Eli Lilly & Co. (NYSE:LLY)

Inventory levels exhibited a consistent upward trend over the five-year period. Significant growth was observed across all inventory categories, with notable acceleration in the later years of the observed timeframe. The composition of inventory also shifted, with Work in Process and Raw Materials & Supplies demonstrating the most substantial proportional increases.

Finished Products

Finished products inventory increased from US$762 million in 2021 to US$1,931 million in 2025. While growth was present each year, the rate of increase accelerated significantly between 2023 and 2025, suggesting a potential build-up in completed goods.

Work in Process

Work in process inventory experienced the most dramatic increase, rising from US$2,373 million in 2021 to US$8,183 million in 2025. This represents a more than threefold increase, indicating a substantial expansion in ongoing production activities or potentially bottlenecks within the production cycle. The increase was particularly pronounced between 2023 and 2025.

Raw Materials and Supplies

Raw materials and supplies inventory also showed considerable growth, increasing from US$717 million in 2021 to US$3,587 million in 2025. This increase suggests a proactive approach to securing necessary inputs for production, or potentially, an accumulation of materials due to anticipated future needs or supply chain concerns. The largest increases occurred between 2022 and 2024.

Total Inventories

Total inventories, approximating replacement cost, increased from US$3,852 million in 2021 to US$13,701 million in 2025. This represents a significant increase, driven by the growth in all inventory categories. The reported inventories, adjusted for LIFO cost, followed a similar pattern, increasing from US$3,886 million to US$13,744 million over the same period.

LIFO Adjustment

The increase to LIFO cost remained relatively stable, ranging from US$9 million to US$102 million annually. While present each year, the adjustment amount remained a small percentage of total inventory values, suggesting LIFO has a limited impact on the overall inventory valuation. The adjustment decreased in the final year of the period.

The substantial increases in Work in Process and Raw Materials & Supplies inventories, particularly in the later years, warrant further investigation to determine the underlying causes and potential implications for operational efficiency and financial performance. The accelerated growth in Finished Products in 2024 and 2025 also merits attention.

The information presents a five-year trend of reported and adjusted financial figures for a company, reflecting the impact of a change in inventory valuation method from LIFO to FIFO. Reported inventories demonstrate a consistent increase over the period, escalating significantly from US$3.886 billion in 2021 to US$13.744 billion in 2025. The adjusted inventories, calculated after the conversion, follow a similar trajectory, reaching US$13.701 billion in 2025. The difference between reported and adjusted inventory values remains relatively small throughout the observed period, suggesting a limited overall impact from the LIFO to FIFO conversion.

Inventory Levels

Reported inventory increased steadily, with a substantial jump between 2023 and 2024 (US$1.816 billion) and again between 2024 and 2025 (US$6.155 billion). The adjusted inventory values mirror this pattern, indicating the inventory growth is not solely attributable to the accounting method change. The consistent increase suggests growing business activity or potential stockpiling.

Current Assets

Reported current assets exhibit a similar upward trend, rising from US$18.452 billion in 2021 to US$55.629 billion in 2025. The adjusted current assets also increase, though by slightly smaller amounts, reflecting the minor adjustments to inventory. The largest increase in current assets occurs between 2024 and 2025 (US$22.889 billion reported, US$22.809 billion adjusted).

Total Assets

Total assets, both reported and adjusted, demonstrate a consistent growth pattern, increasing from US$48.806 billion in 2021 to US$112.476 billion in 2025. The adjustments to total assets due to the inventory valuation change are minimal, indicating that inventory represents a relatively small portion of the overall asset base. The most significant increase in total assets is observed between 2024 and 2025 (US$33.761 billion reported, US$33.781 billion adjusted).

Shareholders’ Equity

Reported total shareholders’ equity shows a substantial increase over the period, growing from US$8.979 billion in 2021 to US$26.535 billion in 2025. The adjusted shareholders’ equity follows a similar trend, with minor differences. The largest increase in shareholders’ equity occurs between 2024 and 2025 (US$12.343 billion reported, US$12.363 billion adjusted).

Net Income

Reported net income increases from US$5.582 billion in 2021 to US$20.640 billion in 2025. The adjustment to net income resulting from the inventory method change is small in 2022, 2023, 2024 and 2025, suggesting the LIFO reserve was not substantial. The largest increase in net income occurs between 2024 and 2025 (US$10.050 billion reported, US$10.070 billion adjusted).

