Tesla Inc. (NASDAQ:TSLA)

The short-term operating activity ratios exhibit varied trends over the observed period. Generally, a decline in efficiency metrics is apparent in the later quarters, particularly from 2023 onwards, though some ratios show stabilization or improvement in the most recent periods. Inventory management, accounts receivable management, accounts payable management, and overall working capital efficiency all demonstrate distinct patterns worthy of note.

Inventory Turnover

Inventory turnover generally decreased from 6.78 in March 2022 to a low of 4.60 in March 2023. A slight recovery occurred through December 2023, reaching 5.81, but this trend plateaued, with values fluctuating between 4.86 and 6.68 through March 2025. This suggests an initial slowdown in the rate at which inventory is sold, followed by a period of relative stabilization, but not a return to earlier levels.

Receivables Turnover

Receivables turnover showed initial strength, peaking at 34.15 in September 2022, before declining significantly to 22.11 by December 2023. The ratio remained subdued through the first half of 2025, with values ranging from 20.33 to 20.72. This indicates a lengthening of the time it takes to collect receivables, potentially signaling increased credit risk or less effective collection efforts.

Payables Turnover

Payables turnover demonstrated a consistent upward trend from 4.06 in March 2022 to 6.43 in December 2023. While it decreased slightly in subsequent periods, it remained above the initial value, ending at 5.81 in December 2025. This suggests the company is becoming more efficient in managing its payments to suppliers, potentially benefiting from improved negotiation terms or streamlined payment processes.

Working Capital Turnover

Working capital turnover experienced a steady decline from 8.19 in March 2022 to 2.57 in December 2025. This substantial decrease indicates a diminishing ability to generate sales from each dollar invested in working capital, potentially due to a combination of factors including slower inventory turnover and increased receivables collection periods.

Average Inventory Processing Period

The average inventory processing period increased from 54 days in March 2022 to 79 days in March 2023, indicating inventory is taking longer to sell. It then decreased to 58 days by December 2025, but remained elevated compared to the initial period. This aligns with the observed trends in inventory turnover.

Average Receivable Collection Period

The average receivable collection period remained relatively stable at around 13 days through June 2023, then increased to 18 days by December 2025. This lengthening collection period corroborates the decline in receivables turnover and suggests potential issues with collecting payments from customers.

Cash Conversion Cycle

The cash conversion cycle initially showed negative values, indicating efficient cash management, but shifted to positive values starting in March 2023, reaching 22 days by June 2025. This lengthening cycle suggests the company is taking longer to convert its investments in inventory and receivables into cash, potentially impacting liquidity.

In summary, the observed trends suggest a gradual deterioration in short-term operating efficiency, particularly concerning inventory and receivables management. While payables management appears to be improving, it has not been sufficient to offset the negative trends in other areas. The lengthening cash conversion cycle warrants further investigation to assess potential impacts on the company’s liquidity position.

The inventory turnover ratio exhibits fluctuations over the observed period, spanning from March 31, 2022, to December 31, 2025. Initially, a declining trend is apparent, followed by a period of relative stability and then a resurgence. A detailed examination reveals specific patterns and potential insights into operational efficiency.

Initial Decline (Mar 31, 2022 – Dec 31, 2022)

The inventory turnover ratio decreased from 6.78 in March 2022 to 4.72 by December 2022. This suggests a lengthening of the sales cycle or an increase in inventory levels relative to cost of revenues during this period. The cost of revenues increased over this time, but not at the same rate as inventory, contributing to the decline.

Stabilization and Moderate Increase (Mar 31, 2023 – Dec 31, 2023)

From March 2023 through December 2023, the ratio stabilized and showed a modest increase, moving from 4.60 to 5.81. This indicates a potential improvement in inventory management or increased sales velocity. Cost of revenues continued to rise, but inventory levels were relatively contained, supporting the improved turnover.

