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)
Baxter International Inc., short-term (operating) activity ratios (quarterly data)
Based on: 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31).
The analysis of the quarterly financial data reveals notable trends in several key operational efficiency ratios and periods over the examined timeframe.
- Inventory Turnover
- The inventory turnover ratio demonstrated a general downward trend from early 2012 to mid-2015, declining from approximately 2.53 to a low of about 1.88. However, from the third quarter of 2015 onward, there is a significant and sharp increase, peaking around 3.86 in Q3 2015 and maintaining higher levels thereafter. This indicates an improvement in the frequency of inventory being sold and replaced during the later periods, suggesting enhanced inventory management or increased sales efficiency.
- Receivables Turnover
- The receivables turnover ratio fluctuated moderately within the range of roughly 4.75 to 6.31 throughout the period. It initially remained relatively steady around the 6.0 mark until mid-2013, then dipped to lower values near 4.75 in mid-2015, before partially recovering to slightly above 5.5 by mid-2016. This pattern indicates some variability in the company's effectiveness in collecting receivables, with a noticeable decline during 2014-2015 followed by gradual recovery.
- Working Capital Turnover
- Working capital turnover showed considerable volatility, initially decreasing from over 4 in 2012 to a low around 1.65 in mid-2015. Despite this low, the ratio rose again approaching 3.24 by mid-2016. This suggests fluctuations in how effectively the company utilized its working capital to generate sales, with periods of reduced efficiency and some recovery towards the end of the timeframe.
- Average Inventory Processing Period
- The average inventory processing period steadily increased between 2012 and mid-2015, rising from about 145 days up to nearly 194 days, indicating a lengthening duration to process inventory. From Q3 2015 onward, there was a dramatic decrease to approximately 95 days, maintaining a much shorter period going forward. This substantial reduction reflects improved inventory turnover earlier noted, and possibly operational improvements or changes in inventory policy.
- Average Receivable Collection Period
- The average receivable collection period remained relatively stable around 60 to 63 days from 2012 through early 2014, followed by a noticeable increase to approximately 77 days in mid-2015. Subsequently, it decreased back to the mid-60s range by mid-2016. This trend aligns with the earlier noted decline and partial recovery in receivables turnover, indicating less efficient collection during mid-2015 with improvement thereafter.
- Operating Cycle
- The operating cycle, combining inventory processing and receivable collection, reflected the trends observed in its components. It increased from about 206 days in early 2012 up to a peak of roughly 271 days in mid-2015, suggesting longer cash-to-cash cycles and potentially higher working capital requirements. After this peak, it significantly shortened to around 150 days by Q1 2016 and remained in that reduced range, indicative of more efficient overall operational processes.
In summary, the financial data indicates a period of increasing operational inefficiencies peaking around mid-2015, characterized by longer inventory turnover durations, lengthening collection periods, and expanded operating cycles. This was followed by marked improvements in late 2015 and into 2016, with notably enhanced inventory turnover, shorter processing and collection periods, and more efficient use of working capital. These trends suggest a successful implementation of measures aimed at improving operational efficiency during the latter part of the period analyzed.
Turnover Ratios
Average No. Days
Inventory Turnover
Baxter International Inc., inventory turnover calculation (quarterly data)
| Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||||||||||||||||||||
| Cost of sales | 1,613) | 1,410) | 1,531) | 1,453) | 1,454) | 1,384) | 2,248) | 2,124) | 2,185) | 1,957) | 2,414) | 1,828) | 1,730) | 1,692) | 1,848) | 1,667) | 1,700) | 1,674) | ||||||
| Inventories | 1,591) | 1,682) | 1,604) | 1,696) | 3,842) | 3,501) | 3,559) | 3,704) | 3,836) | 3,748) | 3,499) | 3,581) | 3,069) | 2,963) | 2,803) | 2,831) | 2,730) | 2,737) | ||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||
| Inventory turnover1 | 3.78 | 3.48 | 3.63 | 3.86 | 1.88 | 2.27 | 2.39 | 2.34 | 2.19 | 2.12 | 2.19 | 1.98 | 2.26 | 2.33 | 2.46 | 2.43 | 2.53 | 2.53 | ||||||
| Benchmarks | ||||||||||||||||||||||||
| Inventory Turnover, Competitors2 | ||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31).
