Analysis of Short-term (Operating) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Short-term Activity Ratios (Summary)
Colgate-Palmolive Co., short-term (operating) activity ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The financial analysis reveals multiple trends related to efficiency and liquidity management over the five-year period ending December 31, 2022.
- Inventory Turnover
- This ratio exhibits a declining trend, starting at 5.05 in 2018 and decreasing to 3.72 by 2022. The gradual reduction indicates that inventory is being sold or used more slowly over time, potentially suggesting increased inventory levels or slower sales.
- Receivables Turnover
- This ratio remained relatively stable in 2018 and 2019 (around 11.0), then improved in 2020 and 2021 with peaks at 13.03 and 13.43 respectively, before declining to 11.95 in 2022. This pattern suggests enhanced efficiency in collecting receivables during 2020-2021, followed by a slight loosening in collection efforts or terms in 2022.
- Payables Turnover
- There was a slight decline from 2018 (5.17) to 2020 (4.63), indicating slower payment to suppliers, but the ratio recovered somewhat to 4.98 in 2022. This implies that the company managed payables more conservatively during the mid-period and began to accelerate payments again by 2022.
- Working Capital Turnover
- Data is inconsistent with a missing value in 2020, but notable values include 111.3 in 2019 and a decrease to 16.2 by 2022, after a peak of 50.35 in 2021. The sharp fluctuations suggest volatility in working capital efficiency, with a pronounced decrease in 2022 pointing to potential challenges in optimizing working capital or changes in sales and current asset structure.
- Average Inventory Processing Period
- There is an increasing trend in inventory days, rising from 72 days in 2018 to 98 days in 2022. This corroborates the inventory turnover ratio and implies a longer holding period for inventory, potentially increasing holding costs or reflecting supply chain challenges.
- Average Receivable Collection Period
- This period shortened from 33 days in 2018–2019 down to 27 days by 2021, indicating improved collection efficiency, but increased again to 31 days in 2022, aligned with the downward trend in receivables turnover that year.
- Operating Cycle
- The operating cycle lengthened steadily from 105 days in 2018 to 129 days in 2022, signifying a longer time to convert raw materials into cash from sales. This aligns with increasing inventory and collection periods, possibly indicating slower overall business processes.
- Average Payables Payment Period
- This metric showed some fluctuation, increasing from 71 days in 2018 to a peak of 79 days in 2020, and then shortening to 73 days by 2022. The changes suggest adjustments in payment policies to suppliers, moving towards quicker payment in recent years.
- Cash Conversion Cycle
- The cash conversion cycle increased from 34 days in 2018 to 56 days in 2022, despite some variation during the period. The longer cycle suggests increased time to free up cash tied in operations, reflecting the combined impact of slower inventory turnover and receivables collection relative to payables.
Overall, the analysis points to a trend of decreasing operational efficiency with regard to inventory management and cash flow conversion, especially in the later years. While receivables management showed some improvement mid-period, it slightly weakened in 2022. Payables management appears to have become more consistent with a slight trend towards quicker payments. The extension of the operating and cash conversion cycles may indicate challenges in working capital management that could affect liquidity and operational flexibility.
Turnover Ratios
Average No. Days
Inventory Turnover
Colgate-Palmolive Co., inventory turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cost of sales | 7,719) | 7,046) | 6,454) | 6,368) | 6,313) | |
| Inventories | 2,074) | 1,692) | 1,673) | 1,400) | 1,250) | |
| Short-term Activity Ratio | ||||||
| Inventory turnover1 | 3.72 | 4.16 | 3.86 | 4.55 | 5.05 | |
| Benchmarks | ||||||
| Inventory Turnover, Competitors2 | ||||||
| Procter & Gamble Co. | 6.09 | 6.20 | 6.41 | 6.93 | — | |
| Inventory Turnover, Industry | ||||||
| Consumer Staples | 7.08 | 8.15 | 7.71 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Inventory turnover = Cost of sales ÷ Inventories
= 7,719 ÷ 2,074 = 3.72
2 Click competitor name to see calculations.
The cost of sales for the company showed a consistent increase throughout the analyzed period from 2018 to 2022. Starting at 6,313 million US dollars in 2018, the cost of sales rose steadily each year, reaching 7,719 million US dollars by the end of 2022. This represents a significant upward trend, indicating growing expenses directly related to the production of goods sold by the company.
Inventories also followed an upward trajectory during the same period. Beginning at 1,250 million US dollars in 2018, inventory levels increased annually, reaching 2,074 million US dollars by the end of 2022. This rise in inventories may suggest expanding stock levels, which could be related to increased production, buildup of safety stock, or changes in demand patterns.
