Becton, Dickinson & Co. (NYSE:BDX)

Inventory Turnover

The inventory turnover ratio showed some fluctuations over the years, starting at 3.78 in 2016, declining to a low of 3.38 in 2017, and then gradually recovering to 3.78 by 2021. This indicates a moderate efficiency in managing inventory, with a slight dip followed by improvement in the later years.

Receivables Turnover

The receivables turnover ratio exhibited a generally stable pattern with minor variations, starting at 7.72 in 2016 and dropping slightly to the range of 6.89 to 7.37 from 2017 to 2020. A noticeable increase occurred in 2021, reaching 8.11, reflecting enhanced efficiency in collecting receivables during that year.

Payables Turnover

The payables turnover ratio experienced a consistent decline from 9.76 in 2016 to 6.04 in 2021. This trend suggests a lengthening payment cycle to suppliers, implying potentially more extended credit terms or delayed payments over time.

Working Capital Turnover

Working capital turnover displayed extreme volatility, with an abnormal spike to 81.96 in 2018 from 0.79 in 2017, and then fluctuated widely in subsequent years. This erratic pattern could indicate significant changes or irregularities in working capital management during this period, possibly due to alterations in current assets or liabilities.

Average Inventory Processing Period

The average inventory processing period mostly remained stable around 100 to 108 days, with a slight increase from 97 days in 2016 to 108 days in 2017, followed by minor fluctuations thereafter, and returning to 97 days in 2021. This suggests that the time to turn inventory into sales was relatively consistent over the years.

Average Receivable Collection Period

The average period for collecting receivables rose from 47 days in 2016 to about 53 days during 2017-2018, then gradually decreased to 45 days by 2021, implying improved efficiency in receivable collections in recent years.

Operating Cycle

The operating cycle duration increased from 144 days in 2016 up to approximately 156 days during 2018-2020, before declining to 142 days in 2021. This indicates that overall business cycle time lengthened temporarily but improved by the end of the observed period.

Average Payables Payment Period

The average payables payment period extended steadily from 37 days in 2016 to 60 days in 2021. This growing period aligns with the declining payables turnover ratio, reinforcing the observation of a longer time frame in settling obligations with suppliers.

Cash Conversion Cycle

The cash conversion cycle showed a moderate increase from 107 days in 2016 to a peak of 114 days in 2017, maintaining near 110-111 days through 2018-2019, then improving significantly to 82 days by 2021. The reduction in the cash conversion cycle towards the end suggests enhanced cash flow efficiency and improved short-term liquidity management.

Cost of products sold

The cost of products sold exhibited a fluctuating but generally upward trend over the analyzed period. It started at 6,492 million US dollars in 2016, decreased slightly to 6,151 million in 2017, then increased significantly to 8,721 million in 2018. Following this, it showed a steady increase year over year, reaching 10,821 million by 2021. This pattern suggests increasing production costs or sales volume expansion over time, especially from 2018 onward.

Inventories

Inventories increased consistently during the period. From 1,719 million US dollars in 2016, inventory levels rose each year, reaching 2,866 million in 2021. This steady increase indicates a buildup of stock, which may reflect preparation for higher sales demand or slower turnover.

Inventory turnover ratio

The inventory turnover ratio showed minor fluctuations but remained relatively stable over the period. Starting at 3.78 in 2016, it decreased to 3.38 in 2017, then increased to 3.56 in 2018, followed by a slight decline to 3.48 in 2019 and 2020. In 2021, it rose back to 3.78, matching the initial value of the period. This stability suggests consistent efficiency in inventory management, with turnover rates hovering around similar levels despite changes in inventory and cost of goods sold.

The financial data under review reveals several notable trends over the six-year period ending September 30, 2021. Revenues exhibit fluctuations with an overall upward trajectory, demonstrating growth particularly between 2017 and 2018, and again markedly from 2020 to 2021, where the revenue increased from 17,117 million USD to 20,248 million USD.

Trade receivables, net, consistently increased year over year, moving from 1,618 million USD in 2016 to 2,497 million USD in 2021. This steady rise suggests expanding credit sales or potentially longer collection periods, which warrants further attention to working capital management.

The receivables turnover ratio shows some variability, with a decline from 7.72 in 2016 to 6.89 in 2018, indicating a slower collection period during that time. However, the ratio rebounded to 8.11 by 2021, the highest in the period, implying an improvement in efficiency of collecting receivables in the most recent year.

Revenues

While there is year-to-year fluctuation, the overall pattern is positive, reflecting growth in top-line performance, especially significant in recent years.

Trade Receivables, Net

There is a consistent upward trend, which could signal increased sales on credit. Careful management is necessary to prevent potential liquidity risks.

