AT&T Inc. (NYSE:T)

The financial ratios and related metrics for the analyzed periods reveal significant dynamics in the management of inventory, receivables, and payables, impacting the overall operating and cash conversion cycles.

Inventory Turnover

The inventory turnover ratio shows volatility over the observed periods. Starting at 21.63 in 2020, it peaked at 23.04 in 2021, then dropped sharply to 16.28 in 2022 before recovering to around 23.02 in 2023 and slightly declining to 21.68 in 2024. This indicates fluctuations in how efficiently inventory was sold and replaced, with a notable slowdown in 2022 followed by a return to higher turnover rates.

Receivables Turnover

There is a clear upward trend in receivables turnover from 8.5 in 2020 to 12.69 in 2024, implying an improvement in the company's efficiency in collecting receivables. This increasing turnover corresponds with a decreasing average receivable collection period, which fell steadily from 43 days in 2020 to 29 days in 2024, reflecting faster cash inflows from credit sales.

Payables Turnover

The payables turnover ratio shows a declining trend after 2021, decreasing from 2.59 to 1.79 by 2024, with a significant dip in 2022. Correspondingly, the average payables payment period expanded from 145 days in 2020 to a high of 223 days in 2022, before slightly reducing but remaining elevated at 203 days in 2024. This suggests longer delays in settling payables, which could be a strategy to preserve cash or a reflection of supplier payment terms.

Operating Cycle

The operating cycle decreased overall, from 60 days in 2020 to 46 days in 2024, with some fluctuation in between. The decline indicates an improvement in the combined duration of inventory processing and receivable collection periods, contributing to a shorter time interval from inventory acquisition to cash collection.

Cash Conversion Cycle

The cash conversion cycle is negative across all periods and shows a marked intensification, dropping from -85 days in 2020 to -157 days in 2024. This increasingly negative cash conversion cycle is driven by the extended payables payment period relative to the operating cycle, denoting that the company is able to delay cash outflows longer than it takes to convert inventory and receivables into cash. This dynamic can improve liquidity and working capital management.

Average Inventory Processing Period

This measure varies inversely with inventory turnover, rising to 22 days in 2022 from 16-17 days in other years, consistent with the temporary decline in inventory turnover that year. It then returns close to earlier levels, indicating the time inventory remains in stock before being sold fluctuated but stabilized towards the end of the period.

Overall, the company exhibits improvements in receivables management and maintains a highly efficient working capital system, as evidenced by shortening operating and receivable collection cycles combined with lengthening payable periods. The significantly negative and increasingly negative cash conversion cycle suggests strong liquidity management, allowing the company to use supplier financing effectively. However, the variability in inventory turnover and processing periods indicates areas where inventory management faced challenges, particularly in 2022.

Cost of Revenues

The cost of revenues displayed a decreasing trend over the five-year period. Starting at 79,920 million USD in 2020, it remained nearly stable in 2021 at 79,807 million USD but then dropped significantly in 2022 to 50,848 million USD. This lower level persisted through 2023 and 2024, with slight decreases to 50,123 and 49,221 million USD respectively. The marked reduction beginning in 2022 suggests significant changes in operating scale, pricing strategies, or cost management initiatives that effectively lowered the cost of goods sold or services rendered.

Inventories

Inventories demonstrated a consistent downward trend from 2020 to 2023, starting at 3,695 million USD and declining to 2,177 million USD. This downward movement indicates a reduction in stock held, potentially reflecting either improved inventory management or decreased demand levels requiring lower stock holdings. In 2024, there was a modest increase to 2,270 million USD, which may indicate a slight buildup of inventory possibly in anticipation of increased sales or supply chain adjustments.

Inventory Turnover

The inventory turnover ratio shows a fluctuating pattern. It started at 21.63 in 2020 and increased to 23.04 in 2021, indicating improved efficiency in managing inventory relative to sales. However, in 2022, there was a notable decline to 16.28, suggesting slower movement of inventory or increased holding periods. The ratio then rebounded in 2023 to 23.02 and slightly declined to 21.68 in 2024, returning closer to earlier levels of inventory management efficiency. These fluctuations may relate to changes in inventory levels, cost of revenues, or operational strategies affecting turnover speed.

The annual financial data display several notable trends over the periods analyzed.

Operating Revenues

Operating revenues exhibit a declining trend from 2020 to 2024. Starting at $171,760 million in 2020, revenues decreased slightly to $168,864 million in 2021. A more pronounced decline is observed in 2022, with revenues dropping to $120,741 million. Revenues then show marginal increases in 2023 ($122,428 million) and 2024 ($122,336 million), although these remain significantly below the 2020 and 2021 levels. This pattern suggests a substantial reduction in revenue generation after 2021, with a plateauing effect in the most recent years.

