Eli Lilly & Co. (NYSE:LLY)

Inventory Turnover

The inventory turnover ratio demonstrates a fluctuating trend over the observed quarters. Starting at 1.38 in March 2020, it increased steadily to peak at 1.93 in June 2022, indicating improved efficiency in managing inventory. However, subsequent quarters show a steady decline, reaching 0.84 by June 2025, suggesting a slowdown in inventory turnover and potentially signaling slower sales or excess stock accumulation.

Receivables Turnover

The receivables turnover ratio remained relatively stable, beginning at 4.18 in March 2020 and maintaining values mostly between 3.5 and 4.7 throughout the periods. Some volatility is seen with a decrease to around 3.53 in September 2024 and slight recovery thereafter. Overall, the receivables collection efficiency shows minor fluctuations without a clear long-term upward or downward trend.

Payables Turnover

Payables turnover shows an increasing trend early on, reaching a high of 5.24 in June 2022, suggesting faster payment to suppliers initially. After this peak, a steady decline is apparent, with the ratio falling to 2.27 by June 2025. This indicates the company is taking longer to pay its payables later in the timeline.

Working Capital Turnover

The working capital turnover ratio is highly volatile across the periods. Notably, spikes occurred in September 2020 (12.14), September 2022 (19.45), and December 2023 (31.79), indicating periods of significantly higher efficiency in utilizing working capital. However, these spikes are interspersed with sharp declines into single-digit values and several gaps in data, implying irregular working capital management or seasonal influences. Overall, this ratio lacks a consistent trend.

Average Inventory Processing Period

The average inventory processing period shows a general increasing trend after an initial decline. Starting from 265 days in March 2020, it decreased to around 189 days by June 2022, indicating improved inventory turnover speed. After mid-2022, there is a reversal with a continuous increase reaching up to 435 days by June 2025, which corresponds with the declining inventory turnover ratio and signals slower movement of inventory.

Average Receivable Collection Period

This ratio fluctuates moderately around 80 to 100 days, with some periods of increase such as 103 days in June 2024 and 97 days in June 2025, indicating a slight lengthening of collection time from customers toward the latter part of the timeline. Despite fluctuations, the receivable collection period remains relatively stable over time.

Operating Cycle

The operating cycle initially decreased from 352 days in March 2020 to 268 days in June 2022, suggesting improved overall operational efficiency. However, from that point onward, the operating cycle increases significantly, reaching 532 days by June 2025. This longer operating cycle implies a slowdown in the time required to convert inventory and receivables into cash.

Average Payables Payment Period

The average payables payment period decreased from 107 days in March 2020 to 70 days in June 2021, indicating quicker payments to suppliers. However, afterward, it exhibits a rising trend again, increasing to 161 days by June 2025. This reflects a strategic lengthening in the time taken to pay creditors in the later periods.

Cash Conversion Cycle

The cash conversion cycle (CCC) improves from 245 days in March 2020 to approximately 194 days in December 2022, suggesting efficient management of working capital. Post-2022, the CCC extends consistently, escalating to 371 days by June 2025. This lengthening cycle indicates a decline in liquidity management efficiency, with the company taking longer to convert resources back into cash.

Cost of Sales

The cost of sales exhibits considerable fluctuations over the observed periods. Initially, from March 2020 through December 2020, there is a general upward trend, increasing from approximately 1.22 billion to around 2.05 billion US dollars. This pattern continues with intermittent drops and rises; for instance, a notable decrease occurs in the middle of 2022, followed by an increase toward the end of 2022 and into 2023. The highest recorded value appears in December 2024, reaching nearly 2.44 billion US dollars. Overall, the cost of sales tends to increase over time, reflecting potential growth in operational activity or other cost factors.

Inventories

Inventories also show a consistent upward trajectory throughout the periods. Starting from just over 3.1 billion US dollars at March 2020, inventory levels rise steadily, with occasional minor fluctuations. The increase accelerates especially from early 2023 onward, with inventories surpassing 7.5 billion US dollars by March 2025 and reaching over 11 billion US dollars by June 2025. This sustained growth suggests increased stockpiling or expansion in inventory holdings, which may be linked to strategic planning or supply chain management decisions.

Inventory Turnover Ratio

The inventory turnover ratio presents a declining trend over the periods in which it is reported. Early values start around 1.38 in September 2020 and rise slightly to a peak near 1.93 in March 2022. Following this peak, a consistent decrease is observed, dropping to 0.84 by June 2025. This decline in turnover ratio indicates that inventory is being sold or used less frequently relative to its level, potentially pointing to slower inventory movement or increasing stock levels relative to sales volume.