Receivables Turnover Ratio

The turnover ratio experienced a decline initially but improved after 2018, reaching the highest level in 2021. This suggests enhanced collection efficiency despite the increased receivables balance.

The financial data reveals several notable trends over the six-year period from 2016 to 2021. Both the cost of products sold and accounts payable exhibit a general upward trajectory, indicating an expansion in operational scale or increased procurement activities.

Cost of Products Sold

The cost of products sold increased steadily from US$6,492 million in 2016 to US$10,821 million in 2021. This represents a significant increase of approximately 66.7% over the period. The year-on-year data shows consistent growth, with particularly strong rises between 2017 and 2018, and again from 2020 to 2021.

Accounts Payable

Accounts payable also displayed a rising trend, growing from US$665 million in 2016 to US$1,793 million in 2021. This more than doubling of payables aligns with the increasing cost of products sold, suggesting an increase in outstanding obligations to suppliers consistent with business growth. The increment was most pronounced between 2019 and 2021.

Payables Turnover Ratio

The payables turnover ratio declined from 9.76 in 2016 to 6.04 in 2021. A decreasing payables turnover ratio often indicates that the company is taking longer to pay its suppliers. While the ratio remained relatively stable between 2017 and 2019, it exhibits a marked downward trend beginning in 2020. This could reflect changes in supplier payment terms, cash flow management strategies, or the company's negotiation leverage.

In summary, the data suggests that while the company has experienced substantial growth in procurement volume, it has increasingly extended the period for settling its payables. The combination of rising costs and accounts payable, together with a falling turnover ratio, may warrant further investigation into working capital management and supplier relations.

The analysis of the financial data reveals several key trends pertaining to working capital, revenues, and working capital turnover over the six-year period.

Working Capital

Working capital demonstrated considerable fluctuations throughout the period. Initially, it stood at 1,967 million USD in 2016 and then surged significantly to 15,291 million USD in 2017. Subsequently, it declined sharply to 195 million USD in 2018, followed by a gradual recovery reaching 3,133 million USD in 2020, before slightly decreasing to 2,212 million USD in 2021. This volatility suggests varying efficiency in managing short-term assets and liabilities or changes in operational needs.

Revenues

Revenues exhibited an overall upward trend with some fluctuations. Starting at 12,483 million USD in 2016, there was a minor decrease to 12,093 million USD in 2017. From 2018 onwards, revenues rose steadily, reaching 15,983 million USD in 2018, 17,290 million USD in 2019, and 17,117 million USD in 2020. The highest revenue was recorded in 2021 at 20,248 million USD. This suggests positive growth in sales or business expansion over the years despite minor periods of stagnation.

Working Capital Turnover

Working capital turnover showed extreme variability, reflecting the changes in both working capital and revenues. In 2016, the ratio was moderately high at 6.35, drastically dropped to 0.79 in 2017, and then spiked to an unusually high level of 81.96 in 2018. This dramatic peak could be attributed to the very low working capital in that year coupled with relatively high revenues. Thereafter, the turnover returned to more reasonable levels, with 17.14 in 2019, then decreasing to 5.46 in 2020, and rising again to 9.15 in 2021. These fluctuations indicate inconsistent efficiency in using working capital to generate revenues over the analyzed years.

Inventory Turnover

The inventory turnover ratio shows fluctuations over the six-year period. It started at 3.78 in 2016, declined to a low of 3.38 in 2017, then gradually recovered reaching 3.56 in 2018 and slightly declining again to 3.49 and 3.48 in 2019 and 2020, respectively. By 2021, the ratio reverted to the initial level of 3.78. This pattern indicates variability in the rate at which inventory was sold and replaced, with a dip observed primarily in 2017 and stability returning towards the end of the period.

Average Inventory Processing Period

The average inventory processing period, measured in days, demonstrates an inverse pattern to the inventory turnover. It increased from 97 days in 2016 to a peak of 108 days in 2017, suggesting that inventory was held longer during that year. Subsequent years saw a moderate decrease to 103 days in 2018 and a slight increase stabilizing at 105 days in 2019 and 2020. By 2021, the period reduced back to 97 days, mirroring the initial year's value. This trend aligns with the variations in inventory turnover, indicating fluctuations in inventory management efficiency and sales velocity over time.

Overall Analysis

There is a clear inverse relationship between inventory turnover and the average inventory processing period throughout the analyzed years. Periods of lower turnover coincide with longer inventory holding times, and vice versa. The data suggests that the company experienced a dip in inventory management efficiency around 2017, with improvements leading to recovery by 2021. The return to initial values in 2021 indicates a restoration to earlier operational levels regarding inventory handling.

