Tesla Inc. (NASDAQ:TSLA)

An examination of short-term operating activity ratios reveals several noteworthy trends between 2021 and 2025. Generally, efficiency metrics demonstrate a weakening trend over the period, though with some variation across specific ratios. Inventory management appears to have stabilized after an initial decline, while collection and payment periods have shown more consistent shifts.

Inventory Management

Inventory turnover decreased from 6.99 in 2021 to 4.72 in 2022, indicating a slower rate of inventory sales. It partially recovered to 5.81 in 2023 and further to 6.68 in 2024 before settling at 6.27 in 2025. Correspondingly, the average inventory processing period increased from 52 days in 2021 to 77 days in 2022, then decreased to 63 days in 2023, 55 days in 2024, and stabilized at 58 days in 2025. These movements suggest initial challenges in managing inventory levels, followed by improvements in processing time, but not a full return to 2021 efficiency.

Receivables Management

Receivables turnover exhibited a slight decline from 28.14 in 2021 to 27.60 in 2022 and 27.59 in 2023, before a more pronounced decrease to 22.11 in 2024 and 20.72 in 2025. The average receivable collection period remained stable at 13 days from 2021 to 2023, then increased to 17 days in 2024 and 18 days in 2025. This indicates a lengthening of the time required to collect payments from customers, potentially signaling a weakening in credit control or changes in customer payment behavior.

Payables Management

Payables turnover increased from 4.01 in 2021 to 5.48 in 2023, and peaked at 6.43 in 2024, before decreasing to 5.81 in 2025. The average payables payment period decreased from 91 days in 2021 and 92 days in 2022 to 67 days in 2023, 57 days in 2024, and 63 days in 2025. This suggests an increasing ability to utilize supplier credit, initially improving payment terms, but with a slight lengthening in 2025.

Overall Operating Cycle & Cash Conversion

The operating cycle increased from 65 days in 2021 to 90 days in 2022, then decreased to 76 days in 2023 and 72 days in 2024, before stabilizing at 76 days in 2025. The cash conversion cycle, initially negative at -26 days in 2021, became positive in 2023 at 9 days, and further increased to 15 days in 2024 and 13 days in 2025. The shift from a negative to a positive cash conversion cycle indicates a longer period between paying suppliers and receiving cash from customers, potentially requiring more working capital financing.

Working Capital Efficiency

Working capital turnover decreased consistently from 7.28 in 2021 to 2.57 in 2025. This decline suggests a decreasing ability to generate sales from each dollar invested in working capital, potentially indicating inefficiencies in managing current assets and liabilities.

The analysis reveals fluctuations in inventory turnover over the five-year period. Cost of revenues demonstrated a consistent upward trend from 2021 to 2023, followed by a slight decrease in 2024 and a further decrease in 2025. Inventory levels increased significantly from 2021 to 2022, then stabilized with minor variations through 2025.

Inventory Turnover

The inventory turnover ratio decreased from 6.99 in 2021 to 4.72 in 2022, indicating a slower rate of inventory being sold and replenished. A subsequent increase to 5.81 was observed in 2023. The ratio continued to improve, reaching 6.68 in 2024, before decreasing slightly to 6.27 in 2025. This suggests an initial decline in efficiency in managing inventory, followed by improvements, and then a slight regression in the most recent year.

The initial drop in inventory turnover in 2022 coincided with a substantial increase in inventory levels. While cost of revenues also increased in 2022, the growth in inventory outpaced it, resulting in the lower turnover ratio. The subsequent improvements in 2023 and 2024 suggest more effective inventory management practices were implemented. The slight decrease in 2025 warrants further investigation to determine if it represents a temporary fluctuation or the beginning of a new trend.

The relationship between cost of revenues and inventory suggests a dynamic interplay between production, sales, and inventory control. The relatively stable inventory levels from 2023 to 2025, coupled with the fluctuations in cost of revenues, likely influenced the observed changes in inventory turnover.

The receivables turnover ratio exhibits a generally decreasing trend over the five-year period. While revenues demonstrate consistent growth initially, the growth in accounts receivable outpaces revenue increases, leading to a decline in the ratio.

