Becton, Dickinson & Co. (NYSE:BDX)

The analysis of the financial ratios over the specified periods reveals several trends in operational efficiency and working capital management.

Inventory Turnover

The inventory turnover ratio started at a moderate level around 3.78 in late 2016, peaking slightly and then dipping significantly to 2.09 in early 2018, indicating slower movement of inventory during that period. Subsequently, the ratio recovered steadily to fluctuate around the mid-3's, suggesting an improvement in inventory management towards more efficient turnover by early 2022, though still with some variability.

Receivables Turnover

This ratio demonstrates relatively stable performance over time, beginning at about 7.72 in late 2016, dipping somewhat in 2017 and early 2018, and then progressively rising from 7.14 in late 2020 to exceed 9 by mid-2021. This indicates improved efficiency in collecting receivables over the last few years, enhancing liquidity. Some fluctuations are observed but overall the trend is positive.

Working Capital Turnover

The working capital turnover ratio shows considerable volatility, with very high spikes observed in late 2017 and 2018 reaching above 80, and multiple missing data points in related periods. Such spikes may indicate abnormal operational conditions or data anomalies. Apart from these outliers, the ratio mostly fluctuates in a moderate range between approximately 4 and 14. This inconsistency suggests variable efficiency in converting working capital into sales.

Average Inventory Processing Period

The number of days inventory is held tends to increase from approximately 97 days at the end of 2016 to a peak of 174 days in early 2018, reflecting slower inventory turnover consistent with the dip in inventory turnover ratio. Following this peak, the processing period generally declines and stabilizes near the 100 to 110-day range, indicating a return to more effective inventory management practices over time.

Average Receivable Collection Period

The days taken to collect receivables increased gradually from about 47 days at the end of 2016, rising to 60 days in early 2018, correlating with the lower receivables turnover in that period. Subsequent data shows a downward trend, reaching as low as 38 days in mid-2021, demonstrating enhanced collection efficiency. Some fluctuation is noted, but the general movement favors shorter collection periods.

Operating Cycle

The operating cycle lengthened from around 144 days at the end of 2016 to a peak of 234 days in early 2018, indicating slower inventory and receivable turnover. Post-2018, the operating cycle shortens to fluctuate around 140 to 160 days. This suggests an improvement in the company's overall operational efficiency, managing both inventory and receivables more effectively.

Overall, the data indicates a period of operational challenges around 2017 to early 2018 characterized by slower turnover and longer cycles. Following this, there is a clear trend towards improving efficiency in inventory management and receivables collection, resulting in more favorable turnover ratios and shortened operating cycles by 2021 and early 2022. The working capital turnover ratio remains volatile, which may warrant further investigation into underlying causes.

The cost of products sold demonstrates variability across the reported periods, with values ranging from approximately 1,470 million USD to over 2,848 million USD. There is a noticeable increase starting from the March 31, 2018 period, where costs rise sharply from earlier levels around 1,530 to 1,679 million USD observed in 2016 and 2017. This spike continues through 2018 and peaks in the December 31, 2021 period before showing a slight decline in the first quarter of 2022.

Inventories exhibit a general upward trend throughout the periods, starting from 1,692 million USD in December 2016 and reaching a peak of 3,258 million USD by March 31, 2022. This trend indicates growing inventory holdings over time, with a significant jump occurring from late 2016 to late 2017. After some fluctuations, the inventory level stabilizes above the 2,800 million USD mark from late 2019 onward, with mild increases resulting in record highs in early 2022.

Inventory turnover ratios, available for partial periods, oscillate primarily between 3.15 and 3.78, with a few notable dips as low as 2.09 around the December 31, 2017 period. Overall, turnover ratios illustrate periods of reduced efficiency in inventory management around 2017 and early 2020, followed by recoveries to levels comparable to earlier years. The fluctuations correspond with the periods of increased inventory values, hinting at potential adjustments in operational or market conditions impacting how quickly inventory is sold.

Cost of Products Sold

Shows significant increase starting in 2018 with peaks in late 2020 and 2021, followed by a slight decrease in early 2022.

Inventories

Exhibit a sustained upward trajectory with a marked increase between 2016 and 2017, stabilizing at higher levels from 2019 onward and reaching new highs in early 2022.

