Stock Analysis on Net

Vertex Pharmaceuticals Inc. (NASDAQ:VRTX)

$24.99

Analysis of Short-term (Operating) Activity Ratios

Microsoft Excel

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Short-term Activity Ratios (Summary)

Vertex Pharmaceuticals Inc., short-term (operating) activity ratios

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Turnover Ratios
Inventory turnover
Receivables turnover
Payables turnover
Working capital turnover
Average No. Days
Average inventory processing period
Add: Average receivable collection period
Operating cycle
Less: Average payables payment period
Cash conversion cycle

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).


Inventory Turnover
The inventory turnover ratio shows a consistent declining trend from 2.62 in 2020 to 1.27 in 2024. This decline suggests that inventory is being sold and replaced less frequently over time, indicating a potential slowdown in sales or increased inventory levels.
Receivables Turnover
Receivables turnover experienced a moderate decrease from 7.01 in 2020 to 6.19 in 2022, followed by a slight increase to 6.85 in 2024. This reflects a general stability in the efficiency of collecting receivables, with some improvement in the last two years.
Payables Turnover
There is a marked decline in payables turnover from 4.75 in 2020 to a low of 3.46 in 2023, then a slight recovery to 3.71 in 2024. This indicates a lengthening in payment periods to suppliers, implying extended credit terms or slower payments.
Working Capital Turnover
Working capital turnover remained relatively stable around 1.00 from 2020 to 2021 but dropped to 0.85 in 2022 and 0.93 in 2023, then sharply increased to 1.83 in 2024. This suggests a recent improvement in how effectively the company is using working capital to generate sales.
Average Inventory Processing Period
The average inventory processing period steadily increased from 139 days in 2020 to 287 days in 2024, aligning with the decrease in inventory turnover. This indicates inventory is held for longer durations before being sold.
Average Receivable Collection Period
The average receivable collection period rose from 52 days in 2020 to a peak of 59 days in 2022 but then declined to 53 days by 2024. This pattern suggests a temporary slowdown in collections that has since improved.
Operating Cycle
The operating cycle lengthened significantly from 191 days in 2020 to 340 days in 2024, driven largely by the extended inventory processing period and relatively stable receivable collection period. This lengthening indicates a slower conversion of raw materials and receivables into cash.
Average Payables Payment Period
This period increased from 77 days in 2020 to a peak of 106 days in 2023, before slightly decreasing to 98 days in 2024. The trend implies the company is taking longer to pay its suppliers, which may aid cash flow management but could also affect supplier relations.
Cash Conversion Cycle
The cash conversion cycle, after modest fluctuations, increased sharply from 114 days in 2020 to 242 days in 2024. This lengthening reflects the combined effect of slower inventory turnover and longer operating cycle, partially offset by extended payable periods. The increase indicates a slower overall conversion of investment in inventory and receivables into cash.

Turnover Ratios


Average No. Days


Inventory Turnover

Vertex Pharmaceuticals Inc., inventory turnover calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in thousands)
Cost of sales
Inventories
Short-term Activity Ratio
Inventory turnover1
Benchmarks
Inventory Turnover, Competitors2
AbbVie Inc.
Amgen Inc.
Bristol-Myers Squibb Co.
Danaher Corp.
Eli Lilly & Co.
Gilead Sciences Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
Regeneron Pharmaceuticals Inc.
Thermo Fisher Scientific Inc.
Inventory Turnover, Sector
Pharmaceuticals, Biotechnology & Life Sciences
Inventory Turnover, Industry
Health Care

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Inventory turnover = Cost of sales ÷ Inventories
= ÷ =

