International Business Machines Corp. (NYSE:IBM)

Inventory Turnover

The inventory turnover ratio demonstrates variability over the observed periods. It declined from 20.69 in 2020 to 15.68 in 2021, indicating slower inventory movement. A recovery is visible in 2022, with an increase to 17.94, followed by a significant improvement reaching 23.74 in 2023. A slight decrease to 21.1 in 2024 still reflects relatively efficient inventory management compared to earlier years.

Receivables Turnover

This ratio exhibits a declining trend from 10.32 in 2020 to 8.49 in 2021, suggesting a slower collection of receivables. Although it partially recovers in 2022 to 9.25, subsequent years show a modest instability with 8.57 in 2023 and a slight increase to 9.22 in 2024, indicating moderate fluctuations in customer payment patterns.

Payables Turnover

The payables turnover ratio gradually decreased from 7.75 in 2020 to 6.54 in 2021, staying relatively stable thereafter around 6.67 to 6.87 through 2022 to 2024. This suggests a lengthening of the payment period to suppliers, reflecting possible extended credit terms or delayed payments.

Working Capital Turnover

The absence of data until 2024 makes trend analysis impossible for prior years. However, the reported ratio of 46.83 in 2024 indicates a very high efficiency in generating sales from working capital during that year.

Average Inventory Processing Period

The average inventory processing period increased from 18 days in 2020 to 23 days in 2021, denoting slower turnover. This duration decreases sharply to 15 days in 2023, signaling improved inventory handling. In 2024, it slightly rises again to 17 days but remains below early-year levels, indicating relatively efficient inventory turnover.

Average Receivable Collection Period

The receivable collection period lengthened from 35 days in 2020 to 43 days in 2021, reflecting slower recovery of outstanding amounts. Although it dropped slightly to 39 days in 2022, it returned to 43 days in 2023. The figure then decreased to 40 days in 2024, showing ongoing challenges in maintaining optimal receivables collection efficiency.

Operating Cycle

The operating cycle increased from 53 days in 2020 to 66 days in 2021, indicating a longer time to convert inventory and receivables into cash. Subsequent periods depict a gradual reduction to 59 days in 2022 and stabilize around 57-58 days in 2023 and 2024, suggesting some improvement in operational efficiency.

Average Payables Payment Period

The average payables payment period extended from 47 days in 2020 to a peak of 56 days in 2021, indicating a lengthened time frame before suppliers are paid. This period slightly decreased during the following years, stabilizing around 53-55 days by 2024, signifying a continued practice of utilizing credit terms effectively.

Cash Conversion Cycle

The cash conversion cycle shows an increasing trend from 6 days in 2020 to 10 days in 2021, reflecting a longer interval between outlay of cash and cash recovery. The cycle improves notably in 2022, reducing back to 6 days, and further shortens to 3 days in 2023 and 2024, which demonstrates enhanced liquidity management and operational efficiency in these periods.

Cost

From 2020 to 2021, there is a significant decrease in costs, dropping from 38,045 million US dollars to 25,864 million US dollars. This decline moderates from 2021 to 2024, with costs fluctuating slightly but generally trending downward, reaching 27,202 million US dollars by 2024. The sharp initial decrease followed by a stabilization period suggests efforts to control or reduce expenses.

Inventory

Inventory levels display a consistent downward trend from 1,839 million US dollars in 2020 to a low of 1,161 million US dollars in 2023. There is a modest increase in 2024 to 1,289 million US dollars, indicating a slight replenishment after several years of reduction. Overall, inventory management appears focused on leaner holdings.

Inventory turnover

The inventory turnover ratio declines notably from 20.69 in 2020 to 15.68 in 2021, implying slower inventory movement in that year. However, this ratio recovers thereafter, increasing to 17.94 in 2022, then notably accelerating to peak at 23.74 in 2023, before slightly declining to 21.1 in 2024. This fluctuation suggests improvements in inventory efficiency and sales or operational adjustments enhancing inventory turnover in recent years.

Over the five-year period, revenue shows a notable decline initially, followed by a gradual recovery. Revenue decreased significantly from 73,620 million US dollars in 2020 to 57,350 million US dollars in 2021. Subsequently, revenue increased steadily each year, reaching 62,753 million US dollars by the end of 2024, though it did not return to the 2020 peak within this timeframe.

The net notes and accounts receivable balance experienced fluctuations without a clear linear trend. After decreasing from 7,132 million US dollars in 2020 to 6,541 million US dollars in 2022, it rose to 7,214 million US dollars in 2023 and then declined again to 6,804 million US dollars in 2024. These variations suggest adjustments in credit policies or changes in sales on credit, corresponding variably with overall revenue changes.

The receivables turnover ratio, which measures the efficiency of collecting receivables, decreased from 10.32 in 2020 to a low of 8.49 in 2021. Following this, it showed variability, climbing back to 9.25 in 2022, dropping slightly to 8.57 in 2023, and increasing again to 9.22 in 2024. These fluctuations indicate variations in collection efficiency, which may reflect changes in credit terms, customer payment behavior, or collection processes.