Accounts Receivable, Net

Accounts receivable, net of allowance for credit losses, demonstrate a continuous decrease across the time horizon. From $20,215 million in 2020, the balance declines steadily to $9,638 million by the end of 2024. This downward movement could be indicative of improving collections or a reduction in credit sales, aligning with the reduction in overall operating revenues.

Receivables Turnover

Receivables turnover exhibits a consistent upward trajectory, rising from 8.5 in 2020 to 12.69 in 2024. This increase signifies an improvement in the efficiency with which receivables are collected, with the company turning over its receivables more frequently each year. The trend corresponds with the decline in accounts receivable balances and may suggest enhanced credit management practices or tighter credit terms.

In summary, the financial data reveal decreasing operating revenues accompanied by a reduction in accounts receivable balances and a notable increase in receivables turnover. These combined trends suggest that while the company has faced declining revenues, it has simultaneously improved its receivables management efficiency over the analyzed periods.

Cost of Revenues

The cost of revenues shows a notable downward trend over the five-year period. Starting from approximately $79.92 billion in 2020, it remained almost stable in 2021 before experiencing a significant decline in 2022, continuing to decrease through 2023 and 2024 to about $49.22 billion. This reduction may indicate effective cost management, changes in business scale, or shifts in revenue recognition.

Accounts Payable

Accounts payable exhibit a fluctuating yet overall declining pattern. Values start at $31.84 billion in 2020, decrease slightly in 2021, rise marginally in 2022, then fall sharply in 2023, and stabilize around $27.43 billion in 2024. This fluctuation could reflect changes in supplier payment strategies or adjustments in procurement and credit terms with vendors.

Payables Turnover Ratio

The payables turnover ratio displays considerable variability. It increased slightly from 2.51 in 2020 to 2.59 in 2021, then declined sharply to 1.63 in 2022, followed by a moderate recovery to 1.84 in 2023 and a slight decrease to 1.79 in 2024. The lower turnover ratios from 2022 onward may suggest longer payment periods taken by the company or a reduced pace in settling payables relative to cost of revenues, which aligns with the reduction observed in cost of revenues during this period.

Working capital

The working capital figures show a persistently negative value over the five-year period, indicating that current liabilities consistently exceed current assets. The negative working capital increased significantly from -11,430 million USD in 2020 to a peak negative value of -25,591 million USD in 2021. Following this peak, there was an improvement in 2022 and 2023, with working capital becoming less negative at -23,065 million USD and -14,669 million USD, respectively. However, in 2024, the negative working capital slightly worsened again to -15,704 million USD compared to the previous year. Overall, the trend suggests considerable liquidity pressure with some improvement after 2021 but remaining in a challenging negative range.

Operating revenues

Operating revenues demonstrated a declining trend during the period. In 2020, revenues were 171,760 million USD and slightly decreased to 168,864 million USD in 2021. A more notable drop occurred in 2022, when revenues decreased sharply to 120,741 million USD, representing a decline of approximately 29% from the previous year. From 2022 through 2024, operating revenues stabilized around the 122,000 million USD mark, with minor fluctuations: 122,428 million USD in 2023 and 122,336 million USD in 2024. This decline and subsequent stabilization may indicate structural changes in the revenue base or the impact of asset disposals or other business transformations.

Working capital turnover

Data for working capital turnover is not provided, therefore no analysis can be performed on this metric.

Inventory Turnover

The inventory turnover ratio displays notable fluctuations across the observed periods. After beginning at 21.63 in 2020, it increased to 23.04 in 2021, indicating improved efficiency in managing and selling inventory. However, in 2022, the ratio declined significantly to 16.28, suggesting a slowdown in inventory movement or an accumulation of stock relative to sales. This decline was reversed in 2023 when the ratio rebounded to 23.02, almost reaching its peak value. In 2024, a slight decrease to 21.68 was observed, yet the figure remained relatively high compared to the initial year.

Average Inventory Processing Period

The average inventory processing period inversely mirrors the trends observed in inventory turnover. The period shortened from 17 days in 2020 to 16 days in 2021, indicating faster inventory turnover. In contrast, 2022 saw a lengthening of the processing period to 22 days, corresponding with the decline in turnover for the same year. The processing period then decreased back to 16 days in 2023, reinforcing the recovery in inventory efficiency. In 2024, the period slightly increased to 17 days, aligning with the minor drop in inventory turnover for that year.

Overall Insights

The data reflects a cycle of efficiency gains followed by a temporary decline and subsequent recovery in inventory management over the analyzed timeframe. The significant dip in 2022 could indicate operational challenges or shifts in demand, which were largely addressed by the next year. The relatively consistent values in 2023 and 2024 suggest stabilization in inventory practices. Monitoring these metrics will be crucial to sustaining operational efficiency and responding proactively to market conditions.