2 Click competitor name to see calculations.


Cost of Sales
The cost of sales exhibited a consistent upward trend over the five-year period. Starting at 736.3 million US dollars in 2020, it increased annually to reach 1.53 billion US dollars by 2024. This indicates a significant expansion in the company's production or procurement expenses.
Inventories
Inventories showed a marked increase throughout the years, rising from approximately 280.8 million US dollars in 2020 to 1.21 billion US dollars in 2024. This substantial growth suggests an accumulation of stock, possibly due to increased production or a strategic build-up of inventory.
Inventory Turnover
The inventory turnover ratio demonstrated a declining trend, dropping from 2.62 in 2020 to 1.27 in 2024. This reduction indicates that the company is turning over its inventory less frequently over time, which may reflect slower sales, increased inventory levels relative to sales, or changes in inventory management practices.
Overall Analysis
The combined trends indicate that while the cost of sales has been steadily rising, inventory levels have increased at a faster pace, leading to a declining efficiency in inventory turnover. This could imply that the company is facing challenges in managing inventory levels in relation to sales growth, which might have implications for working capital management and operational efficiency.

Receivables Turnover

Vertex Pharmaceuticals Inc., receivables turnover calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in thousands)
Revenues
Accounts receivable, net
Short-term Activity Ratio
Receivables turnover1
Benchmarks
Receivables Turnover, Competitors2
AbbVie Inc.
Amgen Inc.
Bristol-Myers Squibb Co.
Danaher Corp.
Eli Lilly & Co.
Gilead Sciences Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
Regeneron Pharmaceuticals Inc.
Thermo Fisher Scientific Inc.
Receivables Turnover, Sector
Pharmaceuticals, Biotechnology & Life Sciences
Receivables Turnover, Industry
Health Care

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Receivables turnover = Revenues ÷ Accounts receivable, net
= ÷ =

2 Click competitor name to see calculations.


Revenue Trends
Revenues exhibit a consistent upward trajectory over the five-year period, increasing from approximately $6.21 billion in 2020 to $11.02 billion in 2024. The growth trend is steady, with the most significant absolute increases observed between 2021-2022 and 2023-2024, indicating sustained business expansion and effective revenue generation strategies.
Accounts Receivable, Net
The net accounts receivable balance shows a continuous increase from $885 million in 2020 to roughly $1.61 billion in 2024. This rise parallels the revenue increase, suggesting that as sales grow, the company is extending more credit or experiencing longer collections periods. The growth in receivables is substantial but not disproportionate to the revenue growth, implying manageable credit exposure.
Receivables Turnover Ratio
The receivables turnover ratio declines from 7.01 in 2020 to a low of 6.19 in 2022, indicating a slowdown in the collection efficiency or longer time to convert receivables into cash during that period. However, there is a mild recovery in 2023 and 2024, with the ratio rising to 6.85 by the end of 2024. This suggests some improvement in collection effectiveness or credit policy adjustments in the later years.
Overall Insights
The data reflects robust revenue growth accompanied by rising receivables, which is typical for an expanding company. Despite the increasing receivables, the turnover ratio’s initial decline and subsequent partial recovery demonstrate fluctuations in collection efficiency but no alarming deterioration. Continual monitoring of receivables relative to revenues is recommended to ensure that credit management remains aligned with business growth.

Payables Turnover

Vertex Pharmaceuticals Inc., payables turnover calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in thousands)
Cost of sales
Accounts payable
Short-term Activity Ratio
Payables turnover1
Benchmarks
Payables Turnover, Competitors2
AbbVie Inc.
Amgen Inc.
Bristol-Myers Squibb Co.
Danaher Corp.
Eli Lilly & Co.
Gilead Sciences Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
Regeneron Pharmaceuticals Inc.
Thermo Fisher Scientific Inc.
Payables Turnover, Sector
Pharmaceuticals, Biotechnology & Life Sciences
Payables Turnover, Industry
Health Care

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Payables turnover = Cost of sales ÷ Accounts payable
= ÷ =

2 Click competitor name to see calculations.


An analysis of the annual financial data reveals notable trends in cost of sales, accounts payable, and payables turnover over the five-year period ending December 31, 2024.

