Johnson & Johnson (NYSE:JNJ)

Inventory Turnover

The inventory turnover ratio shows a declining trend over the observed periods, starting around 3.04 and gradually decreasing to approximately 2.17 by the latest quarter. This suggests a slower movement of inventory, indicating that inventory is being held longer before sale.

Receivables Turnover

Receivables turnover generally exhibits some fluctuations but overall shows a slight downward trend from about 6.08 to near 5.08. This implies a moderately slower collection of receivables, potentially indicating an elongation in the credit period granted to customers or difficulties in collection.

Payables Turnover

Payables turnover fluctuates without a strong directional trend, ranging mostly between 2.66 and 3.38. Periodic increases and decreases suggest variability in the payment behavior to suppliers but no sustained acceleration or deceleration is evident.

Working Capital Turnover

The working capital turnover ratio displays significant variability. Early periods show moderate levels near 5.0 to 7.3, followed by extreme spikes, such as a notable peak at 284.99 in one quarter. These large jumps may indicate unusual operational or accounting events impacting the efficient use of working capital.

Average Inventory Processing Period

The average inventory processing period steadily increases from around 120 days to approximately 168 days. This reinforces the observation from inventory turnover, indicating inventory remains longer in stock before being sold.

Average Receivable Collection Period

The average receivable collection period varies somewhat but shows an overall gradual increase from about 60 days to 72 days. This aligns with receivables turnover trends, suggesting slower customer payment patterns over time.

Operating Cycle

The operating cycle lengthens from roughly 180 days to about 240 days, indicating a longer duration between the acquisition of inventory and receipt of cash from sales, possibly due to increasing inventory holding and receivable collection times.

Average Payables Payment Period

The average payables payment period shows irregular movements, ranging from approximately 108 to 137 days. The absence of a clear trend reflects varying supplier payment strategies without consistent acceleration or delay tendencies.

Cash Conversion Cycle

The cash conversion cycle fluctuates notably, initially rising from 58 days to around 116 days before varying between 89 and 121 days in later quarters. These fluctuations suggest changes in cash flow timing related to inventory, receivables, and payables management, with a tendency toward elongation of the period during which cash is tied up in operations.

The cost of products sold demonstrates variability over the observed periods with a general upward tendency from early 2024 onward. Initially, the cost fluctuated between approximately 6,500 and 8,000 million US dollars, with peaks near the end of calendar years 2020 and 2021. Following a decline in mid-2023, costs began increasing again by the first quarter of 2024, reaching higher levels by mid-2025.

Inventories showed a steady increase across the timeline, moving from around 8,800 million US dollars in early 2020 to over 13,000 million US dollars by mid-2025. The inventory level experienced consistent growth with some minor fluctuations, particularly a slight reduction between late 2023 and early 2024 before continuing its upward trajectory.

The inventory turnover ratio, starting from the measurement available in late 2020, generally declined over the periods analyzed. Initially above 3.0, the ratio gradually decreased to values near 2.15 by the second quarter of 2025, suggesting a slower rate of inventory turnover. This decline indicates an increasing amount of inventory held relative to the cost of products sold, which could imply potential challenges in inventory management or changes in sales velocity.

Cost of Products Sold

Shows periodic fluctuations with peak values typically at year-end dates; an upward trend resumes in early 2024 projecting into 2025.

Inventories

Exhibits a consistent upward trend throughout the entire period, growing by more than 50% from early 2020 to mid-2025, indicative of expanding stock levels.

Inventory Turnover Ratio

Displays a declining pattern from over 3.0 in late 2020 to around 2.15 by mid-2025, reflecting a slower inventory movement relative to sales.

Overall, the data indicates increasing costs and inventory levels with a decreasing turnover rate, potentially signaling a buildup of inventory relative to sales activity. This dynamic may warrant further analysis into inventory management effectiveness and sales trends.

The quarterly financial data reveals several notable trends in sales, accounts receivable, and receivables turnover over the analyzed periods.

