HP Inc. (NYSE:HPQ)

Inventory Turnover

The inventory turnover ratio exhibited a declining trend over the six-year period, starting from 14.29 in 2013 and decreasing to 7.89 by 2018. This indicates a slowdown in the rate at which the company sold and replaced its inventory, which could suggest either lower sales velocity or increased inventory levels.

Receivables Turnover

Receivables turnover showed some fluctuations but generally improved from 7.07 in 2013 to peak at 11.79 in 2017 before slightly declining to 11.44 in 2018. This suggests an overall improvement in the efficiency of collecting accounts receivables, with faster conversion of credit sales into cash.

Payables Turnover

The payables turnover ratio steadily declined from 6.16 in 2013 to a low of 3.20 in 2017, with a minor increase in 2018 to 3.23. This trend indicates the company took longer to pay its suppliers over time, which may reflect extended payment terms or delayed payments.

Working Capital Turnover

Working capital turnover showed a significant decrease from 23.19 in 2013 to 10.77 in 2015, after which data is unavailable. The downward trend may indicate less efficient use of working capital to generate sales during the observed period.

Average Inventory Processing Period

The average days inventory is held increased from 26 days in 2013 to 50 days in 2017, before slightly decreasing to 46 days in 2018. This confirms the slowdown implied by the inventory turnover ratio and indicates longer holding periods for inventory items.

Average Receivable Collection Period

The average days taken to collect receivables decreased from 52 days in 2013 to 31 days in 2016 and remained stable around that level through 2018. This indicates improvement in cash collections and management of credit policies.

Operating Cycle

The operating cycle fluctuated between 73 and 81 days with no definitive trend. This metric, representing the time between inventory acquisition and cash collection from sales, remained relatively stable despite changes in its components.

Average Payables Payment Period

The average number of days to pay suppliers increased significantly from 59 days in 2013 to over 110 days by 2017 and 2018. This suggests the company extended payment terms or delayed payments to suppliers, potentially improving short-term liquidity at the cost of longer creditor obligations.

Cash Conversion Cycle

The cash conversion cycle decreased dramatically from 19 days in 2013 to negative values from 2016 onwards, reaching negative 35 days in 2018. A negative cash conversion cycle indicates that the company is able to collect cash from customers before it needs to pay its suppliers, reflecting strong working capital management and improving cash flow timing.

Cost of Revenue

The cost of revenue demonstrates a notable decline from 2013 to 2016, dropping from 86,380 million USD to 39,240 million USD. This represents a reduction of more than 50%. Following this sharp decrease, there is a gradual increase in the subsequent two years, rising to 47,803 million USD in 2018. This trend suggests a significant change in either the scale of operations, cost management, or revenue recognition policies during the period, with some recovery or expansion after 2016.

Inventory

Inventory levels fluctuate throughout the period, initially increasing slightly from 6,046 million USD in 2013 to 6,485 million USD in 2015. Thereafter, inventory decreases significantly in 2016 to 4,484 million USD but rebounds in the following years, reaching 6,062 million USD in 2018. The reduction in 2016 aligns with the decreased cost of revenue for that year, while the subsequent increase might indicate a buildup in stock or preparation for higher sales volumes.

Inventory Turnover Ratio

The inventory turnover ratio exhibits a consistent downward trend from 14.29 in 2013 to a low of 7.34 in 2017, followed by a slight increase to 7.89 in 2018. This decline points to a slower rate of inventory being sold and replaced over time, which could signify changing operational efficiency, sales pace, or inventory management practices. The slight recovery in 2018 may indicate some improvement in inventory utilization or sales activity.

Net Revenue

The net revenue demonstrated a declining trend from 2013 to 2016, falling from approximately 112.3 billion US dollars in 2013 to 48.2 billion US dollars in 2016. However, from 2016 onwards, there was a recovery pattern observed, with net revenue increasing to around 58.5 billion US dollars by 2018, indicating a moderate rebound but not reaching the initial levels seen in the early period.

Accounts Receivable, Net

The net accounts receivable showed a consistent decline from 15.9 billion US dollars in 2013 to 4.1 billion US dollars in 2016. Following this drop, there was a slight upward trend from 2016 to 2018, reaching approximately 5.1 billion US dollars. This movement parallels the trend in net revenue, reflecting changes in credit sales or collections.