Revenue Trends

Significant decline in 2021 followed by steady recovery through 2024; partial rebound but not to peak 2020 levels.

Notes and Accounts Receivable Trends

Decreased over the first three years, then fluctuated upward and downward; no consistent trend aligned perfectly with revenue movements.

Receivables Turnover Ratio Trends

Decline in 2021, followed by fluctuations indicative of varying collection efficiency; remains below 2020 levels by 2024.

Cost

The cost figures experienced a significant decline from 2020 to 2021, dropping from 38,045 million US dollars to 25,864 million US dollars. Following this sharp decrease, costs exhibited a slight upward trend, rising to 27,843 million in 2022, then marginally declining in subsequent years to 27,560 million in 2023 and 27,202 million in 2024. Overall, there was a notable reduction in costs compared to the 2020 baseline, remaining relatively stable after 2021.

Accounts payable

Accounts payable showed a decreasing pattern from 4,908 million US dollars in 2020 to 3,955 million in 2021. From 2021 onward, this figure slightly increased to 4,051 million in 2022 and peaked at 4,132 million in 2023 before falling back to 4,032 million in 2024. This indicates a stabilization in the level of accounts payable after the initial decline, with fluctuations around the 4,000 million mark in the later years.

Payables turnover

The payables turnover ratio declined from 7.75 in 2020 to 6.54 in 2021, signifying a slower rate of payment to suppliers. After this decrease, the ratio showed modest recovery, rising to 6.87 in 2022, slightly declining to 6.67 in 2023, and again increasing to 6.75 in 2024. These fluctuations suggest some variability in payment efficiency but generally indicate a somewhat reduced turnover pace compared to 2020.

The analysis of the annual financial data reveals several notable trends and shifts over the observed periods.

Working Capital

The working capital figures show a significant improvement over the periods. Initially, there was a substantial negative working capital of -704 million US dollars at the end of 2020, which deepened further to -4080 million by the end of 2021. However, the negative working capital started to decrease in magnitude in subsequent years, recording -2387 million in 2022 and -1214 million in 2023. By the end of 2024, the working capital turned positive, reaching 1340 million US dollars. This improvement suggests enhanced ability to cover short-term liabilities with short-term assets, indicating a strengthening liquidity position.

Revenue

Revenue shows some fluctuation but an overall declining trend followed by modest recovery. Revenue was highest in 2020 at 73,620 million US dollars, declined sharply to 57,350 million in 2021, then gradually increased to 60,530 million in 2022, 61,860 million in 2023, and finally 62,753 million in 2024. Despite the recovery, the revenue by the end of 2024 remained below the 2020 peak, indicating potential challenges in maintaining or growing sales.

Working Capital Turnover

Data for working capital turnover ratio is only available for the final period, 2024, reported at 46.83. This very high ratio suggests significant revenue generation relative to working capital in that year, corresponding with the positive working capital position reported.

In summary, the financial data indicates enhanced liquidity and operational efficiency coming from the reversal of negative working capital into positive territory. Revenue experienced a dip followed by gradual recovery, suggesting ongoing efforts to regain sales momentum. The high working capital turnover in the latest period underscores efficient use of working capital to generate revenue.

Inventory turnover

The inventory turnover ratio demonstrates notable fluctuations over the five-year period. Beginning at 20.69 in 2020, it declined to 15.68 in 2021, indicating slower inventory movement during that year. A recovery is observed in 2022 with an increase to 17.94, followed by a significant rise to 23.74 in 2023, suggesting enhanced efficiency in inventory management or stronger sales. However, in 2024, the ratio slightly decreased to 21.1, yet it remains higher than the values reported in 2021 and 2022, reflecting a generally improved turnover compared to those years.

Average inventory processing period

The average inventory processing period exhibits an inverse trend relative to the inventory turnover ratio, as expected. It increased from 18 days in 2020 to 23 days in 2021, corresponding with the decline in inventory turnover. The period then shortens to 20 days in 2022, continues decreasing to 15 days in 2023, and rises modestly to 17 days in 2024. This pattern indicates that the duration inventory is held decreased significantly in 2023, aligned with the peak in turnover ratio, before slightly increasing again in 2024.

Overall analysis

The data reveals a period of reduced inventory efficiency in 2021, followed by gradual improvement and optimization in subsequent years, peaking in 2023. The slight decline in turnover and increase in processing period in 2024 may warrant monitoring to ensure these changes do not indicate emerging inefficiencies. Overall, the trends suggest effective inventory management adjustments that have enhanced operational performance compared to the earlier years.

Receivables Turnover Ratio

The receivables turnover ratio shows a fluctuating pattern over the examined period. Starting at 10.32 in 2020, it declined to 8.49 in 2021, indicating a slowdown in the frequency of receivables collection. This ratio moderately rebounded to 9.25 in 2022 but again declined slightly to 8.57 in 2023 before recovering to 9.22 in 2024. Overall, the trend suggests a variable efficiency in the collection of receivables with some inconsistency year to year.

