Abbott Laboratories (NYSE:ABT)

The analysis of financial activity ratios over the reported periods indicates a variety of trends in operational efficiency and working capital management.

Inventory Turnover

The inventory turnover ratio shows fluctuations within a moderate range, generally trending downward from early 2023 before a mild recovery near the end of the period. The ratio decreased from about 3.59 to near 2.88 over the span, suggesting a slower rate of inventory turnover, which could imply increased inventory levels or slower sales during certain quarters.

Receivables Turnover

Receivables turnover displayed a slight decline over time, dropping from over 7.0 in late 2021-early 2022 to approximately 5.39 by late 2025. This decline suggests a lengthening in the time taken to collect receivables, potentially reflecting extended credit terms or collection challenges.

Payables Turnover

Payables turnover remained relatively stable with mild variability, moving between roughly 3.97 and 4.69. There is no marked trend, indicating consistent payment practices to suppliers over the periods assessed.

Working Capital Turnover

The working capital turnover ratio exhibited moderate variation, peaking near 4.83 at some mid-periods but generally fluctuating around a mean slightly above 4.0. The trend suggests relatively steady efficiency in utilizing working capital to generate revenue, with some quarters showing stronger performance than others.

Average Inventory Processing Period

The average inventory processing period generally increased from around 102 days to about 127 days at the end of the timeline, indicating a lengthening of the time inventory remains on hand before sale. This may correspond with the declining inventory turnover noted earlier, suggesting slower movement of inventory through the supply chain.

Average Receivable Collection Period

There is a noticeable increase in the collection period, from about 52-55 days early on to close to 68 days in the final periods. This aligns with the decreasing receivables turnover rate, highlighting potential concerns regarding credit management and cash inflows.

Operating Cycle

The operating cycle, combining inventory and receivables periods, lengthened slightly over time, rising from approximately 157 days to near 195 days. This upward trend indicates the overall process from inventory procurement to cash collection is requiring more time, which could impact liquidity.

Average Payables Payment Period

Average payment period to suppliers remained relatively stable, fluctuating mostly between 78 and 92 days. This consistency suggests steady supplier payment policies without significant strategic extension or shortening of payables terms.

Cash Conversion Cycle

The cash conversion cycle exhibited a general increase, particularly in 2023 and onward, rising from about 70 days to values exceeding 110 days. This indicates a lengthening in the duration between outlay of cash to suppliers and collection of cash from customers, reflecting a potential stress in cash flow cycles which may warrant closer attention.

In summary, the company shows signs of a gradual slowdown in inventory turnover and receivables collection, causing an elongated operating and cash conversion cycle. Payables management remains stable, indicating possible efforts to maintain supplier relations consistently. The lengthening cash conversion cycle points to a potential need for enhanced working capital management to ensure healthy cash flow levels in the future.

The cost of products sold, excluding amortization of intangible assets, exhibits fluctuations over the observed periods. Initially, there is a slight increase from the first to the second quarter of 2021, followed by a general decline into early 2023. Thereafter, the cost tends to rise again, reaching notable peaks in the mid to late 2025 period. This pattern indicates variability in production or procurement expenses, possibly reflecting changes in sales volume, input costs, or operational adjustments.

Inventories show a general upward trend throughout the timeline, increasing from just over 5,300 million in early 2021 to levels around 6,700 million by early 2025. Despite some short-term decreases, the inventory balance remains elevated, which may suggest strategic stockpiling, supply chain considerations, or preparation for anticipated demand growth.

The inventory turnover ratio reveals variability that aligns inversely with the changes in inventory levels. Initially, the turnover ratio increases from 2.99 to 3.59 between early 2021 and late 2021, indicating faster movement of inventory relative to cost of goods sold. This ratio then trends downward through 2023 and into 2024, reflecting slower inventory movement despite rising inventory balances. There is a slight recovery toward the end of the observed period, but the turnover remains below early 2021 levels. This decline in inventory turnover suggests a potential buildup of stock relative to sales or production costs, which could impact liquidity and operational efficiency.

Cost of Products Sold

Displayed fluctuating values with an increase in mid-2025, indicating variable production costs or sales volume changes.

Inventories

Showed a consistent upward trend, implying accumulation of stock possibly for demand anticipation or supply chain management.

Inventory Turnover Ratio

Peaked at the end of 2021, then declined into 2024, demonstrating slower inventory movement relative to cost of goods sold, with a minor improvement thereafter.