Inventory Turnover Ratio

Displays variability with a general band between 3.15 and 3.78, including occasional downturns, reflecting shifts in the efficiency of inventory usage matching the inventory and cost trends.

The analysis of the quarterly financial data reveals several notable trends in revenues, trade receivables, and receivables turnover over the observed periods.

Revenues

Revenues exhibit a general upward trajectory from the beginning to the end of the reporting period. Starting at approximately $2,986 million in December 2015, revenues fluctuate with moderate increases and decreases but show significant growth after the first quarter of 2018, peaking around $5,315 million in March 2021. Despite some periods of decline, such as in late 2016 and mid-2020, the overall pattern suggests expansion in sales or service income over time.

Trade Receivables, Net

Trade receivables increase alongside revenues, beginning near $1,513 million and rising to over $2,300 million by early 2022. This growth is consistent but not without fluctuations; for example, there are dips in mid-2019 and late 2021. The general increase in trade receivables corresponds to the increasing sales volumes but also signifies a growing amount of credit extended to customers.

Receivables Turnover Ratio

The receivables turnover ratio, which measures how efficiently the company collects its receivables, displays some variability over the periods examined. Early on, values hover between about 7.72 to 6.13, indicating a decrease in turnover speed. However, after mid-2018, the ratio increases overall, peaking at 9.57 in June 2021, suggesting improved collection efficiency and potentially tighter credit policies or better receivables management. The periods of high turnover ratio coincide with peaks in revenues, implying effective realization of sales into cash.

In summary, the company demonstrates growing revenues complemented by increasing trade receivables, with a generally improving receivables turnover ratio over time. While trade receivables have grown in value, the improvement in turnover ratio suggests enhanced efficiency in collection practices, supporting healthier cash flow dynamics relative to sales growth.

The financial data reveals several notable trends in working capital, revenues, and working capital turnover ratios over the periods analyzed.

Working Capital

Working capital shows significant volatility throughout the quarters. Starting from a positive value of 1,112 million USD at the end of 2015, it rises sharply to 14,939 million USD by mid-2017 before drastically dropping to negative territory around late 2018 and early 2019. Subsequently, it recovers with fluctuations, reaching values above 3,000 million USD in several periods towards the end of 2020 and early 2021, but again experiences a decrease in some quarters, settling around 1,572 to 3,495 million USD in the most recent quarters.

Revenues

Revenues generally exhibit an upward trend over the entire period, increasing from 2,986 million USD at the end of 2015 to a peak of approximately 5,315 million USD in the first quarter of 2021. Despite some quarterly fluctuations, revenues maintain a relatively steady increase. There are occasional dips, such as in late 2016 and late 2020, but overall, the trend is positive, indicating growth in sales or service activity.

Working Capital Turnover Ratio

The working capital turnover ratio, reported sporadically with some missing data, shows considerable variation. Notably, it exhibits very high values during late 2018 (around 82) and early 2019 (above 31), suggesting efficient use of working capital during these periods. These spikes are followed by declines and renewed fluctuations, with ratios generally ranging between 4 and 13 in the most recent periods. The inconsistency and extreme values indicate fluctuating efficiency in converting working capital into revenue.

Overall, the data highlights a company experiencing substantial fluctuations in working capital levels, which at times turn negative, coupled with a steady increase in revenues. The working capital turnover ratio's variability suggests periods of both high and low efficiency in asset management relative to revenues. Such patterns could be indicative of operational adjustments, changes in asset management strategies, or fluctuating market conditions affecting liquidity and efficiency over time.

The analysis of the inventory turnover ratio and average inventory processing period over the presented quarterly periods reveals several patterns and trends.

Inventory Turnover Ratio

The inventory turnover ratio shows variation throughout the periods, beginning around 3.78 in late 2016, then declining to a low of approximately 2.09 in early 2018. Following this low point, the ratio recovers gradually, stabilizing around the 3.4 to 3.7 range through late 2018 and into 2019. There are minor fluctuations observed into 2020 and 2021, with the ratio generally maintaining a level between 3.1 and 3.8, indicating a relative consistency in how efficiently inventory is converted into sales during this timeframe.