Despite the growing inventories, the inventory turnover ratio exhibited a declining trend over the five years. The ratio dropped from 5.05 in 2018 to 3.72 in 2022, with some fluctuations in the intervening years. The decrease in turnover ratio implies that inventory is being sold and replaced less frequently, which may point to slower movement of goods, potential overstocking, or changes in sales velocity.
- Cost of Sales
- Consistent annual increase from 6,313 million to 7,719 million US dollars.
- Inventories
- Steady growth from 1,250 million to 2,074 million US dollars over five years.
- Inventory Turnover Ratio
- Declined from 5.05 to 3.72, indicating slower inventory cycles despite increasing inventory levels.
Receivables Turnover
Colgate-Palmolive Co., receivables turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | 17,967) | 17,421) | 16,471) | 15,693) | 15,544) | |
| Receivables, net of allowances | 1,504) | 1,297) | 1,264) | 1,440) | 1,400) | |
| Short-term Activity Ratio | ||||||
| Receivables turnover1 | 11.95 | 13.43 | 13.03 | 10.90 | 11.10 | |
| Benchmarks | ||||||
| Receivables Turnover, Competitors2 | ||||||
| Procter & Gamble Co. | 15.59 | 16.11 | 16.98 | 13.67 | — | |
| Receivables Turnover, Industry | ||||||
| Consumer Staples | 31.53 | 34.96 | 33.86 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Receivables turnover = Net sales ÷ Receivables, net of allowances
= 17,967 ÷ 1,504 = 11.95
2 Click competitor name to see calculations.
The financial data demonstrates several notable trends over the five-year period ending December 31, 2022.
- Net Sales
- There is a consistent upward trend in net sales from 2018 through 2022. Starting at 15,544 million US dollars in 2018, sales increased steadily each year, reaching 17,967 million US dollars in 2022. This represents an approximate cumulative growth of 15.5% over the five years, indicating sustained revenue expansion for the period analyzed.
- Receivables, Net of Allowances
- Receivables exhibit some fluctuations during the period. Beginning at 1,400 million US dollars in 2018, the value rose slightly to 1,440 million in 2019, then declined to 1,264 million in 2020. From 2020 onward, receivables recovered and increased to 1,504 million by 2022, surpassing the 2018 level. This variability may reflect changes in credit terms, collections policies, or sales composition across the years.
- Receivables Turnover Ratio
- The receivables turnover ratio, which measures how efficiently receivables are collected, shows a rising trend from 11.1 in 2018 to a peak of 13.43 in 2021. This suggests improved collection efficiency or tighter credit management during these years. However, in 2022, the ratio declined to 11.95, indicating a slight relaxation in collections efficiency or longer collection periods. Despite this dip, the 2022 ratio remains above the 2018 and 2019 levels.
Overall, the company demonstrates consistent revenue growth accompanied by a generally efficient receivables management process, albeit with some variations in collection performance during 2022. The increase in receivables alongside rising sales and changing turnover ratios suggests active management of credit policies adjusted in response to operational or market conditions.
Payables Turnover
Colgate-Palmolive Co., payables turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cost of sales | 7,719) | 7,046) | 6,454) | 6,368) | 6,313) | |
| Accounts payable | 1,551) | 1,479) | 1,393) | 1,237) | 1,222) | |
| Short-term Activity Ratio | ||||||
| Payables turnover1 | 4.98 | 4.76 | 4.63 | 5.15 | 5.17 | |
| Benchmarks | ||||||
| Payables Turnover, Competitors2 | ||||||
| Procter & Gamble Co. | 2.83 | 2.70 | 2.92 | 3.09 | — | |
| Payables Turnover, Industry | ||||||
| Consumer Staples | 6.37 | 6.65 | 6.70 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Payables turnover = Cost of sales ÷ Accounts payable
= 7,719 ÷ 1,551 = 4.98
2 Click competitor name to see calculations.
The analysis of the financial data over the five-year period reveals several trends related to cost of sales, accounts payable, and payables turnover.
- Cost of Sales
- The cost of sales has shown a steady increase each year, rising from $6,313 million in 2018 to $7,719 million in 2022. This represents a cumulative increase of approximately 22.2% over the five-year span, indicating a consistent growth in the direct costs associated with producing goods sold by the company.
