Abbott Laboratories (NYSE:ABT)

Inventory Turnover

The inventory turnover ratio presents a general downward trend from 3.59 in March 2022 to a low of 2.62 in June 2023, followed by slight fluctuations around 2.7 until the end of 2024, when it increases to 3.02 but then drops slightly to 2.82 by March 2025. This suggests a modest reduction in the efficiency of inventory management over time with occasional improvements.

Receivables Turnover

The receivables turnover ratio increased steadily from 5.4 in March 2020, peaking at 7.03 in December 2021. Subsequently, it declined gradually to 5.78 by March 2025. This reflects an initial improvement in the speed of collecting receivables, followed by a recovery in collection periods indicating slower receivables turnover in the later periods.

Payables Turnover

The payables turnover ratio increased from 3.8 in March 2020 to a peak of 4.67 in December 2021. Thereafter, it generally stabilized around 4.4 to 4.5 through March 2025, indicating consistent payment practices and a relatively stable supplier payment schedule over the time frame.

Working Capital Turnover

The working capital turnover ratio remained relatively stable with minor fluctuations around the 4.0 mark, peaking at 4.83 in December 2023. The ratio showed some volatility but no clear upward or downward long-term trend, indicating consistent efficiency in using working capital to generate sales.

Average Inventory Processing Period

The average inventory processing period decreased from 122 days in March 2020 to a low of 102 days in March 2021, indicating faster inventory movement initially. After that, it gradually increased, reaching 139 days by June 2023 and remaining elevated near this level with some fluctuations, suggesting slower inventory turnover in later periods.

Average Receivable Collection Period

The average receivable collection period showed improvement from 68 days in March 2020 to 52 days in December 2021, signaling faster collections. However, from 2022 onward, the period increased again, reaching 63 days by March 2025, indicative of slower collections over the most recent periods.

Operating Cycle

The operating cycle shortened from 190 days in March 2020 to approximately 157 days by March 2021. Thereafter, the cycle generally increased again, peaking around 198 days in late 2023 and early 2024, followed by a reduction to 181 days before rising again. This suggests initial efficiency gains in the overall operating process followed by some reversal in subsequent years.

Average Payables Payment Period

The average payables payment period decreased from 96 days in March 2020 to 78 days in December 2021, indicating quicker payment to suppliers initially. Subsequently, the period exhibited moderate variability, maintaining a range mostly between 80 and 87 days through March 2025, signaling relatively stable payment terms with suppliers.

Cash Conversion Cycle

The cash conversion cycle improved (shortened) from 94 days in March 2020 to 70 days in March 2021, reflecting more efficient cash flow management. Following this, it lengthened substantially, reaching a peak of 114 days in several quarters between 2022 and 2024. The cycle then showed some fluctuations, closing at 111 days by March 2025, indicating less efficiency in converting resources back to cash over time.

Cost of Products Sold, Excluding Amortization of Intangible Assets

The cost of products sold exhibited fluctuations over the observed periods. Starting at 3,281 million USD in March 2020, the cost increased significantly to a peak of approximately 4,947 million USD by June 2021. This peak was followed by a decline and stabilization in late 2021 and early 2022, fluctuating between approximately 4,500 and 5,000 million USD. There was a slight decrease observed during the middle of 2023, with values around 4,300 to 4,600 million USD. Towards the end of the data series, in early 2025, the cost remained around 4,468 million USD. Overall, while there is volatility, the cost of goods sold appears to maintain a relatively high level compared to the initial period.

Inventories

Inventory levels showed a rising trend throughout the period. Beginning at approximately 4,568 million USD in March 2020, inventories increased steadily, reaching a maximum of about 6,871 million USD in June 2023. After this peak, inventories slightly decreased but remained elevated near 6,600 million USD through early 2025, with some minor fluctuations noted around 6,100 to 6,800 million USD. This persistent increase suggests a buildup of stock, possibly indicating strategic inventory management or changes in sales demand or supply chain conditions.

Inventory Turnover Ratio

The inventory turnover ratio, reported from December 2020 onward, started at 2.99 and rose to a high of 3.59 in December 2021, indicating improved efficiency in inventory management during that period. However, following this peak, the ratio gradually declined to around 2.62 to 2.77 during 2022 and much of 2023, suggesting a reduction in the frequency of inventory turnover. In late 2024 and early 2025, the ratio displayed some recovery, moving back towards approximately 2.82 to 3.02. The overall pattern reflects variability, with periods of enhanced turnover efficiency followed by slower inventory movement.