Receivables Turnover Trend

The receivables turnover ratio began at 28.14 in 2021 and experienced a slight decrease to 27.60 in 2022. It remained relatively stable at 27.59 in 2023. A more pronounced decline is observed in 2024, with the ratio falling to 22.11, and continues downward in 2025, reaching 20.72.

Revenue and Accounts Receivable Relationship

Revenues increased from US$53,823 million in 2021 to US$96,773 million in 2023, then plateaued at US$97,690 million in 2024, and decreased slightly to US$94,827 million in 2025. Accounts receivable, net, increased consistently from US$1,913 million in 2021 to US$4,576 million in 2025. The consistent growth in receivables, coupled with the leveling off of revenue, contributes to the observed decline in the receivables turnover ratio.

The decreasing receivables turnover ratio suggests that, on average, it is taking longer to collect on credit sales. This could indicate a relaxation of credit terms, a shift in the customer base, or potential issues with the collection process. Further investigation into the aging of receivables and credit policies would be beneficial.

Implications of Declining Ratio

A lower receivables turnover ratio generally implies a greater proportion of capital tied up in accounts receivable. This can increase the risk of bad debts and reduce the company’s overall liquidity. The trend warrants monitoring to assess potential impacts on cash flow and profitability.

The analysis of accounts payable activity reveals fluctuating turnover rates alongside increasing cost of revenues over the observed period. Accounts payable generally increased from 2021 to 2022, then experienced a slight decrease in 2023, followed by a further decrease in 2024, and a modest increase in 2025. Cost of revenues demonstrated consistent growth from 2021 to 2023, plateaued in 2024, and experienced a slight decline in 2025.

Payables Turnover Trend

Payables turnover remained relatively stable between 2021 and 2023, fluctuating around 4.0. A notable increase occurred between 2023 and 2024, rising to 6.43. The ratio then decreased to 5.81 in 2025, but remained above the levels observed in the earlier years of the period. This suggests an improved efficiency in managing payments to suppliers in 2024, followed by a slight moderation of that efficiency in 2025.

The increase in payables turnover from 2023 to 2024, concurrent with a relatively stable cost of revenues, indicates that the company was able to utilize its credit terms with suppliers more effectively, potentially benefiting from early payment discounts or improved negotiation strategies. The subsequent decrease in 2025, while still elevated compared to prior years, suggests a possible shift in supplier relationships or payment practices. The relationship between cost of revenues and accounts payable suggests that the company is managing its supply chain effectively, although the slight decrease in cost of revenues in 2025 warrants further investigation to determine if it is a temporary fluctuation or a developing trend.

Accounts Payable and Cost of Revenues Relationship

While cost of revenues increased significantly from 2021 to 2023, accounts payable did not increase at the same rate. This suggests the company was becoming more efficient in managing its purchasing and payment processes during this period. The leveling off of cost of revenues in 2024 and 2025, coupled with a decrease in accounts payable in 2024, further supports this observation. The modest increase in accounts payable in 2025, alongside the slight decrease in cost of revenues, could indicate a strategic decision to build stronger relationships with suppliers or to take advantage of favorable payment terms.

Overall, the payables turnover ratio indicates a generally healthy and improving trend in the company’s ability to manage its short-term liabilities, although the fluctuations require continued monitoring to understand the underlying drivers and potential implications.

The working capital turnover ratio demonstrates a consistent decline over the five-year period. Simultaneously, working capital itself has exhibited substantial growth. This analysis details these trends and their implications.

Working Capital

Working capital increased significantly from US$7,395 million in 2021 to US$36,928 million in 2025. This represents a compounded annual growth rate of approximately 38.4%. The largest single-year increase occurred between 2022 and 2023, adding US$6,660 million. Growth slowed in subsequent years, but remained positive.

Revenues

Revenues also increased between 2021 and 2023, rising from US$53,823 million to US$96,773 million. However, revenue growth plateaued in 2024 at US$97,690 million and then decreased slightly to US$94,827 million in 2025. This suggests a potential slowdown in sales momentum.