Average Inventory Processing Period

The average inventory processing period, expressed in days, exhibits an inverse pattern to the inventory turnover ratio, which is expected given their relationship. The processing period increased significantly from approximately 97 days in late 2016 to a peak of 174 days in early 2018, marking a pronounced slowdown in inventory turnover. Subsequently, there is a clear downward trend, with the period decreasing through the rest of 2018 to under 100 days, followed by some fluctuations around the 100 to 110-day mark during 2019 and into 2022. This indicates an improvement in the speed of inventory processing after the peak delays noted in early 2018.

Overall Observations

The data highlights a period of reduced inventory efficiency around early 2018, with significant increases in inventory days and a corresponding drop in turnover ratio. After this period, the company appears to have taken measures that resulted in improving inventory management, as reflected by the normalization and stabilization of both metrics. Despite some variability, the inventory processing period hovers around 100 days in the most recent quarters, and the turnover ratio remains relatively stable above 3, suggesting consistent operational performance in managing inventory.

The receivables turnover ratio exhibits noticeable fluctuations over the examined periods, indicating variable efficiency in the collection of receivables. Starting from the first recorded value in December 2016, the ratio initially shows a decline from 7.72 to 6.13 by March 2018, suggesting a slower turnover of receivables during this phase. However, following this decline, there is a period of recovery and improvement, with the ratio increasing steadily to peak around 9.57 in June 2021, representing enhanced efficiency in receivables collection. After this peak, the ratio experiences a slight decrease toward the end of the period, settling near 8.7 by March 2022.

Correspondingly, the average receivable collection period, expressed in the number of days, moves inversely to the turnover ratio, as expected. It begins with higher values around 47 days in December 2016 and increases to a plateau at about 62 days by mid-2018, indicating slower collections. Subsequently, the collection period shortens steadily, reaching around 38 days in late 2021, reflecting improved collection processes and faster conversion of receivables into cash. In the most recent quarters, the collection period slightly lengthens but remains considerably lower than the mid-period peak, stabilizing around 40-42 days.

This inverse relationship between the receivables turnover and the average collection period demonstrates a cyclical pattern of efficiency over the observed timeline. The initial decline in turnover combined with an increase in collection days points to challenges in receivables management during the earlier phase. The later improvement signifies enhanced operational control or favorable market conditions facilitating quicker collections. Overall, the recent data implies a more effective receivables management approach, contributing positively to the company's liquidity and working capital management.

The average inventory processing period exhibits a generally fluctuating pattern over the observed quarters. Beginning at 97 days in December 2015, it shows an increasing trend, reaching a peak of 174 days in March 2018. Following this peak, the period declines steadily towards the end of 2018, settling around 98 days in the fourth quarter of 2018. Subsequently, it stabilizes with minor fluctuations, mostly ranging between 100 and 110 days, concluding the observed period at approximately 110 days in March 2022.

The average receivable collection period similarly demonstrates variability with some noticeable shifts. Starting around 47 days in December 2015, it remains relatively stable through 2016 with values fluctuating between 45 and 53 days. From late 2016 through 2018, the period peaks at 62 days in June 2018 before declining to the mid-40 days range by early 2019. It continues to oscillate around 40 to 50 days thereafter, with a slight decrease apparent from the first quarter of 2021 through the first quarter of 2022, ending near 42 days.

The operating cycle, which combines inventory processing and receivable collection periods, reflects the combined trends observed in the two underlying metrics. It begins at 144 days in December 2015 and gradually increases, showing an upward trajectory that peaks at 234 days in March 2018. After this peak, the operating cycle declines steadily, reaching approximately 140 days by the end of 2021. The cycle then experiences a slight increase toward the first quarter of 2022, finishing around 152 days.

Inventory Processing Period

Shows an initial increase peaking in early 2018, followed by a reduction and relatively stable performance with minor fluctuations from late 2018 to early 2022.

Receivable Collection Period

Displays moderate fluctuations with peaks around mid-2018, followed by a decline and stabilization around 40 to 50 days in recent periods.

Operating Cycle

Tracks the combined impact of inventory and receivable periods, peaking significantly in early 2018, then declining toward more moderate levels by the end of the analyzed period.

Overall, the data reveals a significant elongation of the operating cycle through 2017 and early 2018, driven primarily by an extension in inventory processing days and a moderate increase in the receivable collection period. Post-2018, operational efficiency appears to improve, evidenced by shorter inventory and receivable periods resulting in a decreased operating cycle. The improvements suggest better management of working capital components after the peak period.