Texas Instruments Inc. (NASDAQ:TXN)

The data reveals evident trends in operational efficiency and liquidity management over the five-year period. Key turnover ratios generally exhibit a declining trajectory, indicating shifts in how assets and liabilities are managed.

Inventory Turnover

The inventory turnover ratio declined significantly from 2.66 in 2020 to 1.45 in 2024. This downward trend suggests that inventory is being sold and replaced less frequently, potentially indicating slower sales or increased inventory levels. Correspondingly, the average inventory processing period increased substantially from 137 days to 252 days, reinforcing the observation of lengthening inventory holding times.

Receivables Turnover

The receivables turnover ratio decreased moderately from 10.23 in 2020 to 9.10 in 2024. This decline implies a slower conversion of receivables into cash. Supporting this, the average receivable collection period extended from 36 to 40 days, indicating customers are taking longer to pay.

Payables Turnover

Payables turnover exhibited a marked decline from 12.51 in 2020 to 7.98 in 2024, with a notable drop between 2021 and 2022. This suggests the company is taking longer to pay its suppliers. The average payables payment period data support this, increasing from 29 days to 46 days, although a slight reduction occurred between 2022 and 2023.

Working Capital Turnover

Working capital turnover ratio decreased from 1.84 in 2020 to 1.37 in 2024, demonstrating less efficient use of working capital to generate sales. This pattern indicates potential challenges in managing current assets and liabilities efficiently.

Operating Cycle

The operating cycle lengthened substantially, moving from 173 days in 2020 to 292 days in 2024. This reflects a combined effect of slower inventory processing and extended receivable collection periods, indicating that cash is tied up longer in the operating process.

Cash Conversion Cycle

The cash conversion cycle experienced a considerable increase from 144 days to 246 days during the period. This upward trend suggests that the time between outlay of cash for inventory and receipt of cash from customers has lengthened significantly, reflecting reduced operational efficiency in converting investments into cash flow.

In summary, the data indicates a general decline in turnover ratios coupled with an increase in days related to inventory, receivables, and overall cash conversion cycles. These trends point toward a slowdown in asset turnover and cash flow conversion, which may warrant management attention to optimize inventory management, receivables collection, and payables strategies to improve liquidity and operational efficiency.

The financial data shows several notable trends over the five-year period from 2020 to 2024. The cost of revenue has steadily increased year over year, rising from 5,192 million US dollars in 2020 to 6,547 million US dollars in 2024. This upward movement indicates a continuous growth in the expenses associated with producing the goods or services sold by the company.

Inventories have exhibited a marked increase throughout the same period. Beginning at 1,955 million US dollars in 2020, inventory levels decreased slightly in 2021 but then rose sharply in subsequent years, reaching 4,527 million US dollars by 2024. This substantial accumulation of inventory suggests an increasing stockpile of goods, which may indicate preparation for anticipated higher demand, slower sales, or changes in supply chain management.

Inventory turnover ratio reveals an inverse trend relative to inventory levels. The ratio decreased significantly from 2.66 in 2020 to 1.45 in 2024. This decline means the company is turning its inventory into sales less frequently, which could imply a slower movement of inventory or excess stock. The lowest turnover ratio in 2024 correlates with the highest inventory figures, highlighting a potential efficiency or demand issue affecting inventory management.

Overall, the rising cost of revenue coupled with increasing inventory levels and declining inventory turnover ratio may point toward operational challenges or strategic decisions that have led to higher costs and slower inventory throughput. These patterns warrant further investigation to understand underlying causes and to determine if adjustments are needed to improve inventory management and cost control.

The financial data over the five-year period from 2020 to 2024 indicates notable fluctuations and emerging trends in revenue, accounts receivable, and receivables turnover.

Revenue Trends

Revenue exhibited a strong growth trajectory from 2020 to 2022, increasing from $14,461 million in 2020 to a peak of $20,028 million in 2022. However, this upward trend reversed in subsequent years, with revenue declining to $17,519 million in 2023 and further to $15,641 million in 2024. The pattern suggests an initial period of expansion followed by contraction, which could reflect shifts in market demand, competitive dynamics, or operational factors impacting sales.

Accounts Receivable

Accounts receivable, net of allowances, grew steadily from $1,414 million in 2020 to $1,895 million in 2022, mirroring the revenue increase during the same period. Following 2022, the balance declined slightly to $1,787 million in 2023 and further to $1,719 million in 2024. Although receivables decreased in absolute terms, they remained relatively elevated compared to the 2020 baseline, indicating sustained credit sales activity but with some moderation aligned with the revenue decreases.

Receivables Turnover Ratio

The receivables turnover ratio rose modestly from 10.23 in 2020 to a high of 10.78 in 2021, reflecting improved efficiency in collecting receivables. It then experienced a gradual decline each year, reaching 9.1 by 2024. This trend signals a slowing in the rate of collections or an elongation in the average collection period, which may warrant further monitoring as it could impact cash flow and working capital management.

