Caterpillar Inc. (NYSE:CAT)

Inventory Turnover

The inventory turnover ratio shows a relatively stable trend from March 2020 through June 2025, fluctuating mostly between 2.16 and 2.58. There was a gradual increase from early 2021 through late 2023, peaking around 2.58, followed by a mild decline in 2024 and 2025. This suggests consistent inventory management with minor variations in the speed of inventory movement.

Receivables Turnover

Receivables turnover gradually improved from 5.33 in early 2020, reaching a peak around 6.95 by late 2023. After that peak, the ratio slightly declined but remained above 6.1 through mid-2025. This indicates enhanced collection efficiency over the years, reflecting faster collection of outstanding receivables overall.

Payables Turnover

Payables turnover presented a general increasing trend from 4.75 in early 2020 to a peak exceeding 5.5 in late 2023. This was followed by a moderate decline to approximately 4.69 by mid-2025. The initial rise suggests quicker payment to suppliers, which later slowed down slightly toward 2025.

Working Capital Turnover

The working capital turnover ratio exhibited a pronounced positive trajectory, starting near 2.84 in early 2020 and climbing significantly to peaks above 6.6 in late 2024. Subsequent values show some volatility but remained elevated above 4.5 through mid-2025. This reflects more effective use of working capital to generate sales or revenue.

Average Inventory Processing Period

The average number of days inventory is held reveals relative stability with minor fluctuations, generally ranging between 141 and 169 days. The period slightly trended upward in the later years, indicating a modest increase in the time products remain in inventory before sale.

Average Receivable Collection Period

The average days to collect receivables generally decreased from approximately 68 days in 2020 to the low 50s between 2022 and 2024, indicating improved collection efficiency. Slight increases occurred toward 2025 but remained near historical lows, suggesting management maintained good control over receivables collection times.

Operating Cycle

The operating cycle duration remained fairly constant, mostly oscillating between 194 and 228 days. There was a marginal downward trend from 211 days in early 2020 to around 194 days in mid-2023, which rebounded slightly toward 2025, suggesting stability in the complete production and sales cycle duration.

Average Payables Payment Period

The average number of days taken to pay suppliers initially rose from 77 days in early 2020 to about 84 days in early 2021, then gradually decreased to around 66–67 days by late 2023. From there it increased again toward 78 days in 2025, indicating varying supplier payment strategies and some extension of payment terms in recent periods.

Cash Conversion Cycle

The cash conversion cycle ranged between 124 and 150 days, exhibiting cyclical fluctuations without a definitive upward or downward trend. The cycle improved toward 124 days in 2021 and 2022 but extended back to around 150 days by mid-2025. This indicates periods of enhanced liquidity management interspersed with instances of lengthened cash conversion times.

The analysis of the quarterly financial data reveals several noteworthy trends regarding cost of goods sold, inventories, and inventory turnover ratios over the observed periods.

Cost of Goods Sold (COGS)

The cost of goods sold demonstrates a fluctuating pattern with a general upward tendency over the years. Starting at 7,266 million USD in March 2020, COGS shows some volatility throughout 2020, with a decrease in the second and third quarters, followed by an increase toward the end of the year. Through 2021 and 2022, the COGS mostly rises, reaching peaks as high as 11,614 million USD in December 2022. The first quarter of 2023 sees a decline, but subsequent quarters reflect fluctuating but generally moderate increases, culminating in 10,807 million USD in June 2025. Despite periodic dips, the overall trend indicates increased production costs or sales volume pushing cost recognition higher over time.

Inventories

Inventory levels steadily increase from March 2020 to June 2025. Beginning at 11,748 million USD, inventories rise consistently with occasional periods of stabilization or minor decreases. The highest levels occur toward the end of the timeline, peaking at 18,595 million USD in June 2025. The growth in inventory stock may reflect expanded production capacity, cautious stockpiling, or anticipation of higher demand. The rise is relatively steady, suggesting a strategic buildup rather than erratic supply chain changes.

Inventory Turnover Ratio

The inventory turnover ratio, which measures how efficiently inventory is utilized or sold, generally declines over the reported quarters. It starts at 2.55 in March 2020, decreasing to a low point around 2.16 by June 2025. This downward trend implies that inventory is turning over more slowly relative to cost of goods sold. A declining turnover ratio can indicate either increasing inventory levels not matched by proportional sales increases or potential issues in inventory management and sales efficiency.

