Caterpillar Inc. (NYSE:CAT)

Inventory Turnover

The inventory turnover ratio remained relatively stable between 2020 and 2023, fluctuating narrowly around 2.53 to 2.58. However, in 2024, a noticeable decline occurred, with the ratio dropping to 2.39, indicating slower inventory movement compared to previous years.

Receivables Turnover

The receivables turnover ratio demonstrated a generally upward trend from 5.33 in 2020 to a peak of 6.86 in 2023, suggesting improved efficiency in collecting receivables. In 2024, this ratio decreased slightly to 6.61, though it remains higher than the levels observed in 2020 and 2021.

Payables Turnover

This ratio exhibited variability over the period. After declining from 4.75 in 2020 to 4.36 in 2021, it rose again to reach 5.41 in 2023 before slightly decreasing to 5.24 in 2024. The trend indicates some fluctuations in the rate at which the company pays its suppliers, with a peak efficiency in 2023.

Working Capital Turnover

The working capital turnover ratio showed a strong upward trajectory from 2.84 in 2020 to a high of 5.23 in 2023, marking a considerable improvement in how effectively working capital is utilized to generate sales. This upward movement reversed somewhat in 2024, declining to 4.58, though it remains significantly above the 2020 figure.

Average Inventory Processing Period

The average inventory processing period remained fairly constant around 143-144 days from 2020 through 2022, then slightly shortened to 141 days in 2023. In 2024, there was an increase to 153 days, indicating that it took longer to sell inventory, correlating with the reduction in inventory turnover that year.

Average Receivable Collection Period

This metric showed consistent improvement, decreasing from 68 days in 2020 to 53 days in 2023, reflecting faster collection of receivables. A minor increase to 55 days occurred in 2024, but the period remains shorter compared to earlier years.

Operating Cycle

The operating cycle steadily shortened from 211 days in 2020 to 194 days in 2023, indicating an enhancement in overall operational efficiency. However, the cycle extended again to 208 days in 2024, partially reversing previous improvements.

Average Payables Payment Period

The company extended its payment period from 77 days in 2020 to a peak of 84 days in 2021, then reduced the period to 67 days by 2023. In 2024, the period slightly increased to 70 days. These changes suggest a strategic balancing between optimizing cash outflows and supplier relationships.

Cash Conversion Cycle

The cash conversion cycle improved from 134 days in 2020 to 124 days in 2021 and 2022, maintaining a favorable liquidity position. It slightly deteriorated to 127 days in 2023 and further to 138 days in 2024, indicating longer durations to convert investments in inventory and receivables back into cash.

Analysis of the annual financial data reveals several noteworthy trends related to cost of goods sold, inventories, and inventory turnover ratios over the five-year period studied.

Cost of Goods Sold (COGS)

The cost of goods sold has demonstrated a generally increasing trend from 2020 through 2023, rising from 29,082 million US dollars to a peak of 42,767 million US dollars. However, in 2024, there was a decline bringing the figure down to 40,199 million US dollars. This represents a notable decrease after continuous growth and could signal changes in production costs or sales volume.

Inventories

Inventories have steadily increased each year from 11,402 million US dollars in 2020 to 16,827 million US dollars in 2024. The growth rate appears consistent, reflecting potential stock accumulation or adjustments in inventory management strategies to support anticipated sales or production.

Inventory Turnover Ratio

The inventory turnover ratio remained relatively stable across the period from 2.55 in 2020 to 2.58 in 2023, indicating consistent efficiency in managing inventory relative to cost of goods sold. However, 2024 saw a decrease in the turnover ratio to 2.39, suggesting a slower movement of inventory or increased inventory levels relative to sales.

In summary, the data suggests that while inventory levels have steadily risen, the efficiency of turning over inventory has slightly declined in the latest year, potentially signaling changes in demand dynamics or inventory management. The decline in cost of goods sold during 2024 contrasts with the increase in inventory, which may reflect shifts in sales, pricing, or cost control measures.

Sales of Machinery, Energy & Transportation

The sales figures show a consistent upward trend from 2020 to 2023, increasing from $39,022 million to $63,869 million. However, in 2024 there is a slight decline to $61,363 million, which indicates a potential slowdown or market adjustment after several years of robust growth.