In summary, the data portrays a company that expanded revenue and receivables effectively through 2022 but faced a downturn in subsequent years. Despite the reduction in revenue, receivables remained comparatively high and collection efficiency declined, suggesting potential challenges in credit management or changes in customer payment behavior. Close attention to the causes behind the revenue contraction and ongoing monitoring of receivables turnover will be important for sustaining financial health moving forward.

Cost of Revenue

The cost of revenue has exhibited a consistent upward trend over the five-year period. Starting at $5,192 million in 2020, it increased each year, reaching $6,547 million by the end of 2024. This steady rise suggests growing operational expenses or expanding production activity within the company.

Accounts Payable

Accounts payable demonstrated a significant increase from $415 million in 2020 to $851 million in 2022, nearly doubling in two years. Following this peak, the value slightly declined to $802 million in 2023 but rose again modestly to $820 million in 2024. This pattern indicates enhanced credit terms or increased purchasing activities, although some fluctuations suggest adjustments in payment practices.

Payables Turnover Ratio

The payables turnover ratio has generally declined over the period, moving from 12.51 in 2020 to 7.98 in 2024. A declining payables turnover ratio implies the company is taking longer to settle its suppliers, possibly due to negotiating extended payment terms or managing cash flow more conservatively. The ratio dipped sharply between 2021 and 2022, moving from 10.45 to 7.35, before showing slight recovery in subsequent years, though remaining below levels seen in the early period.

Overall Analysis

The data indicates increasing operational scale or costs, alongside management of payables that allows for longer payment durations. The company appears to be leveraging supplier credit more extensively, as evidenced by rising accounts payable and declining payables turnover. These trends might reflect strategic financial management or changes in operational dynamics that warrant monitoring to ensure liquidity remains adequate.

Working Capital

The working capital exhibits an overall increasing trend from 2020 to 2023, rising from 7,849 million USD in 2020 to a peak of 11,802 million USD in 2023. In 2024, there is a slight decline to 11,383 million USD, though the level remains substantially higher than the starting point in 2020. This indicates a general improvement in the company's short-term liquidity position over the five-year period.

Revenue

Revenue demonstrates growth from 2020 through 2022, increasing from 14,461 million USD in 2020 to a high of 20,028 million USD in 2022. However, from 2022 onwards, revenue declines notably, falling to 17,519 million USD in 2023 and further down to 15,641 million USD in 2024. This downward trend after 2022 suggests challenges in maintaining sales growth or market demand during the latter period.

Working Capital Turnover

The working capital turnover ratio follows a declining pattern over the years. Starting at 1.84 in 2020, it decreases to 1.65 in 2021, slightly rises to 1.81 in 2022, but then falls more sharply to 1.48 in 2023 and further to 1.37 in 2024. This reduction in turnover ratio indicates that despite the increase in working capital, revenue generation relative to working capital is weakening, possibly reflecting reduced efficiency in asset utilization or slower revenue growth relative to capital invested.

Summary Insights

Overall, the data reflects an increase in working capital accompanied by fluctuating revenue performance and a declining efficiency ratio (working capital turnover). The rise in working capital coupled with falling turnover and shrinking revenue in recent years may point to potential operational inefficiencies or market conditions affecting sales. The modest dip in working capital in 2024, alongside continued revenue decline, suggests careful monitoring of liquidity and revenue drivers is warranted to sustain financial health.

Inventory Turnover Ratio

The inventory turnover ratio demonstrates a declining trend over the five-year period. Starting at 2.66 in 2020, it increased slightly to 3.12 in 2021 but then decreased consistently each year thereafter, reaching 1.45 by 2024. This indicates a slowing rate at which inventory is sold and replaced, suggesting potential challenges in inventory management or changes in sales efficiency.

Average Inventory Processing Period

The average inventory processing period shows a converse pattern to the inventory turnover ratio, starting at 137 days in 2020 and decreasing to 117 days in 2021. However, from 2021 onward, the period lengthens significantly, rising to 161 days in 2022, then extending sharply to 225 days in 2023, and reaching 252 days by 2024. This indicates that inventory is being held for progressively longer durations before being sold, which can reflect slower movement of goods or accumulation of stock.

Overall Insights

The opposing trends of declining inventory turnover and increasing average inventory processing period suggest a growing inefficiency in inventory management or slower sales cycles. The sharp increase in processing days after 2021 highlights a potential area of concern for operational efficiency and working capital management, possibly requiring strategic actions to accelerate inventory movement and optimize stock levels.

The analysis of the receivables turnover ratio and the average receivable collection period over the five-year span reveals a discernible downward trend followed by a gradual increase in collection time.