Overall, the conversion from LIFO to FIFO has a limited quantitative impact on the reported financial figures. The primary driver of changes in the financial statements appears to be underlying business performance, as evidenced by the consistent and substantial increases in inventory, assets, equity, and net income. The adjustments made for the inventory valuation method are consistently small relative to the overall values, indicating that the LIFO reserve was not a material component of the company’s financial position.

The financial ratios presented demonstrate generally consistent performance between reported and adjusted values across the examined period. This suggests that the difference between LIFO and FIFO inventory costing methods has a minimal impact on the overall financial picture of the company. However, a closer examination reveals some noteworthy trends.

Liquidity (Current Ratio)

The reported and adjusted current ratios initially decreased from 1.23 in 2021 to 0.94 in 2023, indicating a potential weakening in short-term liquidity. A subsequent recovery is observed, with both ratios increasing to 1.58 by 2025. The consistency between reported and adjusted values suggests that inventory valuation methods do not significantly affect the assessment of the company’s ability to meet its short-term obligations.

Profitability (Net Profit Margin)

The reported net profit margin experienced fluctuations throughout the period, rising from 19.71% in 2021 to 21.88% in 2022, declining to 15.36% in 2023, and then increasing substantially to 31.67% in 2025. The adjusted net profit margin mirrors this trend closely, with minor differences. This indicates that changes in inventory costing methods have a negligible effect on reported profitability.

Efficiency (Total Asset Turnover)

The reported and adjusted total asset turnover ratios remained relatively stable between 2021 and 2024, hovering around 0.58. A slight decrease to 0.53 is observed in 2023, followed by a return to 0.58 in 2025. The consistent values between reported and adjusted figures suggest that the choice of inventory costing method does not materially influence the efficiency with which assets are used to generate sales.

Leverage (Financial Leverage)

Financial leverage decreased from 5.44 in 2021 to 4.65 in 2022, increased to 5.94 in 2023, and then decreased again to 4.24 in 2025. The adjusted financial leverage ratios follow a similar pattern, differing only slightly. This suggests that the company’s use of debt financing is not significantly impacted by the inventory costing method employed.

Return on Equity (ROE)

ROE exhibited volatility, decreasing from 62.16% in 2021 to 48.65% in 2023, before rising sharply to 77.78% in 2025. The adjusted ROE closely tracked the reported ROE, with minimal divergence. This indicates that the impact of inventory valuation on returns to shareholders is limited.

Return on Assets (ROA)

ROA followed a similar pattern to ROE, declining from 11.44% in 2021 to 8.19% in 2023, and then increasing to 18.35% in 2025. The adjusted ROA remained consistently close to the reported ROA, reinforcing the conclusion that inventory costing methods have a minimal effect on the company’s ability to generate profits from its assets.

In summary, the analysis reveals that the application of LIFO versus FIFO inventory costing methods results in negligible differences across the examined financial ratios. The trends observed in these ratios appear to be driven by factors other than inventory valuation, suggesting that the company’s financial performance is not materially sensitive to this accounting choice.

The adjusted current ratio remained consistent with the reported current ratio across the observed period, indicating similar liquidity positions when considering adjustments to current assets. An initial decline in the ratio is followed by a period of improvement.

Adjusted Current Ratio Trend

The adjusted current ratio exhibited a slight decrease from 1.22 in 2021 to 1.05 in both 2022 and 2023. This suggests a marginal weakening in the company’s ability to cover its current liabilities with its adjusted current assets during these years. However, the ratio then increased to 1.15 in 2024 and further to 1.58 in 2025, demonstrating a substantial improvement in short-term liquidity.

Consistency Between Reported and Adjusted Ratios

The adjusted current ratio mirrored the reported current ratio in each year. This consistency suggests that the adjustments made to current assets did not materially alter the overall assessment of the company’s short-term liquidity position. The difference between the reported and adjusted values was consistently less than 1%.

The significant increase in the adjusted current ratio in 2024 and 2025 warrants further investigation to understand the drivers behind this improvement. The substantial growth in adjusted current assets, moving from US$25,625 million in 2023 to US$32,677 million in 2024 and US$55,586 million in 2025, appears to be the primary contributor to this positive trend.