Cost of Sales
The cost of sales shows a consistent upward trajectory throughout the period. Starting at $736.3 million in 2020, it increased each year, reaching $1.53 billion by the end of 2024. The increase represents more than doubling over the five years, indicating either growth in production volume, higher input costs, or an expansion in business operations.
Accounts Payable
Accounts payable also displays a steady rise, growing from approximately $155.1 million in 2020 to $413 million in 2024. This suggests an increasing reliance on credit from suppliers or delayed payments, possibly reflecting higher purchase volumes corresponding with the rise in cost of sales.
Payables Turnover Ratio
The payables turnover ratio has generally declined over the period, starting at 4.75 in 2020 and decreasing to 3.71 by 2024, with the lowest point being 3.46 in 2023. This decline indicates that the company is taking longer, on average, to pay its suppliers. The decrease in turnover ratio coupled with the increase in accounts payable suggests extended payment terms or slower payment cycles.

Working Capital Turnover

Vertex Pharmaceuticals Inc., working capital turnover calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in thousands)
Current assets
Less: Current liabilities
Working capital
 
Revenues
Short-term Activity Ratio
Working capital turnover1
Benchmarks
Working Capital Turnover, Competitors2
AbbVie Inc.
Amgen Inc.
Bristol-Myers Squibb Co.
Danaher Corp.
Eli Lilly & Co.
Gilead Sciences Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
Regeneron Pharmaceuticals Inc.
Thermo Fisher Scientific Inc.
Working Capital Turnover, Sector
Pharmaceuticals, Biotechnology & Life Sciences
Working Capital Turnover, Industry
Health Care

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Working capital turnover = Revenues ÷ Working capital
= ÷ =

2 Click competitor name to see calculations.


Working Capital
The working capital exhibited an increasing trend from 2020 through 2023, rising from 6,255,846 thousand US dollars in 2020 to a peak of 10,596,800 thousand US dollars in 2023. However, in 2024, a notable decline occurred, with working capital decreasing significantly to 6,031,800 thousand US dollars.
Revenues
Revenues showed a steady and consistent increase across the entire period analyzed. Revenues grew each year from 6,205,683 thousand US dollars in 2020 to 11,020,100 thousand US dollars in 2024, reflecting sustained growth in top-line performance over the five years.
Working Capital Turnover Ratio
The working capital turnover ratio was relatively stable around 1.0 for the years 2020 to 2021, with values of 0.99 and 1.02 respectively, indicating a consistent efficiency in using working capital to generate revenues. In 2022 and 2023, this ratio declined to 0.85 and 0.93 respectively, suggesting a reduction in efficiency. However, a sharp increase to 1.83 in 2024 indicates a considerable improvement in the utilization of working capital relative to revenues during that year.
Overall Analysis
The data highlights strong revenue growth throughout the period, supported by generally increasing working capital until 2023. The sudden decrease in working capital in 2024, combined with a substantial increase in working capital turnover ratio, suggests a more aggressive or efficient use of working capital in generating higher revenue. This could imply improved management of current assets and liabilities or a change in operational strategy resulting in better capital utilization in 2024. The drop in working capital in the last year contrasts with the steady revenue rise, showing a divergence between capital reserves and activity level.

Average Inventory Processing Period

Vertex Pharmaceuticals Inc., average inventory processing period calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data
Inventory turnover
Short-term Activity Ratio (no. days)
Average inventory processing period1
Benchmarks (no. days)
Average Inventory Processing Period, Competitors2
AbbVie Inc.
Amgen Inc.
Bristol-Myers Squibb Co.
Danaher Corp.
Eli Lilly & Co.
Gilead Sciences Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
Regeneron Pharmaceuticals Inc.
Thermo Fisher Scientific Inc.
Average Inventory Processing Period, Sector
Pharmaceuticals, Biotechnology & Life Sciences
Average Inventory Processing Period, Industry
Health Care

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ =

2 Click competitor name to see calculations.


The analysis of the inventory-related financial metrics over the five-year period reveals notable trends indicative of operational changes.

Inventory Turnover
The inventory turnover ratio shows a consistent decline from 2.62 in 2020 to 1.27 in 2024. This decrease suggests that the company is selling and replacing its inventory less frequently each year. A lowering turnover ratio may imply slower movement of goods or potential issues in inventory management, such as overstocking or reduced sales velocity.
Average Inventory Processing Period
Correspondingly, the average inventory processing period has increased substantially from 139 days in 2020 to 287 days in 2024. This metric effectively reflects the average time inventory remains in stock before being sold or used. The progressive lengthening of this period supports the observation of reduced inventory turnover and suggests growing inefficiency or longer holding periods for inventory.