Receivables Turnover

The receivables turnover ratio exhibited a fluctuating trend over the six-year period. Initially, it decreased from 7.72 in 2016 to 6.89 in 2018, indicating a reduction in the efficiency of collecting receivables. However, from 2018 onwards, the ratio improved, reaching 8.11 by 2021, the highest point in the dataset, which suggests enhanced credit management and quicker collection of receivables in the later years.

Average Receivable Collection Period

The average receivable collection period showed a corresponding inverse pattern compared to the receivables turnover. It increased from 47 days in 2016 to a peak of 53 days during 2017 and 2018, reflecting a longer time to collect receivables. After 2018, the period gradually decreased, reaching a low of 45 days in 2021, signifying improved collection efficiency and a shorter time to convert receivables into cash.

Overall Analysis

The data reveals that the company's receivables management experienced a phase of decline in efficiency through 2016 to 2018, followed by a steady improvement from 2019 to 2021. The upward trend in receivables turnover combined with the downward trend in the collection period during the latter years indicates strengthened operational control over accounts receivable. This enhancement likely contributes positively to cash flow and working capital management.

The data reflects the operational efficiency and working capital management over a six-year period, focusing on inventory processing, receivables collection, and the overall operating cycle.

Average Inventory Processing Period

This metric shows a moderate fluctuation over the period. It increased from 97 days in 2016 to a peak of 108 days in 2017, followed by a slight decline and stability around 103 to 105 days in the subsequent years. By 2021, it returned to its initial level of 97 days, indicating an improvement in inventory turnover toward the end of the period.

Average Receivable Collection Period

The receivable collection period demonstrated variability with an initial increase from 47 days in 2016 to 53 days in 2017 and 2018, suggesting slower collections during those years. Thereafter, it gradually reduced, reaching 45 days in 2021, the lowest in the dataset. This trend indicates enhanced efficiency in collecting receivables in recent years.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, mirrored the individual components' trends. It increased from 144 days in 2016 to a high of 161 days in 2017, then remained relatively stable between 155 and 156 days until 2020. In 2021, it decreased to 142 days, the shortest cycle length within the period, implying an improvement in the overall efficiency of working capital management.

Overall, the data suggest that while there was some volatility in inventory and receivable management around 2017 and 2018, the company improved its operational efficiency in recent years. The reduction in both the average receivable collection period and the operating cycle in 2021 is particularly notable, reflecting enhanced effectiveness in managing core business processes related to cash conversion.

Payables Turnover

The payables turnover ratio exhibits a declining trend over the six-year period. Starting at 9.76 in 2016, it decreased to 6.04 by 2021. This decline suggests that the company is paying its suppliers less frequently or taking longer to settle its accounts payable year over year.

Average Payables Payment Period

The average payables payment period shows an increasing trend, moving from 37 days in 2016 to 60 days in 2021. This indicates that the company is gradually extending the length of time it takes to pay its suppliers. The period increased especially from 2019 onwards, with notable rises in 2020 and 2021.

Overall Insights

The inverse relationship between payables turnover and average payment period is consistent and expected: as the payment period lengthens, the payables turnover decreases. These trends suggest a strategic or operational shift toward longer payment terms with suppliers or possible liquidity management considerations. The extension of the payment period could improve short-term cash flow but might also impact supplier relationships if extended excessively.

Average Inventory Processing Period

The average inventory processing period increased from 97 days in 2016 to a peak of 108 days in 2017. It subsequently decreased slightly and stabilized around 103 to 105 days between 2018 and 2020, then dropped back to 97 days in 2021. This indicates an initial lengthening of inventory processing time, followed by a return to earlier levels, suggesting improved inventory management or faster turnover in the most recent year.

Average Receivable Collection Period

The average receivable collection period rose from 47 days in 2016 to 53 days in 2017 and remained steady at that level in 2018. It then experienced a gradual decline to 45 days by 2021. This trend reflects an initial slowdown in collecting receivables which was later corrected, improving liquidity through faster receipt of payments from customers.

Average Payables Payment Period

The average payables payment period showed a rising trend throughout the period under review. Starting at 37 days in 2016, it consistently increased each year, reaching 60 days in 2021. This suggests the company extended the time taken to settle its payables, potentially improving cash management by delaying outflows.

Cash Conversion Cycle

The cash conversion cycle was relatively stable around 107 to 114 days between 2016 and 2017, then showed a slight downward trend to 104 days in 2020. A significant decrease to 82 days occurred in 2021, indicating a marked improvement in the efficiency with which the company manages its working capital. The reduction seems driven primarily by reductions in the inventory processing period and receivable collection period, along with an extended payable payment period.