PepsiCo Inc. (NASDAQ:PEP)

The short-term operating activity ratios exhibit varied trends over the observed period. Inventory turnover generally remains within a relatively narrow range, while receivables turnover demonstrates similar stability. The average inventory processing period and average receivable collection period show some fluctuation, impacting the overall operating cycle.

Inventory Turnover

Inventory turnover began at 7.95 and experienced a slight decline to 7.26 before recovering to 7.83. It remained relatively stable through the end of 2022, fluctuating between 7.77 and 7.85. A slight decrease was observed in the first half of 2023, falling to 7.01, followed by a recovery to 7.87 by the end of 2024. More recently, a downward trend is apparent, with turnover decreasing to 6.44 in March 2025, before a partial recovery to 7.37 by December 2025. This suggests potential changes in inventory management efficiency or demand patterns.

Receivables Turnover

Receivables turnover mirrored inventory turnover in some respects, starting at 8.58 and decreasing to 7.80. It then increased to 8.50 by the end of 2022. The first half of 2023 saw a decline to 7.87, followed by a rise to 8.46. A similar pattern to inventory turnover emerged in 2024, with a decrease to 7.71, followed by a notable increase to 8.89. The most recent period shows a slight decline to 8.16. These fluctuations may be linked to changes in credit policies or customer payment behavior.

Average Inventory Processing Period

The average inventory processing period began at 46 days and increased to 50 days before stabilizing around 47-48 days through late 2022 and early 2023. A noticeable increase to 52 days occurred in June 2023, followed by a return to 46 days by December 2024. The period then increased to 57 days in March 2025, before decreasing to 50 days by December 2025. This indicates variability in the time required to convert inventory into finished goods and make them available for sale.

Average Receivable Collection Period

The average receivable collection period started at 43 days and increased to 47 days. It remained around 43-47 days through much of 2022 and 2023. A slight increase to 48 days was observed in September 2024, followed by a rise to 50 days in September 2025. The period decreased to 45 days by December 2025. This suggests fluctuations in the efficiency of collecting payments from customers.

Operating Cycle

The operating cycle, calculated as the sum of the average inventory processing period and the average receivable collection period, generally ranged between 89 and 98 days. It peaked at 98 days in June 2023 and again in June 2024. A decrease to 87 days was observed in December 2024, followed by an increase to 106 days in March 2025, before decreasing to 95 days by December 2025. The operating cycle’s fluctuations reflect the combined effect of changes in both inventory management and receivables collection.

Overall, the observed ratios suggest a generally stable operating cycle with some periods of increased inefficiency, particularly in the most recent quarters. The slight downward trends in inventory and receivables turnover, coupled with increases in processing and collection periods, warrant further investigation to determine the underlying causes and potential impacts on liquidity and profitability.

The inventory turnover ratio exhibits fluctuations over the observed period, generally remaining within a relatively narrow range. An initial decline is noted from March 2022 through June 2023, followed by a period of increased variability and a slight upward trend towards the end of the analyzed timeframe.

Overall Trend

The ratio begins at 7.95 in March 2022, decreases to a low of 6.44 in June 2023, and then demonstrates a recovery, reaching 7.37 by December 2025. While there is no consistent, strong directional trend, the latter portion of the period suggests a potential stabilization or modest improvement.

Seasonal Patterns

A recurring pattern appears to exist, with lower ratios often observed in the first and second quarters (March/June) and higher ratios in the third and fourth quarters (September/December). This suggests potential seasonality in sales or inventory management practices. For example, the ratio consistently increases from the June to September timeframe across multiple years.

Short-Term Fluctuations

Significant decreases are observed between September 2023 and June 2024 (from 7.59 to 7.12) and between June 2024 and September 2024 (from 7.12 to 7.38). These fluctuations warrant further investigation to determine the underlying causes, such as changes in sales volume, production levels, or inventory valuation methods. The most substantial decline occurs between September 2024 and June 2025, dropping from 7.38 to 6.44, before recovering slightly.

Relationship to Cost of Sales and Inventories

The inventory turnover ratio is calculated from cost of sales and inventory levels. The observed fluctuations in the ratio correlate with changes in both of these components. Increases in cost of sales, without corresponding increases in inventory, generally lead to higher turnover ratios, and vice versa. The decline in turnover in June 2023 coincides with increases in both cost of sales and inventories. The recovery in later periods is associated with continued increases in cost of sales, but with more moderate inventory increases or even decreases.

