Twenty-First Century Fox Inc. (NASDAQ:FOX)

An analysis of the operating activity ratios reveals a general decline in operational efficiency and a lengthening of the cash conversion process between 2013 and 2018. There is a observable trend toward slower asset turnover and extended collection periods, which has collectively increased the duration of the operating cycle.

Inventory Management

Inventory turnover exhibited a peak of 6.83 in 2014 before entering a general decline, reaching 5.39 by 2018. This downward trend is mirrored in the average inventory processing period, which increased from a low of 53 days in 2014 to 68 days in 2018, indicating that inventory is remaining in stock for longer durations.

Receivables Management

A consistent deterioration in receivables efficiency is observed. The receivables turnover ratio declined steadily from 5.07 in 2013 to 4.27 in 2018. Consequently, the average receivable collection period lengthened from 72 days to 85 days over the same period, suggesting a slowdown in the collection of payments from customers.

Working Capital Efficiency

Working capital turnover showed significant volatility, peaking at 4.89 in 2014 before declining to 2.74 by 2018. This suggests that the company is generating less revenue per unit of working capital invested in its operations over time.

Operating and Cash Conversion Cycles

The operating cycle experienced a notable expansion, rising from 127–130 days between 2013 and 2015 to a range of 147–154 days between 2016 and 2018. This expansion is driven by the simultaneous slowdown in both inventory and receivable turnovers.

Payables and Liquidity Timing

Payables turnover decreased from 63.44 in 2016 to 44.63 in 2018, though the average payables payment period remained extremely short, ranging between 6 and 8 days. Because the company settles its obligations rapidly while collecting receivables slowly, the cash conversion cycle remains high, fluctuating between 139 and 148 days from 2016 to 2018.

An analysis of the operating activity between 2013 and 2018 reveals a period of fluctuating efficiency in inventory management and varying operational cost structures.

Operating Expenses

Operating expenses exhibited significant volatility during the period. A peak occurred in 2014 at 21,108 million, followed by a steady decline to a period low of 17,129 million in 2016. Subsequently, expenses trended upward, reaching 19,769 million by June 30, 2018.

Net Inventory Levels

A general upward trend in inventory holdings is observed over the six-year span. After fluctuating between 2,749 million and 3,291 million from 2013 to 2017, net inventories rose sharply to 3,669 million in 2018, representing the highest inventory balance in the analyzed timeframe.

Inventory Turnover Ratio

The inventory turnover ratio indicates a decline in operational efficiency over time. The ratio peaked in 2014 at 6.83 and remained relatively strong through 2015. A significant contraction occurred in 2016, with the ratio dropping to 5.20. Despite a moderate recovery to 5.73 in 2017, the ratio settled at 5.39 in 2018, reflecting a slower rate of inventory cycling compared to the 2013-2015 period.

The correlation between increasing net inventory levels and a generally declining turnover ratio suggests a decrease in the velocity of asset conversion. The expansion of inventory to its peak in 2018, coupled with a turnover ratio significantly lower than the 2014 peak, indicates that the growth in stock levels has outpaced the growth in operating expenses utilized to move those assets.

The operational efficiency regarding the collection of accounts receivable exhibited a steady decline over the period from June 30, 2013, to June 30, 2018. Despite fluctuations in annual revenue, the growth in net receivables consistently outpaced revenue gains in the latter part of the period, resulting in a gradual reduction in the receivables turnover ratio.

Revenue Performance

Annual revenues showed volatility, reaching a peak of 31,867 million USD in 2014 and ending the period at 30,400 million USD in 2018. The lack of a consistent linear growth pattern in revenue contributed to the instability of the turnover metrics.

Net Receivables Trajectory

A general increase in net receivables is observed, rising from 5,459 million USD in 2013 to 7,120 million USD in 2018. This growth suggests a larger portion of sales remained uncollected at the end of each fiscal year.