Working Capital Turnover

The working capital turnover ratio, calculated as Revenues divided by Working Capital, decreased from 7.28 in 2021 to 2.57 in 2025. This indicates that the company is becoming less efficient in utilizing its working capital to generate revenue. The most substantial decrease occurred between 2023 and 2024, falling from 4.64 to 3.31. The continued decline into 2025 suggests this trend is persistent. While revenue increased substantially between 2021 and 2023, the growth in working capital outpaced revenue growth, driving down the ratio. The recent revenue decline in 2025, coupled with continued working capital growth, further exacerbated this trend.

The combination of increasing working capital and plateauing, then declining, revenues suggests a potential inefficiency in managing short-term assets and liabilities. Further investigation into the components of working capital – accounts receivable, inventory, and accounts payable – is recommended to identify the specific drivers of this trend and potential areas for improvement.

The average inventory processing period exhibited fluctuations over the five-year period. Initially, the period increased before stabilizing and showing a slight increase in the most recent year. Concurrent changes were observed in the inventory turnover ratio, which appears to influence the processing period.

Average Inventory Processing Period

The average inventory processing period lengthened from 52 days in 2021 to 77 days in 2022, representing a substantial increase. This suggests a slowdown in the rate at which inventory was sold and replenished during that year. A subsequent decrease to 63 days occurred in 2023, indicating improved efficiency. Further improvement was seen in 2024, with the period falling to 55 days. However, in 2025, the period increased slightly to 58 days.

Inventory Turnover

Inventory turnover decreased from 6.99 in 2021 to 4.72 in 2022, aligning with the increase in the average inventory processing period. This indicates slower sales relative to inventory levels. The ratio then recovered to 5.81 in 2023 and further to 6.68 in 2024, corresponding with the reduction in the processing period. A slight decrease to 6.27 in 2025 suggests a potential moderation of the improved turnover rate.

The inverse relationship between the inventory turnover ratio and the average inventory processing period is evident. A lower turnover ratio generally corresponds to a longer processing period, and vice versa. The increase in the processing period in 2025, coupled with the slight decrease in turnover, warrants further investigation to determine the underlying causes, such as changes in product mix, supply chain disruptions, or shifts in demand.

The analysis reveals a consistent pattern in receivables turnover and a corresponding shift in the average receivable collection period over the five-year period. While receivables turnover demonstrates a gradual decline, the average collection period exhibits a more pronounced increase towards the end of the observed timeframe.

Receivables Turnover

Receivables turnover remained relatively stable between 2021 and 2023, fluctuating around 28. This indicates a consistent efficiency in converting receivables into cash during those years. However, a downward trend emerges in 2024 and 2025, with the ratio decreasing to 22.11 and subsequently to 20.72. This suggests a slowing in the rate at which the company collects its receivables.

Average Receivable Collection Period

The average receivable collection period remained constant at 13 days from 2021 through 2023. This signifies a consistent timeframe for collecting payments from customers. Starting in 2024, the collection period began to lengthen, reaching 17 days, and further extending to 18 days in 2025. This increase correlates inversely with the decline in receivables turnover, indicating that it is taking longer to collect on outstanding receivables.

The observed trends suggest a potential weakening in the company’s ability to efficiently manage its receivables in the later years of the period. The increasing collection period, coupled with the decreasing turnover ratio, warrants further investigation to determine the underlying causes, such as changes in credit policies, customer payment behavior, or the composition of the customer base.

The operating cycle exhibited fluctuations over the five-year period. Initial values increased significantly before stabilizing and showing modest changes. A detailed examination of the components reveals specific trends in inventory management and receivables collection.

Average Inventory Processing Period

The average inventory processing period increased from 52 days in 2021 to 77 days in 2022, representing a substantial lengthening of the time required to convert inventory into finished goods. This was followed by a decrease to 63 days in 2023 and a further reduction to 55 days in 2024. The period then experienced a slight increase to 58 days in 2025. This suggests potential improvements in production efficiency and inventory management processes following 2022, though the latest period indicates a possible stabilization or minor reversal of that trend.

Average Receivable Collection Period

The average receivable collection period remained relatively stable at 13 days from 2021 through 2023. A gradual increase was observed in the subsequent two years, rising to 17 days in 2024 and 18 days in 2025. This indicates a lengthening of the time taken to collect payments from customers, potentially signaling a shift in credit terms or a decline in the efficiency of collection efforts.