1 Q2 2016 Calculation
Inventory turnover
= (Cost of salesQ2 2016
+ Cost of salesQ1 2016
+ Cost of salesQ4 2015
+ Cost of salesQ3 2015)
÷ Inventories
= (1,613 + 1,410 + 1,531 + 1,453)
÷ 1,591 = 3.78
2 Click competitor name to see calculations.
The financial data reveals notable fluctuations in cost of sales, inventories, and inventory turnover over the examined periods.
- Cost of Sales
- The cost of sales exhibits a generally volatile trend with some pronounced increases and decreases. During 2012, the values remain relatively stable around the 1,660 to 1,850 million USD range. However, there is a significant increase in the fourth quarter of 2013 reaching 2,414 million USD, which appears to mark a peak within the dataset. Subsequently, the cost decreases in 2015, dropping below previous levels to around 1,384 to 1,531 million USD, before modestly rising again in 2016. This pattern suggests seasonal or restructuring effects impacting direct production costs or goods sold.
- Inventories
- Inventories steadily increase from early 2012 through mid-2015, with values rising from approximately 2,737 million USD to a peak near 3,842 million USD. This steady accumulation suggests either stockpiling in anticipation of demand or slower inventory turnover. However, in the latter half of 2015 and into 2016, there is a sudden and substantial reduction, with inventory levels falling sharply to about 1,591 million USD by mid-2016. This abrupt decline may be indicative of an inventory write-down, divestiture, or significant improvement in inventory management.
- Inventory Turnover
- The inventory turnover ratio trends consistently downward from 2012 (around 2.5) through much of 2015, hitting lows near 1.88, indicating declining efficiency in converting inventory to sales. This correlates with the rising inventory levels noted above. Interestingly, from late 2015 through 2016, the inventory turnover ratio sharply rises to approximately 3.7, reflecting a marked improvement in inventory management or sales acceleration relative to inventory held. This inverse movement compared to inventory levels in the same timeframe supports the hypothesis of structural changes impacting inventory strategy or market demand.
Overall, the data reflects a dynamic operating environment with significant inventory build-up followed by a notable purge and corresponding improvements in turnover efficiency. Cost of sales shows volatility concentrated around the end of 2013 and a reduction preceding the inventory drop, potentially linked to operational or strategic shifts in supply chain or market focus.
Receivables Turnover
Baxter International Inc., receivables turnover calculation (quarterly data)
| Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||||||||||||||||||||
| Net sales | 2,585) | 2,375) | 2,603) | 2,487) | 2,475) | 2,403) | 4,472) | 4,197) | 4,154) | 3,848) | 4,368) | 3,774) | 3,669) | 3,448) | 3,753) | 3,477) | 3,572) | 3,388) | ||||||
| Accounts and other current receivables, net | 1,813) | 1,830) | 1,731) | 1,772) | 2,852) | 2,599) | 2,803) | 2,842) | 2,914) | 2,708) | 2,911) | 2,766) | 2,342) | 2,319) | 2,425) | 2,324) | 2,225) | 2,341) | ||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||
| Receivables turnover1 | 5.54 | 5.43 | 5.76 | 6.68 | 4.75 | 5.86 | 5.95 | 5.83 | 5.54 | 5.78 | 5.24 | 5.29 | 6.13 | 6.14 | 5.85 | 6.04 | 6.31 | 5.98 | ||||||
| Benchmarks | ||||||||||||||||||||||||
| Receivables Turnover, Competitors2 | ||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Elevance Health Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| UnitedHealth Group Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31).
1 Q2 2016 Calculation
Receivables turnover
= (Net salesQ2 2016
+ Net salesQ1 2016
+ Net salesQ4 2015
+ Net salesQ3 2015)
÷ Accounts and other current receivables, net
= (2,585 + 2,375 + 2,603 + 2,487)
÷ 1,813 = 5.54
2 Click competitor name to see calculations.
The company's net sales exhibited fluctuations over the observed quarters. Initially, net sales showed a generally upward trajectory from the first quarter of 2012 through the end of 2013, reaching a peak in December 2013. However, from the first quarter of 2015 onwards, net sales declined significantly in March 2015 compared to the prior year, followed by modest recovery through 2016, though remaining below earlier peak levels.
Accounts and other current receivables, net, showed a generally increasing trend from early 2012 through late 2013, indicating a growth in outstanding amounts owed to the company. Beginning with 2014, receivables levels fluctuated somewhat but appeared to experience a substantial decrease in the third and fourth quarters of 2015 before stabilizing at lower levels into 2016.
