AbbVie Inc. (NYSE:ABBV)

Inventory Turnover

The inventory turnover ratio demonstrates a declining trend over the observed periods. It began around 4.65 in early 2020 and increased slightly to a peak of 5.76 by the end of 2020. However, starting from 2021, the ratio gradually decreased, reaching approximately 3.42 by the first quarter of 2025. This indicates a slowdown in the rate at which inventory is sold and replaced over time.

Receivables Turnover

The receivables turnover ratio remained relatively stable with minor fluctuations. It oscillated between roughly 5.19 and 5.94 during 2020 and 2021 before gradually declining to a range of about 4.6 to 4.87 towards the first half of 2025. This suggests a slight decrease in the efficiency of collecting receivables over the periods.

Working Capital Turnover

Data for working capital turnover is only available for one period, recorded at 130.12. Due to lack of further data points, no trend analysis can be performed for this metric.

Average Inventory Processing Period

The average inventory processing period, expressed in days, exhibits an overall increasing trend. Starting from 79 days in early 2020, it declined to a low of 63 days near the end of 2020, indicating quicker inventory processing at that time. However, from 2021 onwards, the period progressively lengthened, reaching 107 days by the end of the first quarter of 2025, pointing to slower inventory turnover over time.

Average Receivable Collection Period

The average receivable collection period remained fairly steady initially, fluctuating around 60 to 70 days in 2020 and 2021. Subsequently, the period tended to increase, reaching approximately 79 days by early 2025. This indicates a gradual extension in the time taken to collect receivables over the analyzed timeframe.

Operating Cycle

The operating cycle, which combines inventory processing and receivables collection periods, exhibited a decreasing trend in 2020, dropping from 149 to 124 days. Following this, the cycle gradually lengthened, moving from 130 days in early 2021 to 186 days by the first quarter of 2025. This suggests increasing total time to turn inventory into cash, reflecting slower operational efficiency in the company's working capital management over time.

The cost of products sold exhibits noticeable fluctuations over the observed periods, with peaks and troughs that suggest variability in production or sales volume. Initially, there is a sharp increase from March 2020 to September 2020, reaching a high point above 5,000 million USD. This is followed by a decline toward early 2021. Mid-2023 and late 2023 mark significant spikes, with the cost peaking again near or above previous high levels. The most recent data points indicate a downward adjustment, though values remain elevated compared to early 2020 levels.

Inventories show an overall increasing trend throughout the periods, albeit with some oscillations. Starting below 2,000 million USD in early 2020, inventories rose markedly in mid-2020, subsequently decreasing in the following quarters but remaining consistently higher than the initial values. From late 2022 onward, inventory levels demonstrate a steady upward movement, reaching their highest values in the final quarters, surpassing 4,500 million USD. This suggests growing stock accumulation or slower turnover in recent periods.

The inventory turnover ratio, available from December 2020 onward, reveals a generally declining trend. It began at approximately 4.65 and increased modestly to peak near 5.76 in early 2021, indicating a period when inventories were converted to sales more rapidly. Following this peak, turnover ratios decline progressively over the subsequent periods, falling below 4.0 in the last few quarters observed. The downward trend in turnover implies a decreasing efficiency in managing or selling inventory, which could be associated with the increasing inventory levels documented.

Cost of products sold

Displays significant variation with notable peaks around September 2020 and late 2023, and a general elevation compared to early 2020 levels.

Inventories

Incremental increase over time with highest values recorded in late 2024 and early 2025, indicating accumulation of stock.

Inventory turnover ratio

Peaked in early 2021 but shows a gradual decline afterwards, suggesting reduced inventory movement efficiency.

Net Revenues

The net revenues exhibit a general upward trend with notable seasonal fluctuations across quarters. From March 2020 to December 2020, revenues increased steadily from approximately $8.6 billion to $13.9 billion. This upward momentum continued into 2021, peaking near $14.9 billion in the final quarter. A decline appears at the start of 2023 with revenues declining to approximately $12.2 billion in Q1 2023, followed by recovery in subsequent quarters reaching about $15.4 billion by mid-2025. This cyclical pattern suggests potential industry seasonality or external factors influencing quarterly performance. Overall, revenue growth appears positive over the five-year span despite intermittent dips.

Accounts Receivable, Net

Accounts receivable demonstrate a predominantly increasing trajectory over the period. Beginning at approximately $6.4 billion in Q1 2020, the balance rose steadily, crossing $11 billion in early 2022, and continuing to progress beyond $12 billion into 2025. The growth in receivables generally parallels the growth in net revenues, though receivables appear to accumulate at a higher relative pace during certain quarters, such as in early 2023 and mid-2025. This may indicate extended collection periods or changes in credit terms. Despite the increase, the company maintains a sizeable receivable balance consistent with its expanding revenue base.

Receivables Turnover Ratio

The receivables turnover ratio, available from Q4 2020 onwards, exhibits a declining trend. Initially reported at approximately 5.19, the ratio increased slightly in the following quarters reaching a peak near 5.94 but then commenced a gradual decline to figures around 4.6 to 4.8 by 2024–2025. A lower turnover ratio suggests that it is taking longer for the company to collect receivables relative to sales. This trend, combined with the increasing accounts receivable balances, may indicate potential easing of payment collection efficiency or strategic extension of credit to customers.

Overall Insights

The data indicates strong revenue growth accompanied by a parallel increase in receivables. However, the declining receivables turnover ratio signals a potential slowing in cash collection efficiency. While the company is expanding its sales, receivables management might require attention to mitigate liquidity risks. The seasonal and cyclical fluctuations in revenue also suggest the necessity for ongoing monitoring of market or operational factors influencing quarterly results. The interplay between increasing revenues, rising receivables, and decreasing turnover ratio warrants careful analysis to maintain financial stability.

