Eli Lilly & Co. (NYSE:LLY)

The financial data exhibits several notable trends over the five-year period ending in 2024, reflecting changes in operational efficiency and liquidity management.

Inventory Turnover

The inventory turnover ratio decreased from a peak of 1.88 in 2021 to 1.11 in 2024, indicating a slower movement of inventory. This trend is corroborated by the increasing average inventory processing period, which extended from 194 days in 2021 to 329 days in 2024, suggesting that the company is holding inventory for a longer duration before sale.

Receivables Turnover

The receivables turnover ratio remained relatively stable with minor fluctuations, moving between 4.09 and 4.24 over the years. Correspondingly, the average receivable collection period hovered around 86-97 days, suggesting consistent collection efforts without significant deterioration or improvement.

Payables Turnover

The payables turnover ratio showed a declining trend from 4.38 in 2021 to 2.61 in 2024, indicating the company is taking longer to pay its suppliers. This is reflected in the increase in the average payables payment period from 83 days in 2021 to 140 days in 2024.

Working Capital Turnover

The working capital turnover ratio displayed considerable volatility, with a remarkable spike to 31.84 in 2022 but missing data in 2023. By 2024, it settled at 10.32, remaining significantly higher than the 2020 and 2021 levels. This suggests fluctuating efficiency in utilizing working capital to generate sales.

Operating Cycle

The operating cycle, representing the total duration from inventory acquisition to cash collection, has lengthened steadily from 280 days in 2021 to 418 days in 2024. The increase reflects longer inventory holding and receivables collection periods.

Cash Conversion Cycle

The cash conversion cycle, measuring the duration between cash outflow and inflow, increased from 197 days in 2021 to 278 days in 2024. This increase indicates that cash is tied up in the operating cycle for a longer time before being converted back into cash, which could pressure liquidity.

The analysis of the financial data reveals several key trends related to cost of sales, inventories, and inventory turnover over the five-year period ending December 31, 2024.

Cost of Sales

There is a notable increase in cost of sales from 2020 to 2024. The figure rose from approximately US$5.48 billion in 2020 to about US$8.42 billion in 2024. Despite a peak in 2021 at around US$7.31 billion, a slight decrease occurred in 2022 to roughly US$6.63 billion before rising again in 2023 and reaching the highest point in 2024. This overall upward trend indicates increasing production or procurement costs, possibly due to expansion, inflationary pressures, or changes in product mix.

Inventories

Inventories show a steady increase throughout the five years. Starting at approximately US$3.98 billion in 2020, inventories rose gradually each year, reaching roughly US$7.59 billion by 2024. The most significant annual increase occurred between 2022 and 2023, where inventories jumped from about US$4.31 billion to US$5.77 billion, suggesting either stockpiling strategies, anticipation of higher demand, or slower inventory turnover.

Inventory Turnover Ratio

Inventory turnover declined over the period analyzed, falling from 1.38 in 2020 to 1.11 in 2024. This decreasing ratio indicates that the company is selling through its inventory less frequently each year, pointing to slower movement of goods relative to inventory levels. The decline is consistent with the significant rise in inventory balances, indicating potential excess stock or slower sales growth compared to inventory accumulation.

In summary, the company experienced increasing costs of sales alongside a notable build-up in inventories, accompanied by a decreasing frequency of inventory turnover. These patterns collectively could reflect changes in operational dynamics, supply chain strategies, or market demand conditions, which may warrant further investigation to optimize inventory management and cost control.

The financial data reveals several notable trends over the five-year period from 2020 to 2024.

Revenue

Revenue exhibits a consistent upward trajectory with a particularly strong increase in 2023 and 2024. Starting at approximately $24.5 billion in 2020, revenue grows steadily in the first two years, then accelerates to $34.1 billion in 2023 and reaches $45.0 billion by the end of 2024. This indicates robust sales growth and possibly expanding market demand or successful product launches during these years.

