Linde plc (NASDAQ:LIN)

An examination of short-term operating activity ratios reveals several trends over the five-year period. Inventory turnover generally decreased, while receivables and payables turnover exhibited more fluctuation. Associated processing and conversion cycles show corresponding changes, indicating shifts in the efficiency of managing inventory, collecting receivables, and paying suppliers.

Inventory Management

Inventory turnover declined from 10.12 in 2021 to 8.46 in 2025. This suggests a decreasing efficiency in converting inventory into sales. The average inventory processing period increased from 36 days in 2021 to 43 days in 2025, corroborating the declining turnover and indicating inventory is held for a longer duration. A slight recovery in inventory turnover was observed in 2024, but this did not sustain into the final year.

Receivables Management

Receivables turnover remained relatively stable, fluctuating between 6.84 and 7.32. The average receivable collection period remained consistently around 50-53 days, with minimal variation throughout the period. This suggests consistent efficiency in collecting payments from customers.

Payables Management

Payables turnover increased from 5.01 in 2021 to 6.84 in 2024 before decreasing to 6.19 in 2025. The average payables payment period decreased significantly from 73 days in 2021 to 56 days in 2022, then fluctuated between 53 and 63 days for the remaining years. This indicates a shift towards faster payment of suppliers, followed by a slight lengthening of the payment period in the most recent year.

Operating and Cash Conversion Cycles

The operating cycle lengthened from 89 days in 2021 to 96 days in 2023 and 2025. The cash conversion cycle increased from 16 days in 2021 to 39 days in 2024, before decreasing slightly to 37 days in 2025. The increase in the cash conversion cycle suggests that the company is taking longer to convert its investments in inventory and receivables into cash, potentially due to the slower inventory turnover and relatively stable receivables collection period.

Overall, the trends suggest a potential weakening in inventory management efficiency, offset by consistent receivables collection and fluctuating, but generally improving, payables management. The lengthening cash conversion cycle warrants further investigation to determine the underlying causes and potential impacts on liquidity.

Analysis of the presented financial information reveals a fluctuating pattern in inventory turnover over the five-year period. While cost of sales experienced an initial increase, it subsequently decreased, and inventory levels generally trended upward before experiencing a slight decline. These movements have a direct impact on the calculated inventory turnover ratio.

Inventory Turnover Trend

The inventory turnover ratio decreased from 10.12 in 2021 to 9.83 in 2022, representing a modest decline. A more significant decrease was observed in 2023, with the ratio falling to 8.27. The ratio partially recovered in 2024, increasing to 8.81, but then decreased again in 2025 to 8.46. This indicates a general downward trend in the efficiency of inventory management over the period, although with some year-to-year volatility.

Cost of Sales and Inventory Relationship

Cost of sales, exclusive of depreciation and amortization, increased from US$17,543 million in 2021 to US$19,450 million in 2022. However, it then decreased to US$17,492 million in 2023, US$17,143 million in 2024, and US$17,389 million in 2025. Simultaneously, inventories increased from US$1,733 million in 2021 to US$2,115 million in 2023 before decreasing to US$1,946 million in 2024 and US$2,055 million in 2025. The combination of decreasing cost of sales and increasing inventory levels, particularly in 2023, contributed to the observed decline in inventory turnover.

Inventory Level Observations

Inventories exhibited an increasing trend from 2021 to 2023, rising from US$1,733 million to US$2,115 million. This increase, coupled with the decrease in cost of sales in 2023, resulted in the lowest inventory turnover ratio during the analyzed period. While inventories decreased slightly in 2024, they increased again in 2025, preventing a substantial recovery in the inventory turnover ratio.

The observed fluctuations suggest potential shifts in supply chain dynamics, production levels, or sales patterns. Further investigation into the underlying causes of these trends would be necessary to determine the implications for operational efficiency and financial performance.

The receivables turnover ratio exhibits a generally stable pattern over the five-year period, with moderate fluctuations. Sales demonstrate an overall increasing trend, while accounts receivable show a similar, albeit less pronounced, upward movement. The interplay between these two factors influences the receivables turnover ratio.

Receivables Turnover Trend

The receivables turnover ratio increased from 6.84 in 2021 to 7.32 in 2022, indicating improved efficiency in collecting receivables. A slight decrease to 6.96 was observed in 2023, followed by a further increase to 7.14 in 2024. The ratio concluded the period at 6.84 in 2025, returning to the level observed in 2021.

Sales and Receivables Relationship

Sales increased from US$30,793 million in 2021 to US$33,986 million in 2025, representing a cumulative growth of approximately 10.4%. Accounts receivable, net, increased from US$4,499 million in 2021 to US$4,966 million in 2025, a cumulative growth of approximately 10.4%. The parallel increase in both sales and receivables suggests that the company’s credit and collection policies have remained relatively consistent over the period.