Fluctuation and Recent Trend (Mar 31, 2024 – Dec 31, 2025)

The period from March 2024 to December 2025 demonstrates more volatility. The ratio decreased to 4.86 in March 2024, then increased to 6.68 by December 2024, before settling at 6.27 in December 2025. This suggests potential seasonal effects or temporary disruptions in the supply chain or sales patterns. Inventory levels decreased in late 2024, contributing to the increase in turnover, but then stabilized in 2025.

Inventory and Cost of Revenues Relationship

A consistent positive correlation exists between cost of revenues and inventory levels. As cost of revenues increases, inventory generally increases as well, though the relationship is not perfectly linear. The fluctuations in the inventory turnover ratio are influenced by the relative growth rates of these two components. Periods of faster inventory growth relative to cost of revenues result in lower turnover, and vice versa.

Overall, the inventory turnover ratio demonstrates a dynamic pattern. While an initial decline was observed, subsequent periods show stabilization and improvement, followed by more recent fluctuations. Continued monitoring of this ratio, alongside related operational metrics, is recommended to gain a more comprehensive understanding of inventory management effectiveness.

The receivables turnover ratio exhibits fluctuations over the observed period, spanning from March 31, 2022, to December 31, 2025. Initial values indicate a generally strong collection rate, followed by periods of both improvement and decline. A detailed examination reveals specific trends and potential areas of interest.

Overall Trend

The ratio demonstrates considerable variability. While generally remaining above 20, a noticeable downward trend emerges in the latter portion of the analyzed timeframe. The highest values are observed in the second and third quarters of 2022, peaking at 34.15. The lowest values are recorded in the final quarters of 2025, falling to 20.33 and 20.72 respectively.

2022 Performance

The year 2022 began with a receivables turnover of 26.91, increasing to 32.28 and 34.15 in the subsequent quarters. This suggests improving efficiency in collecting receivables during the first three quarters of the year. However, the final quarter of 2022 saw a decrease to 27.60, potentially indicating a slowdown in collections or a change in credit terms.

2023 Fluctuations

2023 presents a more mixed picture. The first quarter shows a ratio of 28.75, followed by 27.28 in the second quarter. A significant increase is then observed in the third quarter, reaching 38.07, which represents a high point for the entire period. The year concludes with a ratio of 27.59, indicating a return to levels similar to the beginning of the year.

Recent Performance (2024-2025)

A consistent decline is apparent from 2024 onwards. The ratio decreased from 24.37 in the first quarter of 2024 to 22.11 in the fourth quarter. This downward trajectory continues into 2025, with values of 25.31, 24.16, 20.33, and 20.72 recorded sequentially. This sustained decrease warrants further investigation to determine the underlying causes, such as potential changes in customer payment behavior, increased credit risk, or adjustments to revenue recognition policies.

Relationship to Revenue

While the receivables turnover fluctuates, it generally moves in a manner consistent with revenue levels. Periods of higher revenue often correlate with higher turnover, and vice versa. However, the recent decline in turnover, despite relatively stable revenue in some quarters, suggests that the company may be experiencing challenges in converting sales into cash as efficiently as in previous periods.

In conclusion, the receivables turnover ratio demonstrates a pattern of variability with a concerning downward trend in the most recent periods. Further analysis, potentially incorporating accounts receivable aging and credit policies, is recommended to fully understand the implications of these changes.

The accounts payable turnover ratio exhibits a generally increasing trend over the observed period, with notable fluctuations. Initial values indicate a relatively stable turnover, followed by a period of more pronounced variability before settling into a higher range.

Initial Period (Mar 31, 2022 – Dec 31, 2022)

The payables turnover ratio begins at 4.06 and fluctuates between 3.95 and 4.37 over the first four quarters. This suggests a consistent, but not rapidly changing, rate at which the company is paying its suppliers. The ratio remains relatively contained within a narrow band during this timeframe.