The reported and adjusted net income figures demonstrate a fluctuating pattern over the five-year period. While both metrics generally trend upwards, there are notable variations. Reported net income decreased from 2022 to 2023 before experiencing substantial growth in 2024 and 2025. Adjusted net income mirrors this pattern, with a similar decrease in 2023 followed by significant increases in the subsequent two years. The difference between reported and adjusted net income is minimal each year, suggesting that adjustments are not materially impacting overall profitability.

Reported Net Profit Margin

The reported net profit margin exhibits volatility. It increased from 19.71% in 2021 to 21.88% in 2022, then declined to 15.36% in 2023. A significant increase is then observed, reaching 23.51% in 2024 and further rising to 31.67% in 2025. This indicates improving profitability as a percentage of revenue in the later years of the period.

Adjusted Net Profit Margin

The adjusted net profit margin follows a similar trajectory to the reported net profit margin. It rose from 19.71% in 2021 to 21.97% in 2022, decreased to 15.08% in 2023, and then increased substantially to 23.60% in 2024 and 31.70% in 2025. The consistency between the reported and adjusted margins suggests that the adjustments do not fundamentally alter the profitability picture. The substantial increase in both margins from 2023 to 2025 warrants further investigation to understand the underlying drivers, such as revenue growth, cost control, or changes in the business mix.

Overall, the company experienced a period of profitability challenges in 2023, as reflected in the decreased margins, followed by a strong recovery and expansion in profitability in 2024 and 2025. The consistent relationship between reported and adjusted net profit margins suggests that the core business performance is driving these trends.

The analysis reveals a consistent pattern in both reported and adjusted total asset turnover ratios over the five-year period. Total asset values, both reported and adjusted, demonstrate a clear upward trend. However, the asset turnover ratios remain relatively stable, suggesting that the growth in assets has been proportionate to the growth in revenue, maintaining a consistent level of asset utilization.

Adjusted Total Asset Turnover

The adjusted total asset turnover ratio exhibits a consistent value of 0.58 in 2021 and 2022. A slight decrease to 0.53 is observed in 2023, followed by a return to 0.57 in 2024 and 0.58 in 2025. This indicates a minimal fluctuation in how efficiently assets are being used to generate sales after accounting for adjustments. The adjustments made to total assets do not materially impact the turnover ratio.

The reported total assets increased from US$48,806 million in 2021 to US$112,476 million in 2025. Adjusted total assets followed a similar trajectory, rising from US$48,772 million to US$112,433 million over the same period. Despite this substantial growth in asset base, the asset turnover ratio has remained largely unchanged, indicating a consistent relationship between asset levels and revenue generation.

Asset Growth and Turnover Relationship

The consistent asset turnover ratio alongside increasing total assets suggests that the company has effectively scaled its operations without compromising its asset utilization efficiency. The growth in assets appears to be aligned with revenue increases, preventing a decline in the turnover ratio. The minor dip in 2023 was quickly recovered.

The difference between reported and adjusted total assets is consistently small across all years, indicating that the adjustments made are not substantial enough to significantly alter the overall asset base or the calculated turnover ratio. This suggests the nature of the adjustments is not a major driver of financial performance.

The financial leverage of the company, as measured by both reported and adjusted metrics, exhibits a fluctuating pattern over the five-year period. Total assets, both reported and adjusted, demonstrate a consistent upward trend, accelerating significantly in the later years. Shareholders’ equity also increases over time, though at a less pronounced rate than assets, particularly in the earlier part of the period, with a substantial increase observed between 2024 and 2025.

Total Assets

Reported total assets increased from US$48,806 million in 2021 to US$112,476 million in 2025, representing a more than doubling of asset value. Adjusted total assets follow a similar trajectory, reaching US$112,433 million in 2025. The rate of growth in assets appears to increase from 2022 onwards, with the largest year-over-year increases occurring between 2023 and 2024, and again between 2024 and 2025.

Shareholders’ Equity

Reported shareholders’ equity grew from US$8,979 million in 2021 to US$26,535 million in 2025. Adjusted shareholders’ equity shows a comparable increase, ending at US$26,492 million in 2025. Growth was moderate between 2021 and 2024, with a significant jump in the final year, indicating a substantial increase in equity financing or retained earnings during that period.

Financial Leverage

Reported financial leverage began at 5.44 in 2021, decreased to 4.65 in 2022, then rose to 5.94 in 2023, followed by a decrease to 5.55 in 2024, and finally decreased to 4.24 in 2025. Adjusted financial leverage mirrors this pattern closely, with values of 5.45, 4.65, 5.99, 5.57, and 4.24 for the same years, respectively. The initial decrease in leverage suggests a strengthening of the equity base relative to assets, while subsequent increases indicate greater reliance on debt or other forms of financing. The final decrease in 2025 suggests a rebalancing towards a stronger equity position.