Overall Insights

The concurrent increase in both cost of sales and inventories alongside a decreasing inventory turnover ratio suggests that inventory is accumulating faster than it is being consumed or sold. This dynamic may reflect operational shifts such as expanded production, anticipation of future demand, supply chain adjustments, or changes in sales velocity. The decline in inventory turnover could indicate growing inefficiencies or a strategic decision to hold more inventory. Monitoring these metrics is essential to assess working capital management and operational efficiency going forward.

Revenue Trends

Revenue exhibited fluctuations throughout the timeline, with several periods of marked growth and temporary declines. During 2020, revenue started around $5.86 billion in Q1, declined slightly mid-year, then increased significantly to approximately $7.44 billion in Q4. A similar pattern of mid-year dips and end-of-year increases occurred in 2021 and 2022, reaching the highest observed peak of about $13.53 billion in Q3 2024. The data suggests seasonal or cyclical patterns with overall upward movement in revenue over the five-year span.

Accounts Receivable, Net of Allowances

The net accounts receivable values generally increased over the observed periods, indicating accumulation of outstanding receivables. Starting at roughly $5.11 billion in Q1 2020, the figure displayed a consistent rising trend, reaching approximately $14.17 billion by Q2 2025. Notably, increases in receivables appear to correspond with rising revenue periods, though receivables growth might be outpacing revenue growth towards the later periods, which could imply extended collection periods or increased credit sales.

Receivables Turnover Ratio

The receivables turnover ratio demonstrates variability without a clear long-term trend, suggesting fluctuating efficiency in collecting receivables. The ratio was approximately 4.18 to 4.69 during 2020 and 2021, then decreased notably to lows around 3.53 to 3.75 in 2023 and early 2024. Some recovery was observed in mid to late 2024 with ratios moving back toward 4.00. Lower turnover ratios during recent periods imply slower collection of receivables, potentially indicating longer customer payment periods or changes in credit policy.

Overall Insights

The combined analysis of revenue growth, accounts receivable increases, and declining receivables turnover ratios suggests that while the company has generally expanded its sales, it may be experiencing challenges in maintaining collection efficiency. The rising accounts receivable figures and lower turnover ratios indicate that more revenue is tied up in credit extended to customers. This trend warrants attention to cash flow management and credit control processes to ensure liquidity is not adversely impacted by the extension of payment terms or collection delays.

The financial data shows notable fluctuations and trends in the cost of sales, accounts payable, and payables turnover over the analyzed periods.

Cost of Sales

The cost of sales has exhibited a generally increasing trend with some periods of volatility. Starting from approximately 1,215,100 thousand USD in March 2020, the figure rose significantly by the end of that year, peaking at about 2,050,200 thousand USD in December 2021. Thereafter, the cost of sales experienced some declines and rebounds, reaching a high of 2,447,800 thousand USD by June 2025. This reflects overall growth but with some short-term variations likely influenced by operational or market conditions.

Accounts Payable

Accounts payable also shows an upward trajectory, starting at 1,207,700 thousand USD in March 2020 and increasing consistently throughout the period. The amount surged to over 4,075,700 thousand USD by June 2025, indicating expanding liabilities or procurement activities. The growth in accounts payable has generally outpaced the increase in cost of sales, suggesting extended payment terms or changes in supplier relationships.

Payables Turnover Ratio

The payables turnover ratio, calculated from September 2020 onwards, fluctuates but demonstrates a downward trend overall. Initially at 3.41 in September 2020, it peaked at 5.24 in March 2022, indicating faster payment to suppliers during that time. However, from that peak, the ratio steadily declined to approximately 2.27 by June 2025. This decreasing trend signals slower payment cycles or lengthening days payable outstanding, which may affect supplier relations or cash flow management.

In summary, both cost of sales and accounts payable have increased substantially over the period, with accounts payable growing at a faster rate. The declining payables turnover ratio in the later quarters suggests the company is taking longer to settle its payables, which could be a strategic move to preserve cash or reflect changes in supplier payment terms.

Working Capital

The working capital demonstrated substantial variability across the observed periods. Starting from approximately $1.38 billion in March 2020, it increased sharply to a peak of around $4.98 billion by December 2020. However, in the first half of 2021, the figure experienced a notable decline, falling to about $2.2 billion in June 2021 before rebounding moderately towards the end of that year. The trend continued with fluctuations in 2022, reaching as low as $896 million in December 2022, followed by a recovery in early 2023. In the latter part of 2023 and early 2024, the working capital showed considerable volatility, even turning negative in December 2023 at about -$1.57 billion. The subsequent quarters from March 2024 onward exhibited a strong upward trajectory, culminating in a significant increase to over $11 billion by mid-2025. This pattern suggests episodic shifts in operational liquidity or current asset management, with recent quarters indicating a strong liquidity position.