Sales to customers

Sales figures exhibit moderate fluctuations across the quarters. Initially, there was a decline from US$20,691 million in March 2020 to US$18,336 million in June 2020, followed by a recovery and gradual growth to a peak of approximately US$24,804 million by December 2021. Sales subsequently decreased slightly during early 2022 but demonstrated some variability in later quarters, fluctuating between roughly US$20,800 million and US$23,700 million. The data indicates no sustained upward or downward trend in recent quarters, suggesting relative stabilization with periodic fluctuations.

Accounts receivable, trade, less allowances

Accounts receivable show a general upward trend over the periods analyzed. Starting at US$14,874 million in March 2020, receivables gradually increased, reaching US$16,160 million by December 2022. A notable rise is observed in the more recent quarters, with values climbing to US$17,846 million by June 2025. The increase in receivables outpaces the more stable sales volumes in some periods, which could imply lengthening collection cycles or changes in credit terms.

Receivables turnover ratio

The receivables turnover ratio, available from September 2020 onward, demonstrates a declining trend. Initially, the ratio stood above 6, indicating strong efficiency in collecting receivables relative to sales. Over subsequent quarters, the ratio gradually fell to just above 5 by mid-2025. This decline suggests that the company may be taking longer to collect its receivables or that receivables are increasing at a faster pace than sales, which aligns with the observed growth in accounts receivable balances.

Overall, while sales volumes showed recovery and relative stability after the initial pandemic-related dip, the combination of steadily increasing accounts receivable and a declining receivables turnover ratio indicates a potential decrease in collection efficiency. This trend merits further examination to determine whether it results from changing customer payment behavior, credit policies, or other operational factors.

The quarterly financial data reveals several notable trends in Johnson & Johnson's cost of products sold, accounts payable, and payables turnover ratios over the analyzed periods from March 2020 through June 2025.

Cost of Products Sold

The cost of products sold exhibits considerable fluctuations over the timeline. Initially, there is a decline from $7,062 million in March 2020 to $6,579 million in June 2020, followed by a rise to $7,814 million in December 2020. The metric then fluctuates moderately through 2021 and 2022 with peaks around $7,919 million in July 2022 and troughs near $6,462 million in July 2023.

From the end of 2022 into 2023 and 2024, a relatively stable but slightly upward trend is observed, with the cost reaching $7,628 million by June 2025. Seasonal or periodic variations appear pronounced, but overall, the cost of goods sold remains within a range of approximately $6,400 million to $7,900 million, indicating some variability but no strong sustained growth or decline.

Accounts Payable

Accounts payable has shown overall growth with significant variation between quarters. Starting at $7,411 million in March 2020, there was a noticeable increase peaking at $11,703 million in December 2021. After this peak, the payables somewhat retraced but remained relatively elevated, fluctuating between $8,174 million and $10,443 million through mid-2023.

From late 2023 through mid-2025, accounts payable figures oscillate around the $9,000 million mark with some variance but no clear directional trend. This suggests periods of increased procurement or credit terms extension but stabilizing somewhat after the earlier peak.

Payables Turnover Ratio

The payables turnover ratio data, available from December 2020 onward, demonstrates variability across quarterly periods with values generally ranging from about 2.66 to 3.38. After a peak at 3.38 in September 2021, the ratio dips to lows near 2.66 and later rebounds to values above 3.0 intermittently.

These fluctuations suggest changes in the pace at which the company settles its accounts payable relative to cost of products sold. Periods of lower payables turnover could indicate slower payment cycles or extended credit terms, whereas higher ratios imply faster payment or better cash management.

Overall, the data indicates that while the cost of products sold exhibits some cyclical variability, it remains within a bounded range without strong acceleration or reduction over the multi-year period. Accounts payable shows consistent but fluctuating growth with peaks and partial retracements, reflective of operational or market conditions affecting supplier credit. The payables turnover ratio reflects varying payment velocity patterns but generally remains around a stable average slightly above 3, signaling consistent credit management practices.

The analysis of the quarterly financial data reveals several notable trends in key financial metrics over the periods under review.

Working Capital

Working capital values exhibit considerable volatility through the periods. Initially, there is an increase from 10,537 million USD in March 2020 to a peak of 18,731 million USD by September 2020, followed by a sharp decline to 8,744 million USD by December 2020. Subsequently, there is a generally positive trend with fluctuations, reaching another high of 19,693 million USD in October 2022. However, there is a pronounced dip to negative working capital (-508 million USD) in December 2022, signaling potential liquidity strain at that point. Post this period, working capital rebounds variably, ending with a significantly low value of 318 million USD in June 2025 after a spike to 14,648 million USD in March 2025. This pattern indicates inconsistent working capital management or seasonal/business cycle effects.