The inverse relationship between these two metrics aligns with standard inventory management principles—the lower the turnover, the longer inventory is retained. The data indicates a gradual but significant extension in inventory holding time which could impact liquidity and increase holding costs. Such trends might warrant a review of inventory management practices and sales strategies to improve operational efficiency and optimize working capital utilization.


Average Receivable Collection Period

Vertex Pharmaceuticals Inc., average receivable collection period calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data
Receivables turnover
Short-term Activity Ratio (no. days)
Average receivable collection period1
Benchmarks (no. days)
Average Receivable Collection Period, Competitors2
AbbVie Inc.
Amgen Inc.
Bristol-Myers Squibb Co.
Danaher Corp.
Eli Lilly & Co.
Gilead Sciences Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
Regeneron Pharmaceuticals Inc.
Thermo Fisher Scientific Inc.
Average Receivable Collection Period, Sector
Pharmaceuticals, Biotechnology & Life Sciences
Average Receivable Collection Period, Industry
Health Care

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ =

2 Click competitor name to see calculations.


Receivables Turnover
The receivables turnover ratio demonstrates a declining trend from 7.01 in 2020 to a low of 6.19 in 2022, indicating a slowdown in the frequency with which receivables are collected. However, there is a noticeable improvement starting in 2023, with the ratio increasing to 6.31 and further to 6.85 by 2024. This suggests a recovery in the efficiency of collecting receivables after a period of deterioration.
Average Receivable Collection Period
Conversely, the average receivable collection period, measured in days, shows an inverse pattern relative to the receivables turnover. It steadily increases from 52 days in 2020 to a peak of 59 days in 2022, reflecting a lengthening time to collect receivables. Following this, there is a reduction to 58 days in 2023 and a more significant decline to 53 days by 2024, indicating an improvement in collection speed over the last two reported periods.
Overall Insights
The data suggests that the company experienced a deterioration in accounts receivable management efficiency between 2020 and 2022, marked by slower collections and lower turnover. Starting in 2023, operational improvements appear to have been implemented, resulting in enhanced turnover ratios and shorter collection periods by 2024. This positive shift could indicate strengthened credit policies, improved customer payment behavior, or more effective receivables management practices.

Operating Cycle

Vertex Pharmaceuticals Inc., operating cycle calculation, comparison to benchmarks

No. days

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data
Average inventory processing period
Average receivable collection period
Short-term Activity Ratio
Operating cycle1
Benchmarks
Operating Cycle, Competitors2
AbbVie Inc.
Amgen Inc.
Bristol-Myers Squibb Co.
Danaher Corp.
Eli Lilly & Co.
Gilead Sciences Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
Regeneron Pharmaceuticals Inc.
Thermo Fisher Scientific Inc.
Operating Cycle, Sector
Pharmaceuticals, Biotechnology & Life Sciences
Operating Cycle, Industry
Health Care

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= + =

2 Click competitor name to see calculations.


Average Inventory Processing Period
The average inventory processing period increased consistently over the five-year span. It rose from 139 days in 2020 to 287 days in 2024, more than doubling. This indicates a progressive elongation in the time taken to process inventory, suggesting potential challenges in inventory turnover or a strategic shift toward holding inventory for longer periods.
Average Receivable Collection Period
The average receivable collection period exhibited moderate fluctuations. It increased gradually from 52 days in 2020 to a peak of 59 days in 2022, then decreased slightly to 53 days by 2024. This relatively stable range indicates consistent credit and collection policies, with some temporary extension in receivables during the middle years.
Operating Cycle
The operating cycle showed a steady and significant increase over the period, rising from 191 days in 2020 to 340 days in 2024. Given that the operating cycle is the sum of the inventory processing and receivable collection periods, the substantial lengthening is largely driven by the increased inventory processing time. This trend signals a longer duration for the company to convert its resources into cash, which could impact liquidity management and operational efficiency.