Revenue

Revenue figures also revealed variable movements but with a generally upward trend. Starting at nearly $5.86 billion in March 2020, revenue fluctuated slightly through the first year, ranging between $5.5 billion and $7.44 billion. From 2021 onward, revenue steadily increased, with periodic minor dips, reaching a high point around $15.56 billion by mid-2025. This upward momentum reflects growing sales performance or expanded market activities despite the short-term fluctuations, indicating resilience and positive growth in the company’s top-line over the long term.

Working Capital Turnover

The working capital turnover ratio, available only intermittently, exhibited significant fluctuations across reported quarters. It started around 4.93 in December 2020, then rose to over 12 by mid-2021 and showed dramatic peaks such as 31.84 in the first quarter of 2023 and 31.79 in the fourth quarter of 2023. These spikes suggest periods during which the company generated a large amount of revenue relative to its working capital, indicating highly efficient use of liquid resources in those quarters. However, the ratio also returned to lower levels in other periods, reflecting inconsistent efficiency in working capital management.

Overall Analysis

The data indicates that while revenue has grown steadily over time, the company’s working capital has experienced pronounced volatility, including a brief period of negative working capital, which may signal changes in current liabilities or asset management strategies. The sharp increases in working capital turnover ratio during select quarters imply that the company occasionally achieves very high efficiency in converting working capital into revenue but lacks consistency in this aspect. Recent trends in both increasing revenue and working capital suggest a strengthening operational liquidity combined with expanding business activities, which is a positive indicator for financial health if maintained.

Inventory Turnover

The inventory turnover ratio shows an initial increase from 1.38 to a peak of 1.93 between March 31, 2020, and June 30, 2022. This trend indicates an improving efficiency in managing inventory during this period. However, from that peak onward, there is a consistent decline in turnover, reaching a low of 0.84 by June 30, 2025. This downward trend suggests a decreasing frequency of inventory replacement, potentially indicating slower sales or overstocking issues in the later quarters.

Average Inventory Processing Period

The average inventory processing period, measured in days, moves inversely to the inventory turnover ratio. It decreases from 265 days as of March 31, 2020, to a low of 189 days by June 30, 2022, reflecting a faster inventory cycle and improved operational efficiency. Subsequently, the processing period increases steadily, reaching 435 days by June 30, 2025, indicative of a slower movement of inventory. This lengthening cycle could imply challenges in selling inventory rapidly or excess stock accumulation over time.

Overall Trend Analysis

The data displays a clear inverse relationship between inventory turnover and average inventory processing period, consistent with operational expectations. There is an evident improvement in inventory management up to mid-2022, followed by a notable deterioration. This change in pattern may warrant further investigation into factors such as market demand shifts, supply chain disruptions, or changes in company strategy impacting inventory management effectiveness over the latter periods.

Receivables Turnover Ratio

The receivables turnover ratio exhibits fluctuations over the observed periods. Starting around 4.18, it increased to a peak near 4.69 by December 2020, indicating improved efficiency in collecting receivables during that interval. Afterwards, it generally trended downward with intermittent recoveries, falling to values as low as 3.53 by June 2024. The most recent periods show a slight improvement again, but the ratio remains below earlier highs. Overall, this suggests variability in collection efficiency with a tendency toward slower collection in the later periods.

Average Receivable Collection Period (in days)

The average collection period inversely mirrors the turnover ratio. It decreased from 87 days in March 2020 to a low of 78 days by December 2020, reflecting faster payments from customers. However, subsequent quarters show a gradual lengthening of the collection period, reaching around 99 days in March 2023, indicating slower receivable collections. This rising trend continues with some fluctuations, with the highest reported period being 103 days in June 2024. The latter periods demonstrate some improvement but still remain elevated compared to earlier years.

Overall Analysis

The data indicates that after an initial phase of improved receivable management characterized by increasing turnover and decreasing collection days, there has been a shift toward less efficient receivables performance. The lengthening average collection period and declining turnover ratio in later years point toward potential challenges in the collection process or changes in credit terms. These trends merit further attention to understand underlying causes and address any impacts on cash flow and working capital management.

