PepsiCo Inc. (NASDAQ:PEP)

An examination of short-term operating activity ratios reveals several trends over the five-year period. Generally, the company demonstrates efficient management of its short-term assets and liabilities, though some indicators suggest a slight lengthening of operational cycles in recent years.

Inventory Turnover

Inventory turnover decreased from 8.53 in 2021 to 7.37 in 2025. While relatively stable between 2022 and 2024, the final year shows a more pronounced decline. This suggests a potential slowdown in the rate at which inventory is sold, possibly indicating increasing inventory levels or decreasing sales velocity.

Receivables Turnover

Receivables turnover experienced a decrease from 9.16 in 2021 to 8.16 in 2025. Similar to inventory turnover, the metric remained relatively consistent between 2022 and 2024 before declining in the most recent year. This indicates a lengthening of the time it takes to collect receivables, potentially due to changes in credit policies or customer payment behavior.

Payables Turnover

Payables turnover has been largely stable, fluctuating between 3.60 and 3.80 over the period. A slight decrease is observed in 2025, moving to 3.68, suggesting a minor lengthening in the time taken to pay suppliers.

Processing, Collection, and Cycle Periods

The average inventory processing period increased from 43 days in 2021 to 50 days in 2025, indicating inventory is held for a longer duration. The average receivable collection period also increased, moving from 40 days to 45 days over the same timeframe. Consequently, the operating cycle lengthened from 83 days to 95 days. These increases suggest a slower overall flow of goods and cash.

The average payables payment period remained consistently around 97 days for the first four years, increasing to 99 days in 2025. This suggests the company maintains a relatively stable relationship with its suppliers regarding payment terms.

Cash Conversion Cycle

The cash conversion cycle, while negative throughout the period, has become less negative, moving from -14 days in 2021 to -4 days in 2025. This indicates the time between paying suppliers and receiving cash from customers is shortening, but the rate of shortening is decreasing. The trend suggests a potential reduction in the company’s ability to finance its operations with supplier credit.

In summary, the observed trends suggest a gradual slowing of the operational cycle, with increases in inventory processing and receivable collection periods. While the company continues to operate with a negative cash conversion cycle, the diminishing negativity warrants monitoring to ensure continued efficient cash management.

The analysis reveals a generally decreasing trend in inventory turnover over the five-year period, despite fluctuations in both cost of sales and inventory levels. While cost of sales demonstrates a consistent increase, inventory levels have also risen, impacting the efficiency with which inventory is sold.

Inventory Turnover Trend

The inventory turnover ratio decreased from 8.53 in 2021 to 7.37 in 2025. This indicates a lengthening of the average time it takes to convert inventory into sales. A slight recovery is observed between 2022 and 2024, moving from 7.77 to 7.87, before resuming the downward trend in the most recent year.

Cost of Sales

Cost of sales has exhibited a consistent upward trajectory, increasing from US$37,075 million in 2021 to US$43,066 million in 2025. This suggests growing operational activity and potentially increased production or procurement costs. The rate of increase appears relatively stable year-over-year.

Inventory Levels

Inventories have generally increased over the period, rising from US$4,347 million in 2021 to US$5,845 million in 2025. The largest increase occurred between 2021 and 2022. While increases in inventory can support higher sales, the concurrent decline in inventory turnover suggests that the increases may be outpacing demand or that inventory management practices require review.

The combination of rising inventory levels and a declining inventory turnover ratio warrants further investigation. Potential factors contributing to this trend could include changes in product mix, supply chain disruptions, increased safety stock levels, or a slowdown in sales relative to inventory accumulation. A more detailed analysis of inventory composition and sales patterns is recommended.

The receivables turnover ratio exhibited a generally declining trend over the five-year period, although with some fluctuation. Net revenue consistently increased year-over-year, while accounts and notes receivable also generally increased, but at a slower pace than revenue in most years. This relationship drives the observed trend in the receivables turnover ratio.

Overall Trend

The receivables turnover ratio decreased from 9.16 in 2021 to 8.16 in 2025. This indicates a lengthening of the average collection period for accounts receivable over time. While not a dramatic decline, the consistent downward movement warrants further investigation.

Year-over-Year Changes

A decrease in the receivables turnover ratio was observed from 2021 to 2022, falling from 9.16 to 8.50. This coincided with an increase in both net revenue and accounts receivable. A further, albeit smaller, decrease occurred from 2022 to 2023, with the ratio reaching 8.46. The ratio experienced a slight recovery in 2024, increasing to 8.89. However, this was followed by a decline to 8.16 in 2025, the lowest value in the observed period.

Revenue and Receivables Relationship

Net revenue increased each year, from US$79,474 million in 2021 to US$93,925 million in 2025. Accounts receivable also increased over the period, rising from US$8,680 million in 2021 to US$11,506 million in 2025. However, the growth in receivables was not proportional to the growth in revenue, contributing to the declining receivables turnover ratio. The increase in receivables in 2025 was notably higher than the revenue increase, resulting in the most significant decrease in the turnover ratio for that year.

