Analysis of Short-term (Operating) Activity Ratios
Quarterly Data
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Short-term Activity Ratios (Summary)
Allergan PLC, short-term (operating) activity ratios (quarterly data)
Based on: 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31).
The analysis of the quarterly financial ratios and operating cycle data reveals several notable trends over the observed period.
- Inventory Turnover
- The inventory turnover ratio shows a general declining trend from an initial value of 4.18 at the beginning of 2016 to approximately 2.18 by the first quarter of 2020. This indicates that the frequency at which inventory is sold and replaced has decreased over time, suggesting a slower inventory movement or increasing inventory levels relative to sales.
- Receivables Turnover
- The receivables turnover ratio exhibits moderate fluctuations around an average range of approximately 5 to 6. It starts at 6 in early 2016, experiences some variability but generally remains stable, ending near 5.75 in early 2020. This stability implies a consistent efficiency in collecting receivables throughout the period.
- Working Capital Turnover
- This ratio demonstrates significant volatility and an overall upward trajectory, starting at low levels in 2016 (with some missing data), then sharply increasing to extraordinary values such as 287.3 and 395.48 in the first quarter of 2020. The large increases suggest an improving efficiency in using working capital to generate revenue, although the erratic values may also warrant scrutiny for consistency or underlying changes in working capital management.
- Average Inventory Processing Period
- The average inventory processing period, measured in days, rises notably from 87 days in early 2016 to a peak around 180 days in early 2017, followed by a gradual decline to mid-150s days. Afterward, it remains relatively stable with slight increases towards the end of the period, concluding at 167 days in early 2020. This pattern corresponds with the inventory turnover decline and reflects lengthening inventory holding periods initially, then some improvement and stabilization.
- Average Receivable Collection Period
- This period fluctuates between roughly 60 to 72 days, showing some cyclical variation but no clear directional trend. There is a slight increase around mid-2019 but overall the collection period remains moderately steady, indicating consistent credit and collection policies.
- Operating Cycle
- The operating cycle in days increases from 148 days in early 2016 to a peak of 244 days in mid-2017. Thereafter, it gradually declines to about 207 days by late 2018, followed by a moderate rise again, finishing at 231 days in early 2020. This reflects changes in both inventory holding and receivables collection periods, impacting the total time taken to convert resources into cash flow.
Overall, the data indicates a lengthening of inventory processing times and a steady receivables collection period, resulting in a generally longer operating cycle compared to the start of the examined timeframe. The marked increase in working capital turnover towards the end suggests enhanced utilization of working capital, though the large variations could indicate shifts in business operations or accounting approaches that would benefit from further investigation.
Turnover Ratios
Average No. Days
Inventory Turnover
Allergan PLC, inventory turnover calculation (quarterly data)
| Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||||||||||||||||||
| Cost of sales, excludes amortization and impairment of acquired intangibles including product rights | 623,100) | 704,000) | 639,000) | 652,300) | 497,800) | 590,000) | 596,800) | 481,800) | 522,800) | 580,900) | 586,500) | 550,200) | 450,400) | 479,700) | 462,200) | 441,500) | 477,400) | ||||||
| Inventories | 1,199,900) | 1,133,100) | 1,083,100) | 1,004,500) | 943,200) | 846,900) | 894,600) | 922,500) | 948,400) | 904,500) | 899,800) | 935,900) | 904,700) | 718,000) | 705,500) | 726,800) | 1,022,200) | ||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Inventory turnover1 | 2.18 | 2.20 | 2.20 | 2.33 | 2.30 | 2.59 | 2.44 | 2.35 | 2.36 | 2.40 | 2.30 | 2.08 | 2.03 | 2.59 | 2.55 | 3.55 | 4.18 | ||||||
| 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. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31).
