Eli Lilly & Co. (NYSE:LLY)

The analysis of the quarterly financial data reveals distinct trends across inventory management, receivables and payables turnover, and cash cycle metrics over the observed period.

Inventory Turnover

The inventory turnover ratio exhibits a gradual decline from 1.68 at the beginning to 0.83 towards the end of the series, indicating slower inventory movement over time. This is corroborated by the increasing average inventory processing period, which rises from 217 days to 441 days, suggesting that inventory is held longer on average.

Receivables Turnover

The receivables turnover ratio shows some volatility but generally declines from around 4.56 to approximately 3.69, reflecting a slower collection of receivables. This trend aligns with the average receivable collection period, which lengthens from 80 days up to nearly 99 days, indicating delays in receiving payments from customers.

Payables Turnover

The payables turnover ratio decreases from a high of 5.24 to about 2.37 by the end, suggesting that the company is taking longer to pay its suppliers. This is supported by the increase in the average payables payment period, extending from 70 days initially to over 154 days ultimately.

Working Capital Turnover

The working capital turnover ratio is characterized by significant fluctuations, with some peaks such as 31.84 and 31.79, indicating periods of highly efficient use of working capital. However, the ratio trends lower overall, reaching about 2.71, reflecting potentially less effective utilization of working capital in more recent quarters.

Operating and Cash Conversion Cycles

The operating cycle shows a steady increase from 297 days to 540 days, implying a lengthening of the time taken from inventory acquisition to cash collection. Similarly, the cash conversion cycle increases from 200 days to approximately 386 days, highlighting growing inefficiencies in converting investments in inventory and receivables into cash.

Overall, the data suggest that while the company may be extending its payment terms with suppliers (longer payables payment period), it faces increasing challenges in managing inventory and collecting receivables efficiently, leading to longer operating and cash conversion cycles. This trend could impact liquidity and working capital management, warranting close monitoring and potential strategic adjustments.

Cost of Sales

The cost of sales experienced notable fluctuations over the observed periods. Initially, there was a moderate increase from early 2021 through mid-2021, followed by a decline in late 2021. In 2022, costs showed variability but remained roughly stable in the first half of the year, then increased markedly toward the end of 2022 and continued rising through 2023 and into 2024. The last recorded periods in 2025 show a sharp upward trend, peaking at the highest level within the dataset. Overall, the cost of sales escalated significantly from early 2021 to late 2025, indicating growing expenditure or increased production cost pressures.

Inventories

Inventories consistently increased throughout the time span. Starting from approximately 3.66 billion US dollars in early 2021, inventory levels showed a steady ascent with minor fluctuations, accelerating substantially from mid-2022 onward. The increase became especially pronounced in 2023 and continued rising sharply through 2024 and 2025, reaching in excess of 12 billion US dollars by the end of the period. The inventory buildup suggests either increasing stockpiling, anticipated demand growth, or potential inventory management challenges.

Inventory Turnover Ratio

The inventory turnover ratio demonstrated a generally declining trend over the period analyzed. It started near 1.68 in early 2021, experienced some oscillation throughout 2021 and 2022, but showed a marked and steady decrease from late 2022 onward. By the end of 2024 and into 2025, the ratio dropped below 1.0, reaching its lowest values in the dataset. This decline indicates slower movement or turnover of inventory, suggesting that inventories are being held longer before sale, potentially reflecting slower sales, overstocking, or inefficiencies in inventory management.

Summary Insights

The combination of rising inventories alongside falling inventory turnover ratios points to an increasing stock accumulation that is not matched by proportional sales velocity. Meanwhile, the sharp rise in cost of sales suggests increased expenditure levels, which could correspond to higher production costs or a response to increased inventory volumes. The divergence between these trends may warrant closer examination to assess potential risks related to inventory obsolescence, cash flow impacts, and operational efficiency. Management might consider strategies to optimize inventory levels and improve turnover to better align costs and sales performance.

The financial data reveals several significant trends in the quarterly performance over the periods analyzed.

Revenue Trends

Revenue figures show a fluctuating yet generally upward trajectory over the quarters. Initial quarters exhibit moderate variations around the 6.7 to 8.0 billion US$ range, with a notable increase starting in early 2023. From March 2023 onwards, the revenue grew substantially, reaching approximately 17.6 billion US$ by the third quarter of 2025. This demonstrates a strong growth momentum in recent periods, indicating successful business expansion or increased sales volume.