Accounts Receivable, Net of Allowances

Accounts receivable follow a similar rising pattern, increasing from about $5.9 billion in 2020 to $11.0 billion in 2024. The growth in accounts receivable is somewhat proportional to revenue growth, suggesting that the company is extending more credit to its customers or experiencing longer collection periods as the business scales up.

Receivables Turnover Ratio

The receivables turnover ratio, which measures the efficiency of collecting receivables, remains relatively stable but shows some fluctuations. It starts at 4.18 in 2020, marginally improves to 4.24 in 2021, then dips to 4.14 in 2022 and further decreases to 3.75 in 2023, before rebounding to 4.09 in 2024. The drop in 2023 may indicate a slower collection process or more lenient credit terms, which then slightly recovers in the following year.

In summary, the company demonstrates strong revenue growth supported by increasing accounts receivable balances. While the receivables turnover ratio fluctuates, the general level remains fairly stable, suggesting that the company manages to maintain reasonable collection efficiency despite the significant expansion in sales and receivables.

The financial data displays notable trends in cost of sales, accounts payable, and payables turnover over the five-year period from 2020 to 2024.

Cost of Sales

The cost of sales exhibits a generally increasing trajectory across the given years. Starting at approximately 5.48 billion US dollars in 2020, it rises sharply in 2021 to about 7.31 billion, followed by a decline to roughly 6.63 billion in 2022. Subsequently, it increases again to around 7.08 billion in 2023 and further to about 8.42 billion in 2024. This pattern suggests variability but an overall trend of growth in the costs associated with production or procurement.

Accounts Payable

Accounts payable shows a consistent upward trend over the period examined. Beginning at approximately 1.61 billion US dollars in 2020, it incrementally increases each year to approximately 1.67 billion in 2021, 1.93 billion in 2022, 2.60 billion in 2023, and reaching about 3.23 billion by 2024. This steady increase indicates that the company is delaying payments to suppliers or increasing its purchase on credit.

Payables Turnover Ratio

The payables turnover ratio demonstrates a declining trend, indicating slower turnover of accounts payable. The ratio rises from 3.41 in 2020 to a peak of 4.38 in 2021, suggesting faster payment to suppliers in that year. However, from 2022 onward, the ratio decreases progressively to 3.43, then 2.73, and finally 2.61 in 2024. This decline correlates with the rising accounts payable balance and suggests the company is taking more time to pay its suppliers as time progresses.

In summary, the data reveals an increasing cost of sales and a corresponding rise in accounts payable, coupled with a declining payables turnover ratio after 2021. This combination implies that the company’s operational expenses are growing and that it is extending the payment period to its suppliers, which could be a strategic move to optimize cash flow management or a response to changing supplier terms or market conditions.

Working Capital

The working capital exhibits significant volatility over the five-year period. Initially, there is a noticeable decline from 4,980,500 thousand US dollars in 2020 to 896,300 thousand US dollars in 2022. This decline continues into 2023, where working capital turns negative, reaching -1,566,200 thousand US dollars. However, in 2024, the working capital rebounded sharply to 4,363,100 thousand US dollars, indicating a strong recovery after the previous downturn.

Revenue

Revenue displays a consistent upward trend throughout the period analyzed. From 24,539,800 thousand US dollars in 2020, revenue increases steadily each year, reaching 45,042,700 thousand US dollars in 2024. This represents substantial growth, especially noted between 2023 and 2024, where revenue jumped by over 9 billion US dollars. The trend reflects a positive expansion in the company's sales or income-generating activities.

Working Capital Turnover

The working capital turnover ratio shows variability and some data gaps, with the ratio increasing from 4.93 in 2020 to a peak of 31.84 in 2022, indicating that the company was generating significantly more revenue per unit of working capital at that time. However, no value is available for 2023, and the ratio declines to 10.32 in 2024. This suggests a decrease in efficiency in utilizing working capital compared to the peak in 2022 but remains higher than the beginning of the analyzed period.