Receivables, trade and other

The balance of trade and other receivables gradually increases over the period, from $7,317 million in 2020 to a peak of $9,310 million in 2023, followed by a marginal decrease to $9,282 million in 2024. This steady rise corresponds with the sales growth, reflecting increased credit extended to customers, with a slight stabilization in recent years.

Receivables turnover

The receivables turnover ratio demonstrates an improving efficiency in collecting receivables from 5.33 in 2020 to a peak of 6.86 in 2023, suggesting faster conversion of receivables into cash. However, the ratio decreases slightly to 6.61 in 2024, signaling a modest reduction in collection efficiency, though still above the levels observed at the start of the period.

The financial data reveals key trends regarding the cost of goods sold, accounts payable, and payables turnover ratio over a five-year span.

Cost of Goods Sold (COGS)

The cost of goods sold showed an upward trajectory from 2020 through 2023, increasing from approximately $29.1 billion to around $42.8 billion. This represents a steady rise indicative of either growing sales volume or rising input costs during this period. However, in 2024, there was a slight decrease in COGS to roughly $40.2 billion, which could suggest improved cost controls, reduced sales volumes, or changes in production efficiency.

Accounts Payable

Accounts payable increased significantly from about $6.1 billion in 2020 to a peak near $8.7 billion in 2022. Following this peak, a gradual decline was observed in 2023 and 2024, reducing to just above $7.6 billion. This pattern implies that the company may have extended payment terms or accrued more payables up to 2022 before tightening payment schedules or decreasing procurement levels thereafter.

Payables Turnover Ratio

The payables turnover ratio fluctuated within the range of 4.36 to 5.41 over the five-year period. After decreasing from 4.75 in 2020 to 4.36 in 2021, it rebounded to 4.76 in 2022 and then rose more sharply to 5.41 by 2023. It decreased slightly in 2024 to 5.24. These changes point to variations in how quickly the company settled its payables, with higher ratios indicating faster payments. The increased turnover in 2023 suggests a more aggressive payment policy or improved liquidity management during that year.

Overall, the data suggests that the company experienced increased production activities or costs through most of the period, followed by signs of cost management or operational adjustments in 2024. The accounts payable and turnover ratio trends corroborate a strategic shift in payables management, likely aimed at balancing supplier relationships and working capital efficiency.

Working Capital

The working capital displayed a slight decline from 13,747 million USD in 2020 to 12,221 million USD in 2023, followed by a modest recovery to 13,410 million USD in 2024. Overall, this indicates a minor contraction in the short-term liquidity position of the company during the period, with a partial rebound at the end.

Sales of Machinery, Energy & Transportation

Sales revenues for Machinery, Energy & Transportation showed a consistent upward trend from 39,022 million USD in 2020 to a peak of 63,869 million USD in 2023. However, there was a slight decline in 2024 to 61,363 million USD. This trend suggests robust growth in sales over the five-year period, with a slight deceleration or adjustment occurring in the last year.

Working Capital Turnover

The working capital turnover ratio increased steadily from 2.84 in 2020 to 5.23 in 2023, indicating enhanced efficiency in generating sales relative to working capital employed. In 2024, the ratio decreased to 4.58, reflecting a slight reduction in operational efficiency or increased working capital relative to sales. The overall trend demonstrates improvements in asset utilization up to 2023 with some moderation thereafter.

Inventory Turnover Ratio

The inventory turnover ratio remained relatively stable over the five-year period from 2020 to 2024, fluctuating slightly between 2.39 and 2.58. Specifically, the ratio experienced minimal variations, moving from 2.55 in 2020 to a low of 2.39 in 2024, with the highest point observed at 2.58 in 2023. This suggests a consistent efficiency in managing inventory relative to sales, although a modest decline in turnover in the final year indicates a slight reduction in the frequency at which inventory is sold and replaced.

Average Inventory Processing Period

The average inventory processing period, expressed in days, exhibited a generally stable trend between 2020 and 2023, ranging from 141 to 144 days. However, there was a notable increase in 2024, where the period extended to 153 days. This increase indicates that inventory was held for a longer duration before being processed or sold, which may reflect either slower sales or a buildup of inventory levels. The inverse relationship between inventory turnover ratio and processing period is evident, as the increase in processing days corresponds with the decrease in inventory turnover during 2024.