Summary of Trends and Insights

The relationship between rising inventories and fluctuating inventory turnover indicates a complex dynamic in inventory management and sales performance. Although costs of products sold remain high, inventory levels have steadily climbed, which may suggest either anticipation of increased sales, supply chain adjustments, or slower disappearance of inventory. The declining inventory turnover ratio during certain periods corresponds with increased inventory levels, implying potential overstocking or slower sales. The partial recovery of the turnover ratio towards the end of the timeline suggests some improvement in inventory efficiency. These patterns underscore the need for ongoing monitoring to optimize inventory control and cost management in alignment with sales activity.

The quarterly financial data reveals several noteworthy trends related to net sales, trade receivables, and receivables turnover ratios over the analyzed periods.

Net Sales

Net sales exhibited a generally fluctuating pattern across the quarters. Initially, there was a decline from 7,726 million US dollars in March 2020 to a low of 7,328 million in June 2020, followed by a significant increase to a peak of 11,468 million by December 2021. Subsequently, net sales showed a downward trend in 2022 and early 2023, dropping from 11,895 million in the first quarter of 2022 to a trough of 9,747 million in the first quarter of 2023. Afterward, the figures demonstrate stabilization with minor fluctuations, ending at 10,358 million in the first quarter of 2025.

Trade Receivables, Less Allowances

Trade receivables figures generally rose from 5,292 million in March 2020 to a high of 7,327 million in March 2025, indicating an overall upward trend. There were periodic declines and stabilizations; for example, after peaking at 7,199 million in June 2022, receivables decreased to 6,218 million by December 2022 before gradually increasing again. The pattern suggests fluctuating collection rates or changes in credit terms over time, with the highest levels recorded in the most recent periods.

Receivables Turnover Ratio

The receivables turnover ratio commenced at approximately 5.4 times (early 2020 data not fully available) and showed a strong rising trend to peak at 7.03 in the third quarter of 2022. Since then, the ratio has gradually declined to about 5.78 times by the first quarter of 2025. This ratio movement indicates that the company improved its efficiency in collecting receivables up to late 2022 but that collection speed has moderated somewhat in recent quarters.

In summary, net sales demonstrated notable volatility with a peak near the end of 2021 and some softening afterward. Trade receivables increased over the long term but saw intermittent decreases, suggesting evolving credit management or sales mix impacts. Receivables turnover increased substantially through 2022, implying enhanced collection effectiveness, before slightly decreasing into 2025, which may indicate a relaxation of collection efforts or changes in customer payment behaviors. These dynamics reflect a complex interplay between sales growth, credit policies, and cash collection performance during the analyzed timeframe.

The analysis of the quarterly financial data over the observed periods reveals several noteworthy trends and patterns, particularly relating to the cost of products sold, trade accounts payable, and the payables turnover ratio.

Cost of Products Sold

The cost of products sold, excluding amortization of intangible assets, exhibits some fluctuations over the quarters from March 31, 2020, to March 31, 2025. Initially, there is a noticeable increase from 3,281 million USD in Q1 2020 to a peak of 4,947 million USD in Q2 2021. This is followed by a general decline with some variability, dropping to 4,331 million USD at Q1 2023 and then fluctuating around the range of approximately 4,400 to 4,900 million USD in the subsequent periods. By March 31, 2025, the value slightly declines to 4,468 million USD, indicating some stabilization but no clear long-term upward or downward trend towards the end of the period.

Trade Accounts Payable

Trade accounts payable shows an overall increasing trend early in the timeline, rising from 3,181 million USD in Q1 2020 to a high of 4,757 million USD by Q1 2022. Thereafter, values display some volatility, moving between approximately 4,100 and 4,400 million USD in most quarters through to early 2025. The last reported figure at Q1 2025 stands at 4,214 million USD, which is lower than the peak but higher relative to the early years, reflecting a relatively stable but slightly elevated accounts payable balance over time.

Payables Turnover Ratio

The payables turnover ratio, available from Q4 2020 onward, generally remains stable with moderate oscillations. The ratio hovers mostly between 4.0 and 4.6 throughout the observed period, indicating consistent efficiency in managing payables. Peaks around 4.67 and troughs near 3.8 suggest minor fluctuations in the speed at which the company settles its obligations, but the overall trend does not show significant deterioration or improvement.

These patterns imply consistent operational practices with some sensitivity to market or internal factors affecting costs and payables. The near stabilization in the cost of products sold and trade accounts payable towards the later quarters may suggest adjustments aimed at aligning outflows and operational expenses more tightly, while maintaining a steady pace in settling payables as reflected in the payables turnover ratio.

The analysis of the quarterly financial data reveals several key trends and patterns over the observed periods.

Working Capital

Working capital exhibits a generally increasing trend from March 31, 2020, through December 31, 2021, rising steadily from 4,690 million USD to a peak of 11,134 million USD. However, after December 2021, a fluctuating downward tendency emerges, with values decreasing to 8,829 million USD by December 31, 2023. The working capital experiences some recovery phases afterward, with intermittent increases and decreases, finishing at 10,149 million USD by March 31, 2025. This pattern suggests initial growth and optimization followed by periods of capital adjustment or increased operational demands.