The difference between reported and adjusted figures for both total assets and shareholders’ equity is consistently small across all years, indicating that the adjustments made do not materially alter the overall financial leverage picture. The observed trends suggest a dynamic capital structure, with periods of increased leverage followed by periods of deleveraging, coinciding with significant growth in total assets.

The period between 2021 and 2025 demonstrates a generally increasing trend in both reported and adjusted net income, alongside a corresponding increase in total shareholders’ equity. This has resulted in fluctuating, but ultimately increasing, return on equity (ROE) figures. While reported and adjusted values are very similar, slight differences exist, leading to minor variations in calculated ROE.

Net Income

Reported net income increased from US$5,582 million in 2021 to US$6,245 million in 2022, before decreasing to US$5,240 million in 2023. A substantial increase is then observed, rising to US$10,590 million in 2024 and further to US$20,640 million in 2025. Adjusted net income follows a similar pattern, with only minor differences in absolute values compared to the reported figures.

Shareholders’ Equity

Total shareholders’ equity exhibited a consistent upward trend throughout the period. It rose from US$8,979 million in 2021 to US$10,650 million in 2022, and continued to increase to US$10,772 million in 2023. Further growth is evident in 2024, reaching US$14,192 million, and culminating in US$26,535 million in 2025. Adjusted shareholders’ equity mirrors this trend, remaining close to the reported values.

Return on Equity (ROE)

Reported ROE began at 62.16% in 2021, decreased to 58.64% in 2022, and further declined to 48.65% in 2023. A significant recovery occurred in 2024, with ROE reaching 74.62%, and continued to rise to 77.78% in 2025. Adjusted ROE demonstrates a similar pattern, with values consistently slightly higher than the reported ROE. The fluctuations in ROE appear to be driven by the interplay between net income and shareholders’ equity, with the substantial increase in net income in 2024 and 2025 having the most significant impact on the upward trend.

The convergence of reported and adjusted figures suggests that adjustments made to net income and shareholders’ equity have a limited impact on the overall financial picture. The substantial growth in both net income and equity in the later years of the period resulted in a notable improvement in ROE, indicating increasing profitability relative to shareholder investment.

The period between 2021 and 2025 demonstrates a generally positive trend in both reported and adjusted net income, alongside a consistent increase in total assets. This analysis focuses on the observed trends in Return on Assets (ROA), both as reported and adjusted, to assess the efficiency with which assets are being utilized to generate profits.

Overall ROA Trend

Both reported and adjusted ROA exhibit a similar pattern over the five-year period. An initial increase is observed from 2021 to 2022, followed by a decline in 2023. Subsequently, a substantial increase occurs in both 2024 and 2025, culminating in the highest ROA values of the period.

ROA – 2021 to 2023

From 2021 to 2022, reported ROA increased from 11.44% to 12.62%, while adjusted ROA rose from 11.45% to 12.67%. This suggests improved profitability relative to asset base during this timeframe. However, 2023 witnessed a decrease in both reported and adjusted ROA, falling to 8.19% and 8.05% respectively. This decline coincides with a significant increase in reported and adjusted total assets, indicating that the growth in assets outpaced the growth in net income during this year.

ROA – 2024 to 2025

A significant recovery and subsequent expansion in ROA is evident in 2024 and 2025. Reported ROA increased to 13.45% in 2024 and further to 18.35% in 2025. The adjusted ROA followed a similar trajectory, reaching 13.51% and 18.38% respectively. This substantial improvement suggests a more effective utilization of the growing asset base to generate profits. The increase in net income appears to be the primary driver of this improvement, as the growth in assets continued during these years, but at a slower rate than net income.

Reported vs. Adjusted ROA

The difference between reported and adjusted ROA remains consistently minimal throughout the period, fluctuating within a range of approximately 0.01% to 0.03%. This indicates that adjustments made to net income and total assets have a limited impact on the overall ROA calculation, suggesting the core profitability and asset base remain relatively consistent regardless of these adjustments.

In summary, the ROA demonstrates a cyclical pattern with an overall upward trend. The period from 2024 to 2025 represents a period of particularly strong performance, indicating improved efficiency in asset utilization and substantial profit generation.