The data reveals evolving trends in the company's inventory management, receivables collection, and overall operating cycle over several years, indicating fluctuations in operational efficiency.

Average Inventory Processing Period

The average inventory processing period shows a general downward trend in the early periods, beginning at 265 days and decreasing to a low around 189 days, indicating improved inventory turnover efficiency. However, starting from late 2022, there is a marked reversal with a steady increase escalating to 435 days by the latest date. This suggests growing challenges in managing inventory levels or slower movement of stock towards the most recent quarters.

Average Receivable Collection Period

The average receivable collection period fluctuates moderately throughout the dataset. Initial values hover in the range of high 70s to mid-80s days, with some increases reaching near 100 days at certain points, such as in early 2023. These fluctuations indicate inconsistent efficiency in collecting receivables, with periods of extended collection times interspersed with improvements. Overall, the pattern does not demonstrate a strong directional trend but reflects volatility in cash conversion from sales on credit.

Operating Cycle

The operating cycle closely follows the combined effects of inventory turnover and receivables collection periods. The cycle begins with a decrease from over 350 days to around 268 days, indicating enhanced operating efficiency in the early reported periods. Nonetheless, post-2022, the operating cycle exhibits a substantial upward trend, peaking above 500 days by the end of the timeline. This elongation suggests an overall slowdown in converting resources into cash, impacted heavily by the rising inventory processing period and fluctuating receivables collection.

In summary, efficiency in inventory processing initially improved but faced significant deterioration in recent periods. While receivable collection times have remained variable without a definitive pattern, the aggregate effect is a lengthening operating cycle, signaling increased capital tied up in working capital and potential liquidity pressures for the company.

Payables Turnover Ratio

The payables turnover ratio demonstrates a fluctuating trend over the observed periods. Starting from a ratio of 3.41, the ratio increased steadily through 2021, reaching a peak of 5.24 in June 2022. Following this peak, there was a general decline, with minor fluctuations, leading to a ratio of 2.27 by June 2025. This signals an initial improvement in the frequency of payments to suppliers, indicating faster payments early on, followed by a gradual slowdown in turnover rate in later periods.

Average Payables Payment Period

The average payables payment period, expressed in days, inversely correlates with the payables turnover ratio trends. Beginning at 107 days, the payment period decreased progressively to its lowest point of 70 days in June 2022, which aligns with the peak payables turnover ratio during the same interval. Subsequently, this period increased consistently thereafter, reaching up to 161 days by June 2025. This indicates a lengthening time taken to settle payables, suggesting a slowdown in payments to suppliers in the later periods analyzed.

Overall Analysis

The data depicts a clear period of improved efficiency in payables management through 2020 to mid-2022, characterized by increasing turnover ratios and decreasing payment periods. However, post mid-2022, there is a noticeable reversal with turnover ratios declining and payment periods increasing, signaling a shift towards slower payments. This shift could reflect changes in cash management policies, supplier negotiation strategies, or external economic factors affecting liquidity and payment practices.

Inventory Processing Period

The average inventory processing period exhibits a fluctuating trend with a general increase over the observed timeframe. Starting from 265 days in March 2021, it declined steadily, reaching a low of 189 days in June 2022. Subsequently, the period extended gradually, peaking at 435 days by June 2025. This suggests increasing challenges in inventory turnover toward the latter periods.

Receivable Collection Period

This metric demonstrates moderate variability around the mid-80s to low 90s days range, with some notable spikes. The period remained relatively stable between March 2021 and December 2022, ranging from 78 to 88 days. However, starting in 2023, it increased intermittently, reaching as high as 103 days in September 2024 before slightly fluctuating around the 90-day mark thereafter. The data indicates occasional delays in receivables collection impacting cash flow management.

Payables Payment Period

The payables payment period shows a generally rising trend over time. Initially, it declined from 107 days in March 2021 to 70 days in June 2022, indicating faster payment cycles. From the second half of 2022 onward, it increased consistently, exceeding 140 days by March 2025 and reaching 161 days by June 2025. This demonstrates a strategic extension in payment terms or delays in supplier payments as part of working capital management.

Cash Conversion Cycle

The cash conversion cycle fluctuated between roughly 190 and 371 days, reflecting the combined impact of inventory, receivables, and payables periods. It decreased from 245 days in March 2021 to around 194 days by December 2021, improving operational efficiency. However, from 2022 onwards, the cycle lengthened significantly, rising to 371 days by June 2025. This lengthening indicates a slowdown in the turnaround of cash tied up in operations, influenced by longer inventory holding and payment periods.