Increasing Trend (Mar 31, 2023 – Dec 31, 2023)

From March 2023 through December 2023, a clear upward trend emerges. The ratio increases from 4.16 to 5.48, indicating the company is becoming more efficient in managing its accounts payable, or is taking advantage of extended payment terms from suppliers while simultaneously increasing cost of revenues. The most significant increase occurs between June and September 2023, moving from 4.83 to 5.52.

Recent Performance (Mar 31, 2024 – Dec 31, 2025)

The ratio continues to demonstrate elevated levels, ranging from 5.29 to 6.43. While there is some fluctuation, the ratio generally remains above the levels observed in the earlier periods. A slight decrease is noted in the final period, with the ratio falling to 5.81, though it remains within the higher range established over the preceding quarters. The highest value, 6.43, is recorded in September 2024.

Correlation with Cost of Revenues

A review of the cost of revenues alongside the payables turnover suggests a potential relationship. Periods of increased cost of revenues do not consistently correlate with changes in the payables turnover ratio, indicating factors beyond simply increased purchasing activity are influencing the ratio. For example, the increase in payables turnover from June to September 2023 occurs alongside an increase in cost of revenues, but the increase from March to June 2024 occurs with a decrease in cost of revenues.

Overall, the company demonstrates an improving trend in its ability to manage accounts payable, as evidenced by the increasing payables turnover ratio. However, the relationship between cost of revenues and the ratio is not straightforward, suggesting other operational or financial strategies are at play.

The working capital turnover ratio demonstrates a consistent downward trend over the observed period, spanning from March 31, 2022, to December 31, 2025. Initially, the ratio exhibited values in the range of 8.19 to 6.58 during the first four quarters. However, a more pronounced decline is evident from March 31, 2023, through December 31, 2025, with the ratio decreasing from 5.53 to 2.57.

Working Capital

Working capital consistently increased throughout the period, rising from US$7,595 million in March 2022 to US$36,928 million by December 2025. This growth suggests an increasing investment in short-term assets and liabilities.

Revenues

Revenues experienced fluctuations throughout the period. While there was initial growth from US$18,756 million in March 2022 to US$24,318 million in December 2022, subsequent quarters show variability. Revenues decreased to US$21,301 million by March 2024, then showed some recovery, but ultimately ended at US$24,901 million in December 2025, remaining below the peak observed in late 2022.

Working Capital Turnover Trend

The declining working capital turnover ratio, despite increasing working capital, indicates that the company is generating less revenue for each dollar invested in working capital. This suggests a potential inefficiency in managing short-term assets and liabilities. The most significant decrease occurred in the latter half of the period, coinciding with a period of relatively stagnant revenue growth and substantial increases in working capital. This could indicate slower inventory turnover, extended payment terms to suppliers, or a build-up of accounts receivable.

The ratio’s decline from 2023 onwards warrants further investigation to determine the underlying causes and potential implications for operational efficiency and profitability. A detailed analysis of the components of working capital – accounts receivable, inventory, and accounts payable – is recommended to pinpoint the specific areas contributing to this trend.

The average inventory processing period exhibited fluctuations over the observed timeframe. Initially, the period increased from 54 days in March 2022 to 77 days by December 2022, indicating a lengthening in the time required to convert inventory into sales. Following this peak, a decreasing trend was observed through September 2023, reaching 65 days. The period then increased again to 70 days in June 2025, with a slight decrease to 58 days by December 2025.

Overall Trend

The period generally trended upwards in the first half of the analyzed period, peaking in late 2022, before demonstrating a decline. More recently, the period has shown some volatility, with increases in the first half of 2024 and 2025.

Inventory Turnover Relationship

The average inventory processing period demonstrates an inverse relationship with the inventory turnover ratio. As inventory turnover decreased from 6.78 in March 2022 to 4.60 in March 2023, the processing period increased from 54 to 79 days. Conversely, as inventory turnover increased to 6.68 in December 2024, the processing period decreased to 55 days. This correlation suggests that changes in sales velocity directly impact the time inventory is held.

