overall Insight
- The combined trends suggest a lengthening of the cash conversion cycle related to receivables, as evidenced by a dropping receivables turnover ratio and rising collection period. This progression could have implications for the company’s working capital management and liquidity position, potentially increasing the need for external funding if the trend continues. Monitoring and managing accounts receivable efficiently will be critical to maintaining financial flexibility.
Average Payables Payment Period
PayPal Holdings Inc., average payables payment period calculation (quarterly data)
| Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||||||||||||
| Payables turnover | |||||||||||||||||||||||
| Short-term Activity Ratio (no. days) | |||||||||||||||||||||||
| Average payables payment period1 | |||||||||||||||||||||||
| Benchmarks (no. days) | |||||||||||||||||||||||
| Average Payables Payment Period, Competitors2 | |||||||||||||||||||||||
| Accenture PLC | |||||||||||||||||||||||
| Adobe Inc. | |||||||||||||||||||||||
| AppLovin Corp. | |||||||||||||||||||||||
| CrowdStrike Holdings Inc. | |||||||||||||||||||||||
| Datadog Inc. | |||||||||||||||||||||||
| International Business Machines Corp. | |||||||||||||||||||||||
| Intuit Inc. | |||||||||||||||||||||||
| Microsoft Corp. | |||||||||||||||||||||||
| Oracle Corp. | |||||||||||||||||||||||
| Palantir Technologies Inc. | |||||||||||||||||||||||
| Palo Alto Networks Inc. | |||||||||||||||||||||||
| ServiceNow Inc. | |||||||||||||||||||||||
| Workday Inc. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q1 2023 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ =
2 Click competitor name to see calculations.
- Payables Turnover
- The payables turnover ratio exhibits a generally increasing trend over the observed quarters, reflecting a growing frequency of payment to suppliers. Starting at 70.33 in the first quarter of 2019, the ratio shows fluctuations but tends to rise notably after mid-2020. The most significant increases appear from 2021 onward, reaching peaks over 230 in late 2022 before a slight decline to approximately 198 in early 2023. Such a trend implies a faster payment cycle or improved management of accounts payable during this period.
- Average Payables Payment Period
- The average payment period, measured in days, inversely correlates with the payables turnover ratio. Initially fluctuating between 4 and 5 days through 2019 and the first half of 2020, a consistent reduction in the payment period begins mid-2020. From early 2021 onward, the period stabilizes around 2 to 3 days, reaching as low as 2 days predominantly in 2022 and maintaining this in early 2023. This shortening of the payment period indicates an acceleration in settling payables, aligning with the observed increase in payables turnover.
- Overall Insights
- The concurrent increase in payables turnover and decrease in average payment days suggests an enhanced efficiency in managing payables. The company appears to be paying its obligations more promptly over time, which could reflect stronger cash availability or a strategic decision to maintain favorable supplier relationships. However, the peak values in turnover and the lowest payment days achieved towards the end of 2022 might also warrant an evaluation of the impacts on cash flow to ensure sustainability of this payment pace.