Coca-Cola Co. (NYSE:KO)

The analysis of the financial ratios and cycle periods reveals several noteworthy trends over the five-year period.

Inventory Turnover

The inventory turnover ratio exhibits a fluctuating but overall slightly declining trend, starting at 4.11 in 2020, peaking at 4.5 in 2021, then gradually decreasing to 3.88 by the end of 2024. This suggests a modest slowdown in the frequency of inventory replenishment, which is corroborated by the increase in the average inventory processing period from 89 days in 2020 to 94 days in 2024.

Receivables Turnover

The receivables turnover ratio shows a consistent upward trend from 10.5 in 2020 to 13.19 in 2024, indicating improved efficiency in collecting receivables. Correspondingly, the average receivable collection period decreases steadily from 35 days to 28 days, supporting the assessment of enhanced credit management and cash inflow acceleration.

Payables Turnover

The payables turnover ratio exhibits a slight downward trend in the early years from 3.82 in 2020 to a low of 3.31 in 2023, recovering slightly to 3.35 in 2024. This movement is mirrored by an increase in the average payables payment period from 96 days to a peak of 110 days by 2023, then a slight reduction to 109 days, indicating a longer time to settle payables which may positively influence short-term liquidity.

Working Capital Turnover

The working capital turnover ratio shows significant volatility, with a sharp increase from 7.12 in 2020 to 14.9 in 2021, remaining stable through 2023, followed by a dramatic spike to 62.92 in 2024. This suggests a considerable increase in revenue generated per unit of working capital, possibly due to either efficient working capital management or a reduction in working capital base, warranting further investigation to understand the underlying causes.

Operating Cycle

The operating cycle remains relatively stable, fluctuating mildly between 114 and 124 days. This stability suggests a consistent period from inventory purchase to cash collection despite changes in the components of inventory, receivables, and payables management.

Cash Conversion Cycle

The cash conversion cycle demonstrates a marked improvement between 2020 and 2021, dropping from 28 days to 5 days, and remaining low through 2023 before increasing moderately to 13 days in 2024. This indicates a strengthening of the company's ability to convert inventory and receivables into cash more rapidly while managing payables efficiently, contributing to better liquidity management overall.

In summary, the company has improved receivables turnover and reduced collection periods alongside a stable operating cycle. Inventory turnover shows slight weakening, and the payables period has lengthened marginally. The pronounced rise in working capital turnover and fluctuations in the cash conversion cycle suggest effective working capital optimization, though the sudden spike in 2024 warrants a more detailed examination to ascertain sustainability and implications for operational health.

The financial data reveals several trends regarding the company's inventory management and cost structure over the five-year period ending December 31, 2024.

Cost of Goods Sold

The cost of goods sold (COGS) has shown a consistent upward trend from 13,433 million US dollars in 2020 to a peak of 18,520 million in 2023. However, there is a slight decrease observed in 2024, where COGS amounted to 18,324 million US dollars. This increase overall suggests growing production or sales volumes, coupled with potential inflationary pressures or rising input costs over the years.

Inventories

Inventories have increased steadily throughout the period, rising from 3,266 million US dollars in 2020 to 4,728 million US dollars in 2024. This consistent growth in inventory levels indicates either an accumulation of stock possibly in anticipation of higher sales, or a longer holding period of inventory items. The increase might also reflect the company's strategy to buffer against supply chain uncertainties.

Inventory Turnover

The inventory turnover ratio experienced fluctuations during the period. Starting at 4.11 in 2020, it increased to 4.5 in 2021, signaling improved efficiency in converting inventory into sales. However, from 2022 onwards, the ratio gradually declined to 3.88 in 2024, indicating a slower movement of inventory relative to sales. This decreasing turnover towards the end of the period may suggest potential challenges in inventory management or slowing sales relative to stock levels.

In summary, while cost of goods sold and inventory values have generally increased, the declining inventory turnover ratio in recent years highlights a potential decrease in operational efficiency regarding inventory management. This trend warrants further investigation to optimize working capital and maintain profitability.

The financial data presents a clear pattern of growth and operational efficiency over the five-year period.

Net Operating Revenues

There is a consistent upward trend in net operating revenues from US$33,014 million in 2020 to US$47,061 million in 2024. The increase each year reflects steady revenue growth, with the largest absolute growth occurring between 2021 and 2022, and continued yet decelerating growth towards 2024.

Trade Accounts Receivable, Less Allowances

The trade accounts receivable values show moderate fluctuations but generally remain within a stable range from US$3,144 million in 2020 to US$3,569 million in 2024. Despite the increase in revenues, receivables grew only slightly, indicating effective management of credit or tighter credit policies.