Net Sales

Net sales fluctuate over the quarters but maintain a relatively stable range between approximately 7,326 million USD and 11,895 million USD. The data indicate strong sales performance spikes in December quarters notably in 2020 and 2021, reaching over 10,700 million USD and 11,468 million USD respectively. However, sales exhibit a mild decline towards the end of 2022 and early 2023, before picking up slightly throughout 2023 and stabilizing near 10,000 million USD in early 2025. This suggests seasonal sales variation combined with a largely steady revenue base.

Working Capital Turnover

The working capital turnover ratio is available from December 31, 2020, onward and shows a mostly stable figure around the 4.0 mark, with minor variations each quarter. Ratios oscillate between approximately 3.6 and 4.8, which generally indicates consistent efficiency in utilizing working capital to generate sales. The highest observed turnover occurs in June 30, 2024, at 4.83, suggesting relatively better capital utilization during that period. Generally, the ratio's stability over multiple years implies steady operational management of capital in relation to sales.

Overall, the financial indicators reflect a company managing capital effectively, with moderate fluctuations in working capital and sales volume that correspond to typical business cycles and seasonal effects. The steadiness of the working capital turnover further reinforces the presence of consistent operational efficiency across the evaluated time span.

The inventory turnover ratio exhibits a fluctuating pattern over the observed periods. Initially recorded at 2.99 in March and June 2021, it demonstrates an increasing trend through the end of 2021, peaking at 3.59 in March 2022. Thereafter, a gradual decline is noted, reaching a low of 2.62 by September 2023. Toward the latest periods, the ratio shows some recovery, moving back above 2.65 and ending at 2.82 by March 2025.

Concurrently, the average inventory processing period inversely correlates with the turnover ratio trend. Starting at 122 days in early 2021, the period decreases steadily to a minimum of 102 days by March 2022, consistent with the peak in turnover. Following this, the processing period extends, reaching a maximum of 139 days in September 2023, coinciding with the lowest inventory turnover ratio observed. In the most recent quarters, the processing period contracts slightly once again, finishing at 130 days by March 2025.

Inventory Turnover Ratio

Shows initial growth from 2.99 to 3.59, indicating improved efficiency in inventory management up to early 2022.

Subsequent decline to 2.62 signals reduced turnover, suggesting slower inventory movement or accumulation.

Recent periods indicate a modest rebound, potentially reflecting efforts to stabilize inventory flow.

Average Inventory Processing Period

Declines from 122 to 102 days, reflecting faster inventory processing during the period when turnover ratio was rising.

Following the turnover peak, processing period lengthens to 139 days, indicating slower inventory clearance.

A slight decrease in days toward the end suggests some improvement in processing efficiency.

Overall, the data reveals a cyclical pattern in inventory management effectiveness, with periods of acceleration in inventory turnover followed by phases of deceleration. This dynamic indicates that inventory control and sales or production alignment undergo variability, which may warrant further investigation to optimize operational performance and capital utilization.

The receivables turnover ratio and the average receivable collection period provide insights into the company's efficiency in managing its accounts receivable over the observed periods.

Receivables Turnover Ratio

The receivables turnover ratio shows an initial increasing trend starting from 5.4 at March 31, 2021, rising steadily to a peak of 7.03 by December 31, 2022. This indicates an improvement in the frequency at which the company collects its receivables. However, following this peak, the ratio gradually declines, reaching 5.78 by March 31, 2025. This downward trend suggests a reduction in collection efficiency during the later periods.

Average Receivable Collection Period

The average receivable collection period exhibits an inverse movement to the turnover ratio, as expected. Initially, it improves from 68 days at March 31, 2021, down to a low of 52 days around December 31, 2022, reflecting faster collection of receivables. After this period, the collection period starts to lengthen again, rising back to 63 days by March 31, 2025. This lengthening indicates a slower collection process in the more recent quarters.

Overall Trend and Insights

Both metrics show an overall cycle with improving receivables management performance through 2022, followed by a gradual decline in effectiveness starting in 2023 and continuing through early 2025. This pattern could reflect changes in credit policies, customer payment behavior, or broader market conditions affecting the company's cash conversion cycle.

The financial data reveals several key trends in inventory management and receivables collection over the analyzed periods. The average inventory processing period demonstrates a generally fluctuating pattern with a moderate increase observed in recent quarters. Starting from 122 days in early 2020, it decreased to a low of 102 days by the first quarter of 2022 but then gradually increased again, reaching levels above 130 days in 2024, indicating a lengthening time for inventory turnover.

The average receivable collection period shows a somewhat more stable and slightly improving trend in the middle periods, decreasing from 68 days in early 2020 to around 52 days by the end of 2021. However, from 2022 onwards, the collection period shows a gradual increase and stabilization around 60 days, suggesting a slight delay or maintenance of the time needed to collect receivables in more recent quarters.