Receivables turnover ratio, which measures how efficiently the company collects its receivables, displays variable behavior across the observed periods. The ratio was relatively high in 2012 through early 2013, indicating faster collection of receivables. However, a downward trend is observed in late 2013 and again in mid-2015, signifying slower collection efficiency during those periods. Notably, a spike in the turnover ratio occurs in the third quarter of 2015, suggesting improved collection performance temporarily, but the ratio settles back to more moderate levels by 2016.
Overall, the data imply a period of growth in sales and receivables through 2013 followed by volatility and reduced sales in 2015, accompanied by decreased receivables balances and fluctuations in collection efficiency. The combination of declining sales and variable receivables turnover in the recent period warrants attention to the company’s credit policies and sales strategy.
- Net Sales
- Growth with a peak at the end of 2013, followed by decline in early 2015 and partial recovery in 2016.
- Accounts and Other Current Receivables, Net
- Generally increasing through 2013; notable decline in late 2015; stabilized at lower levels in 2016.
- Receivables Turnover Ratio
- High and stable early on; decline in late 2013 and mid-2015; temporary spike in Q3 2015; moderate levels by 2016.
Working Capital Turnover
Baxter International Inc., working capital turnover calculation (quarterly data)
| Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||||||||||||||||||||
| Current assets | 6,823) | 8,017) | 11,796) | 11,138) | 14,497) | 9,734) | 10,351) | 9,631) | 9,487) | 9,388) | 10,004) | 9,597) | 12,185) | 8,814) | 9,260) | 9,105) | 8,048) | 8,117) | ||||||
| Less: Current liabilities | 3,723) | 3,823) | 5,750) | 5,981) | 6,312) | 6,074) | 6,042) | 5,990) | 5,795) | 5,645) | 5,906) | 4,996) | 4,516) | 4,778) | 4,759) | 4,458) | 4,870) | 4,857) | ||||||
| Working capital | 3,100) | 4,194) | 6,046) | 5,157) | 8,185) | 3,660) | 4,309) | 3,641) | 3,692) | 3,743) | 4,098) | 4,601) | 7,669) | 4,036) | 4,501) | 4,647) | 3,178) | 3,260) | ||||||
| Net sales | 2,585) | 2,375) | 2,603) | 2,487) | 2,475) | 2,403) | 4,472) | 4,197) | 4,154) | 3,848) | 4,368) | 3,774) | 3,669) | 3,448) | 3,753) | 3,477) | 3,572) | 3,388) | ||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||
| Working capital turnover1 | 3.24 | 2.37 | 1.65 | 2.30 | 1.66 | 4.16 | 3.87 | 4.55 | 4.37 | 4.18 | 3.72 | 3.18 | 1.87 | 3.53 | 3.15 | 3.02 | 4.42 | 4.29 | ||||||
| Benchmarks | ||||||||||||||||||||||||
| Working Capital Turnover, Competitors2 | ||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Elevance Health Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| UnitedHealth Group Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31).
1 Q2 2016 Calculation
Working capital turnover
= (Net salesQ2 2016
+ Net salesQ1 2016
+ Net salesQ4 2015
+ Net salesQ3 2015)
÷ Working capital
= (2,585 + 2,375 + 2,603 + 2,487)
÷ 3,100 = 3.24
2 Click competitor name to see calculations.
- Working Capital
- The working capital figures demonstrate noticeable volatility throughout the periods analyzed. Initially, there is a moderate level around the 3,000 to 4,600 million USD range with a peak of 7,669 million USD in June 2013. This peak is followed by fluctuations, with significant increases observed in June 2015 (8,185 million USD) and corresponding declines in subsequent quarters, ending near 3,100 million USD by June 2016. Such variability suggests periods of both accumulation and utilization of short-term assets and liabilities, possibly reflecting operational changes or financial management strategies.
- Net Sales
- Net sales exhibit a generally rising trend from March 2012 through December 2014, increasing from approximately 3,388 million USD to a peak near 4,472 million USD. However, a sharp drop occurs in the first quarter of 2015, with net sales falling dramatically to about 2,403 million USD. Following this low, net sales stabilize but remain comparatively lower than earlier years, fluctuating modestly between 2,375 and 2,603 million USD up to June 2016. This significant decline in early 2015 suggests a shift either in revenue recognition policies, divestitures, or adverse market conditions impacting sales volume or pricing.