Peak and Trough Analysis

The longest average inventory processing period was 79 days, recorded in March 2023. This coincided with the lowest inventory turnover ratio during the analyzed period. The shortest period was 54 days, observed in March 2022, corresponding with the highest inventory turnover ratio. These points highlight the sensitivity of the processing period to changes in sales volume and inventory management efficiency.

The fluctuations in the average inventory processing period suggest potential shifts in demand, supply chain dynamics, or inventory management strategies. The recent increases in the period, despite improvements in inventory turnover, warrant further investigation to determine the underlying causes and potential implications for working capital management.

The average receivable collection period exhibited relative stability for much of the observed period, with fluctuations occurring primarily between 10 and 15 days. An initial decrease was noted from 14 days in March 2022 to a low of 10 days in September 2022, before returning to 13 days by the end of 2022 and remaining at that level through the first half of 2023.

Trend Analysis - 2023-2025

A gradual upward trend in the average collection period became apparent in the latter half of 2023. The period increased from 10 days in September 2023 to 18 days by December 2025. This represents a significant lengthening of the time required to collect receivables.

The period experienced a peak of 17 days in December 2024, followed by a continuation of the upward trend into the first half of 2025, reaching 18 days in both September and December of that year. This suggests a potential shift in credit policies, customer payment behavior, or the composition of sales.

Short-Term Fluctuations

While the overall trend from late 2023 through 2025 is upward, some quarterly variations were present. For example, a slight decrease to 14 days was observed in March 2025, but this was followed by a return to 15 days in June 2025 and a further increase to 18 days in the subsequent two quarters.

The consistency of the collection period between 11 and 13 days from March 2022 through June 2023 indicates a period of efficient receivables management. However, the more recent increases warrant further investigation to determine the underlying causes and potential implications for cash flow.

Overall Observation

The average receivable collection period demonstrates a transition from a consistently efficient collection cycle to a lengthening period, particularly pronounced in the final two years of the observed timeframe. This shift requires monitoring to assess its impact on liquidity and working capital management.

The operating cycle exhibited fluctuations over the analyzed period, spanning from March 31, 2022, to December 31, 2025. A general trend of lengthening, followed by contraction, and then a slight increase is observable. The individual components of the operating cycle – average inventory processing period and average receivable collection period – contribute to this overall pattern.

Average Inventory Processing Period

The average inventory processing period generally increased from 54 days in March 31, 2022, to 79 days in March 31, 2023. Following this peak, a decline was noted, reaching 55 days by December 31, 2024. The period then experienced a slight increase to 58 days by June 30, 2025, and 56 days by September 30, 2025. This suggests potential improvements in inventory management efficiency after March 2023, followed by a stabilization in the latter part of the period.

Average Receivable Collection Period

The average receivable collection period remained relatively stable between 11 and 15 days for most of the analyzed period. A slight increase was observed from 10 days in September 30, 2022, to 18 days in September 30, 2025, and remained at 18 days by December 31, 2025. This indicates a potential lengthening in the time taken to collect receivables towards the end of the period, which warrants further investigation.

Operating Cycle

The operating cycle increased from 68 days in March 31, 2022, to a peak of 92 days in March 31, 2023, mirroring the increase in the inventory processing period. A subsequent decrease brought the cycle down to 72 days by December 31, 2024. The operating cycle then rose to 85 days in June 30, 2025, before settling at 76 days by December 31, 2025. The overall trend suggests a period of increased operational inefficiency, followed by improvements, and then a slight resurgence in cycle length. The increase in the operating cycle in the latter part of the period is likely influenced by the lengthening receivable collection period.

In summary, the operating cycle demonstrates a dynamic relationship between inventory management and receivable collection. While improvements were evident in reducing the cycle length after March 2023, the recent trend suggests a need for continued monitoring and potential adjustments to optimize working capital management.