Receivables Turnover

The receivables turnover ratio exhibits a general upward trend over the five-year period. Starting at 5.33 in 2020, the ratio increased steadily each year, reaching a peak of 6.86 in 2023 before experiencing a slight decline to 6.61 in 2024. This pattern suggests an overall improvement in the efficiency of collecting receivables, with the company able to convert its receivables into cash more frequently. The slight dip in 2024 may indicate a minor shift in collection performance or a change in credit policies.

Average Receivable Collection Period

The average receivable collection period demonstrates a consistent decline from 68 days in 2020 down to 53 days by 2023, reflecting a shortening in the time taken to collect outstanding receivables. In 2024, however, there is a modest increase to 55 days. This trend aligns inversely with the receivables turnover ratio, confirming that enhanced collection efficiency occurred throughout the earlier part of the timeframe followed by a slight reversal. The initial steady reduction in collection days indicates improvements in credit management or customer payment behavior, while the increase in 2024 suggests some loosening or external factors affecting collection timing.

Average Inventory Processing Period

The average inventory processing period remained relatively stable from 2020 to 2023, fluctuating slightly between 143 and 144 days before declining marginally to 141 days in 2023. However, in 2024, there was an increase to 153 days, indicating a notable rise in the time inventory is held before being processed or sold.

Average Receivable Collection Period

The average receivable collection period showed a clear downward trend from 68 days in 2020 to 53 days in 2023, indicating improved efficiency in collecting receivables. Nonetheless, in 2024, this period increased slightly to 55 days, suggesting a minor easing in collection efficiency compared to the previous year.

Operating Cycle

The operating cycle decreased steadily from 211 days in 2020 to 194 days in 2023, reflecting improved overall operational efficiency with faster inventory turnover and receivables collection. In 2024, the operating cycle increased again to 208 days, largely influenced by the rise in inventory processing time and slight increase in receivables collection period.

Payables Turnover

The payables turnover ratio exhibits variability across the analyzed period. Starting at 4.75 in 2020, the ratio declined to 4.36 in 2021, indicating slower payments or increased accounts payable relative to purchases. However, the ratio recovered to 4.76 in 2022, nearly matching the 2020 level, and improved further to 5.41 in 2023, suggesting faster payments or reduced accounts payable. In 2024, the ratio slightly decreased to 5.24, but remained higher than the initial years, highlighting a general trend towards more efficient management of payables over time.

Average Payables Payment Period

The average payables payment period mirrors the inverse of the payables turnover trend. It increased from 77 days in 2020 to 84 days in 2021, reflecting slower payment to suppliers. Subsequently, this period decreased to 77 days in 2022, then sharply fell to 67 days in 2023, indicating accelerated payments. A slight increase to 70 days occurred in 2024, yet the payment period remained shorter than at the beginning of the timeframe. These changes collectively point to an improvement in cash outflow timing and possibly stronger supplier relations or credit terms in recent years.

Average Inventory Processing Period

The average inventory processing period remained relatively stable from 2020 through 2023, fluctuating narrowly between 141 and 144 days. However, in 2024, there was a noticeable increase to 153 days, indicating a longer time to process inventory compared to previous years.

Average Receivable Collection Period

A progressive decrease in the average receivable collection period is apparent from 68 days in 2020 to 53 days in 2023, suggesting improved efficiency in collecting receivables. In 2024, this number rose slightly to 55 days, indicating a small reversal though still better than the earlier years.

Average Payables Payment Period

The average payables payment period peaked at 84 days in 2021 but then declined to 67 days by 2023. There was a moderate increase to 70 days in 2024. This pattern shows some fluctuation in the payment terms or strategies with suppliers, with a general trend towards faster payment after 2021 but a slight lengthening again in the most recent year.

Cash Conversion Cycle

The cash conversion cycle decreased from 134 days in 2020 to 124 days in both 2021 and 2022, indicating improved overall efficiency in working capital management. It then increased slightly to 127 days in 2023 and further to 138 days in 2024, reflecting a lengthening of the time between cash outflows and inflows and potentially signaling a need to review working capital practices.