Receivables Turnover Efficiency

The receivables turnover ratio declined from 5.07 in 2013 to 4.27 in 2018. This persistent downward trend indicates a decrease in the velocity of cash inflows from customers and a potential lengthening of the average collection period.

Operating expenses exhibited volatility between 2013 and 2018. A significant peak was reached in 2014 at 21,108 million US$, followed by a decline to a period low of 17,129 million US$ in 2016. Subsequently, expenditures trended upward, reaching 19,769 million US$ by June 30, 2018.

Accounts Payable Trends

A consistent upward trajectory in accounts payable is observed from 2016 to 2018. The balance increased from 270 million US$ in 2016 to 406 million US$ in 2017, further rising to 443 million US$ in 2018. This represents a steady expansion of short-term liabilities owed to suppliers.

Payables Turnover Analysis

The payables turnover ratio experienced a sharp decline between 2016 and 2017, dropping from 63.44 to 43.78. This contraction indicates a deceleration in the frequency with which the company settled its accounts payable. The ratio remained relatively stable in 2018 at 44.63, suggesting a stabilization of the payment cycle and credit management strategy during the latter part of the period.

The analysis of short-term operating activity reveals a fluctuating relationship between working capital levels and revenue generation over the six-year period from 2013 to 2018.

Revenue Performance

Revenues exhibited volatility, reaching a peak of 31,867 million USD in 2014 before declining to a period low of 27,326 million USD in 2016. A recovery phase followed, with revenues increasing steadily to 30,400 million USD by June 30, 2018.

Working Capital Trends

Working capital experienced significant fluctuations, starting at 7,132 million USD in 2013 and ending at a peak of 11,089 million USD in 2018. A substantial increase was noted in 2015, where levels rose to 10,114 million USD, followed by a contraction in 2016 before trending upward again through 2018.

Working Capital Turnover Analysis

The working capital turnover ratio peaked in 2014 at 4.89, coinciding with the highest revenue levels and the lowest working capital requirements of the period. This indicates a period of maximum efficiency in utilizing short-term assets to generate sales. Conversely, the ratio entered a general decline following 2014, reaching its lowest point of 2.74 in 2018. This downward trajectory is attributed to the growth of working capital outstripping the growth in revenues during the final three years of the analyzed period.

The overall trend suggests a decrease in the efficiency of working capital utilization over time. Although revenues recovered toward 2018, the concurrent expansion of the working capital base resulted in a diminished turnover ratio, indicating that more working capital was required to support each dollar of revenue generated compared to the 2014 peak.

An analysis of short-term operating efficiency indicates a distinct shift in inventory management performance between the 2013–2015 period and the 2016–2018 period. A general trend toward slower inventory movement and reduced turnover efficiency is observed in the latter half of the analyzed timeframe.

Inventory Turnover Ratio

The inventory turnover ratio exhibited a peak in June 2014 at 6.83, representing the highest level of asset utilization within the observed period. Following this peak, a significant contraction occurred, with the ratio falling to 5.20 by June 2016. Although a moderate recovery to 5.73 was recorded in 2017, the ratio ultimately declined again to 5.39 by June 2018, indicating that inventory was turned over less frequently than in the early part of the period.

Average Inventory Processing Period

The processing period mirrors the turnover trend, showing an inverse relationship. Efficiency peaked in June 2014, with inventory processing taking an average of 53 days. A notable increase in the processing cycle began in 2016, where the duration extended to 70 days. Despite a temporary reduction to 64 days in 2017, the period increased to 68 days by June 2018. This trend demonstrates an overall extension of the time required to move inventory through the operating cycle.

An evaluation of short-term operating activity reveals a gradual decline in the efficiency of receivables management between 2013 and 2018. There is a clear inverse correlation between the turnover rate and the time required to collect outstanding payments, indicating that cash conversion from sales has slowed over the observed period.

Receivables Turnover

A steady downward trend is observed in the receivables turnover ratio, which declined from 5.07 in 2013 to 4.27 by 2018. This reduction indicates that the company is cycling through its accounts receivable less frequently, which may point to less stringent credit policies or slower payments from debtors.