The average payables payment period exhibited a generally decreasing trend over the observed period, though with some fluctuations. Initially, the period stood at 90 days in March 2022, before declining to 84 days by June 2022. A slight increase to 92 days was noted in September 2022, which remained consistent through December 2022.

Overall Trend

From December 2022 through December 2024, a noticeable downward trend in the average payables payment period is apparent. The period decreased from 92 days to 57 days, indicating a faster rate of payment to suppliers. A slight rebound occurred in the first half of 2025, with the period increasing to 63 days by June 2025, before stabilizing at 63 days by December 2025.

The most significant reduction in the payment period occurred between March 2023 and December 2024, suggesting a deliberate strategy to improve supplier relationships through quicker payments or a change in payment terms. The stabilization in the latter part of 2025 indicates that the company may have reached a new equilibrium in its payables management.

Short-Term Fluctuations

Minor increases in the average payables payment period were observed between June 2022 and September 2022, and again between March 2024 and June 2024. These fluctuations could be attributed to seasonal variations in purchasing activity or temporary changes in supplier payment schedules.

The period consistently remained below 70 days from September 2023 onwards, demonstrating a sustained commitment to efficient payables management. The final value of 63 days in December 2025 represents the lowest point in the observed period.

Payables Turnover Relationship

The observed decrease in the average payables payment period correlates with an increase in the payables turnover ratio. The payables turnover ratio increased from 4.06 in March 2022 to 6.43 in December 2024, before settling at 5.81 in December 2025. This inverse relationship confirms that the company is processing and paying its payables more frequently over time.

The short-term operating activity, as measured by the cash conversion cycle and its components, exhibits notable fluctuations over the observed period. Generally, the cycle lengthened from early 2022 through the end of 2023, before showing some signs of stabilization and slight contraction in 2024 and 2025. A detailed examination of the individual components reveals the drivers of these changes.

Average Inventory Processing Period

The average time to process inventory generally increased from 54 days in March 2022 to 79 days in March 2023. This suggests a lengthening in the time required to convert raw materials into finished goods. A slight decrease was observed through September 2023 (65 days), followed by a rise to 75 days in March 2024. The period then decreased to 55 days by December 2024, and fluctuated between 56 and 58 days through the end of the forecast period. This suggests potential improvements in supply chain management or inventory control in late 2024, followed by stabilization.

Average Receivable Collection Period

The average number of days to collect receivables remained relatively stable between 11 and 14 days from March 2022 through December 2023. A gradual increase was observed in 2024, peaking at 17 days in December, before decreasing to 18 days by the end of the forecast period. This indicates a potential, albeit modest, lengthening in the time taken to convert sales into cash, particularly in 2024.

Average Payables Payment Period

The average payables payment period demonstrated a decreasing trend from 90 days in March 2022 to 63 days by December 2025. The most significant decrease occurred between March 2022 and June 2023, falling from 90 to 76 days. This suggests the company has been negotiating shorter payment terms with its suppliers or improving its payment efficiency. The decline continued, albeit at a slower pace, through the end of the forecast period.

Cash Conversion Cycle

The cash conversion cycle began as negative, at -22 days in March 2022, indicating efficient management of working capital. The cycle shortened to -13 days by June 2022, then stabilized around -12 days. A turning point occurred in March 2023, with the cycle becoming positive at 4 days, and increasing to 9 days by September 2023. The cycle peaked at 22 days in March 2025, before decreasing slightly to 13 days by December 2025. The shift from negative to positive indicates a slower conversion of inventory and receivables into cash, or a faster payment of payables, or a combination of these factors. The lengthening cycle in 2023 and 2024 suggests a potential need to optimize working capital management.

In summary, the company experienced a shift in its cash conversion cycle from highly efficient (negative) to requiring a longer period to convert investments into cash (positive). This change appears driven by a combination of increasing inventory processing times and a slight increase in receivable collection periods, offset by a consistent reduction in payables payment terms. The recent stabilization and slight contraction in the cycle towards the end of the forecast period may indicate successful implementation of working capital improvement initiatives.