In summary, the data suggests that while production costs and inventory levels have increased steadily over the period, the efficiency with which inventory is converted into sales has diminished somewhat. This could warrant further investigation into sales performance, inventory management practices, or market conditions affecting demand and supply chains.

The sales of Machinery, Energy & Transportation demonstrate a generally upward trajectory over the periods analyzed, with some fluctuations. Starting from 9,914 million USD at the beginning of 2020, sales experienced a decline in the second and third quarters of 2020 before recovering and increasing steadily through 2021, reaching a peak of 15,871 million USD in the fourth quarter of 2021. After some variability, the sales volumes continued to show growth and resilience into 2023, though the first quarter of 2025 recorded a decreased figure compared to earlier peaks, suggesting potential recent challenges or market adjustments.

Receivables, trade and other, follow a somewhat correlated pattern with sales, reflecting changes in the company’s credit sales and collection practices. Beginning with 7,834 million USD in early 2020, receivables decreased slightly during the initial pandemic impact but recovered through 2021, peaking intermittently. Variations in receivables appear less volatile than sales, with a tendency towards stabilization in later periods. The slight fluctuations in receivables indicate ongoing management of credit terms and collections that correspond with the sales activity.

The receivables turnover ratio provides insight into the efficiency of the company’s credit and collection policies. From a starting point of 5.33 in late 2020, the ratio generally improves over time, reaching values above 6.0 consistently from early 2022 onward, and peaking at 6.95 in the third quarter of 2022. This suggests enhanced efficiency in collecting receivables, with the company converting its receivables into cash more frequently during the later periods. Although minor decreases in turnover ratio occur periodically, the overall trend indicates strengthening operational effectiveness in managing outstanding receivables.

Sales of Machinery, Energy & Transportation

Exhibits a recovery and steady growth after initial pandemic-related decline, peaking in late 2021 and generally maintaining elevated levels with moderate fluctuations into early 2025.

Receivables, Trade and Other

Shows some volatility but generally aligns with sales trends, indicating consistent receivables management and credit practices aimed at supporting business scale.

Receivables Turnover Ratio

Demonstrates an improving trend implying enhanced efficiency in collection processes, with turnover rates increasing from just above 5.3 to near or above 6.5, reflecting timely conversion of receivables to cash.

The financial data reveals several notable trends over the analyzed periods relating to cost of goods sold, accounts payable, and the payables turnover ratio.

Cost of Goods Sold (COGS)

The COGS figures exhibit a generally increasing trend from March 2020 through December 2024, with fluctuations reflective of varying economic or operational conditions. Starting at approximately $7.3 billion in the first quarter of 2020, COGS rose to a peak around $11.6 billion by the end of 2022. Following this peak, there is a slight decline observed in subsequent quarters, with values oscillating around $10 billion into early 2025. The increases in COGS from 2020 to 2022 suggest expanding production or sales volume, while the later stabilization and modest decline could indicate cost control efforts or changes in demand.

Accounts Payable

Accounts payable displays an upward trajectory from just under $5.8 billion in March 2020 to over $8.9 billion by December 2023. After this peak, accounts payable shows some volatility but remains elevated, fluctuating between approximately $7.7 billion and $8.6 billion through mid-2025. The growing payables level parallels the increased COGS, suggesting larger purchases or extended credit terms. However, the moderation in payables towards the later periods may reflect shifts in supplier payment strategies or improvements in working capital management.

Payables Turnover Ratio

The payables turnover ratio started from around 4.75 in late 2020 and trended downward to a low point near 4.36 by early 2021, indicating slower payments to suppliers during that timeframe. Thereafter, the ratio steadily increased, reaching a peak of approximately 5.54 in mid-2023, which implies quicker payment cycles. Toward the end of the reporting period, the ratio slightly declined but stayed above 4.5, suggesting a sustained effort to maintain efficient payables management. The fluctuations in this ratio correspond with the observed changes in accounts payable balances and demonstrate active management of payment terms or cash flow timing.