Average Receivable Collection Period

The collection period increased from 72 days in 2013 to 85 days in 2018. A notable shift occurred between June 30, 2015, and June 30, 2016, when the period expanded from 74 days to 84 days. This jump suggests a structural change in payment terms or a decline in the quality of the receivables portfolio during that timeframe.

An analysis of the operating activity ratios indicates a general lengthening of the operating cycle over the observed six-year period, with a notable shift in operational efficiency occurring after June 30, 2015.

Average Inventory Processing Period

The duration required to process inventory remained relatively stable between 2013 and 2015, fluctuating within a narrow range of 53 to 58 days. A significant increase was observed in 2016, when the period rose to 70 days. Although a slight correction occurred in 2017 to 64 days, the period ended at 68 days in 2018, representing a general increase in the time assets remain in inventory compared to the baseline years.

Average Receivable Collection Period

A consistent upward trend is observed in the time required to collect outstanding receivables. The collection period increased steadily from 72 days in 2013 to 85 days in 2018. A marked escalation occurred between 2015 and 2016, where the period jumped from 74 days to 84 days, suggesting a decrease in the efficiency of credit collections or a strategic shift in payment terms granted to clients.

Operating Cycle

The total operating cycle expanded from 130 days in 2013 to 153 days in 2018. The most substantial expansion occurred in 2016, when the cycle reached 154 days. This overall extension of 23 days indicates a slower conversion of current assets into cash, which typically necessitates greater reliance on working capital management to maintain liquidity.

The analysis of short-term activity ratios reveals a shift in the company's payables management between 2016 and 2018. A notable transition occurred between the 2016 and 2017 fiscal years, characterized by a deceleration in the rate at which obligations to suppliers were settled.

Payables Turnover

The turnover ratio experienced a significant decline from 63.44 in 2016 to 43.78 in 2017, before stabilizing at 44.63 in 2018. This downward movement indicates a reduction in the frequency of payable settlements throughout the observed period.

Average Payables Payment Period

The average duration for settling payables increased from 6 days in 2016 to 8 days in 2017, remaining constant at 8 days in 2018. While this represents a slight increase in the time liabilities remain outstanding, the overall payment window remains exceptionally short.

The correlation between the decrease in the turnover ratio and the increase in the payment period reflects a slight extension of the credit period utilized by the company. However, the stability observed between 2017 and 2018 suggests that a consistent operational baseline for vendor payments has been established.

An analysis of the operating activity ratios indicates a general expansion of the cash conversion cycle over the observed period, driven primarily by increases in both inventory processing and receivable collection times, combined with a very short payables payment window.

Average Inventory Processing Period

The period remained relatively stable between 2013 and 2015, fluctuating between 53 and 58 days. However, a notable increase occurred in 2016, reaching 70 days. While there was a slight reduction to 64 days in 2017, the period ended at 68 days in 2018, suggesting a long-term shift toward slower inventory turnover compared to the 2013-2015 baseline.

Average Receivable Collection Period

A consistent upward trend in the time required to collect receivables is evident. The period grew from 72 days in 2013 to 85 days by 2018. A significant jump occurred between 2015 (74 days) and 2016 (84 days), after which the collection period remained elevated, indicating a decrease in the efficiency of credit recovery.

Average Payables Payment Period

For the years where information is available, the payables payment period is remarkably short, ranging from 6 to 8 days. This indicates a strategy or requirement of rapid settlement of obligations to suppliers, which provides minimal relief to the company's cash flow compared to the length of the collection and inventory cycles.

Cash Conversion Cycle

The overall cash conversion cycle is substantial, peaking at 148 days in 2016. Although a slight improvement was observed in 2017 with a decrease to 139 days, the cycle lengthened again to 145 days in 2018. The high duration of this cycle is a direct result of the disparity between the extended time required to sell inventory and collect receivables and the accelerated payment of liabilities.