Receivables Turnover

The receivables turnover ratio exhibits a steady upward trend over the five-year period. Starting at 8.5 in 2020, it increases consistently each year, reaching 12.69 by 2024. This suggests an improvement in the efficiency of collecting receivables, indicating that the company is converting its credit sales into cash at an increasingly faster rate over time.

Average Receivable Collection Period

Conversely, the average receivable collection period shows a clear downward trend. From 43 days in 2020, the period decreases progressively every year, dropping to 29 days by 2024. This reduction aligns with the rising receivables turnover and implies that the company is reducing the time it takes to collect payments from its customers, enhancing liquidity and cash flow management.

Overall Insights

The simultaneous increase in receivables turnover and decrease in the collection period indicate a strengthening in the company's credit and collection policies. This pattern reflects positively on the company’s operational efficiency, demonstrating better management of working capital and potentially lowering the risk of bad debts. Continued monitoring of these trends will be important to ensure sustained financial health.

Average Inventory Processing Period

The average inventory processing period fluctuated over the observed years. It started at 17 days in 2020, then decreased slightly to 16 days in 2021. A notable increase occurred in 2022, rising to 22 days, followed by a return to 16 days in 2023 and a slight increase to 17 days in 2024. This pattern indicates variability in inventory management efficiency, with a peak duration in 2022 before normalizing closer to previous levels.

Average Receivable Collection Period

This period demonstrates a consistent downward trend, improving steadily each year. Beginning at 43 days in 2020, it decreased to 38 days in 2021, 35 days in 2022, 31 days in 2023, and reached 29 days in 2024. The continuous reduction suggests enhanced effectiveness in collecting receivables, contributing positively to cash flow management.

Operating Cycle

The operating cycle shows an overall improvement with some variation. It started at 60 days in 2020 and declined to 54 days in 2021. A slight increase to 57 days occurred in 2022, followed by more significant reductions to 47 days in 2023 and 46 days in 2024. The decreasing trend reflects enhanced operational efficiency by reducing the total time span between inventory acquisition and cash collection.

The analysis of the provided financial ratios indicates a significant change in the company's payables management over the five-year period from 2020 to 2024.

Payables Turnover

The payables turnover ratio exhibits a downward trend from 2.51 in 2020 to a low of 1.63 in 2022, followed by a modest recovery to 1.79 by 2024. This decline suggests that the company has been turning over its payables at a slower rate over time, which may imply a lengthening in the time taken to settle short-term liabilities.

Average Payables Payment Period

The average payables payment period, expressed in number of days, shows a consistent increase from 145 days in 2020 to a peak of 223 days in 2022. Although there is a slight reduction to 199 days in 2023, the period increases again to 203 days in 2024. This pattern indicates that the company is taking progressively more time to pay its suppliers, which corresponds inversely with the decline in the payables turnover ratio.

Overall, these trends suggest a strategic or operational shift toward lengthening accounts payable terms or a possible cash flow management approach aimed at extending the payment period to suppliers. The peak in delayed payment timing occurs around 2022, with minor improvements afterward; however, the levels remain significantly higher than at the start of the period.

Average Inventory Processing Period

The average inventory processing period demonstrated minor fluctuations over the five-year span. Starting at 17 days in 2020, it decreased slightly to 16 days in 2021, then increased to 22 days in 2022, followed by a reduction back to 16 days in 2023, and a slight rise to 17 days in 2024. Overall, the period remained relatively stable with a notable increase observed in 2022 before returning to near initial levels in subsequent years.

Average Receivable Collection Period

The average receivable collection period exhibited a consistent downward trend from 2020 to 2024. It decreased steadily from 43 days in 2020 to 29 days in 2024. This indicates an improvement in the efficiency of collecting receivables, suggesting enhanced cash flow management through faster customer payments over the analyzed period.

Average Payables Payment Period

The average payables payment period showed significant variability and an overall increasing trend. It started at 145 days in 2020, slightly decreased to 141 days in 2021, then experienced a sharp increase to 223 days in 2022. Subsequently, it declined to 199 days in 2023 and rose slightly again to 203 days in 2024. This pattern suggests the company extended its payment terms substantially beginning in 2022, potentially managing cash outflows more conservatively during this period.

Cash Conversion Cycle

The cash conversion cycle remained negative throughout the period, indicating that the company collects cash from sales faster than it pays its suppliers. The cycle was -85 days in 2020, improved slightly to -87 days in 2021, then dramatically decreased to -166 days in 2022, reflecting a much quicker conversion of resources into cash. This trend slightly reversed to -152 days in 2023 and significantly stabilized at -157 days in 2024. The negative and increasingly large absolute values in the cash conversion cycle indicate efficient working capital management, particularly a faster receivables collection combined with delayed payables payment.