Net Sales

Net sales exhibited fluctuations over the analyzed periods. Starting at 10,456 million USD in March 2021, sales showed growth reaching a peak of 11,895 million USD in March 2022. Following this peak, there was a decline through the rest of 2022, dropping to 10,091 million USD by December 2022. In 2023, sales initially decreased slightly but then gradually recovered toward the end of the year, reaching 10,241 million USD. The trend in 2024 revealed moderate growth again, increasing from 9,964 million USD in March to 10,974 million USD by December. Early 2025 numbers continued this upward trajectory, with sales at 11,369 million USD by September. Overall, net sales exhibit a cyclical pattern with periods of growth followed by declines but show a tendency to recover and grow in the medium term.

Trade Receivables, Less Allowances

Trade receivables followed a Generally increasing trend during the period. Beginning at 6,096 million USD in March 2021, receivables showed steady growth to 7,179 million USD by March 2022. After experiencing a slight dip in the following quarters of 2022, they resumed an upward trend through 2023 and 2024, reaching 7,051 million USD by December 2024. The upward path continued into 2025, culminating at 8,138 million USD by September. This progressive increase in trade receivables suggests an expansion in credit sales or potentially longer collection periods.

Receivables Turnover Ratio

The receivables turnover ratio, an indicator of how efficiently the company collects its receivables, showed notable variation. The ratio was relatively stable but showed a slight decline after a peak around September and December 2021, moving from about 6.6 down to a low of 5.39 by September 2025. The gradual reduction in the turnover ratio suggests that receivables were being collected at a slower pace over time. This trend aligns with the increasing trade receivables balance, indicating that outstanding receivables are accumulating faster than collections.

Summary Insights

The financial data indicates that while net sales have experienced some volatility, they generally trend upward over the longer term. Trade receivables have increased steadily throughout the periods, consistent with expanding sales but also indicating growing credit extended to customers. The declining receivables turnover ratio highlights a potential area for attention, as slower collection could impact cash flow. Monitoring and managing receivables collection efficiency could be important to support sustainable sales growth going forward.

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

Cost of products sold, excluding amortization of intangible assets

The cost of products sold demonstrates some fluctuations but generally remains within a range of approximately US$4,300 million to US$5,000 million. Initially, there is an increase from US$4,401 million in March 2021 to a peak around June 2022 at about US$4,933 million. Subsequently, the values tend to oscillate without a clear upward or downward trend, though the highest values are observed again in mid and late 2025, reaching up to US$5,075 million. This suggests periods of rising costs interspersed with intervals of relative stability or slight decline.

Trade accounts payable

Trade accounts payable shows a variable pattern between approximately US$3,961 million and US$4,757 million. Early periods exhibit relatively high levels, peaking near March 2022. This is followed by some declines and intermittent recoveries. The data suggests fluctuations in payables that do not strictly follow the cost of products sold. For example, the peak in payables in March 2022 does not continuously sustain, with values falling and rising irregularly through subsequent quarters. By late 2025, payables appear to hover closer to the mid-range observed over the entire period.

Payables turnover ratio

The payables turnover ratio generally fluctuates between approximately 3.97 and 4.69. It shows periods of increase and decrease without a strong directional trend but remains relatively stable, indicating consistent management of payables relative to the cost of products sold. The turnover ratio peaks near the early quarters of the dataset and again somewhat in late 2025, suggesting moments when payables are paid off at a faster rate, possibly reflecting better liquidity or strategic payment timing. The ratio’s relative stability indicates that despite fluctuations in cost and payables, the company's efficiency in managing payables remains consistent over time.

Overall, the data reflects a cyclical pattern in both costs and payables with no pronounced long-term trend either upward or downward in the short-to-medium term. The steadiness of the payables turnover ratio amidst this volatility indicates effective working capital management. The variations in cost of products sold and trade payables likely respond to operational cycles, market conditions, or strategic purchasing and payment policies.

Working Capital

Working capital exhibits fluctuations over the analyzed periods, starting at 9,355 million US dollars in March 2021 and generally increasing until a peak of 12,564 million in June 2022. After this peak, it shows a downward trend through December 2022, then fluctuates moderately around the 9,000 to 10,000 million range between 2023 and 2025. The lowest points are observed near the end of 2023 and the beginning of 2024, followed by some recovery later in 2024 and 2025.

Net Sales

Net sales demonstrate a somewhat cyclical pattern with variations each quarter but an overall upward trend from 10,456 million in March 2021 to 11,369 million in September 2025. Initial growth is observed through early 2022 reaching nearly 11,895 million, followed by a decline in the second half of 2022. A gradual recovery and increase ensue through 2023 and into 2024, maintaining sales consistently above 10,000 million. Late 2024 and 2025 periods show improved sales figures, peaking near 11,369 million.