- Accounts Payable
- Accounts payable also increased steadily from $1,222 million in 2018 to $1,551 million in 2022. This increase of approximately 26.9% suggests growing obligations to suppliers and vendors over time, which may be aligned with the higher volume of purchases or extended credit terms.
- Payables Turnover
- The payables turnover ratio shows a fluctuating pattern. Starting at 5.17 in 2018, it slightly declined to 5.15 in 2019, then dropped more noticeably to 4.63 in 2020. In 2021, it improved modestly to 4.76 and increased further to 4.98 in 2022. Despite the overall decline from 2018 to 2020, the ratio demonstrates a partial recovery in the most recent two years. This trend could indicate variations in payment practices or negotiation of payment terms, with the lower turnover suggesting longer payment periods during 2020 and a gradual return to quicker payments thereafter.
In summary, the company experienced consistent growth in both cost of sales and accounts payable, reflecting increased operational activity and purchasing commitments. The payables turnover ratio fluctuated but showed signs of improvement after a decline, which may reflect changes in working capital management or supplier payment policies during the period analyzed.
Working Capital Turnover
Colgate-Palmolive Co., working capital turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | 5,113) | 4,397) | 4,338) | 4,179) | 3,793) | |
| Less: Current liabilities | 4,004) | 4,051) | 4,404) | 4,038) | 3,341) | |
| Working capital | 1,109) | 346) | (66) | 141) | 452) | |
| Net sales | 17,967) | 17,421) | 16,471) | 15,693) | 15,544) | |
| Short-term Activity Ratio | ||||||
| Working capital turnover1 | 16.20 | 50.35 | — | 111.30 | 34.39 | |
| Benchmarks | ||||||
| Working Capital Turnover, Competitors2 | ||||||
| Procter & Gamble Co. | — | — | — | — | — | |
| Working Capital Turnover, Industry | ||||||
| Consumer Staples | — | — | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Working capital turnover = Net sales ÷ Working capital
= 17,967 ÷ 1,109 = 16.20
2 Click competitor name to see calculations.
The financial data over the five-year period demonstrates notable fluctuations in key operational metrics.
- Working Capital
- The working capital figures exhibit considerable volatility. Starting at 452 million US dollars in 2018, it sharply declined to 141 million in 2019 and further transitioned into negative territory in 2020 with -66 million. However, it recovered notably in subsequent years, reaching 346 million in 2021 and further surging to 1109 million by the end of 2022. This recovery and growth after 2020 suggest an improvement in the company's short-term financial health and liquidity management.
- Net Sales
- Net sales show a consistent upward trend throughout the period. The sales increased steadily every year from 15,544 million US dollars in 2018 to 17,967 million by 2022. This growth reflects a positive trajectory in the company’s revenue generation capacity, indicating expanding market demand or improved sales strategies.
- Working Capital Turnover
- The working capital turnover ratio fluctuates significantly. It started at a high ratio of 34.39 in 2018, peaked dramatically at 111.3 in 2019, and data is missing for 2020. In 2021, the ratio was 50.35, followed by a sharp decline to 16.2 in 2022. These variations imply changes in how efficiently the company managed its working capital relative to its sales. The extremely high ratio in 2019 could be a result of the reduced working capital base that year, while the drop toward 2022 corresponds with the large increase in working capital, indicating a deceleration in turnover efficiency despite rising sales.
Overall, while sales steadily grew, the working capital and its turnover reflected more erratic changes, highlighting fluctuating operational efficiencies and liquidity positions across the timeframe analyzed.
Average Inventory Processing Period
Colgate-Palmolive Co., average inventory processing period calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Inventory turnover | 3.72 | 4.16 | 3.86 | 4.55 | 5.05 | |
| Short-term Activity Ratio (no. days) | ||||||
| Average inventory processing period1 | 98 | 88 | 95 | 80 | 72 | |
| Benchmarks (no. days) | ||||||
| Average Inventory Processing Period, Competitors2 | ||||||
| Procter & Gamble Co. | 60 | 59 | 57 | 53 | — | |
| Average Inventory Processing Period, Industry | ||||||
| Consumer Staples | 52 | 45 | 47 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 3.72 = 98
2 Click competitor name to see calculations.
The financial data reveals a downward trend in inventory turnover over the five-year period, indicating a decline in the efficiency with which inventory is sold and replaced. The ratio decreased from 5.05 in 2018 to 3.72 in 2022, showing a substantial reduction in turnover velocity.
Correspondingly, the average inventory processing period exhibits an increasing trend, moving from 72 days in 2018 to 98 days in 2022. This lengthening period suggests that inventory remains in stock for a longer duration before being sold, which could indicate slower sales or accumulation of inventory.