Overall Insights

The data highlights a company experiencing fluctuations in working capital management alongside steady revenue growth. The negative working capital in 2023 may signal liquidity challenges or changes in operational financing, but the recovery in 2024 suggests corrective measures or improved cash flow management. The peak in working capital turnover in 2022 indicates efficient use of working capital that was not sustained in subsequent years. The strong and continuous increase in revenue underscores robust business performance and market demand, outweighing the working capital volatility observed.

The financial data indicates notable trends in inventory management over the five-year period.

Inventory Turnover

The inventory turnover ratio increased from 1.38 in 2020 to a peak of 1.88 in 2021, suggesting improved efficiency in selling inventory during that year. However, subsequent years show a consistent decline to 1.54 in 2022, 1.23 in 2023, and further down to 1.11 in 2024. This declining trend reflects a gradual slowing in the rate at which inventory is sold or used, potentially indicating excess stock or slower sales velocity over recent years.

Average Inventory Processing Period

The average inventory processing period, measured in days, shows an inverse relationship to inventory turnover. Starting at 265 days in 2020, the period decreases sharply to 194 days in 2021, complementing the increased turnover that year. However, from 2022 onward, the processing period increases to 237 days, then escalates significantly to 298 days in 2023 and 329 days in 2024. This suggests that inventory is remaining on hand for longer durations, indicating potential inefficiencies in inventory management or changes in demand and supply chain dynamics.

Overall, the data reveals an initial improvement in inventory efficiency in 2021, followed by a reversal that points to increasing inventory holding times and reduced turnover rates. This trend could impact working capital and operational efficiency, warranting further investigation into causes such as changes in sales patterns, production scheduling, or supply chain constraints.

Receivables Turnover

The receivables turnover ratio demonstrates a slight fluctuation over the observed period. Starting at 4.18 in 2020, it showed a modest increase to 4.24 in 2021, followed by a decline to 4.14 in 2022. A more pronounced decrease occurred in 2023, where the ratio dropped to 3.75, indicating a slower collection of receivables. In 2024, there was a recovery to 4.09, approaching levels seen earlier in the period but still below the 2021 peak.

Average Receivable Collection Period

The average collection period mirrors the trends observed in receivables turnover. It remained relatively stable between 86 and 88 days from 2020 through 2022. However, in 2023, there was a noticeable increase to 97 days, signifying a lengthening in the time taken to collect receivables. This duration decreased to 89 days in 2024, indicating an improvement in receivables management though still higher than the initial years.

Overall Analysis

The trends suggest that the company experienced some challenges in efficiently collecting receivables during 2023, as reflected by the reduced turnover ratio and increased collection period. The partial recovery in 2024 indicates efforts to improve cash flow management, though the efficiency had not fully returned to the earlier, more favorable levels. Monitoring these metrics is important as prolonged collection periods may affect liquidity and working capital.

The financial data reveals notable fluctuations in key operational efficiency metrics over the five-year period. The average inventory processing period exhibits a general upward trend after an initial decrease, indicating changes in inventory management speed. Specifically, the period dropped significantly from 265 days in 2020 to 194 days in 2021, followed by a steady increase reaching 329 days by 2024. This prolonged processing period in later years suggests potential challenges in inventory turnover or shifts in inventory strategy.

The average receivable collection period remains relatively stable with minor variations. It starts at 87 days in 2020, slightly decreases to 86 days in 2021, moderately rises to 88 days in 2022, peaks at 97 days in 2023, and then decreases again to 89 days in 2024. This fluctuation indicates consistent collections with a temporary delay in 2023, which could point to timing issues in receivables or changes in credit policies.

The operating cycle, combining both inventory processing and receivable collection periods, follows an overall increasing trajectory from 352 days in 2020 to 418 days in 2024. After a decline to 280 days in 2021, it consistently rises through the subsequent years, reaching a peak in 2024. This lengthening operating cycle suggests a gradual extension in the time required to turn resources into cash, potentially impacting liquidity and working capital efficiency.