Receivables Turnover

The receivables turnover ratio improves significantly from 10.5 in 2020 to a peak of 13.42 in 2023 before a slight decline to 13.19 in 2024. The upward movement indicates enhanced efficiency in collecting receivables relative to revenue, suggesting improving cash flow management and possibly shorter collection periods.

Overall, the data suggests a strong growth trajectory in revenue accompanied by disciplined credit management leading to improved receivables turnover. This combination is positive for liquidity and operational efficiency.

The analysis of the provided financial metrics for the observed periods reveals several notable trends and insights related to cost management and payables efficiency.

Cost of Goods Sold (COGS)

The cost of goods sold has shown a consistent increase from 13,433 million US dollars in 2020 to a peak of 18,520 million US dollars in 2023, followed by a slight decrease to 18,324 million US dollars in 2024. This upward trend suggests rising expenses related to production or procurement over the years, with a marginal containment in the most recent year.

Accounts Payable

The accounts payable balance increased steadily from 3,517 million US dollars in 2020 to 5,590 million US dollars in 2023 before experiencing a moderate decline to 5,468 million US dollars in 2024. This indicates that the company has been gradually increasing its use of credit from suppliers, with a minor reduction in obligations outstanding in the latest year.

Payables Turnover Ratio

The payables turnover ratio decreased from 3.82 in 2020 to 3.34 in 2021, remained relatively stable around 3.31 to 3.39 during 2022 to 2024, with a slight increase to 3.35 in 2024. The initial drop indicates a lengthening of the payment cycle or slower payment of liabilities, while the stabilization suggests consistent payment practices in the latter years, albeit at a slower pace compared to 2020.

Working Capital

The working capital exhibits a downward trend overall, starting at 4639 million US dollars in 2020 and declining to 748 million US dollars by 2024. Notably, there is a sharp decrease between 2023 and 2024, where working capital falls significantly from 3161 million to 748 million. This suggests a reduction in short-term liquidity or current assets relative to current liabilities over the period, especially pronounced in the final year.

Net Operating Revenues

Net operating revenues show a consistent increase over the five-year span, rising from 33,014 million US dollars in 2020 to 47,061 million US dollars in 2024. The upward trend reflects steady growth in the company's sales or core business income, with particularly sizable increments in the earlier years.

Working Capital Turnover

The working capital turnover ratio, which measures revenue generated per unit of working capital, reveals an increasing pattern overall, from 7.12 times in 2020 to a marked 62.92 times in 2024. This sharp increase in the ratio in 2024 is driven by the simultaneous drop in working capital and continued growth in revenues. The elevated ratio in 2024 indicates improved efficiency in utilizing working capital to generate sales but may also signal potential liquidity risks due to the low level of working capital.

Summary

The data indicate growing net operating revenues accompanied by a declining working capital base, particularly in the most recent year. The increasing working capital turnover ratio supports the conclusion that the company has become more efficient in using its working capital to drive revenue growth. However, the significant reduction in working capital raises questions about the sustainability of liquidity and whether operational efficiency gains are balanced against potential short-term financial constraints.

The inventory turnover ratio shows a fluctuating trend over the five-year period. It increased from 4.11 in 2020 to a peak of 4.5 in 2021, followed by a gradual decline to 3.88 by the end of 2024. This indicates that the company initially improved its efficiency in selling and replenishing inventory but experienced a slowdown in this efficiency in the subsequent years.

The average inventory processing period, measured in days, exhibited an inverse pattern compared to the inventory turnover ratio. Starting at 89 days in 2020, it decreased to 81 days in 2021, suggesting faster inventory turnover during that year. However, from 2022 onwards, the processing period lengthened each year, reaching 94 days in 2024. This increase implies that inventory was held longer before sale, reflecting reduced turnover speed.

Inventory Turnover

Increased from 4.11 to 4.5 between 2020 and 2021, then declined to 3.88 by 2024.

Average Inventory Processing Period

Decreased from 89 days to 81 days from 2020 to 2021, then increased steadily to 94 days by 2024.

The inverse relationship between these two metrics is consistent with typical inventory management dynamics. The initial improvement in inventory turnover ratio with a corresponding drop in processing days suggests better inventory management efficiency in 2021. However, the subsequent deterioration indicates challenges in maintaining that level of efficiency, potentially due to changes in demand, supply chain issues, or strategic shifts in inventory policies.

Receivables Turnover

The receivables turnover ratio shows a consistent upward trend over the five-year period. Starting at 10.5 in 2020, it increased steadily each year to reach a peak of 13.42 in 2023, followed by a slight decline to 13.19 in 2024. This indicates an overall improvement in the efficiency with which the company collects its receivables, suggesting enhanced credit management and possibly better customer payment behavior over time.