Working Capital

Working capital exhibited significant volatility across the reported periods. Initially, there was a strong positive figure reported at the end of the first quarter of 2020, followed by multiple consecutive quarters featuring negative values, indicating potential liquidity challenges during those periods. Despite occasional recoveries where working capital returned to positive or near-neutral territory, the general trend shows a decline in working capital over time, reaching notably negative levels by the latter quarters ending in 2024 and 2025. This fluctuation suggests periodic strains in managing current assets and liabilities effectively.

Net Revenues

Net revenues generally showed a positive growth trajectory with intermittent fluctuations. The figures rose steadily from early 2020 through to late 2021, reflecting consistent revenue growth during this timeframe. However, there was a notable decline in revenue in early 2023, before revenues stabilized and resumed an upward trend in subsequent quarters through 2024 and into early 2025. The periodic decreases in revenue could be interpreted as market or operational challenges which were later mitigated, given the return to growth.

Working Capital Turnover

The working capital turnover ratio was only reported for one quarter, displaying a very high value early in the data set. The absence of further data limits the ability to analyze trends or confirm if turnover ratios sustained similar levels or declined. The single high figure might indicate efficient use of net working capital to generate net revenues during that specific period, but no ongoing pattern can be inferred.

Inventory Turnover Ratio

The inventory turnover ratio exhibits a fluctuating decline over the observed periods. Beginning at 4.65 in March 2020, it increased moderately to a peak of 5.76 by December 2020. After this peak, the ratio generally trended downward, falling to 3.42 by March 2025. This trend suggests a reduction in the frequency with which inventory is sold and replaced over time, potentially indicating slower inventory movement or increased inventory levels relative to sales.

Average Inventory Processing Period (Days)

The average inventory processing period shows an inverse pattern relative to the turnover ratio, as expected due to their mathematical relationship. Starting at 79 days in March 2020, it decreased to a low of 63 days by December 2020, coinciding with the peak inventory turnover. Following that, the days steadily increased, reaching 107 days by March 2025. This increase indicates that inventory is being held for a longer period before being processed or sold, which may imply slower sales cycles or excess inventory buildup.

Overall Inventory Management Insight

The observed data indicates a deterioration in inventory management efficiency over the period from early 2020 through early 2025. Initially, improvements led to faster inventory turnover and reduced holding periods up to late 2020. However, sustained declines in turnover and corresponding increases in processing days thereafter point to potential challenges in managing inventory levels relative to sales demand. This trend may warrant further investigation into sales performance, supply chain management, or market conditions influencing inventory dynamics.

Receivables Turnover Ratio

The receivables turnover ratio data begins from March 31, 2021. Initially, the ratio shows an upward trend, rising from 5.19 to a peak of 5.94 by December 31, 2020 (considering available data from March 2021 onwards, this peak occurs likely earlier in that timeline). After this peak, the ratio generally declines, dropping to 4.83 by September 30, 2023. There are minor fluctuations observed thereafter, with the ratio slightly increasing to 4.87 by December 31, 2023, followed by dips and modest recoveries through 2024. Overall, the ratio trends downward from its high point, ending near 4.62 by June 30, 2025.

Average Receivable Collection Period

The average receivable collection period inversely reflects the pattern of the receivables turnover ratio. Starting at 70 days in March and June 2020, the collection period shortens to 61 days by December 31, 2020, indicating more efficient collection during this period. However, following this, there is a trend towards lengthening collection periods, with days increasing to 76 by September 30, 2023, which suggests a decline in collection efficiency. The collection period then stabilizes around the mid-70s to high 70s days range through mid-2025, with a minor improvement to 71 days by March 31, 2025, but rising again to 79 days by June 30, 2025.

Interpretation and Insights

The initial improvement in receivables turnover ratio and reduction in collection days during 2020 indicates enhanced operational efficiency in receivable management. However, the subsequent and persistent decline in turnover ratio coupled with increasing collection days from 2021 onward may reflect challenges in maintaining this efficiency over time. This could be due to several factors, such as lenient credit policies, slower customer payments, or changes in the sales mix. The fluctuations and eventual stabilization in collection days near higher levels highlight a potential area of concern in working capital management, signaling the need for operational focus to improve or maintain receivable collection.

Average inventory processing period

The average inventory processing period shows a general upward trend over the analyzed quarters. Starting from 79 days in the first recorded quarter, it decreases slightly to the mid-60s by the end of 2020 but then progressively rises. Throughout 2022 and 2023, the period fluctuates mostly between the mid-70s and low 80s, before increasing more sharply toward the end of the dataset, reaching 107 days by the last quarter of 2025. This indicates a slowdown in inventory turnover over time, suggesting either longer holding times for inventory or slower sales fulfillment.

Average receivable collection period

The average receivable collection period remains relatively stable with moderate fluctuations around 70 days. Initially, it holds steady at 70 days but dips to a low of 61 days by the end of 2020. Subsequently, the period generally trends upward, peaking at 80 days in mid-2024, before declining slightly to 75-79 days towards the end of the timeframe. This pattern reflects some variability in customer payment behaviors but no drastic changes in credit policy or collections efficiency.

Operating cycle

The operating cycle exhibits an increasing trend over the reported range. It starts from 149 days early in the data and decreases gradually to around 124 days by the end of 2020. Afterward, the cycle lengthens steadily, reaching 186 days by the final quarter of the dataset. This increase corresponds with the combined effect of longer inventory processing times and slightly extended receivable collection periods. The elongation of the operating cycle may point to a lengthening of the cash conversion cycle, possibly impacting working capital requirements and liquidity.