Working Capital Turnover Ratio

The working capital turnover ratio, representing sales generated per unit of working capital, fluctuates between approximately 3.6 and 4.8 over the periods. It begins around 4.0 in early 2021, fluctuating moderately before peaking at 4.83 in March 2024. The ratio suggests periods of increasing efficiency in generating sales from working capital, particularly notable around late 2022, early 2024, and mid-2024. However, there are periods of decline, especially after mid-2024, where the ratio drops closer to 3.9 before rising again near 4.3 by late 2025.

Summary

The financial data reveals an overall stable but dynamic relationship between working capital and net sales across the period. Working capital shows moderate volatility, with peaks in mid-2022 and lows in early 2024, indicating fluctuations in liquidity and operational investment. Meanwhile, net sales exhibit an overall upward trajectory with some seasonal or cyclical dips, indicating growth in revenue generation capacity. The working capital turnover ratio reflects these dynamics, showing periods of improved operational efficiency when sales growth outpaces working capital changes and vice versa. In conclusion, the measured periods reflect careful management of working capital supporting consistent sales performance and efficiency improvements at various intervals.

Inventory Turnover Ratio

The inventory turnover ratio exhibits notable fluctuations over the observed periods. Initially, the ratio increased steadily from 2.99 to a peak of 3.59, indicating improved efficiency in inventory management during the first year. Following this peak, a general downward trend is observed, reaching lows around 2.62 to 2.69 in mid to late 2023. Subsequently, a slight recovery occurs towards the end of 2024 and early 2025, with the ratio moving back above 2.8. This pattern suggests variability in the speed at which inventory is sold and replenished, with potential influences from market demand, supply chain factors, or operational adjustments.

Average Inventory Processing Period (Days)

The average inventory processing period, inversely related to inventory turnover, starts at 122 days and declines to 102 days within the first year, reflecting increasing efficiency in processing inventory. Thereafter, the period increases, exceeding 130 days in several quarters of 2023 and 2024, indicating slower inventory turnover during these times. Toward the end of the analysis period, this metric slightly declines again to around 127 days by the first quarter of 2025. These shifts reinforce the observations from the turnover ratio, highlighting periods of both improved and reduced inventory handling effectiveness.

Overall Analysis

The data reflects a cyclical pattern in inventory management efficiency. The initial improvement in turnover and processing speed suggests effective inventory control strategies or favorable market conditions in early periods. The subsequent decline points to challenges such as potential overstocking, slower sales, or supply chain disruptions. The slight rebound after the trough hints at adjustments in operational practices or market recovery. Continuous monitoring and strategic adaptations are advisable to sustain optimal inventory levels and operational performance.

Receivables Turnover Ratio

The receivables turnover ratio exhibited a fluctuating trend across the observed quarters. Initially, it increased from 6.13 to a peak of 7.03 during the third quarter of 2022, indicating an improvement in the efficiency of collecting receivables. However, following this peak, the ratio declined gradually, ending lower at around 5.39 by the third quarter of 2025. This downward trend suggests a decrease in the speed with which receivables are converted to cash in the latter periods.

Average Receivable Collection Period

The average collection period initially decreased from 60 days to a low of 52 days by the third quarter of 2022, complementing the increase in receivables turnover during the same timeframe. This implies a more efficient collection process during this period. Subsequently, the collection period began to lengthen steadily, reaching approximately 68 days by the third quarter of 2025. This upward trend in days indicates that receivables are taking longer to be collected over time, aligning with the observed decline in the turnover ratio.

Overall Analysis

The inverse relationship between the receivables turnover ratio and the average collection period is apparent. Improvements in turnover corresponded with shortened collection periods, reflecting enhanced operational efficiency up to late 2022. Conversely, the period from late 2022 to 2025 shows a reversal, with a declining turnover ratio and increasing collection days, signaling potential challenges in receivables management or changes in customer payment behaviors. Monitoring these trends is essential to identify causes and respond appropriately to maintain liquidity and operational efficiency.

The analysis of the data reveals notable trends and fluctuations in the company's inventory management, receivables collection, and overall operating cycle over multiple quarters from March 2021 to September 2025.

Average Inventory Processing Period

The inventory processing period demonstrates some volatility across the quarters. Beginning at 122 days in March 2021, it shows a general decline through the end of 2021, reaching a low of 102 days in December 2021. Subsequently, there is an upward trend with intermittent decreases, peaking at 139 days in June 2023. This reaching of a high point is followed by moderate fluctuations but maintains generally elevated levels compared to early 2021. By September 2025, the period slightly decreases to 127 days. This trend indicates a lengthening of the inventory holding period post-2021, which could imply slower inventory turnover or changes in inventory strategies.