Accounts Receivable, Net of Allowances

The accounts receivable balances also increase steadily throughout the time frame. Starting at about 5.6 billion US$, there is a consistent rise reaching over 16 billion US$ by the third quarter of 2025. This trend aligns with the rising revenue figures, which is expected as higher sales typically lead to larger receivable balances. However, the pace of increase in receivables is quite pronounced, suggesting a potential lengthening in collection periods or increasing credit sales.

Receivables Turnover Ratio

The receivables turnover ratio, which measures the efficiency in collecting receivables, exhibits a declining trend from around 4.56 in early 2021 down to a range between 3.5 and 4.1 in subsequent periods. Lower turnover ratios generally imply slower collection of receivables. Notably, there is a dip to approximately 3.53 during mid-2024, which may point to a temporary slowdown in collection processes. Although the ratio recovers somewhat afterward, it does not return to the higher levels observed in 2021. This suggests a trend toward longer collection cycles or lenient credit terms over time.

In summary, the company’s revenue and accounts receivable figures both reflect strong growth, particularly from 2023 onwards. While growing sales is a positive indicator, the simultaneous decline in receivables turnover ratio requires attention as it may signify increasing exposure to credit risk or challenges in cash flow management. Monitoring collection efficiency will be crucial to ensure sustained financial health amid expanding operations.

Cost of Sales

The cost of sales exhibited fluctuations over the periods analyzed, generally trending upwards over the longer term. Initial values were around 1.88 billion US dollars, with some declines during mid-2021 and early 2022 quarters, notably a drop in June and September 2021. From late 2022 onwards, the cost of sales demonstrated an overall notable increase, reaching a peak towards the end of the latest period analyzed, culminating at approximately 3.01 billion US dollars in September 2025. This indicates increasing expenses related to production or procurement activities over the timeline.

Accounts Payable

Accounts payable showed a consistent and significant upward trend throughout the periods. Starting slightly below 1.64 billion US dollars in March 2021, the payable balances increased steadily, accelerating particularly after June 2022. The highest levels occur toward the end of the timeline, reaching approximately 4.26 billion US dollars by September 2025. This pattern suggests the company has been extending its payment obligations potentially due to increased purchasing activities or extended payment terms with suppliers.

Payables Turnover Ratio

The payables turnover ratio demonstrated a clear declining trend over time. Initially, values were relatively high, with figures above 4.0 in 2021, peaking at 5.24 in March 2022. However, following this peak, the ratio consistently decreased, dropping below 3.0 from late 2022 onwards and continuing to fall to around 2.3 by mid to late 2025. A declining payables turnover ratio typically implies that the company is taking longer to settle its payables or that accounts payable are growing at a faster pace than cost of sales, which aligns with the observed increase in accounts payable.

Working Capital

The working capital exhibits notable volatility across the periods without a consistent upward or downward trend. It starts at a high of approximately 4.9 billion USD in March 2021, sharply declines in mid-2021, fluctuates through the remainder of the year, and hits a negative value near the end of 2023. Subsequently, there is a recovery beginning in early 2024, with a substantial increase observed in 2025 reaching over 21.9 billion USD by September 2025. This pattern indicates both periods of tightening and loosening liquidity, with the latter part of the timeline showing strengthening working capital positions.

Revenue

Revenue demonstrates an overall growth trajectory with some fluctuations. It initiates around 6.8 billion USD in early 2021, shows a slight dip mid-2021, then increases steadily through 2022 and 2023. Notable surges occur at intervals, especially from early 2024 onward, culminating in a marked rise to approximately 17.6 billion USD by September 2025. This consistent upward movement suggests solid sales growth and possibly expanding market presence or successful product performance.

Working Capital Turnover Ratio

The working capital turnover ratio fluctuates considerably over the periods, reflecting changes in the efficiency of using working capital to generate revenue. Early figures in 2021 signal moderate efficiency, with peaks above 30 times turnover in late 2022 and parts of 2023, indicative of maximizing revenue from relatively low working capital balances. However, turnover decreases substantially toward mid and late 2025, dropping below 3 times, coinciding with the highest working capital levels recorded. This inverse relationship suggests that as the company increased its working capital significantly, the rate at which that capital was turned over to generate revenue slowed, potentially indicating increased asset holding or investment in working capital-intensive operations.