Receivables Turnover Ratio

The receivables turnover ratio initially increased from 10.23 in 2020 to 10.78 in 2021, indicating improved efficiency in collecting receivables. However, from 2021 onwards, the ratio declined consistently each year to 10.57 in 2022, 9.8 in 2023, and further to 9.1 in 2024. This trend suggests a gradual reduction in the efficiency of receivables collection over time.

Average Receivable Collection Period

Inversely mirroring the turnover ratio, the average receivable collection period decreased from 36 days in 2020 to 34 days in 2021, indicating a faster collection cycle. Subsequently, the collection period increased steadily over the next three years to 35 days in 2022, 37 days in 2023, and 40 days in 2024. This increase points to a lengthening of the time taken to collect receivables.

Overall, the data indicates an initial improvement in receivables management during 2020-2021, followed by a gradual decline in collection efficiency in the subsequent years through 2024. The consistent increase in the average collection period suggests potential challenges in the credit policy or customer payment behavior influencing liquidity and operational cash flows.

The data reveals clear upward trends in all measured periods, indicating changes in the company's operational efficiency and cash flow dynamics over the five years.

Average inventory processing period

This metric shows a steady and notable increase from 137 days in 2020 to 252 days in 2024. The extension in days suggests that inventory turnover slowed down significantly, implying that products are being held in inventory for longer periods before sale or use. This could impact liquidity and increase holding costs.

Average receivable collection period

The receivable collection period experiences a moderate increase, starting at 36 days in 2020 and rising to 40 days by 2024. This indicates that the company is taking slightly longer to collect payment from customers, which might signal changes in credit terms or customer payment behavior.

Operating cycle

The operating cycle, which combines inventory processing and receivable collection periods, extends markedly from 173 days in 2020 to 292 days in 2024. This near doubling suggests a lengthening of the time needed to convert inventory and receivables back into cash. Such a trend could have implications for working capital management and overall cash flow efficiency.

In summary, the company's operational processes related to inventory and receivables have slowed over the period analyzed, resulting in a longer operating cycle. These trends merit attention for their potential impact on liquidity and financial flexibility.

The payables turnover ratio demonstrates a declining trend over the five-year period. Starting at 12.51 in 2020, the ratio decreases markedly to 7.35 in 2022 before stabilizing around 8.0 in the subsequent years. This indicates that the company is settling its payables less frequently over time.

Correspondingly, the average payables payment period exhibits an increasing pattern, rising from 29 days in 2020 to 50 days in 2022. Although there is a slight decrease to 45 days in 2023, it increases again to 46 days in 2024. This suggests that the company is taking longer to pay its suppliers as the years progress.

Payables turnover ratio

Declining from a high of 12.51 to approximately 8, indicating slower turnover of accounts payable.

Average payables payment period

Increasing from 29 to around 46 days, showing a lengthening of the time taken to pay suppliers.

Overall, the data suggests a strategic or operational shift toward extending payment terms or slower payment processing. This could potentially improve cash flow by retaining funds longer but may also affect supplier relationships.

Average inventory processing period

The average inventory processing period demonstrates a notable upward trend over the five-year span. Starting at 137 days in 2020, it initially decreased slightly to 117 days in 2021, but then progressively increased each subsequent year, reaching 252 days by 2024. This indicates a lengthening duration for inventory turnover, suggesting either slower movement of inventory or changes in inventory management policies.

Average receivable collection period

The average receivable collection period has remained relatively stable, with a slight increasing trend over time. It decreased marginally from 36 days in 2020 to 34 days in 2021, then gradually increased to 40 days by 2024. This suggests a minor elongation in the time taken to collect receivables from customers, which could impact cash inflows.

Average payables payment period

The average payables payment period increased significantly from 29 days in 2020 to a peak of 50 days in 2022. Following this peak, it declined somewhat to 45 days in 2023, before slightly increasing again to 46 days in 2024. This pattern indicates an extended period in settling payables during the middle of the period, which could be a sign of improved credit terms or deliberate cash management strategies.

Cash conversion cycle

The cash conversion cycle exhibits a marked increase over the years, from 144 days in 2020 down to 116 days in 2021, then rising steadily to 246 days by 2024. The increasing cash conversion cycle reflects a lengthening interval between cash outflows for inventory and payables and cash inflows from receivables, largely driven by the significant rise in inventory processing days and, to a lesser extent, receivables collection period.

Overall analysis

There is a clear trend toward extended operational cycle times, predominantly driven by a prolonged inventory processing period. While payment periods have fluctuated, the overall effect contributes to a substantially longer cash conversion cycle by 2024. This may suggest challenges in operational efficiency or strategic decisions to hold more inventory or optimize cash flow timing, potentially impacting liquidity and working capital management.