Average Receivable Collection Period

The receivable collection period starts at 60 days in March 2021 and exhibits slight reductions in the latter half of 2021, bottoming at 52 days in September and December 2021. From 2022 onwards, a gradual increase is observed leading to 68 days in September 2025. The pattern reveals a modest but consistent lengthening in the time taken to collect receivables, potentially indicating more extended credit terms or challenges in collections.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, exhibits a decline from 182 days in March 2021 to a low of 157 days in December 2021. Afterwards, there is an increasing trend with peaks around 198 days in March and September 2024, followed by a mild decrease to 195 days in September 2025. The overall pattern reflects an initial effort to streamline operations but suggests a turnaround toward longer operating cycles in recent years, implying more extended working capital usage.

Collectively, these patterns suggest that while the company initially improved efficiency in managing inventory and receivables in 2021, subsequent periods show a reversal with both inventory holding and receivable collection periods lengthening. The extended operating cycle in recent years may indicate increased working capital requirements, warranting closer attention to liquidity and cash conversion effectiveness.

The payables turnover ratio exhibits moderate fluctuations across the periods, generally oscillating within the range of approximately 4.0 to 4.7. An observable pattern indicates periods of increases followed by slight declines, suggesting a relatively stable but dynamic management of accounts payable. The ratio reaches its lower values near 4.0 and peaks near 4.7 at various points, reflecting intermittent acceleration in the frequency of payables settlement.

Concurrently, the average payables payment period, measured in days, shows a corresponding inverse pattern to the turnover ratio. The days oscillate roughly between 78 and 92 days, indicating variability in the duration taken to settle obligations. Notably, periods with higher turnover ratios generally coincide with lower payment periods, implying more prompt payments. Conversely, when the turnover ratio declines, the payment period tends to extend, indicating slower payments.

Payables Turnover Ratio Trends

Overall, the ratio demonstrates a stable yet somewhat cyclical trend over time, reflecting consistency in the company's accounts payable management with occasional periods of acceleration.

Average Payables Payment Period Patterns

The payment period similarly fluctuates, with a tendency towards shorter periods aligning with higher turnover ratios, reflecting an interplay between these metrics related to payment efficiency.

Relationship Between Metrics

The inverse relationship between the payables turnover and the average payment period suggests effective working capital management where quicker payment cycles correspond to higher turnover and vice versa.

The financial data indicates notable fluctuations in the company's working capital management metrics over the observed periods. The analysis focuses on four key indicators: average inventory processing period, average receivable collection period, average payables payment period, and cash conversion cycle.

Average Inventory Processing Period

This metric shows an initial decreasing trend from 122 days at the beginning of 2021 to a low of 102 days by the end of that year, suggesting improved inventory turnover. However, from 2022 onward, the period generally increased, peaking at 139 days in mid-2023 before experiencing minor fluctuations and ending lower but still elevated compared to the start of the timeframe. The increase in days implies a slowing in inventory processing efficiency during the latter periods.

Average Receivable Collection Period

The receivable collection period remained relatively stable in 2021, fluctuating modestly between 55 and 60 days. From 2022 forward, there is a gradual upward trend, increasing from approximately 52 days to 68 days by the third quarter of 2025. This suggests a lengthening in time taken to collect receivables, which may have implications for cash flow management.

Average Payables Payment Period

This period demonstrates some variability throughout the quarters, starting at 92 days in early 2021 and generally trending downward to near 78 days at various points, including the end of the observed timeframe. The payables period shows a mix of increases and decreases but overall indicates a somewhat stable, slightly decreasing trend in the days taken to pay suppliers.

Cash Conversion Cycle

The cash conversion cycle, which reflects the net time interval between outlay of cash and cash recovery, exhibits a significant decrease during 2021 from 90 to 70 days, implying an improvement in cash flow efficiency. From 2022 onwards, however, the cycle lengthened progressively, surpassing 100 days in 2023 and reaching values close to 118 days in mid to late 2025. This elongation indicates a potential decline in working capital efficiency, possibly driven by slower inventory turnover and longer receivable collection periods.

Overall, the company initially improved its management of inventory and working capital in 2021, as reflected by shorter inventory processing and cash conversion cycles. Nevertheless, from 2022 onwards, there is evidence of increasing working capital utilization days, primarily due to extended inventory holding and receivable collection periods. Payables payment period, on the other hand, has slightly decreased, which might partially offset these effects but was insufficient to prevent the lengthening of the cash conversion cycle. These trends suggest a need for close monitoring of operational efficiency and liquidity management going forward.