- Working Capital Turnover Ratio
- The working capital turnover ratio, calculated as net sales divided by working capital, shows considerable variation over the period. Early on, the ratio is relatively high, around 3 to 4.5, indicating efficient use of working capital to generate sales. Notably, sharp dips to near or below 2 occur in mid-2013 and mid-2015, coinciding with peaks in working capital, reflecting lower operational efficiency or overinvestment in working capital assets relative to sales during these periods. The ratio recovers somewhat after these troughs but remains inconsistent, pointing to fluctuating operational efficiency or significant changes in shifts between sales and working capital management.
- Overall Insights
- The data reveals a correlation between spikes in working capital and decreases in working capital turnover, implying that increases in working capital have not always translated into proportionate sales increases. The abrupt decline in net sales beginning in early 2015 coupled with a simultaneous surge in working capital suggests potential structural changes in business operations or asset management practices. Stability in working capital and sales after these changes appears limited, as volatility persists across the most recent quarters.
Average Inventory Processing Period
Baxter International Inc., average inventory processing period calculation (quarterly data)
| Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||||||||||||||||||||
| Inventory turnover | 3.78 | 3.48 | 3.63 | 3.86 | 1.88 | 2.27 | 2.39 | 2.34 | 2.19 | 2.12 | 2.19 | 1.98 | 2.26 | 2.33 | 2.46 | 2.43 | 2.53 | 2.53 | ||||||
| Short-term Activity Ratio (no. days) | ||||||||||||||||||||||||
| Average inventory processing period1 | 97 | 105 | 101 | 95 | 194 | 161 | 153 | 156 | 167 | 173 | 167 | 184 | 161 | 157 | 149 | 150 | 144 | 145 | ||||||
| Benchmarks (no. days) | ||||||||||||||||||||||||
| Average Inventory Processing Period, Competitors2 | ||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31).
1 Q2 2016 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 3.78 = 97
2 Click competitor name to see calculations.
- Inventory Turnover
- The inventory turnover ratio exhibited a declining trend from early 2012 through mid-2015, decreasing from approximately 2.53 to a low of around 1.88. This suggests a gradual reduction in the frequency at which inventory was sold and replaced during that period. However, starting in late 2015, there was a pronounced improvement, with turnover ratios increasing sharply to levels above 3.4, ultimately reaching near 3.8 by mid-2016. This indicates enhanced efficiency in inventory management and faster sales cycles towards the end of the observed timeframe.
- Average Inventory Processing Period
- Corresponding with the turnover trends, the average inventory processing period generally lengthened from 145 days in early 2012 to a peak near 194 days by late 2015, reflecting slower inventory movement and longer holding times. This increase suggests a buildup of stock or reduced sales velocity during this interval. Notably, from late 2015 onwards, the inventory processing period decreased markedly, falling to around 97 days by mid-2016. This reduction aligns with the improved turnover rates, indicating a more efficient inventory cycle and quicker conversion of inventory back into sales.
- Summary Insights
- Overall, the data reveals a phase of deteriorating inventory efficiency lasting several years, culminating around late 2015. Following this, a significant operational improvement is observable, characterized by higher inventory turnover and shorter processing periods. This shift suggests effective measures were likely implemented to optimize inventory levels, accelerate sales, or both, resulting in more streamlined working capital management as of mid-2016.
Average Receivable Collection Period
Baxter International Inc., average receivable collection period calculation (quarterly data)
| Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||||||||||||||||||||
| Receivables turnover | 5.54 | 5.43 | 5.76 | 6.68 | 4.75 | 5.86 | 5.95 | 5.83 | 5.54 | 5.78 | 5.24 | 5.29 | 6.13 | 6.14 | 5.85 | 6.04 | 6.31 | 5.98 | ||||||
| Short-term Activity Ratio (no. days) | ||||||||||||||||||||||||
| Average receivable collection period1 | 66 | 67 | 63 | 55 | 77 | 62 | 61 | 63 | 66 | 63 | 70 | 69 | 60 | 59 | 62 | 60 | 58 | 61 | ||||||
| Benchmarks (no. days) | ||||||||||||||||||||||||
| Average Receivable Collection Period, Competitors2 | ||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Elevance Health Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| UnitedHealth Group Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31).
1 Q2 2016 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 5.54 = 66
2 Click competitor name to see calculations.
- Receivables Turnover Ratio
- The receivables turnover ratio exhibits a fluctuating pattern over the periods analyzed. It initially increases from 5.98 at the end of the first quarter of 2012 to a peak of 6.31 by mid-2012, indicating an improvement in the efficiency of receivables collection. Subsequently, it declines to 5.24 by the end of 2013, suggesting a slowdown in collection efficiency. The ratio stabilizes somewhat in 2014, fluctuating around the mid-5 range. In 2015, the ratio shows higher volatility, with a pronounced dip to 4.75 in the second quarter, followed by a recovery to 6.68 by the third quarter. The year 2016 reflects a modest decrease again, with values slightly above 5.4.