1 Q1 2020 Calculation
Inventory turnover
= (Cost of sales, excludes amortization and impairment of acquired intangibles including product rightsQ1 2020
+ Cost of sales, excludes amortization and impairment of acquired intangibles including product rightsQ4 2019
+ Cost of sales, excludes amortization and impairment of acquired intangibles including product rightsQ3 2019
+ Cost of sales, excludes amortization and impairment of acquired intangibles including product rightsQ2 2019)
÷ Inventories
= (623,100 + 704,000 + 639,000 + 652,300)
÷ 1,199,900 = 2.18
2 Click competitor name to see calculations.
- Cost of Sales
- The cost of sales exhibited fluctuations over the observed period. Initially, there was a slight decline from 477,400 thousand US dollars in the first quarter of 2016 to 441,500 thousand in the second quarter of 2016, followed by a gradual increase towards the end of that year. In 2017, cost of sales generally trended upward, peaking at 586,500 thousand in the third quarter before stabilizing around the 580,000 thousand mark. During 2018, a similar pattern of increase and stabilization is evident, with a notable rise reaching 596,800 thousand in the third quarter. The period between 2019 and early 2020 saw a marked upward trend, with a high of 704,000 thousand in the fourth quarter of 2019, followed by a slight decrease to 623,100 thousand in the first quarter of 2020. The overall trend points to increasing costs with some seasonal or quarter-specific variances.
- Inventories
- Inventories showed substantial variation in the early part of the data set, starting at over one million thousand US dollars in the first quarter of 2016, then declining significantly in the subsequent two quarters before a moderate recovery by year-end 2016. From 2017 onwards, the inventory levels remained relatively stable around the 900,000 to 950,000 thousand mark until mid-2018. After this period, a gradual increase is observed, reaching a peak of 1,133,100 thousand in the fourth quarter of 2019. The trend continued to increase into the first quarter of 2020, reaching approximately 1,199,900 thousand. This progression suggests growing inventory holdings, potentially reflecting strategic stockpiling or changes in sales demand and supply chain management.
- Inventory Turnover Ratio
- The inventory turnover ratio demonstrated a clear declining trend from 4.18 in the first quarter of 2016 to approximately 2.18 by the first quarter of 2020. The ratio declined steadily through 2016 and remained relatively stable but lower than initial values throughout the later periods, fluctuating between approximately 2.0 and 2.6. Such a decline typically indicates that inventory is being sold and replaced more slowly over time, implying a possible build-up of inventory relative to sales or a change in operational efficiency impacting turnover rates.
- Summary of Trends
- Over the reporting timeframe, the cost of sales increased generally, with quarterly variances potentially due to operational or market factors. Inventories initially contracted but then rose steadily from mid-2017 onwards, reaching record highs toward the end of 2019 and early 2020. Meanwhile, the declining inventory turnover ratio suggests reduced efficiency in moving inventory, possibly due to lower sales volume growth relative to inventory increases or deliberate inventory accumulation. These combined patterns highlight a need for closer attention to inventory management and cost controls to ensure alignment with revenue generation and operational sustainability.
Receivables Turnover
Allergan PLC, receivables turnover calculation (quarterly data)
| Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||||||||||||||||||
| Net revenues | 3,604,400) | 4,351,000) | 4,050,700) | 4,090,100) | 3,597,100) | 4,079,700) | 3,911,400) | 4,124,200) | 3,672,100) | 4,326,100) | 4,034,300) | 4,007,400) | 3,572,900) | 3,864,300) | 3,622,200) | 3,684,800) | 3,399,300) | ||||||
| Accounts receivable, net of allowances for doubtful accounts and credit losses | 2,800,600) | 3,192,300) | 3,012,300) | 3,086,300) | 2,731,200) | 2,868,100) | 2,826,900) | 2,760,800) | 2,639,200) | 2,899,000) | 2,808,600) | 2,795,900) | 2,542,000) | 2,531,000) | 2,398,500) | 2,490,500) | 2,652,800) | ||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Receivables turnover1 | 5.75 | 5.04 | 5.25 | 5.08 | 5.75 | 5.50 | 5.67 | 5.85 | 6.08 | 5.50 | 5.51 | 5.39 | 5.80 | 5.76 | 5.57 | 5.56 | 6.00 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Receivables Turnover, Competitors2 | |||||||||||||||||||||||
| AbbVie Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Amgen Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Danaher Corp. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Eli Lilly & Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Gilead Sciences Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Johnson & Johnson | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Merck & Co. Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Pfizer Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Thermo Fisher Scientific Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31).