Receivables Turnover Ratio

The receivables turnover ratio exhibited an improving efficiency until 2016, increasing from 7.07 times in 2013 to a peak of about 11.79 times in 2017. This suggests enhanced collection efficiency over the period despite declining revenue. There was a minor decrease in 2018 to 11.44 times, which still reflects a solid turnover rate relative to earlier years.

Cost of Revenue

The cost of revenue displayed a declining trend from October 2013 to October 2016, dropping from 86,380 million US dollars to 39,240 million US dollars. After this decline, there was a subsequent increase in cost of revenue in the following two years, reaching 47,803 million US dollars by October 2018. This pattern indicates a significant reduction in costs initially, followed by a moderate rise over the last two periods.

Accounts Payable

Accounts payable figures generally increased from 14,019 million US dollars in October 2013 to 15,956 million US dollars in October 2015. Subsequently, a sharp decrease occurred in October 2016, bringing the payable amount down to 11,103 million US dollars. In the next two years, accounts payable rebounded, reaching 14,816 million US dollars by October 2018. This suggests variability in vendor payments or credit terms over the period.

Payables Turnover Ratio

The payables turnover ratio showed a steady decline throughout the period under review, falling from 6.16 in October 2013 to 3.23 by October 2018. This decline indicates that the company was taking longer to pay its suppliers and vendors over time, reflecting changes in payment policies or cash management strategies.

Working Capital

The working capital exhibited a rising trend from 2013 to 2015, increasing from 4,843 million US dollars to 9,596 million US dollars. However, from 2016 onwards, the working capital sharply declined, turning negative starting in 2016 with -340 million US dollars, reaching a low of -3,744 million US dollars by 2018. This indicates a significant deterioration in the company's short-term financial health over the latter period.

Net Revenue

Net revenue remained relatively stable during the period from 2013 to 2015, with a slight decline from 112,298 million to 103,355 million US dollars. From 2016 forward, there is a marked decrease in reported revenue figures, dropping to 48,238 million US dollars in 2016 before showing moderate growth in the subsequent two years, rising to 58,472 million US dollars by 2018. This pattern suggests either a substantial business contraction or a change in reporting scope after 2015.

Working Capital Turnover

The working capital turnover ratio decreased steadily from 23.19 in 2013 to 10.77 in 2015, indicating a reduction in efficiency with which the company generated revenue from its working capital. Data are unavailable beyond 2015, which may be related to the company's shift to negative working capital values that would affect the meaningfulness of this ratio.

The financial data exhibits a clear declining trend in inventory turnover from 2013 to 2018, which suggests reduced efficiency in managing inventory over the years. Specifically, the inventory turnover ratio decreased from 14.29 in 2013 to a low point of 7.34 in 2017, with a slight recovery to 7.89 in 2018. This decline indicates that the company turned over its inventory fewer times per year, implying either increased inventory levels or slower sales of inventory.

Conversely, the average inventory processing period shows an increasing trend during the same period, moving from 26 days in 2013 to a peak of 50 days in 2017, followed by a minor improvement to 46 days in 2018. This aligns inversely with the inventory turnover ratio and further confirms that inventory was held longer before being sold.

Inventory Turnover Ratio

Decreased from 14.29 in 2013 to 7.34 in 2017, indicating less frequent inventory turnover.

Saw a modest improvement to 7.89 in 2018, but remained significantly below earlier levels.

Average Inventory Processing Period

Increased from 26 days in 2013 to 50 days in 2017, demonstrating longer holding periods for inventory.

Improved slightly to 46 days in 2018, suggesting attempts to reduce inventory duration.

Overall, the trends reflect a deteriorating inventory management efficiency over the six-year period with some signs of stabilization or recovery in the last year. The inverse relationship between the turnover ratio and the processing period is consistent, indicating that the company may need to continue addressing inventory management practices to optimize operational efficiency and reduce inventory carrying costs.

Receivables Turnover

The receivables turnover ratio demonstrates a general upward trend from 2013 to 2018. Starting at 7.07 in 2013, it increased significantly to 8.06 in 2014, then showed a slight decline to 7.73 in 2015. From 2015 onwards, there was a notable rise, reaching a peak of 11.79 in 2017, followed by a minor decrease to 11.44 in 2018. This pattern indicates an overall improvement in the efficiency of collecting receivables over the period, especially from 2015 through 2018.