- Inventory Turnover Ratio
- Declined consistently from 5.05 in 2018 to 3.72 in 2022, with a slight fluctuation observed in 2021 (4.16).
- Average Inventory Processing Period
- Increased from 72 days in 2018 to 98 days in 2022, with a peak at 95 days in 2020 and a small dip to 88 days in 2021 before rising again.
The inverse relationship between these two metrics suggests that the company is experiencing reduced operational efficiency in inventory management over the examined years. The rise in inventory holding period combined with lower turnover points to potential challenges in demand forecasting or sales effectiveness, which may impact liquidity and carrying costs.
Average Receivable Collection Period
Colgate-Palmolive Co., average receivable collection period calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Receivables turnover | 11.95 | 13.43 | 13.03 | 10.90 | 11.10 | |
| Short-term Activity Ratio (no. days) | ||||||
| Average receivable collection period1 | 31 | 27 | 28 | 33 | 33 | |
| Benchmarks (no. days) | ||||||
| Average Receivable Collection Period, Competitors2 | ||||||
| Procter & Gamble Co. | 23 | 23 | 21 | 27 | — | |
| Average Receivable Collection Period, Industry | ||||||
| Consumer Staples | 12 | 10 | 11 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 11.95 = 31
2 Click competitor name to see calculations.
The analysis of the receivables turnover and average receivable collection period over the five-year period reveals notable trends indicative of changes in the efficiency of accounts receivable management.
- Receivables Turnover
- The receivables turnover ratio experienced a general increase from 11.1 in 2018 to a peak of 13.43 in 2021, suggesting an improvement in the frequency at which receivables were collected during this period. However, this trend reversed in 2022, with the ratio declining to 11.95, indicating a slower collection process or potential challenges in receivables management in the latest year available.
- Average Receivable Collection Period
- The average receivable collection period, measured in days, decreased from 33 days in 2018 and 2019 to 28 days in 2020 and further to 27 days in 2021, demonstrating increased efficiency in collecting receivables promptly during these years. In 2022, the collection period lengthened to 31 days, which corresponds with the observed decrease in receivables turnover, suggesting a slight decline in collection efficiency.
Overall, the data points to improved receivables management performance from 2018 through 2021, characterized by shorter collection periods and higher turnover rates. The reversal of these trends in 2022 may warrant further investigation to identify underlying causes, such as changes in credit policies, customer payment behavior, or external economic factors impacting collection processes.
Operating Cycle
Colgate-Palmolive Co., operating cycle calculation, comparison to benchmarks
No. days
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Average inventory processing period | 98 | 88 | 95 | 80 | 72 | |
| Average receivable collection period | 31 | 27 | 28 | 33 | 33 | |
| Short-term Activity Ratio | ||||||
| Operating cycle1 | 129 | 115 | 123 | 113 | 105 | |
| Benchmarks | ||||||
| Operating Cycle, Competitors2 | ||||||
| Procter & Gamble Co. | 83 | 82 | 78 | 80 | — | |
| Operating Cycle, Industry | ||||||
| Consumer Staples | 64 | 55 | 58 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= 98 + 31 = 129
2 Click competitor name to see calculations.
The analysis of the annual data reveals several key trends in operational efficiency as represented by inventory management and accounts receivable collection periods over the five-year span from 2018 to 2022.
- Average Inventory Processing Period
- The average inventory processing period shows a general increasing trend, rising from 72 days in 2018 to 98 days in 2022. This indicates a lengthening duration in the time inventory remains before being processed or sold. There was a notable rise between 2019 and 2020, with an increase from 80 to 95 days, followed by slight fluctuations but a continuing upward trend through 2022. This trend suggests potential challenges in inventory turnover or changes in inventory management strategies impacting the speed of processing inventory.
- Average Receivable Collection Period
- The average receivable collection period mostly remained stable and relatively efficient over the period examined. From 33 days in 2018 and 2019, it decreased slightly to 28 and 27 days in 2020 and 2021, respectively, before increasing again to 31 days in 2022. This pattern indicates a generally prompt receivables collection process, with minor variations that could reflect changes in credit policies, customer payment behavior, or collection practices.
- Operating Cycle
- The overall operating cycle lengthened over the period, increasing from 105 days in 2018 to 129 days in 2022. This increase corresponds primarily to the rise in the inventory processing period, as the collection period remained relatively steady. The operating cycle's extension implies a longer duration to convert inventory purchases into cash, potentially impacting liquidity and working capital management.