1 Q1 2020 Calculation
Receivables turnover
= (Net revenuesQ1 2020
+ Net revenuesQ4 2019
+ Net revenuesQ3 2019
+ Net revenuesQ2 2019)
÷ Accounts receivable, net of allowances for doubtful accounts and credit losses
= (3,604,400 + 4,351,000 + 4,050,700 + 4,090,100)
÷ 2,800,600 = 5.75
2 Click competitor name to see calculations.
The financial data reveals several notable trends over the analyzed periods. Net revenues exhibit a recurring seasonal pattern, with generally higher values recorded in the fourth quarters and relatively lower values in the first quarters each year. Despite this seasonal fluctuation, the overall level of net revenues remains fairly consistent across the years from 2016 through early 2020. However, the revenues in the first quarter of 2020 show a decrease compared to the corresponding quarter in the prior year, suggesting a potential dip in performance or external influences impacting sales.
Accounts receivable, net of allowances, display a generally increasing trend over the observed periods, although some quarter-to-quarter fluctuations are evident. Notably, from early 2016 to early 2020, accounts receivable increase overall, indicating possibly extended credit terms or slower collections relative to sales. Despite the increase in accounts receivable, the periodic fluctuations do not always correspond directly with the revenue changes, which may warrant further investigation into credit policies and collection efficiency.
The receivables turnover ratio varies moderately throughout the periods, oscillating between approximately 5.0 and 6.1 times per year. This ratio tends to decrease gradually after peaks observed around early 2018, reflecting a slowing in the collection of receivables relative to sales. The turnover ratios in the first quarter of 2020, although slightly improved from the recent lows, remain lower than the earlier years, consistent with the increased accounts receivable balances and the slight decrease in net revenues.
- Net Revenues Trend
- Seasonal fluctuations with higher fourth-quarter results; consistent but slightly declining first-quarter revenues by 2020.
- Accounts Receivable Trend
- Gradual upward movement over the years, indicating increasing outstanding receivables and possible changes in credit or collection practices.
- Receivables Turnover Ratio
- Moderate decline in turnover ratio over time, implying longer collection periods or slower cash conversion cycles.
Working Capital Turnover
Allergan PLC, working capital turnover calculation (quarterly data)
| Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||||||||||||||||||
| Current assets | 7,474,100) | 11,126,700) | 9,593,600) | 8,572,800) | 6,289,300) | 6,475,400) | 5,740,200) | 6,103,700) | 6,393,300) | 11,376,700) | 10,112,800) | 10,433,200) | 13,700,700) | 17,857,900) | 31,723,900) | 8,755,200) | 10,091,500) | ||||||
| Less: Current liabilities | 7,433,400) | 11,070,700) | 9,638,700) | 8,303,700) | 8,849,200) | 5,727,900) | 6,231,900) | 6,125,300) | 5,816,000) | 9,848,100) | 8,559,800) | 8,638,300) | 10,391,600) | 7,874,700) | 8,025,500) | 8,867,400) | 10,195,500) | ||||||
| Working capital | 40,700) | 56,000) | (45,100) | 269,100) | (2,559,900) | 747,500) | (491,700) | (21,600) | 577,300) | 1,528,600) | 1,553,000) | 1,794,900) | 3,309,100) | 9,983,200) | 23,698,400) | (112,200) | (104,000) | ||||||
| Net revenues | 3,604,400) | 4,351,000) | 4,050,700) | 4,090,100) | 3,597,100) | 4,079,700) | 3,911,400) | 4,124,200) | 3,672,100) | 4,326,100) | 4,034,300) | 4,007,400) | 3,572,900) | 3,864,300) | 3,622,200) | 3,684,800) | 3,399,300) | ||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Working capital turnover1 | 395.48 | 287.30 | — | 58.26 | — | 21.12 | — | — | 27.78 | 10.43 | 9.97 | 8.39 | 4.46 | 1.46 | 0.56 | — | — | ||||||
| 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. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31).
1 Q1 2020 Calculation
Working capital turnover
= (Net revenuesQ1 2020
+ Net revenuesQ4 2019
+ Net revenuesQ3 2019
+ Net revenuesQ2 2019)
÷ Working capital
= (3,604,400 + 4,351,000 + 4,050,700 + 4,090,100)
÷ 40,700 = 395.48
2 Click competitor name to see calculations.
- Working Capital
- The working capital shows significant fluctuations over the analyzed period. Initially, there was a negative working capital position at the beginning of 2016, which dramatically shifted to a large positive figure by the third quarter of 2016. Subsequently, working capital decreased substantially and became mostly positive but relatively low and volatile from 2017 onwards, exhibiting both slight positive and negative values across quarters. This variability suggests changes in short-term liquidity, with no clear sustained trend of improvement or deterioration after 2016.