Average Receivable Collection Period

The average collection period in days exhibits a declining trend, reflecting faster collection of receivables. Beginning at 52 days in 2013, this metric decreased to 45 days in 2014 and slightly increased to 47 days in 2015. Subsequently, there was a sharp reduction to 31 days in 2016, maintaining this lower collection period in 2017, and slightly increasing to 32 days in 2018. This trend corresponds inversely with the receivables turnover ratio, confirming improved credit management efficiency and quicker cash inflow from receivables during the latter years.

Summary

Across the six-year span, the company enhanced its receivables management, as evidenced by higher turnover ratios and reduced collection periods. The significant improvements from 2015 onwards suggest targeted efforts to optimize working capital. Minor fluctuations in 2015 and 2018 indicate that while the general trend is positive, occasional variability in collection efficiency remains. Overall, the data points to strengthening operational efficiency in accounts receivable processes.

Average inventory processing period

The average inventory processing period shows a general upward trend from 26 days in 2013 to a peak of 50 days in 2017, followed by a slight decline to 46 days in 2018. This indicates that the time taken to process inventory increased significantly between 2013 and 2017, suggesting potential changes in inventory management or product turnover rates during this time frame.

Average receivable collection period

The average receivable collection period fluctuated over the analyzed years. It decreased from 52 days in 2013 to 45 days in 2014, then experienced a minor rise in 2015 to 47 days before declining substantially to 31 days in both 2016 and 2017. A slight increase to 32 days occurred in 2018. Overall, there is a noticeable improvement in receivable collection efficiency starting from 2015 onwards.

Operating cycle

The operating cycle remained relatively stable throughout the period with minor fluctuations. It decreased from 78 days in 2013 to 73 days in 2014, remained almost steady in 2016, then increased to a high of 81 days in 2017, before settling back to 78 days in 2018. This suggests that the combined effect of inventory processing and receivable collection periods maintained an overall consistent operational timeline, despite some variations in individual components.

Payables Turnover

The payables turnover ratio demonstrates a consistent downward trend over the six-year period. Starting at 6.16 in 2013, the ratio steadily declined each year, reaching a low point of 3.20 in 2017, with a slight improvement to 3.23 in 2018. This decreasing trend suggests that the company is paying its suppliers less frequently or taking longer to settle its payables.

Average Payables Payment Period

The average payables payment period exhibits an inverse pattern relative to the payables turnover. It has increased significantly from 59 days in 2013 to 114 days in 2017, followed by a marginal reduction to 113 days in 2018. This indicates a lengthening duration before payments are made to suppliers, reflecting a strategic extension of payment terms or slower disbursement processes.

Insight

The combination of decreasing payables turnover and increasing average payment period suggests that the company has progressively extended its accounts payable cycle. This could be a deliberate effort to conserve cash or optimize working capital management. However, the trend plateaus in the last year, indicating that the extension of payment terms may have reached a limit or that the company is stabilizing its payment practices.

Average Inventory Processing Period

The average inventory processing period shows a general upward trend from 26 days in 2013 to a peak of 50 days in 2017, followed by a slight improvement to 46 days in 2018. This indicates that the company has been holding inventory for longer durations over the years, potentially reflecting changes in inventory management or demand patterns.

Average Receivable Collection Period

The receivable collection period decreased significantly from 52 days in 2013 to around 31 days by 2016 and remained relatively stable at 31-32 days through 2018. This suggests an improvement in the efficiency of collecting receivables, resulting in a faster conversion of sales into cash during the latter years.

Average Payables Payment Period

The payables payment period has increased steadily, rising from 59 days in 2013 to 113 days in 2018. This lengthening indicates that the company has been extending the time taken to pay its suppliers, which may be a strategic move to manage cash outflows or negotiate longer credit terms.

Cash Conversion Cycle

The cash conversion cycle has improved markedly, moving from a positive 19 days in 2013 to increasingly negative figures, reaching -35 days in 2018. A negative cash conversion cycle implies that the company receives cash from sales before it needs to pay suppliers, representing strong operational efficiency and favorable working capital management over this period.