- Average Receivable Collection Period (Days)
- The average receivable collection period generally mirrors the inverse trend of the receivables turnover ratio. Starting at 61 days in early 2012, collection periods improve slightly to around 58-59 days mid-2012 but then lengthen to approximately 70 days by the end of 2013. This extension indicates slower cash inflow from receivables during that time. The period shortens again during 2014, hovering around 61-66 days, before experiencing a significant increase to 77 days in mid-2015, aligning with the drop in turnover ratio noted above. Following this peak, the collection period decreases to 55 days but extends back above 65 days in early 2016, indicating increased variability and some challenges in maintaining consistent collection efficiency.
- Overall Insights
- Over the timeframe analyzed, there is clear evidence of moderate volatility in receivables management efficiency. Periods of improved turnover ratio correspond with shortened collection periods and vice versa, highlighting the expected inverse relationship. Notably, mid-2015 marks a period of reduced efficiency, with the lowest turnover ratio and highest collection period, which may warrant further investigation into underlying causes. The data from 2016 suggests stabilization but does not show a clear trend toward sustained improvement or deterioration. Overall, receivables management appears to experience cyclical fluctuations with occasional significant deviations.
Operating Cycle
Baxter International Inc., operating cycle calculation (quarterly data)
No. days
| Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||||||||||||||||||||
| Average inventory processing period | 97 | 105 | 101 | 95 | 194 | 161 | 153 | 156 | 167 | 173 | 167 | 184 | 161 | 157 | 149 | 150 | 144 | 145 | ||||||
| Average receivable collection period | 66 | 67 | 63 | 55 | 77 | 62 | 61 | 63 | 66 | 63 | 70 | 69 | 60 | 59 | 62 | 60 | 58 | 61 | ||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||
| Operating cycle1 | 163 | 172 | 164 | 150 | 271 | 223 | 214 | 219 | 233 | 236 | 237 | 253 | 221 | 216 | 211 | 210 | 202 | 206 | ||||||
| Benchmarks | ||||||||||||||||||||||||
| Operating Cycle, Competitors2 | ||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31), 10-K (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-Q (reporting date: 2012-03-31).
1 Q2 2016 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= 97 + 66 = 163
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals several notable trends in the company's working capital management over the observed periods.
- Average Inventory Processing Period
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The average inventory processing period exhibited fluctuations over the timeline. Initially, the days ranged from 144 to 157, indicating a relatively stable inventory turnover. However, a significant increase was observed around the third quarter of 2013, peaking at 184 days, which suggests a slowdown in inventory movement or accumulation of stock.
Following this peak, a gradual decrease occurred, but volatility persisted with periods reaching as high as 194 days in the third quarter of 2015. Notably, a sharp reduction in the inventory processing period is evident from late 2015 into 2016, decreasing to approximately 97 days by the second quarter of 2016. This decline suggests an improvement in inventory management or faster turnover during this latter period.
- Average Receivable Collection Period
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The average receivable collection period showed modest variability. It generally stayed within a range of around 58 to 70 days until the first half of 2015. A notable spike occurred in the second quarter of 2015, reaching 77 days, implying that receivables were collected more slowly during this time.
Subsequently, collection periods decreased substantially towards early 2016, with values settling in the mid-60s by mid-2016, indicating an improvement in accounts receivable collection efficiency compared to the earlier spike.
- Operating Cycle
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The operating cycle, encompassing both inventory processing and receivable collection periods, mirrored the trends seen in these components. From 2012 through mid-2015, the cycle lengthened, reaching a peak of 271 days in the second quarter of 2015. This extended cycle length points to slower overall cash conversion, influenced primarily by the increased inventory and receivable periods.
Following this peak, the operating cycle contracted sharply, dropping to around 150-170 days through mid-2016. Such a reduction indicates enhanced operational efficiency, likely driven by faster inventory turnover and improved receivable collections.
In summary, the data reflects a period of increasing working capital duration culminating in mid-2015, characterized by slower inventory processing and receivable collections, which negatively impacted the operating cycle. The subsequent period shows marked improvements, with notable reductions in inventory days and collection periods, resulting in a shortened operating cycle and likely better cash flow management.