- Net Revenues
- Net revenues display a generally stable to moderately increasing trend across the examined quarters, with regular seasonal variations. The first-quarter revenues tend to be lower compared to later quarters within each year. Despite some fluctuations, revenues maintained a healthy range between approximately 3.3 billion and 4.3 billion US dollars, with a noticeable peak toward the end of 2019 and early 2020. This pattern indicates consistent operational performance with periodic growth.
- Working Capital Turnover
- The working capital turnover ratio begins to appear from the third quarter of 2016 onward, showing a progressively increasing trend, indicating enhanced efficiency in using working capital to generate revenues. The ratio rose from under 1 to above 10 by the end of 2017 and achieved very high values by early 2020, exceeding 300 in the first quarter of 2020. Such a substantial increase may reflect either a decrease in working capital magnitude or a relative increase in net revenues, highlighting improved asset utilization or tighter working capital management.
- Overall Analysis
- The data reveals that while net revenues remained relatively stable with modest growth, working capital positions fluctuated significantly and became low in magnitude, which corresponded with a sharp increase in working capital turnover ratio. This suggests that the company was able to generate higher sales volumes relative to available working capital over time, potentially indicating better operational efficiency or changes in working capital management policies. However, the volatility in working capital values calls for attention, as inconsistent liquidity management might pose risks despite strong revenue performance.
Average Inventory Processing Period
Allergan PLC, average inventory processing period calculation (quarterly data)
| Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||||||||||||
| Inventory turnover | 2.18 | 2.20 | 2.20 | 2.33 | 2.30 | 2.59 | 2.44 | 2.35 | 2.36 | 2.40 | 2.30 | 2.08 | 2.03 | 2.59 | 2.55 | 3.55 | 4.18 | ||||||
| Short-term Activity Ratio (no. days) | |||||||||||||||||||||||
| Average inventory processing period1 | 167 | 166 | 166 | 157 | 159 | 141 | 150 | 155 | 155 | 152 | 159 | 176 | 180 | 141 | 143 | 103 | 87 | ||||||
| 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. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31).
1 Q1 2020 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 2.18 = 167
2 Click competitor name to see calculations.
- Inventory turnover ratio
- The inventory turnover ratio demonstrates a clear declining trend over the reviewed periods. Starting at 4.18 in March 2016, the ratio steadily decreased through subsequent quarters, reaching values slightly above 2.0 by 2017 and hovering around 2.2 in early 2020. This reduction indicates that the company is turning over its inventory less frequently over time, possibly reflecting slower sales or stock accumulation.
- Average inventory processing period (days)
- The average inventory processing period exhibits an increasing pattern that inversely correlates with the inventory turnover ratio. It rose from 87 days in March 2016 to consistently above 150 days from 2017 onward, reaching approximately 166-167 days by early 2020. This suggests that inventory remains on hand longer before being sold or used, which may point to potential inefficiencies or changes in inventory management or sales velocity.
- Overall analysis
- The combination of a declining inventory turnover ratio and a lengthening average inventory processing period suggests a trend toward slower inventory movement. This situation could signal challenges such as decreased demand, overstocking, or operational inefficiencies. It would be prudent for the company to investigate underlying causes to optimize inventory management and improve working capital utilization.
Average Receivable Collection Period
Allergan PLC, average receivable collection period calculation (quarterly data)
| Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||||||||||||
| Receivables turnover | 5.75 | 5.04 | 5.25 | 5.08 | 5.75 | 5.50 | 5.67 | 5.85 | 6.08 | 5.50 | 5.51 | 5.39 | 5.80 | 5.76 | 5.57 | 5.56 | 6.00 | ||||||
| Short-term Activity Ratio (no. days) | |||||||||||||||||||||||
| Average receivable collection period1 | 64 | 72 | 70 | 72 | 63 | 66 | 64 | 62 | 60 | 66 | 66 | 68 | 63 | 63 | 65 | 66 | 61 | ||||||
| Benchmarks (no. days) | |||||||||||||||||||||||
| Average Receivable Collection Period, Competitors2 | |||||||||||||||||||||||
| AbbVie Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Amgen Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Danaher Corp. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Eli Lilly & Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Gilead Sciences Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Johnson & Johnson | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Merck & Co. Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Pfizer Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Thermo Fisher Scientific Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31).