These two components combined influence the operating cycle, which measures the total time from inventory acquisition to cash collection. The operating cycle exhibits a downward trend from 190 days in early 2020 to a low near 157 days by early 2022, reflecting improved operational efficiency. Afterward, the cycle extended again, peaking near 198 days multiple times in 2023 and 2024, before a partial reduction to 181 days and slight rise to 193 days towards the end of the observed period.

Average Inventory Processing Period

Initially stable around 122 days, it improved to 102 days by early 2022 but later increased to around 130-139 days in 2023-2024, suggesting slower inventory turnover recently.

Average Receivable Collection Period

Decreased from 68 days to approximately 52 days by late 2021, indicating faster collections, then gradually increased and stabilized near 60 days in subsequent periods, reflecting some delays or stable performance in receivables management.

Operating Cycle

Showed a reduction from 190 days to about 157 days between 2020 and early 2022, demonstrating enhanced efficiency, followed by an increase to nearly 198 days during 2023-2024, indicating longer cash conversion cycles.

Overall, the data indicates improvements in inventory and receivables management leading up to early 2022, followed by signs of lengthening cycles in subsequent periods. These patterns suggest potential challenges in turnover and collection efficiencies in recent quarters, which may warrant further operational scrutiny.

Payables Turnover Ratio

The payables turnover ratio, first reported in March 2020 at 3.8, shows a general upward trend through the observed period ending in March 2025 at 4.44. This increase suggests improved efficiency in paying suppliers over time, as the company is turning over its payables more frequently. Notable fluctuations are evident, such as a peak at 4.67 in December 2022, followed by some minor declines and recoveries. Overall, the ratio maintains a range between approximately 3.8 and 4.67, indicating relative stability with gradual improvement in payables management.

Average Payables Payment Period

The average payables payment period exhibits an inverse pattern relative to the payables turnover ratio, starting at 96 days in March 2020 and declining to approximately 82 days by March 2025. This decrease reflects a tendency toward faster payment to suppliers, with some intermediate variability. The period reaches a low of 78 days in December 2021 and again moves between 80 and 88 days in subsequent quarters. Such variations indicate adjustments in payment terms or cash management strategies while maintaining a general trend toward reduced days payable.

Overall Analysis

The observed data from March 2020 to March 2025 reveals an improvement in the company's accounts payable efficiency. The increasing payables turnover ratio coupled with the decreasing average payment period confirms enhanced liquidity management, allowing the company to settle obligations more promptly. Fluctuations in both metrics suggest responsive adjustments to operational conditions or supplier negotiations, but the underlying trend indicates strengthened financial discipline regarding payables during the five-year span.

The financial data over the reported periods reveals noteworthy trends in the working capital management metrics. The analysis focuses on four key indicators: average inventory processing period, average receivable collection period, average payables payment period, and the cash conversion cycle.

Average Inventory Processing Period

The average inventory processing period initially showed a decreasing trend from 122 days in March 2021 to 102 days in March 2022, indicating an improvement in inventory turnover. However, from March 2022 onwards, there is a general increasing trend, reaching a peak of 139 days by June 2023, signaling a slowdown in inventory movement. This period then stabilizes with minor fluctuations, ending at 130 days in the latest quarter reported (March 2025).

Average Receivable Collection Period

This metric demonstrates a decreasing trend from 68 days in March 2021 to 52 days in December 2022, suggesting more efficient collection of receivables. Post this period, the days increase slightly, fluctuating between 53 and 63 days from March 2023 onward, indicating some variability but overall remaining relatively stable in the mid-50s to low-60s range through March 2025.

Average Payables Payment Period

The payables payment period declined from 96 days in March 2021 to 78 days by December 2022, showing that the company was paying suppliers more quickly during this time. Thereafter, the period oscillated without a clear trend, fluctuating roughly between 80 and 87 days through March 2025, indicating a somewhat stable payment pace with moderate variation.

Cash Conversion Cycle

Reflecting the combined effect of the above components, the cash conversion cycle decreased from 94 days in March 2021 to 70 days by March 2022, indicating improved efficiency in converting investments in inventory and receivables back into cash. However, from March 2022, there is a marked upward trend, with the cycle peaking at 118 days in December 2024, before falling slightly to 111 days in March 2025. This suggests a deterioration in overall working capital efficiency in the latter periods, primarily driven by lengthening inventory and receivable periods.

In summary, the company initially improved its working capital management by reducing inventory and receivable days and accelerating payments. However, subsequent periods reveal challenges with inventory management and collections, causing an extension in the cash conversion cycle and potential liquidity implications. Continuous monitoring and targeted management of inventory levels and receivables will be critical to sustaining operational efficiency.