Average Payables Payment Period
Colgate-Palmolive Co., average payables payment period calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Payables turnover | 4.98 | 4.76 | 4.63 | 5.15 | 5.17 | |
| Short-term Activity Ratio (no. days) | ||||||
| Average payables payment period1 | 73 | 77 | 79 | 71 | 71 | |
| Benchmarks (no. days) | ||||||
| Average Payables Payment Period, Competitors2 | ||||||
| Procter & Gamble Co. | 129 | 135 | 125 | 118 | — | |
| Average Payables Payment Period, Industry | ||||||
| Consumer Staples | 57 | 55 | 54 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ 4.98 = 73
2 Click competitor name to see calculations.
The analysis of the company's payables-related financial data over the five-year period reveals several notable trends and patterns.
- Payables Turnover
- The payables turnover ratio shows a decline from 5.17 in 2018 to a low of 4.63 in 2020, indicating that the company initially slowed its rate of paying suppliers or vendors during that period. Subsequently, the ratio improves moderately, rising to 4.76 in 2021 and further to 4.98 in 2022, though it does not fully recover to the 2018 level. This trend suggests that after a period of slower payment activity, the company began to pay down its payables more quickly in the most recent years, improving its efficiency in managing accounts payable.
- Average Payables Payment Period
- The average number of days the company takes to pay its suppliers increases from 71 days in 2018 and 2019 to 79 days in 2020, indicating a lengthening of the payment period. This trend corresponds with the dip in payables turnover during the same year, reflecting slower payments or extended credit terms. In 2021 and 2022, the payment period shortens to 77 and then 73 days respectively, mirroring the improvement in the payables turnover ratio. However, the payment duration in 2022 remains slightly longer than the pre-2020 levels.
Overall, the data depicts a temporary shift towards slower payments to suppliers around 2020, followed by a gradual return to quicker payment cycles by 2022. This likely reflects a strategic or operational response to external or internal factors influencing cash flow and payables management during the analyzed timeframe.
Cash Conversion Cycle
Colgate-Palmolive Co., cash conversion cycle calculation, comparison to benchmarks
No. days
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Average inventory processing period | 98 | 88 | 95 | 80 | 72 | |
| Average receivable collection period | 31 | 27 | 28 | 33 | 33 | |
| Average payables payment period | 73 | 77 | 79 | 71 | 71 | |
| Short-term Activity Ratio | ||||||
| Cash conversion cycle1 | 56 | 38 | 44 | 42 | 34 | |
| Benchmarks | ||||||
| Cash Conversion Cycle, Competitors2 | ||||||
| Procter & Gamble Co. | -46 | -53 | -47 | -38 | — | |
| Cash Conversion Cycle, Industry | ||||||
| Consumer Staples | 7 | 0 | 4 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= 98 + 31 – 73 = 56
2 Click competitor name to see calculations.
The analyzed financial data presents key operational efficiency metrics over a five-year period. These metrics provide insight into the company's inventory management, receivables collection, payables payment, and overall cash flow cycle.
- Average inventory processing period
- The inventory processing period has shown a generally increasing trend over the years, starting at 72 days in 2018 and rising to 98 days in 2022. This indicates that the time taken to convert inventory into sales has lengthened, suggesting possible slower inventory turnover or changes in inventory management strategies.
- Average receivable collection period
- The collection period for receivables has remained relatively stable, fluctuating between 33 days and 27 days in the earlier years and slightly increasing to 31 days by 2022. The overall consistency indicates steady credit and collections management, with only minor variability over the time frame.
- Average payables payment period
- The payment period to suppliers remained steady at 71 days during 2018 and 2019, increased notably to 79 days by 2020, and then decreased to 73 days in 2022. This fluctuation suggests some changes in payment policies or supplier negotiations, with a peak in payment deferral around 2020 followed by a return towards earlier levels.
- Cash conversion cycle (CCC)
- The cash conversion cycle, representing the net time between cash outflows and inflows, increased overall from 34 days in 2018 to 56 days in 2022, despite some intermediate fluctuations. This lengthening of the CCC implies that the company’s cash is tied up for a longer period in the operating cycle, which may impact liquidity and working capital management.
In summary, the extension of the inventory processing period and cash conversion cycle over the period suggest a trend towards slower operational cycles. The relatively stable receivables collection indicates consistent credit management, while variability in payables payment periods may reflect adjustments in supplier payment practices. Attention to managing inventory turnover and cash conversion efficiency could be areas for operational focus.