Average Payables Payment Period

Vertex Pharmaceuticals Inc., average payables payment period calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data
Payables turnover
Short-term Activity Ratio (no. days)
Average payables payment period1
Benchmarks (no. days)
Average Payables Payment Period, Competitors2
AbbVie Inc.
Amgen Inc.
Bristol-Myers Squibb Co.
Danaher Corp.
Eli Lilly & Co.
Gilead Sciences Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
Regeneron Pharmaceuticals Inc.
Thermo Fisher Scientific Inc.
Average Payables Payment Period, Sector
Pharmaceuticals, Biotechnology & Life Sciences
Average Payables Payment Period, Industry
Health Care

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ =

2 Click competitor name to see calculations.


Payables Turnover
The payables turnover ratio shows a declining trend from 4.75 in 2020 to 3.46 in 2023, followed by a slight rebound to 3.71 in 2024. This indicates a general slowdown in the rate at which the company settles its payables over the period, suggesting that liabilities are being paid less frequently per year as time progresses, with a minor improvement in the final year.
Average Payables Payment Period
The average payables payment period has increased substantially from 77 days in 2020 to 106 days in 2023, before decreasing slightly to 98 days in 2024. This trend corroborates the declining payables turnover ratio and illustrates that the company is taking longer to pay off its suppliers, extending the payment period by nearly 30 days over the four-year span, with a slight reduction in 2024.
Overall Analysis
There is a consistent pattern of delayed payments to suppliers as reflected by the decreasing payables turnover and increasing payment period until 2023. The slight improvement in 2024 suggests a potential strategic adjustment to manage liabilities more promptly. These trends could impact relationships with suppliers and working capital management.

Cash Conversion Cycle

Vertex Pharmaceuticals Inc., cash conversion cycle calculation, comparison to benchmarks

No. days

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data
Average inventory processing period
Average receivable collection period
Average payables payment period
Short-term Activity Ratio
Cash conversion cycle1
Benchmarks
Cash Conversion Cycle, Competitors2
AbbVie Inc.
Amgen Inc.
Bristol-Myers Squibb Co.
Danaher Corp.
Eli Lilly & Co.
Gilead Sciences Inc.
Johnson & Johnson
Merck & Co. Inc.
Pfizer Inc.
Regeneron Pharmaceuticals Inc.
Thermo Fisher Scientific Inc.
Cash Conversion Cycle, Sector
Pharmaceuticals, Biotechnology & Life Sciences
Cash Conversion Cycle, Industry
Health Care

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 2024 Calculation
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= + =

2 Click competitor name to see calculations.


Average Inventory Processing Period
The average inventory processing period exhibits a consistent upward trend over the five-year span, increasing from 139 days in 2020 to 287 days in 2024. This nearly doubles the number of days required to process inventory, indicating a significant slowdown in inventory turnover. The most notable rise occurs between 2022 and 2024, suggesting potential challenges in inventory management or changes in operational efficiency during this period.
Average Receivable Collection Period
The average receivable collection period shows minor fluctuations but remains relatively stable overall. From 52 days in 2020, it gradually increased to 59 days by 2022, followed by a slight decline to 53 days in 2024. This pattern suggests generally consistent credit and collections policies with no major deterioration in the speed of receivables collection.
Average Payables Payment Period
The average payables payment period increases from 77 days in 2020 to a peak of 106 days in 2023, before declining to 98 days in 2024. This indicates that the company extended its payment terms or delayed payments to suppliers significantly over the first four years, but slightly reversed this trend in the last year. The extended payment period could be a strategy to manage cash outflows amid other operational challenges.
Cash Conversion Cycle
The cash conversion cycle exhibits considerable volatility, rising from 114 days in 2020 to 242 days in 2024. After a moderate peak in 2021 and a dip in 2022, it sharply increased in 2023 and 2024. This rising trend is primarily driven by the rapidly increasing inventory processing period, which outpaces improvements in receivables collection and changes in payables payment. The extension of the cash conversion cycle signals a longer time span between outlay of cash and cash recovery, potentially indicating increased working capital requirements and reduced liquidity efficiency.