Ratio Stability

Despite the fluctuations, the receivables turnover ratio remained within a narrow range of 6.84 to 7.32. This suggests a consistent level of efficiency in converting receivables into cash. The return to 6.84 in 2025 warrants monitoring to determine if this represents a new baseline or a temporary deviation.

Overall, the receivables turnover ratio indicates a healthy and stable collection process. The observed fluctuations do not appear to signal significant changes in the company’s ability to manage its receivables effectively, although continued monitoring is recommended.

The analysis of payables turnover reveals fluctuations over the five-year period. Generally, the ratio indicates the efficiency with which the company is managing its accounts payable, reflecting how many times it pays its suppliers during the year. A higher ratio generally suggests greater efficiency, while a lower ratio may indicate slower payments or potential liquidity issues.

Payables Turnover Trend

The payables turnover ratio increased from 5.01 in 2021 to 6.49 in 2022, representing a substantial improvement in the speed at which obligations to suppliers were settled. This was followed by a slight decrease to 5.79 in 2023. A further increase was observed in 2024, reaching 6.84, the highest value within the observed period. The most recent year, 2025, shows a modest decline to 6.19.

Relationship to Cost of Sales

Cost of sales, exclusive of depreciation and amortization, decreased from 2021 to 2023, then remained relatively stable between 2023 and 2025. The increase in payables turnover in 2022 and 2024 occurred alongside increases in cost of sales, suggesting that the improved turnover wasn’t solely due to reduced purchasing activity. The slight decrease in payables turnover in 2025 coincides with a small increase in cost of sales, potentially indicating a normalization of payment patterns.

Accounts Payable Levels

Accounts payable decreased from US$3,503 million in 2021 to US$2,995 million in 2022, which likely contributed to the increase in the payables turnover ratio. Accounts payable then experienced a slight increase in 2023, followed by a more significant decrease in 2024. The value increased again in 2025, but remained below the 2021 level. These fluctuations in accounts payable levels directly influence the calculated payables turnover ratio.

Overall, the company demonstrates a generally efficient management of accounts payable, as indicated by the consistently high payables turnover ratio. The observed fluctuations warrant continued monitoring to understand the underlying drivers and ensure optimal working capital management.

The analysis reveals a fluctuating pattern in working capital alongside a generally increasing sales trend over the five-year period. The working capital turnover ratio, while initially absent, can be calculated based on the provided figures to provide further insight into operational efficiency.

Working Capital

Working capital demonstrates a negative balance throughout the observed period, ranging from approximately -US$3.48 billion to -US$1.59 billion. A reduction in the absolute value of negative working capital is observed from 2021 to 2024, indicating a lessening of short-term liabilities exceeding short-term assets. However, working capital becomes more negative again in 2025, reaching -US$1.873 billion.

Sales

Sales exhibit an overall upward trend, increasing from US$30.79 billion in 2021 to US$33.99 billion in 2025. Growth was most pronounced between 2021 and 2022, followed by a slight decrease in 2023 before resuming growth in 2024 and 2025. The increase suggests a strengthening market position or successful sales strategies.

Working Capital Turnover

The working capital turnover ratio is calculated as Sales divided by Working Capital (absolute value). In 2021, the ratio is approximately 8.85x. It increases to 9.71x in 2022, then decreases to 10.61x in 2023. The ratio further increases to 20.63x in 2024, before decreasing to 18.13x in 2025. The increasing trend from 2021 to 2024 suggests improved efficiency in utilizing working capital to generate sales. The decrease in 2025, however, indicates a potential slowdown in this efficiency, possibly due to the increased negative working capital balance.

The combination of negative working capital and increasing sales suggests the company is effectively managing its short-term financing needs, despite consistently having more short-term obligations than assets. The calculated working capital turnover ratio provides a quantitative measure of this efficiency, with a notable increase observed until 2024, followed by a slight decline in the most recent year.

An examination of the presented financial information reveals trends in inventory management over a five-year period. Specifically, the analysis focuses on inventory turnover and the average inventory processing period.

Inventory Turnover

Inventory turnover exhibited a slight decline from 10.12 in 2021 to 9.83 in 2022. A more pronounced decrease was observed in 2023, falling to 8.27. A modest recovery occurred in 2024, with the ratio increasing to 8.81, but this improvement was not sustained, as the ratio decreased again to 8.46 in 2025. This suggests a generally decreasing efficiency in converting inventory into sales over the period, with a particularly weak performance in 2023.

Average Inventory Processing Period

The average inventory processing period demonstrated an increasing trend throughout the observed timeframe. Starting at 36 days in 2021, it rose to 37 days in 2022. The most significant increase occurred between 2022 and 2023, reaching 44 days. While a slight reduction was noted in 2024, with the period decreasing to 41 days, it increased again to 43 days in 2025. This indicates that, on average, inventory is taking longer to sell over the years, aligning with the observed decline in inventory turnover.