Sales to Customers

Sales figures present a relatively stable and gradually increasing trend with mild fluctuations. Starting at 20,691 million USD in March 2020, sales experience a slight dip in mid-2020 but recover by December 2020 to 22,475 million USD. The sales maintain a range mostly between 21,000 and 24,000 million USD over subsequent periods, peaking at 24,804 million USD in December 2021, and fluctuating around this mark through the subsequent quarters. The data reflects steady revenue generation capacity without sharp declines or rapid growth phases in the observed period.

Working Capital Turnover Ratio

The working capital turnover ratio shows notable irregularities and extreme values, suggesting variability in either sales efficiency or working capital levels. The ratio starts around 9.44 in September 2020 and decreases gradually through 2021 to about 4.88 by October 2022, indicative of decreasing sales relative to working capital. A remarkable surge is observed after gaps in reporting, with the ratio moving sharply up to 23.02 in April 2023 and displaying volatile spikes thereafter, including an exceptionally high value of 284.99 in June 2025. These spikes likely correlate with periods of very low or negative working capital, producing disproportionate ratio values and signaling potential short-term imbalances between operational liquidity and sales activity.

In summary, sales maintain a stable upward trajectory with minor fluctuations, while working capital shows significant variability including periods of negative values. The working capital turnover ratio’s volatility reflects these underlying working capital fluctuations and highlights possible operational or financial management challenges requiring further investigation. The data suggests a need to monitor liquidity closely given the observed working capital dips and the implications on operational efficiency.

Inventory Turnover

The inventory turnover ratio exhibits a generally declining trend over the analyzed periods. Beginning at 3.04, it decreases steadily to 2.17 by the last recorded period. This decline suggests that the company is turning over its inventory less frequently over time, which may indicate slower sales or accumulation of inventory relative to sales.

Average Inventory Processing Period

The average inventory processing period shows an increasing trend across the same time frame. Starting at 120 days, it rises consistently to reach as high as 168 days toward the end of the period. This increase in days corresponds inversely with the falling inventory turnover ratio, indicating that inventory is held longer before being sold or processed.

Relationship Between Metrics

The inverse relationship between inventory turnover and average inventory processing period is apparent throughout the dataset. As the inventory turnover decreases, the average processing period for inventory lengthens. This pattern reinforces the conclusion that inventory management has become less efficient with respect to turnover during the reported timeframe.

Operational Implications

The declining turnover ratio along with the increasing inventory processing period could raise concerns regarding cash flow and working capital management. Extended holding periods may indicate potential overstocking, obsolescence risks, or decreased demand for products. These trends may warrant closer examination of supply chain and sales strategies to improve inventory efficiency.

The receivables turnover ratio exhibits a fluctuating but generally declining trend over the analyzed periods. Beginning at 6.08, the ratio decreases to a low of approximately 5.36, followed by intermittent increases and decreases, ending lower at 5.08 by the final period. This suggests a slight deterioration in the efficiency of receivables collection over time, implying that the company is turning over its receivables less frequently as time progresses.

Correspondingly, the average receivable collection period, measured in number of days, shows a complementary trend. Starting from 60 days, the collection period increases to a peak of 68 days, with some fluctuations throughout the periods, and culminating at 72 days by the end of the observation window. This increase indicates that, on average, it takes more time for the company to collect its outstanding receivables, reinforcing the interpretation of a lengthening cash conversion cycle.

The inverse relationship between these two metrics is consistent with standard financial principles. As the receivables turnover ratio decreases, the average collection period generally rises. This dynamic can have implications on the company’s liquidity and working capital management. The observed patterns suggest that the company may need to evaluate its credit policies or collection processes to enhance cash flow efficiency.

Average Inventory Processing Period

The average inventory processing period exhibits a generally increasing trend throughout the observed quarters. Starting at 120 days in early 2021, this period gradually extended to 168 days by mid-2025. There are noticeable increments particularly between early 2023 and mid-2025, with minor fluctuations occurring around late 2023. This suggests a lengthening time to process inventory over time, potentially indicating changes in inventory management or supply chain dynamics.