In conclusion, the inventory turnover ratio demonstrates a complex pattern of fluctuations and potential seasonality. While generally stable, the observed declines and subsequent recoveries merit continued monitoring and analysis to understand the factors influencing inventory management efficiency.

The receivables turnover ratio exhibits a generally stable pattern over the observed period, with fluctuations occurring throughout the year. An initial decline is noted from March 2022 through June 2022, followed by relative stability through December 2022. This pattern repeats in the subsequent periods, suggesting a seasonal component to the ratio.

Overall Trend

The receivables turnover ratio generally remains within a narrow band, fluctuating between approximately 7.31 and 8.89. This indicates consistent efficiency in collecting receivables over the analyzed timeframe. There isn't a clear long-term upward or downward trend.

Seasonal Patterns

A recurring pattern emerges where the ratio tends to decrease in the second quarter (June) and then recover in the fourth quarter (December). This suggests that collection efforts may be slower during the spring/early summer months and accelerate towards the end of the year. The most recent observation continues this pattern, with a decrease from March 2025 to June 2025.

Recent Performance

The ratio experienced a peak in December 2024 at 8.89, representing the highest value in the observed period. However, this was followed by a decrease in March 2025 to 8.47 and a further decline in June 2025 to 7.41. This recent downward trend warrants monitoring to determine if it represents a temporary fluctuation or the beginning of a more significant change.

Comparative Analysis

Comparing the first half of 2024 (March and June) to the first half of 2025 (March and June), a slight decrease in the receivables turnover ratio is observed. This suggests a potential slowing in the rate of receivables collection during the most recent six-month period.

In conclusion, the receivables turnover ratio demonstrates a consistent, albeit seasonally influenced, performance. While generally stable, the recent decline from December 2024 to June 2025 merits further investigation to understand the underlying causes and potential implications.

The provided financial information details working capital and net revenue over a thirteen-quarter period, allowing for the calculation and analysis of working capital turnover. A consistent pattern of negative working capital is observed throughout the entire period. Despite this, the company demonstrates substantial and fluctuating net revenue.

Working Capital

Working capital consistently registers as a negative value throughout the observed period, ranging from approximately -3,482 million to -8,186 million. The most significant decrease in working capital occurs between March 2025 and June 2025, dropping from -5,223 million to -8,186 million. A subsequent increase is noted in the following quarter, but it does not fully recover to prior levels. Fluctuations are present in each year, but the overall trend suggests increasing negative working capital in the later quarters of the observation period.

Net Revenue

Net revenue exhibits seasonal patterns with generally higher values in the quarters ending September and December. Revenue fluctuates between approximately 16,200 million and 29,343 million. A general upward trend in revenue is observable over the entire period, with the highest revenue recorded in the most recent quarter (December 2025) at 29,343 million. Revenue generally peaks in the fourth quarter of each year.

Working Capital Turnover

Due to the consistently negative working capital, the working capital turnover ratio cannot be meaningfully interpreted as a measure of operational efficiency. A negative working capital base fundamentally alters the ratio’s intended function. While a calculation could be performed, the resulting negative values would not provide useful insights into how efficiently the company is utilizing its working capital to generate sales. The ratio’s typical interpretation – the number of times working capital is turned over during a period – is not applicable in this context. The observed trend of increasing negative working capital suggests a reliance on supplier credit or delayed payments to manage short-term liquidity, rather than efficient working capital management.

In summary, the company operates with a consistently negative working capital position while simultaneously demonstrating growth in net revenue. The working capital turnover ratio is not a useful metric given the negative working capital values.

The average inventory processing period exhibited fluctuations over the observed timeframe, generally ranging between 46 and 57 days. An initial period of stability is followed by a period of increased processing times, then a return towards initial levels, and finally a slight increase again.

Overall Trend

From March 2022 through December 2022, the average inventory processing period remained relatively stable, fluctuating between 46 and 50 days. A gradual increase began in early 2023, peaking at 57 days in June 2025. Following this peak, a slight decrease to 50 days was observed by December 2025.

Short-Term Fluctuations

A slight increase in the average inventory processing period was noted from March 2022 (46 days) to June 2022 (50 days). A subsequent decrease brought the period back to 47 days by September 2022, remaining at 47 days through the end of the year. The period then increased to 51 days in March 2023 and 52 days in June 2023.