Average Receivable Collection Period

The average receivable collection period exhibits a generally declining trend, moving from 35 days in 2020 to a minimum of 27 days in 2023, then rising slightly to 28 days in 2024. This pattern corresponds inversely with the receivables turnover ratio and suggests that the company has been able to reduce the time taken to convert receivables into cash, enhancing liquidity. The minor increase in the final year may warrant monitoring to determine if it signals a shift in collection efficiency.

Overall Analysis

The concurrent improvement in receivables turnover and reduction in the average collection period over the majority of the period demonstrate effective credit and cash flow management practices. The slight reversals in 2024 imply the necessity for ongoing attention to receivables processes to sustain these gains. Maintaining or improving these metrics is essential for optimizing working capital and operational cash flow.

Average Inventory Processing Period

The average inventory processing period exhibited a generally fluctuating trend over the analyzed years. It initially decreased from 89 days in 2020 to 81 days in 2021, indicating a faster turnover of inventory. However, this period then increased to 86 days in 2022 and slightly rose to 87 days in 2023. By 2024, it reached 94 days, marking the highest level within this timeframe, which may imply slower inventory movement in the most recent year.

Average Receivable Collection Period

The average receivable collection period showed a consistent and steady decrease during the observed years. Starting from 35 days in 2020, it declined year-on-year to 33 days in 2021, then to 30 days in 2022, further down to 27 days in 2023, and marginally increased to 28 days in 2024. This pattern suggests improving efficiency in receivables collection, with a slight stabilization at the end of the period.

Operating Cycle

The operating cycle experienced minor fluctuations but generally remained within a narrow range. It decreased from 124 days in 2020 to 114 days in 2021, slightly rose to 116 days in 2022, returned to 114 days in 2023, and then increased to 122 days in 2024. This indicates that the overall time taken for the conversion of inventory and receivables into cash has mostly stabilized but showed an extension towards the end of the period, largely influenced by the increase in the inventory processing period.

The analysis of the financial metrics related to payables over the five-year period reveals several noteworthy trends that indicate the company’s evolving payment behavior towards its creditors.

Payables Turnover Ratio

The payables turnover ratio exhibits a slight downward trend from 3.82 in 2020 to a low of 3.31 in 2023, followed by a marginal increase to 3.35 in 2024. This decrease over the initial four years suggests that the company has been settling its payables less frequently each year, indicating slower turnover of payables. The minor uptick in 2024 could imply a modest acceleration in payments or a stabilization of the payables turnover.

Average Payables Payment Period

Complementing the payables turnover trend, the average payables payment period has increased from 96 days in 2020 to about 109-110 days during 2021-2024. This increase in days payable outstanding confirms a lengthening of the payment cycle, meaning the company is taking longer to settle its obligations. The payment period appears to have stabilized around 109-110 days in the last four years.

Overall, the data suggests that the company has extended its payment terms or delayed payments progressively since 2020, potentially to conserve cash or optimize working capital management. The relative stability in both metrics from 2021 onwards could indicate an established strategy or operational norm regarding payables management. Continuing to monitor these figures would be essential to understand whether this pattern presents any liquidity risk or is part of a deliberate financial management approach.

Average inventory processing period

The average inventory processing period initially decreased from 89 days in 2020 to 81 days in 2021, indicating improved efficiency in inventory management. However, it then increased to 86 days in 2022, remaining relatively stable at 87 days in 2023, and rising again to 94 days in 2024. This suggests a trend of lengthening inventory turnover time in the latter years, which may impact working capital requirements.

Average receivable collection period

The average receivable collection period displayed a consistent decline from 35 days in 2020 to 27 days in 2023, suggesting enhanced effectiveness in collecting receivables and improved liquidity. There was a slight increase to 28 days in 2024, which still indicates relatively efficient credit and collection policies compared to previous years.

Average payables payment period

The average payables payment period increased significantly from 96 days in 2020 to 109 days in 2021, maintaining a similar level through 2022, 2023, and 2024 (between 108 and 110 days). This prolonged payment period may reflect strategic use of supplier credit or negotiated payment terms to optimize cash flow.

Cash conversion cycle

The cash conversion cycle experienced a marked reduction from 28 days in 2020 to just 4 days in 2023, signifying an overall improvement in working capital efficiency by minimizing the time between cash outflows and inflows. There was an increase to 13 days in 2024, although this remains well below the initial 2020 level, indicating maintained improvements despite some reversal.