Average Receivable Collection Period

The average receivable collection period shows more variability but maintains an overall upward trajectory. From 60 days in early 2021, the period fluctuated moderately, reaching a peak of 72 days by mid-2025. Some shorter intervals are observed, particularly in late 2023 and mid-2024, but the general pattern indicates a gradual extension in the duration to collect receivables, which could impact cash flow efficiency.

Operating Cycle

The operating cycle, combining inventory processing and receivable collection periods, follows a clear rising trend over the quarters. It increases from 180 days in early 2021 to 240 days by mid-2025. The expansion in the operating cycle is consistent with the increases in both inventory and receivable collection periods, reflecting a lengthening overall time required to complete the full operating process from inventory acquisition to receivable collection. This trend may imply higher capital tied up in operations and potentially slower turnover rates.

The payables turnover ratio exhibits fluctuations over the observed periods, with values ranging approximately between 2.66 and 3.38. Initially, following the earliest recorded data point at 2.99, the ratio increased to a peak of 3.38 before experiencing a general decline to around 2.66 in later periods. This variability suggests periods of both faster and slower turnover of payables, indicating changes in the company's payment practices or supplier credit terms over time.

Correspondingly, the average payables payment period, expressed in days, displays an inverse pattern relative to the payables turnover ratio. The shortest payment period recorded is approximately 108 days, while the longest reaches up to 137 days. Periods of higher payables turnover coincide with reduced payment periods, and vice versa, highlighting typical financial behavior where quicker payables turnover aligns with shortened payment cycles.

Notably, there are intervals where the average payment period lengthens significantly, especially when the payables turnover ratio dips below 3.0. This indicates that the company may be extending its payment terms during those times, potentially to manage cash flow or renegotiate supplier agreements. Conversely, increases in turnover ratio and decreases in payment days suggest periods of more prompt payables settlement.

Overall, the data reveal cyclical shifts in payables management, reflecting dynamic operational or strategic adjustments. The company appears to balance its payment timing, alternating between longer credit terms and quicker settlements, possibly in response to internal cash management priorities or external market conditions.

The analysis of the financial timing metrics over the presented periods reveals several noteworthy trends. The average inventory processing period has generally exhibited an upward trajectory from 120 days initially recorded to 168 days by the final period. This indicates a gradual lengthening in the time inventory is held before being converted into sales, possibly implying inventory management challenges or strategic holding of stock.

The average receivable collection period shows moderate fluctuations. Starting around 60 days, it experienced some increases and decreases but exhibited a tendency to rise towards the later periods, reaching up to 72 days. This suggests a slight elongation in the company's credit collection process, which could have implications for cash inflows and working capital management.

For the average payables payment period, the values demonstrate considerable volatility without a clear persistent trend. Initially around 122 days, it dropped to near 108 days mid-series, then increased again with peaks surpassing 130 days before settling around the 119-day mark towards the end. This variability may reflect changes in payment policies, supplier negotiations, or cash management strategies over time.

The cash conversion cycle, which integrates the inventory processing period, receivables, and payables, shows considerable variation. It initially ranged around 58 days, climbed up to peaks of approximately 121 days, reflecting periods when cash was tied up longer in the operating cycle. These fluctuations indicate uneven patterns in operational efficiency and liquidity management throughout the periods reviewed.

Inventory Processing Period

Increased from 120 days to 168 days, indicating slower inventory turnover over time.

Receivable Collection Period

Fluctuated but generally increased from 60 to 72 days, suggesting slower collections from customers.

Payables Payment Period

Varied without a clear trend, ranging between approximately 108 and 137 days, implying changes in payment practices.

Cash Conversion Cycle

Varied significantly, increasing from 58 to as high as 121 days, reflecting fluctuations in cash tied up in operations.

In summary, the data depicts a lengthening in the working capital cycle, primarily driven by longer inventory holding and receivables collection periods, despite fluctuating payment practices to suppliers. These patterns suggest increasing capital requirements to sustain operations and highlight areas where efficiency improvements could enhance liquidity and operational performance.