Recent Performance

From September 2023 through March 2024, the average inventory processing period showed some volatility, moving from 48 days to 51 days and back to 48 days. A further increase to 50 days was observed in June 2024. The period then increased to 57 days in June 2025, before decreasing to 50 days by December 2025.

The observed increases in the average inventory processing period may warrant further investigation to determine the underlying causes, such as potential supply chain disruptions, changes in inventory management strategies, or shifts in product mix. The recent peak in June 2025, followed by a slight decrease, suggests potential corrective actions or a return to more typical operating conditions.

The average receivable collection period exhibited relative stability over the observed timeframe, with fluctuations primarily occurring between 41 and 50 days. An initial observation reveals a slight increase from 43 days in March 2022 to 47 days in June 2022, holding steady through September 2022 before returning to 43 days by the end of that year.

Overall Trend

The period generally remained within a narrow range. While there isn't a strong directional trend, a subtle lengthening is noticeable in the latter half of the period examined. The collection period appears to have increased slightly in the most recent quarters.

Throughout 2023, the average collection period mirrored the pattern of 2022, oscillating between 43 and 47 days. A dip to 41 days was observed in December 2024, representing the lowest point in the series. However, this was followed by increases to 43 days in March 2025, 49 days in June 2025, and finally settling at 45 days by December 2025.

Seasonal Variations

A potential seasonal pattern may exist, with collection periods tending to lengthen during the second quarter (June) of each year. This is not consistently observed, however, and requires further investigation to confirm.

The most recent values indicate a slight increase in the average collection period compared to the earlier periods. The movement from 41 days in December 2024 to 45 days in December 2025 suggests a potential shift in collection efficiency or changes in customer payment terms. Continued monitoring is recommended to determine if this represents a temporary fluctuation or a more sustained trend.

Recent Performance

The collection period has increased by 4 days over the last year, from 41 days to 45 days. This warrants further investigation to understand the underlying causes, such as changes in credit policies, customer mix, or economic conditions.

The fluctuations observed are relatively small, suggesting consistent management of accounts receivable. However, the recent uptick in the collection period merits attention to ensure it does not indicate emerging issues with cash flow or credit risk.

The operating cycle exhibited fluctuations over the observed period, spanning from March 2022 to June 2025. Analysis reveals trends in both the components of the operating cycle – average inventory processing period and average receivable collection period – and the resulting combined cycle length.

Average Inventory Processing Period

The average inventory processing period generally remained within a relatively narrow range, fluctuating between 46 and 52 days. An initial increase from 46 days in March 2022 to 50 days in June 2022 was followed by a slight decrease to 47 days in September 2022 and stabilization at 47 days in December 2022. A subsequent rise to 51 and 52 days occurred in the first half of 2023, before decreasing to 48 and 46 days by the end of 2023. The period then increased again to 50 days in March 2024, 51 days in June 2024, and peaked at 57 days in June 2025, before decreasing to 52 days in September 2025 and 50 days in December 2025. This suggests potential variability in inventory management efficiency, possibly influenced by seasonal demand or supply chain dynamics.

Average Receivable Collection Period

The average receivable collection period demonstrated similar variability. It increased from 43 days in March 2022 to 47 days in June 2022, remaining at 47 days through September 2022 before decreasing to 43 days in December 2022. The period remained stable at 43 days in March 2023, then increased to 46 days in June 2023 and 47 days in September 2023, before returning to 43 days in December 2023. A slight increase to 47 and 48 days occurred in the first half of 2024, followed by a decrease to 41 days in December 2024. The period then increased to 43 days in March 2025, 49 days in June 2025, 50 days in September 2025, and decreased to 45 days in December 2025. These fluctuations may reflect changes in credit policies, customer payment behavior, or the composition of sales.

Operating Cycle

The operating cycle, calculated as the sum of the average inventory processing period and the average receivable collection period, generally ranged between 87 and 106 days. The cycle length increased from 89 days in March 2022 to a peak of 98 days in June 2023. A decrease to 89 days was observed in December 2023. The cycle then increased again to 98 days in June 2024, before decreasing to 87 days in December 2024. The operating cycle peaked at 106 days in June 2025, before decreasing to 102 days in September 2025 and 95 days in December 2025. The overall trend suggests a lengthening of the operating cycle, particularly in the latter part of the observed period, potentially indicating a need to review both inventory and receivables management strategies to optimize cash flow.

The observed fluctuations in all three metrics suggest a dynamic operating environment. Further investigation into the underlying causes of these changes could provide valuable insights for improving operational efficiency and financial performance.