Overall Insights

The financial data reveals a pattern where revenue steadily climbs alongside considerable variability in working capital management. The initial periods show efficient capital use with relatively high turnover ratios, but by the end of the data sequence, increased working capital accompanies slower turnovers. This may reflect strategic shifts such as inventory build-up, changing payment terms, or investments in current assets to support growth. Despite the fluctuations in liquidity measures, revenue growth remains robust throughout, which could signal successful operational scaling or market expansion strategies. Attention to the efficiency of capital usage might be warranted to optimize financial performance moving forward.

The analysis of the inventory turnover ratio and average inventory processing period over multiple quarters reveals distinct trends indicating changes in operational efficiency.

Inventory Turnover Ratio

The inventory turnover ratio demonstrates a clear downward trend over the time span. Starting at 1.68 in the first quarter of 2021, the ratio experienced some fluctuations but generally declined, reaching 0.83 by the third quarter of 2025. Notably, after peaking near 1.93 in early 2022, the ratio steadily decreased, dropping below 1.2 from late 2023 onward. This decline suggests that the company is turning over its inventory less frequently, which may indicate slower sales or increased inventory levels.

Average Inventory Processing Period

The average inventory processing period shows an inverse pattern relative to the turnover ratio. From 217 days at the end of the first quarter of 2021, the period initially decreased to a low of 189 days in the first quarter of 2022 but subsequently began rising significantly. From mid-2022 onwards, the period increased steadily, reaching 441 days by the third quarter of 2025. This extended processing period reflects that inventory remains on hand for a longer duration before being sold or utilized, which may be associated with slower inventory movement or potential stock accumulation.

In summary, the concurrent decrease in inventory turnover ratio alongside the increase in the average inventory processing period points to a decrease in inventory management efficiency or a slowdown in demand. The prolonged inventory holding times and reduced frequency of turnover may indicate challenges related to sales pace, inventory planning, or market conditions impacting the company's ability to move stock effectively over the observed periods.

Receivables Turnover

The receivables turnover ratio displays a fluctuating pattern over the analyzed periods. Initially, the ratio hovered around 4.5 to 4.7 in early 2021, indicating relatively efficient collection processes. However, a gradual decline is observed towards the end of 2021, dipping to around 4.14. This downward trend continues more notably into 2023, where the ratio reaches lows near 3.68 to 3.75, suggesting some reduction in collection efficiency. There is partial recovery during late 2023 and early 2024, with the ratio increasing back above 4.0 at some points, but this improvement is not sustained. The ratio again declines toward the middle and latter part of 2024 and into 2025, stabilizing below 4.0 by the end of the observed timeframe.

Average Receivable Collection Period

The average receivable collection period presents an inverse trend to the receivables turnover ratio, as expected. Beginning at approximately 78-80 days in early 2021, the collection period increases notably in late 2021 and 2022, reaching peaks around 88 to 99 days. This suggests a lengthening of the time taken to collect receivables, indicating potential delays or less efficient collections. During 2023, the collection period sustains elevated levels, frequently near or above 90 days, with some peaks exceeding 97 days. Early to mid-2024 shows some variability, with a temporary reduction to around 80 days followed by increases back into the 90-day range. The later periods in 2024 and into 2025 indicate persistently elevated collection periods close to or exceeding 97 to 99 days, signaling ongoing challenges in receivable turnover management.

Summary

The financial data indicates a general weakening in accounts receivable management efficiency over the reported quarters. The declining receivables turnover ratio combined with a rising average collection period suggests that the company is taking longer to collect outstanding payments. This trend, especially pronounced from 2022 through 2025, may impact cash flow and liquidity if not addressed. Periodic partial recoveries in turnover ratios were insufficient to establish a sustained improvement, and elevated collection periods towards the end of the period warrant attention to optimize the credit and collection processes.

Average Inventory Processing Period

The average inventory processing period shows a fluctuating but overall increasing trend over the examined periods. Initially, it decreased from 217 days in the first quarter of 2021 to a low of 189 days by the first quarter of 2022. Subsequently, a notable rise is evident, peaking at 441 days by the third quarter of 2025. This indicates a lengthening duration for inventory to be processed before sale, which may suggest potential inefficiencies or changes in inventory management policies over time.