Average Inventory Processing Period

Decreased sharply in 2021, then increased steadily through 2024, reflecting slower inventory turnover in recent years.

Average Receivable Collection Period

Remained relatively stable with a slight peak in 2023, indicating mostly consistent receivables management.

Operating Cycle

Shortened significantly in 2021 but extended progressively thereafter, suggesting a longer duration to complete the full cash conversion process in recent periods.

Payables Turnover

The payables turnover ratio demonstrates a fluctuating trend over the observed periods. The ratio increased notably from 3.41 in 2020 to 4.38 in 2021, indicating a faster rate of paying off suppliers during that year. However, starting in 2022, the ratio declined each year, dropping to 3.43, then to 2.73 in 2023, and further down to 2.61 by 2024. This decreasing trend implies a progressively slower payment cycle over the last three years.

Average Payables Payment Period

The average payables payment period exhibits an inversely related pattern to the payables turnover ratio. It decreased significantly from 107 days in 2020 to 83 days in 2021, aligning with the higher turnover ratio that year. Subsequently, the payment period increased substantially from 106 days in 2022 to 134 days in 2023 and extended further to 140 days in 2024. This upward trend signifies that the company is taking longer to settle its payables in recent years.

Overall Insights

The data reveal a shift in payment practices over the analyzed timeframe. Initially, there was an improvement in payment efficiency between 2020 and 2021, as reflected by a higher payables turnover and shorter payment period. From 2022 onward, the trend reversed, with payments being made more slowly, which may impact supplier relations or reflect strategic cash flow management. The consistent lengthening of the payment period and corresponding decline in turnover ratio suggest a deliberate extension of payable terms or possible liquidity considerations.

The analysis of the annual financial timing metrics reveals several notable trends and changes over the five-year period under review.

Average Inventory Processing Period

This metric exhibits a fluctuating yet upward trend. Beginning at 265 days in 2020, it decreased substantially to 194 days in 2021, indicating a more efficient inventory turnover during that year. However, from 2021 onwards, the period steadily increased year-over-year, reaching 329 days by 2024. This indicates a lengthening duration to process inventory, which could suggest challenges in inventory management or shifts in product demand or supply chain dynamics.

Average Receivable Collection Period

The receivable collection period remains relatively stable throughout the timeline, fluctuating only slightly. Starting at 87 days in 2020, it decreased marginally to 86 days in 2021, then increased to 88 days in 2022, peaked temporarily at 97 days in 2023, before settling back to 89 days in 2024. Overall, these small variations suggest consistent credit management and collection efficiency, with a minor increase in collection time during 2023.

Average Payables Payment Period

This period shows a substantial increase over the timeframe. Initially recorded at 107 days in 2020, it dropped to 83 days in 2021 but thereafter grew consistently each year, reaching 140 days by 2024. The lengthening of this payment period may reflect extended supplier credit terms or strategic cash management efforts to defer payments. The shorter period in 2021 could have been an anomaly or linked to specific operational or market conditions.

Cash Conversion Cycle

The cash conversion cycle, representing the net time between cash outflows for payables and cash inflows from receivables, mirrors the trends observed primarily in inventory and payables periods. After a reduction from 245 days in 2020 to 197 days in 2021, it progressively increased to 278 days in 2024. This suggests that the company is taking longer to convert its investments in inventory and other resources into cash inflows. The increase could impact liquidity and working capital management, signaling a need for review of operational efficiencies and payment terms.

In summary, the data indicates a period of tightening inventory processing efficiency in the early years followed by a consistent decline, alongside a gradual lengthening of payables payment terms. Receivable collection remains relatively stable. The overall effect has been an extended cash conversion cycle after an initial improvement, which could affect cash flow management and operational flexibility in the most recent years.