The observed trend suggests a potential loosening of credit terms, less efficient collection processes, or a change in the customer mix towards those with longer payment cycles. Further analysis, including days sales outstanding and a review of credit policies, would be beneficial to understand the underlying causes of this trend.

The accounts payable turnover ratio exhibits a relatively stable pattern over the five-year period, with minor fluctuations. While cost of sales consistently increased, the accounts payable balance and the resulting turnover ratio demonstrate a more nuanced trend.

Overall Trend

The payables turnover ratio remained within a narrow range between 3.60 and 3.80 throughout the period. This suggests a consistent efficiency in managing payments to suppliers, without significant improvements or deteriorations.

Year-over-Year Changes

The ratio experienced a slight increase from 3.77 in 2021 to 3.78 in 2022, indicating a marginally faster rate of paying suppliers. A decrease to 3.60 was observed in 2023, potentially due to a larger increase in accounts payable relative to cost of sales. The ratio rebounded to 3.80 in 2024, before decreasing again to 3.68 in 2025.

Relationship to Cost of Sales and Accounts Payable

Cost of sales increased each year, from US$37,075 million in 2021 to US$43,066 million in 2025. Accounts payable also generally increased, moving from US$9,834 million in 2021 to US$11,704 million in 2025. The fluctuations in the payables turnover ratio appear to be influenced by the relative growth rates of these two items. When accounts payable grew at a slower pace than cost of sales, the turnover ratio decreased, and vice versa.

The observed stability in the payables turnover ratio suggests a consistent approach to supplier payment terms and credit management. The minor variations likely reflect normal business fluctuations and strategic adjustments in working capital management.

The analysis reveals consistent negative working capital balances over the five-year period examined. Net revenue demonstrates a generally increasing trend, while the working capital turnover ratio remains uncalculated throughout the period.

Working Capital

Working capital is negative for each year presented, ranging from approximately -4,437 million to -5,710 million. A slight decrease in the negative balance is observed between 2022 and 2023, followed by an increase in the negative balance in 2024, and a subsequent decrease in 2025. This indicates that short-term liabilities consistently exceed short-term assets.

Net Revenue

Net revenue exhibits an upward trajectory throughout the period. Revenue increased from 79,474 million in 2021 to 93,925 million in 2025. The rate of increase appears to moderate in the later years, with smaller gains between 2023 and 2024, and 2024 and 2025.

Working Capital Turnover

The working capital turnover ratio is not reported for any of the years. Given the consistently negative working capital, the interpretation of a calculated turnover ratio would require careful consideration, as the standard formula (Net Revenue / Working Capital) would result in a negative value. This metric’s absence limits the assessment of how efficiently the company utilizes its working capital to generate sales.

The combination of negative working capital and increasing revenue suggests the company is effectively managing its cash conversion cycle despite relying on short-term financing to fund operations. However, the lack of a calculated working capital turnover ratio prevents a definitive conclusion regarding operational efficiency.

The analysis reveals a generally increasing trend in the average inventory processing period, coupled with a fluctuating inventory turnover ratio over the five-year period. These movements suggest potential shifts in inventory management efficiency.

Inventory Turnover

The inventory turnover ratio experienced a decrease from 8.53 in 2021 to 7.77 in 2022. It showed a slight recovery in 2023 and 2024, reaching 7.85 and 7.87 respectively, before declining again to 7.37 in 2025. This indicates a varying ability to convert inventory into sales, with the most recent year showing the lowest turnover rate within the observed period.

Average Inventory Processing Period

The average inventory processing period increased from 43 days in 2021 to 47 days in 2022. It remained relatively stable at 46 days in both 2023 and 2024, before increasing to 50 days in 2025. This consistent upward movement suggests that, on average, inventory is held for a longer duration each year, potentially indicating slower sales, increased inventory levels, or inefficiencies in the supply chain.

The inverse relationship between the inventory turnover ratio and the average inventory processing period is evident. As the turnover ratio decreases, the processing period increases, and vice versa. The lengthening processing period in 2025, alongside the lowest turnover ratio, warrants further investigation into the factors contributing to slower inventory movement.

The stability of the average inventory processing period in 2023 and 2024, despite the fluctuating turnover, could indicate offsetting factors influencing both metrics. However, the final year’s increase in the processing period suggests a more definitive trend towards slower inventory liquidation.

The average receivable collection period exhibited a generally stable pattern over the five-year period, with some fluctuation. While the receivables turnover ratio showed a slight decline overall, the collection period remained relatively consistent, suggesting a corresponding adjustment in credit and collection policies or sales terms.

Average Receivable Collection Period

The average receivable collection period began at 40 days in 2021. It increased to 43 days in both 2022 and 2023, indicating a lengthening in the time required to collect receivables. A slight decrease was observed in 2024, with the period falling to 41 days. However, the period increased again in 2025, reaching 45 days. This suggests potential inconsistencies in collection efficiency or changes in customer payment behavior.

The fluctuations in the average receivable collection period do not appear to correlate directly with the trends in receivables turnover. The receivables turnover ratio decreased from 9.16 in 2021 to 8.16 in 2025, indicating a slower rate of converting receivables into cash. However, the collection period did not consistently increase alongside this decline, suggesting that other factors may be influencing the speed of collections.