The analysis of the quarterly financial data reveals several noteworthy trends and patterns in the working capital, sales of machinery, energy & transportation, and working capital turnover for the periods examined.

Working Capital

Working capital exhibited fluctuations over the observed quarters, starting at US$11,070 million in March 2020 and generally increasing to a peak of US$16,003 million in March 2021. Following this peak, the working capital values demonstrate a downward trend with intermittent recoveries, particularly notable in March 2023 (US$13,818 million) and September 2023 (US$14,881 million). The latest values indicate a decline again, reaching US$10,424 million in September 2025. Overall, working capital shows volatility but with a cyclical pattern of ups and downs rather than a consistent trend.

Sales of Machinery, Energy & Transportation

Sales figures reveal a more consistent upward trajectory. Beginning at US$9,914 million in March 2020, sales showed variability but generally trended upwards, reaching a high of US$16,674 million in December 2023. Some quarters show slight declines or plateaus, such as from December 2023 to September 2024 and again in mid-2025. Despite these short-term variances, the overall direction indicates growth in sales volume or revenue across the period.

Working Capital Turnover

The working capital turnover ratio, which measures how efficiently the company uses its working capital to generate sales, is only available from December 2020 onwards. This ratio consistently increases over time, starting at 2.84 and rising steadily to a peak of 6.61 in September 2024. Some quarters reflect modest declines or stabilization periods, but the general trend is a marked improvement in turnover efficiency. This suggests enhanced operational performance or more effective working capital management, correlating with the growth in sales figures during the same span.

In summary, the company experienced fluctuations in working capital with intermittent recovery phases, whereas sales demonstrated a general growth trend. The working capital turnover ratio improved significantly, indicating better utilization of working capital resources to support sales. These patterns suggest improvements in operational efficiency despite the volatility in working capital levels.

Inventory Turnover Ratio

The inventory turnover ratio exhibits a generally stable trend over the reported periods, fluctuating within a relatively narrow range. Starting from 2.55 in March 2021, the ratio experiences minor decreases and increases, reaching 2.47 in December 2023 and subsequently decreasing to 2.16 by June 2025. This gradual decline in turnover ratio towards the later periods suggests a slower rate of inventory movement.

Average Inventory Processing Period

The average inventory processing period shows an overall increasing trend over time. Beginning at 143 days in March 2021, the period slightly fluctuates but generally rises, reaching 148 days at the end of 2023. This upward trend continues more noticeably into 2024 and 2025, culminating at 169 days by June 2025. The increase in the inventory processing period aligns with the observed decrease in inventory turnover, indicating that inventory is being held longer before sale or use.

Insights

The combined trends of a decreasing inventory turnover ratio and an increasing inventory processing period suggest potential challenges in inventory management. The slower turnover rate and longer processing periods could imply excess inventory levels, possible inefficiencies in sales or production cycles, or changes in customer demand patterns. These factors may warrant further investigation to identify underlying causes and implement corrective measures to optimize inventory management and improve operational efficiency.

Receivables Turnover

The receivables turnover ratio shows a generally increasing trend from the first reported quarter in March 2021 through June 2025. Starting at 5.33 in March 2021, the ratio initially fluctuates slightly, declining to 5.07 in June 2021 before recovering to 5.97 by December 2021. Over subsequent quarters, the ratio rises gradually, exceeding 6.0 consistently from September 2021 onward. The highest levels are observed between December 2023 and June 2024, peaking at 6.95 and 6.86 respectively. Towards the end of the period, the ratio declines moderately to 6.14 by June 2025. This upward trend indicates a progressive improvement in the efficiency of collecting receivables over time, followed by a slight reduction in turnover efficiency in the last few quarters.

Average Receivable Collection Period

The average receivable collection period inversely mirrors the trend seen in the receivables turnover ratio. Starting at 68 days in March 2021, this metric initially worsens, rising to 72 days in June 2021, suggesting slower collections. However, from September 2021, the collection period decreases steadily, reaching a low of 53 days multiple times between December 2023 and June 2024. This improvement in collection efficiency aligns with the higher receivables turnover ratios seen during the same timeframe. From mid-2024, the average collection period sees a slight increase again, moving back to 59 days by June 2025, indicating a marginal elongation in the time taken to collect receivables towards the end of the period.