Average Receivable Collection Period (Number of Days)

The average receivable collection period moved inversely to the receivables turnover ratio as anticipated. The period extended from 35 days in 2020 to 43 days in 2021, reflecting slower collection efforts. Subsequently, the period shortened to 39 days in 2022, before lengthening again to 43 days in 2023 and finally decreasing to 40 days in 2024. This pattern suggests fluctuations in the time taken to collect receivables, affecting cash flow management.

Summary Insights

The data reveals a cycle of decreased efficiency in receivables collection between 2020 and 2021, partial recovery in 2022, a setback in 2023, and improvement in 2024. These oscillations highlight challenges in maintaining consistent receivables management performance. The variations in collection periods and turnover ratios may imply changes in credit policies, customer payment behaviors, or operational factors affecting receivables management.

The analysis of the annual financial data reveals several observable trends in the company's working capital management metrics over the five-year period.

Average Inventory Processing Period

This indicator shows fluctuations with a notable increase from 18 days in 2020 to 23 days in 2021. Subsequently, it declined to 20 days in 2022 and further dropped to 15 days in 2023, suggesting improved efficiency in inventory turnover. However, a slight increase to 17 days in 2024 indicates a minor reversal in this trend, yet the period remains below the earlier peak.

Average Receivable Collection Period

The receivable collection period increased from 35 days in 2020 to 43 days in 2021, indicating a slower collection process. Despite a minor improvement to 39 days in 2022, it reverted back to 43 days in 2023 and then improved slightly to 40 days in 2024. This pattern points to some challenges in maintaining consistent receivable management.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, lengthened significantly from 53 days in 2020 to 66 days in 2021. Afterward, it contracted to 59 days in 2022, with a slight further decline to 58 days in 2023 and 57 days in 2024. This gradual reduction suggests enhanced overall operational efficiency in managing the working capital cycle following the 2021 peak.

In summary, after a period of increased duration in inventory and receivable periods in 2021, the company has made progress in reducing the operating cycle by 2024. Inventory management improved more substantially than receivables, which still exhibit some variability. These dynamics imply efforts toward optimizing cash flow throughout the recent years, though there remains potential for more stable receivables management.

Payables Turnover

The payables turnover ratio exhibited a declining trend from 7.75 in 2020 to 6.54 in 2021, indicating a slower rate of payment to suppliers during this period. Although there was a slight recovery to 6.87 in 2022, the ratio remained below the 2020 level. In 2023 and 2024, the ratio stabilized somewhat, recorded at 6.67 and 6.75 respectively, suggesting relatively consistent payment practices in those years but still at a lower turnover compared to 2020.

Average Payables Payment Period

The average payables payment period increased notably from 47 days in 2020 to 56 days in 2021, reflecting an extension in the time taken to pay suppliers. This longer payment period was slightly reduced to 53 days in 2022 but then lengthened again to 55 days in 2023. In 2024, the payment period shortened marginally to 54 days. Overall, the data reveal a shift towards longer payment cycles compared to 2020, indicating possible changes in cash management strategies or supplier negotiation terms.

Summary of Trends

The inverse relationship between payables turnover and average payment period is evident, with decreases in turnover corresponding to increases in payment days. This pattern suggests a deliberate trend towards extending payment periods over the analyzed timeframe. While the turnover ratio experienced minor fluctuations, it did not return to the higher level seen in 2020, and the payment period remained elevated in all subsequent years. This could imply an emphasis on optimizing working capital management through slower payables clearance.

Average Inventory Processing Period

The average inventory processing period fluctuated over the observed years, starting at 18 days in 2020, rising to a peak of 23 days in 2021, then decreasing to 20 days in 2022, further declining to 15 days in 2023, and slightly increasing to 17 days in 2024. This indicates an overall trend of improvement in inventory turnover efficiency after 2021, with the period required to process inventory generally shortening.

Average Receivable Collection Period

The average receivable collection period showed variability, increasing from 35 days in 2020 to 43 days in 2021, then decreasing to 39 days in 2022, followed by an increase back to 43 days in 2023, and a slight decrease to 40 days in 2024. This suggests some inconsistency in receivables management, with periods of slower and faster collections but generally higher than the starting point in 2020.

Average Payables Payment Period

The average payables payment period steadily increased from 47 days in 2020 to 56 days in 2021, then showed a small decrease to 53 days in 2022, followed by a slight increase to 55 days in 2023 and a slight decrease to 54 days in 2024. This overall pattern suggests a tendency to extend payment terms, implying the company may be leveraging supplier credit more extensively than at the beginning of the analyzed period.

Cash Conversion Cycle

The cash conversion cycle experienced minor fluctuations but demonstrated a general downward trend. It increased from 6 days in 2020 to 10 days in 2021, then returned to 6 days in 2022, followed by a reduction to 3 days in both 2023 and 2024. This trend indicates improved efficiency in managing the time between cash outflows and inflows, reducing the time capital is tied up in operations.