The increase in the collection period in 2025 warrants further investigation. It could be attributed to a variety of factors, including extended credit terms offered to customers, a shift in the customer mix towards those with longer payment cycles, or a deterioration in collection efforts. Monitoring this metric closely in subsequent periods will be important to identify any emerging trends and potential risks.

The operating cycle exhibited fluctuations over the five-year period. While generally remaining within a relatively narrow range, observable trends suggest shifts in the efficiency of inventory management and accounts receivable collection.

Average Inventory Processing Period

The average inventory processing period demonstrated a slight increasing trend. Beginning at 43 days in 2021, it rose to 47 days in 2022, before stabilizing at 46 days in both 2023 and 2024. A further increase to 50 days was noted in 2025. This suggests a gradual lengthening in the time required to convert raw materials into finished goods and ultimately sell them.

Average Receivable Collection Period

The average receivable collection period showed a similar pattern of initial increase followed by stabilization and a final rise. It increased from 40 days in 2021 to 43 days in 2022 and remained at 43 days in 2023. A slight decrease to 41 days occurred in 2024, but the period lengthened again to 45 days in 2025. This indicates potential changes in credit policies or customer payment behavior.

Operating Cycle

The operating cycle, representing the total time to convert investments in inventory and other resources into cash flows from sales, generally followed the combined trends of its component parts. It increased from 83 days in 2021 to 90 days in 2022, decreased to 89 days in 2023 and 87 days in 2024, and then increased to 95 days in 2025. The 2025 value represents the highest point in the observed period, potentially signaling a need for review of working capital management practices. The fluctuations suggest a dynamic relationship between inventory turnover and receivable collection efficiency.

Overall, the observed trends indicate a potential slowing down of the operating cycle towards the end of the period, driven by increases in both inventory processing and receivable collection times. Further investigation into the underlying causes of these increases may be warranted.

The analysis focuses on the observed trends in the average payables payment period over a five-year period. Generally, the metric demonstrates relative stability with minor fluctuations.

Payables Turnover

Payables turnover remained relatively consistent between 2021 and 2024, fluctuating between 3.60 and 3.80. A slight decrease was noted in 2023, followed by a return to a similar level in 2024. The most recent year, 2025, shows a slight decline to 3.68, continuing the trend observed in 2023.

Average Payables Payment Period

The average payables payment period exhibited minimal variation between 2021 and 2024, holding steady at 97 days for the first two years, increasing to 101 days in 2023, and then decreasing back to 96 days in 2024. The period increased slightly in 2025, reaching 99 days. This suggests a generally consistent approach to managing payments to suppliers, with a minor lengthening in 2023 and a partial correction in 2024, followed by a slight increase again in 2025.

The correlation between payables turnover and the average payment period is as expected; as payables turnover decreases, the average payment period tends to increase, and vice versa. The observed fluctuations are modest and do not indicate a significant shift in payment practices or supplier relationships.

The short-term operating activity ratios indicate fluctuations in the company’s efficiency in managing its working capital over the five-year period. Specifically, the average inventory processing period, average receivable collection period, and average payables payment period all contribute to the observed trends in the cash conversion cycle.

Average Inventory Processing Period

The average inventory processing period exhibited a slight increase from 43 days in 2021 to 47 days in 2022. This was followed by relative stability at 46 days in both 2023 and 2024, before increasing again to 50 days in 2025. This suggests a gradual lengthening in the time required to convert inventory into sales, potentially indicating challenges in inventory management or shifts in sales patterns.

Average Receivable Collection Period

The average receivable collection period increased from 40 days in 2021 to 43 days in 2022 and remained at 43 days in 2023. A slight decrease to 41 days was observed in 2024, followed by an increase to 45 days in 2025. These fluctuations suggest some variability in the efficiency of collecting payments from customers, with a general trend towards a longer collection period over the period.

Average Payables Payment Period

The average payables payment period remained consistent at 97 days for 2021 and 2022. It increased to 101 days in 2023, then decreased to 96 days in 2024, and finally settled at 99 days in 2025. This indicates some flexibility in managing payments to suppliers, with a slight overall increase in the time taken to settle obligations.

Cash Conversion Cycle

The cash conversion cycle remained negative throughout the period, ranging from -14 days in 2021 to -4 days in 2025. The cycle improved from -14 days to -7 days between 2021 and 2022, then worsened to -12 days in 2023. It improved again to -9 days in 2024 before worsening to -4 days in 2025. A negative cash conversion cycle indicates that the company is generally able to convert its investments in inventory and other resources into cash before it needs to pay its suppliers. The trend towards a less negative cycle suggests a potential decrease in operational efficiency, as the time between paying suppliers and receiving cash from customers is increasing.

Overall, the trends suggest a gradual shift towards a longer cash conversion cycle, despite remaining negative. While the company continues to generate cash from its operations before needing to pay suppliers, the narrowing negative gap warrants monitoring to ensure continued efficient working capital management.