Operating Cycle

The operating cycle mirrored the trends observed in its component parts. It increased from 65 days in 2021 to 90 days in 2022, driven primarily by the increase in the inventory processing period. A subsequent decrease to 76 days in 2023 and 72 days in 2024 reflected improvements in both inventory management and, to a lesser extent, receivables collection. The operating cycle then stabilized at 76 days in 2025, suggesting a plateau in operational efficiency gains.

Overall, the analysis indicates a period of operational strain in 2022, followed by improvements in the efficiency of converting inventory and collecting receivables. The recent stabilization of the operating cycle suggests that further significant improvements may require additional strategic initiatives.

The average payables payment period exhibited a decreasing trend over the observed period, followed by a slight increase in the most recent year. Initially, the period remained relatively stable before demonstrating a notable reduction. The payables turnover ratio, conversely, generally increased, aligning with the observed changes in the payment period.

Payables Turnover

The payables turnover ratio experienced a slight decrease from 4.01 in 2021 to 3.97 in 2022. However, a substantial increase was observed in 2023, reaching 5.48, and continued to rise to 6.43 in 2024. The ratio then decreased slightly to 5.81 in 2025. This indicates a changing efficiency in managing and paying off supplier obligations.

Average Payables Payment Period

The average payables payment period remained consistent at 91 and 92 days in 2021 and 2022, respectively. A significant decrease was then recorded, falling to 67 days in 2023 and further to 57 days in 2024. In 2025, the period increased marginally to 63 days. This suggests an improvement in the company’s ability to manage its payment obligations to suppliers, followed by a stabilization.

Relationship between Ratios

The inverse relationship between the payables turnover ratio and the average payables payment period is evident. As the payables turnover ratio increased, the average payables payment period decreased, and vice versa. This is expected, as a higher turnover ratio implies faster payment to suppliers, resulting in a shorter payment period. The slight increase in the payment period in 2025 corresponds with the decrease in the turnover ratio during the same period.

The observed trends suggest improved efficiency in accounts payable management between 2022 and 2024, potentially due to negotiated payment terms or improved internal processes. The slight reversal in 2025 warrants further investigation to determine if it represents a temporary fluctuation or the beginning of a new trend.

The short-term operating activity of the company, as measured by key ratios, demonstrates a shifting trend over the five-year period. Initially, the company exhibited a negative cash conversion cycle, indicating efficient management of working capital. However, this efficiency diminished over time, transitioning to a positive cycle before stabilizing.

Average Inventory Processing Period

The average time to process inventory increased from 52 days in 2021 to 77 days in 2022, suggesting a slowdown in inventory turnover. This was partially corrected in 2023, decreasing to 63 days, and further improved to 55 days in 2024. A slight increase to 58 days is observed in the final year. These fluctuations suggest potential variations in production cycles or inventory management strategies.

Average Receivable Collection Period

The average number of days to collect receivables remained stable at 13 days between 2021 and 2023. A gradual increase is then noted, rising to 17 days in 2024 and 18 days in 2025. This lengthening collection period could indicate a potential easing of credit terms or a slight deterioration in the efficiency of collecting payments from customers.

Average Payables Payment Period

The average time taken to pay suppliers decreased significantly from 91 days in 2021 to 67 days in 2023. This suggests improved negotiation power with suppliers or a deliberate strategy to optimize cash flow. The trend continued with a further reduction to 57 days in 2024, before increasing slightly to 63 days in 2025. This indicates a potential return to previous payment terms or a shift in supplier relationships.

Cash Conversion Cycle

The cash conversion cycle began at -26 days in 2021, indicating the company effectively converted its investments in inventory and receivables into cash before paying its suppliers. This negative cycle narrowed to -2 days in 2022, and then turned positive, reaching 9 days in 2023 and 15 days in 2024. The cycle stabilized at 13 days in 2025. The shift from a negative to a positive cycle suggests a lengthening of the time required to convert working capital back into cash, potentially due to the combined effects of increasing inventory processing and receivable collection periods, despite improvements in payables management.

Overall, the company’s working capital management appears to have become less efficient over the period, although the changes in the payables payment period partially offset this trend. The stabilization of the cash conversion cycle in the final year suggests a potential plateau in these operational dynamics.