Average Receivable Collection Period

The average receivable collection period remains relatively stable with minor fluctuations around the 80 to 100-day mark. Early quarters between 2021 and 2022 show periods fluctuating between 78 and 88 days, with a short-term increase to values near 99 days during 2023. Despite some volatility, the collection period does not exhibit a clear long-term upward or downward trend, implying consistent credit collection practices throughout the timeframe.

Operating Cycle

The operating cycle, representing the total time for converting inventory into cash, demonstrates a clear increasing trajectory. Starting from 297 days in the first quarter of 2021, it decreases slightly early on but then steadily increases, reaching 540 days by the third quarter of 2025. This growth corresponds with the extended inventory processing periods noted previously, combined with relatively stable receivable collection times, indicating that the lengthening operating cycle is primarily driven by slower inventory turnover.

The payables turnover ratio and the average payables payment period both exhibit significant variability over the observed quarterly periods. These indicators reveal important insights about the company’s payment practices and supplier relationship management.

Payables Turnover Ratio

The payables turnover ratio started at 3.75 in the first quarter of 2021 and experienced an initial upward trend, peaking at 5.24 by the first quarter of 2022. This suggests an increasingly efficient payables cycle during that timeframe, implying the company was paying its suppliers more quickly or turning over payables more times per period.

However, from the second quarter of 2022 onwards, the ratio showed a sustained decline from 4.21 down to values near 2.3 by mid-2025. This downward trend indicates a slowing in the payment cycle, meaning the company is taking longer to settle payables or that payables are remaining on the books longer than in prior years.

The consistency of this lower ratio towards the end of the period suggests a structural change or new payment strategy, favoring extended payment durations.

Average Payables Payment Period

This metric inversely correlates with the payables turnover ratio, measuring the average number of days taken to pay suppliers. It started at 97 days in early 2021 and showed an overall declining trend to 70 days by the first quarter of 2022, consistent with the peak in payables turnover.

From mid-2022 onwards, the average payment period increased steadily, reaching 161 days by the third quarter of 2025. This reflects a gradual lengthening in the time taken by the company to fulfill its payables obligations.

Periods of minor fluctuations are observed, but the predominant trend is a lengthening payables period over time.

Overall, the data indicates an initial phase in 2021 and early 2022 where the company accelerated its payables turnover and shortened payment periods, potentially improving supplier relations or capital efficiency. In contrast, from mid-2022 forward, there is a clear shift to more extended payment cycles, which could have implications for working capital management, supplier negotiations, and liquidity.

The financial data reveals several notable trends over the examined periods regarding inventory processing, receivable collection, payables payment, and the cash conversion cycle.

Average Inventory Processing Period

The average inventory processing period displayed a fluctuating but generally increasing trend. Starting at 217 days in early 2021, it decreased to a low of 189 days by the first quarter of 2022, indicating improved inventory turnover during that time. However, from mid-2022 onward, the period increased sharply, reaching 441 days by the third quarter of 2025. This suggests a significant slowdown in inventory processing efficiency in the later periods.

Average Receivable Collection Period

The average receivable collection period remained relatively stable but exhibited some volatility. It began at 80 days in the first quarter of 2021, fluctuated between 78 and 97 days through 2022 and early 2023, and experienced a rise to higher values around 103 days by mid-2024. Subsequently, the collection period stayed elevated near the high 80s to mid-90s range, ending at 99 days in late 2025. This pattern indicates an overall lengthening in the time taken to collect receivables toward the later periods, which could impact liquidity.

Average Payables Payment Period

The average payables payment period showed an increasing trend with some fluctuations. Initially, it decreased from 97 days in early 2021 to 70 days by the first quarter of 2022, but subsequently rose steadily to reach 161 days at mid-2025. This suggests that the company has extended its payment terms or delayed payments to suppliers over time, improving short-term cash flow but potentially affecting supplier relationships.

Cash Conversion Cycle

The cash conversion cycle (CCC), which combines the effects of the above metrics, reflected a generally rising trend. After being relatively stable around 197–200 days in 2021 and early 2022, the CCC increased to 219 days by the end of 2022, and then consistently climbed to a high of 386 days by the third quarter of 2025. This indicates a growing length of time between outlay of cash for inventory and receipt of cash from sales, suggesting deteriorating operational efficiency and working capital management in recent periods.

Overall, the data indicate increasing challenges in managing inventory turnover, receivables collection, and payables, resulting in a substantially extended cash conversion cycle. This trend may signal the need for closer scrutiny of working capital practices to mitigate potential liquidity risks going forward.