1 Q1 2020 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 5.75 = 64
2 Click competitor name to see calculations.
- Receivables Turnover Ratio
- The receivables turnover ratio exhibited fluctuations over the analyzed quarterly periods. Initially, the ratio decreased from 6.00 to around 5.56-5.57 in mid-2016, followed by a moderate increase reaching approximately 5.80 by the first quarter of 2017. Thereafter, the ratio showed a downward trend through the remainder of 2017 and into 2018, falling back to the range of 5.50 to 5.67. In 2019, the turnover ratio continued to decline, notably reaching lows near 5.08 to 5.25 in mid to late 2019, before showing a slight rebound to 5.75 in the first quarter of 2020. This pattern suggests variability and some weakening in the efficiency of receivables collection over the period, though the most recent quarter indicates partial recovery.
- Average Receivable Collection Period
- The average collection period demonstrated an inverse relationship to the receivables turnover ratio, as expected. Beginning at 61 days in early 2016, the collection period lengthened to about 66 days by mid to late 2016. A brief improvement was noted in early 2017 with a collection period near 63 days, followed by periods of extension peaking at 68 days in the second quarter of 2017. From late 2017 through 2018, days outstanding stabilized somewhat around 60 to 66 days. However, 2019 saw a marked increase in collection days, rising to 72 days in mid to late 2019, indicating slower customer payments. By the first quarter of 2020, a reduction to 64 days suggests an improvement but remains slightly elevated relative to earlier periods.
- Overall Observations
- Both key metrics reflect variability in the company's receivables management over the nearly five-year period. The moderate decline in receivables turnover ratio alongside the increase in average collection days during 2019 signals potential challenges in collecting receivables efficiently in that year. The early 2020 data suggests some recent effort or external factors contributing to improved collections. Monitoring these indicators will be crucial to ensuring cash flow stability and credit risk management going forward.
Operating Cycle
Allergan PLC, operating cycle calculation (quarterly data)
No. days
| Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||||||||||||
| Average inventory processing period | 167 | 166 | 166 | 157 | 159 | 141 | 150 | 155 | 155 | 152 | 159 | 176 | 180 | 141 | 143 | 103 | 87 | ||||||
| Average receivable collection period | 64 | 72 | 70 | 72 | 63 | 66 | 64 | 62 | 60 | 66 | 66 | 68 | 63 | 63 | 65 | 66 | 61 | ||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Operating cycle1 | 231 | 238 | 236 | 229 | 222 | 207 | 214 | 217 | 215 | 218 | 225 | 244 | 243 | 204 | 208 | 169 | 148 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Operating Cycle, Competitors2 | |||||||||||||||||||||||
| AbbVie Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Amgen Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Danaher Corp. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Eli Lilly & Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Gilead Sciences Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Johnson & Johnson | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Merck & Co. Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Pfizer Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Thermo Fisher Scientific Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31).
1 Q1 2020 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= 167 + 64 = 231
2 Click competitor name to see calculations.
- Inventory Processing Period
- The average inventory processing period exhibited an overall upward trend from March 2016 to March 2020. Starting at 87 days in March 2016, it increased significantly to a peak of 180 days in March 2017. Following this peak, a gradual decline was observed until December 2018, reaching 141 days. Subsequently, the period rose again, fluctuating around the mid-160 days mark towards March 2020, ending at 167 days. This indicates a general lengthening in the time required to process inventory over the analyzed period, with some intermittent improvements.
- Receivable Collection Period
- The average receivable collection period demonstrated relative stability with modest fluctuations. It started at 61 days in March 2016, rose slightly to a range of mid-60 days through much of 2016 and 2017, experienced a brief dip back to 60 days in March 2018, and then increased again, peaking at 72 days in June and December 2019. By March 2020, this period decreased to 64 days. The data suggests that while there was some variability, the company generally maintained a collection period between 60 and 72 days, indicating steady credit management performance over time.
- Operating Cycle
- The operating cycle, representing the combined duration of inventory processing and receivables collection, showed a general upward movement across the analyzed timeframe. Starting at 148 days in March 2016, the operating cycle expanded significantly to a high of 244 days in June 2017. Following this peak, the cycle length shortened somewhat but remained elevated, fluctuating between approximately 207 and 238 days in subsequent periods. By March 2020, the operating cycle was 231 days, indicating a prolonged overall working capital cycle compared to the initial period. This trend reflects the combined effects of longer inventory turnover and receivables periods, potentially impacting cash flow efficiency.