Overall Analysis

The data reveals an overall improvement in receivables management efficiency starting in 2021 through early 2024, characterized by increasing turnover ratios and decreasing collection periods. This suggests enhanced credit and collection policies or better customer payment behavior during this timeframe. The moderate reversal of these trends in the most recent quarters indicates some easing of collection efficiency, which may warrant monitoring for potential impacts on liquidity and working capital management going forward.

Average Inventory Processing Period

The average inventory processing period shows a generally fluctuating pattern over the periods observed. Starting with 143 days in March 2021, the period increases to a peak of 155 days in December 2022. Subsequently, the period experiences minor variations, decreasing to 141 days in March 2024, before gradually rising again to reach 169 days by June 2025. This indicates some volatility in inventory management efficiency, with a recent trend toward longer inventory holding times.

Average Receivable Collection Period

The average receivable collection period demonstrates a somewhat cyclical yet overall decreasing trend initially, starting at 68 days in March 2021 and declining to 53 days by June 2024. However, after this low point, the period rises again to 59 days by June 2025. This pattern suggests increased efficiency in receivables collection in the mid-periods, followed by a slight slowdown in the latest periods.

Operating Cycle

The operating cycle reflects the combined effect of inventory processing and receivables collection periods. It remains relatively stable between 201 and 228 days, with modest fluctuations. The cycle starts around 211 days in March 2021, dips to a low of 194 days in March 2024, and then increases again to 228 days by June 2025. The trend indicates an initial improvement in operational efficiency, followed by a lengthening cycle in the most recent periods, likely influenced by the increased inventory processing and receivables collection times.

Payables Turnover Ratio

The payables turnover ratio shows a fluctuating trend over the observed periods, beginning at 4.75 in the first available quarter and declining slightly to a low of 4.36. Subsequently, it demonstrates a steady increase, peaking at 5.54 before experiencing a mild downward trend towards the end of the timeline, settling around 4.69. This pattern suggests variability in how efficiently the company is managing its payables, with an overall improvement noted in the middle periods followed by a modest decline in later quarters.

Average Payables Payment Period (Number of Days)

The average payment period exhibits an inverse relationship with the turnover ratio as expected. Initially, the payment period increases from 77 days to a high of 84 days, indicating a lengthening of the time taken to settle payables. Over subsequent quarters, there is a gradual reduction in days, reaching a low of 66 days, implying improved payment speed. More recently, the number of days has increased slightly again to 78 days, reflecting a marginal slowing in payment pace compared to the previous low point.

Insights and Implications

The overall trend suggests the company experienced early challenges in payables management, reflected by increasing payment periods and decreasing turnover ratios. Midway through the examined quarters, there was a clear improvement in payables efficiency, with faster payments and higher turnover ratios. However, the latest data points indicate a slight reversal of this trend, suggesting the company may be extending payment terms somewhat in recent quarters, possibly due to strategic decisions, changes in supplier terms, or liquidity management considerations.

Average Inventory Processing Period

The average inventory processing period shows a generally upward trend from 143 days in March 2021 to 169 days by June 2025. There are some fluctuations throughout this period, with intermittent decreases such as from 155 days in December 2022 down to 141 days in March 2024, but the overall pattern reflects an increase in the time inventory remains in process.

Average Receivable Collection Period

The average receivable collection period generally decreased over the observed timeframe, starting at 68 days in March 2021 and dropping to mid-50s by early 2023. The period remains relatively stable between 53 and 59 days from 2023 through June 2025, showing improved efficiency in collection compared to earlier periods.

Average Payables Payment Period

This period fluctuated without a strong directional trend. It started at 77 days in March 2021, peaked at 84 days in September 2021, and then declined to around 66 to 67 days through most of 2023 and early 2024. From mid-2024 onwards, there is a gradual increase again to 78 days by June 2025, indicating some variability in the timing of payments to suppliers.

Cash Conversion Cycle

The cash conversion cycle largely mirrors the trends seen in inventory processing and receivables collection. It began at 134 days in March 2021, dropped to a low of 124 days several times between 2021 and 2023, but increased thereafter, reaching 150 days by June 2025. This cycle indicates that the overall time to convert resource inputs into cash flow lengthened toward the end of the observed period.