The concurrent movements in both ratios suggest a consistent pattern. As inventory turnover decreased, the average time to process inventory increased. This could be attributable to factors such as slowing sales, increased inventory levels, or obsolescence. Further investigation would be required to determine the underlying causes of these trends.

The average receivable collection period exhibited relative stability over the five-year period examined, with minor fluctuations. Overall, the metric remained within a narrow range, indicating consistent efficiency in converting receivables into cash.

Average Receivable Collection Period

The average receivable collection period decreased from 53 days in 2021 to 50 days in 2022, suggesting an improvement in the speed of collecting receivables. A slight increase to 52 days was observed in 2023, followed by a further decrease to 51 days in 2024. The period then returned to 53 days in 2025, mirroring the initial value from 2021. This cyclical pattern suggests the collection period is influenced by factors that cause short-term variations, but does not indicate a significant or sustained change in collection practices.

The observed fluctuations in the average receivable collection period appear to correlate inversely with the receivables turnover ratio. While the receivables turnover ratio showed a slight increase in 2022, the collection period decreased. The subsequent slight decrease in the turnover ratio in 2023 and 2024 coincided with a slight increase and then stabilization of the collection period. This inverse relationship is expected, as a higher turnover ratio generally implies a shorter collection period.

In conclusion, the company demonstrates a consistent ability to manage its receivables, maintaining a collection period around 51-53 days. The minor variations observed do not suggest a fundamental shift in the company’s credit or collection policies.

The operating cycle exhibited a generally increasing trend over the five-year period. While fluctuations occurred, the overall movement suggests a lengthening of the time required to convert raw materials into cash from sales.

Average Inventory Processing Period

The average inventory processing period demonstrated a slight increase from 36 days in 2021 to 37 days in 2022. A more noticeable rise was observed in 2023, reaching 44 days, before decreasing to 41 days in 2024. The period then increased again in 2025, settling at 43 days. This indicates potential inefficiencies in inventory management, particularly in 2023, although the trend is not consistently upward.

Average Receivable Collection Period

The average receivable collection period showed relative stability. It decreased from 53 days in 2021 to 50 days in 2022, then fluctuated around 51-52 days for 2023 and 2024, before returning to 53 days in 2025. This suggests consistent, though not improving, efficiency in collecting payments from customers.

Operating Cycle

The operating cycle, representing the sum of the inventory processing and receivable collection periods, increased from 89 days in 2021 to 96 days in 2023. A slight decrease to 92 days occurred in 2024, followed by a return to 96 days in 2025. The increase in the operating cycle is primarily driven by the changes in the average inventory processing period, indicating that a greater portion of the cycle is tied up in inventory rather than receivables.

The observed lengthening of the operating cycle warrants further investigation. Potential causes could include increased inventory levels, slower inventory turnover, or changes in credit terms offered to customers. Monitoring these trends is crucial for maintaining optimal working capital management.

The average payables payment period exhibited fluctuation over the five-year period. Initially, a decrease was observed, followed by increases and subsequent stabilization. The payables turnover ratio, conversely, generally increased before showing a slight decline in the most recent year.

Average Payables Payment Period

The average payables payment period decreased from 73 days in 2021 to 56 days in 2022, indicating a faster rate of payment to suppliers. An increase to 63 days was then recorded in 2023. This was followed by a further decrease to 53 days in 2024, representing the lowest value in the observed period. The period then increased slightly to 59 days in 2025. This suggests a generally efficient management of payables, with some year-to-year variability.

Payables Turnover

Payables turnover increased from 5.01 in 2021 to 6.49 in 2022, coinciding with the decrease in the average payment period. A slight decrease to 5.79 was noted in 2023, before rising again to 6.84 in 2024, the highest value in the series. The ratio decreased to 6.19 in 2025. This indicates that the company generally settled its obligations more frequently over the period, although the rate slowed slightly in the final year.

Relationship between Ratios

The inverse relationship between the average payables payment period and payables turnover is evident. As payables turnover increases, the average payment period tends to decrease, and vice versa. The fluctuations in both ratios suggest potential changes in supplier relationships, purchasing strategies, or cash management practices. The slight decline in payables turnover in 2025, coupled with a corresponding increase in the payment period, may warrant further investigation to determine the underlying cause.

The short-term operating activity ratios indicate shifts in the company’s working capital management over the five-year period. Specifically, the average inventory processing period, average receivable collection period, and average payables payment period, and their combined effect on the cash conversion cycle, demonstrate evolving trends.

Average Inventory Processing Period

The average inventory processing period exhibited a slight increase from 36 days in 2021 to 37 days in 2022. This was followed by a more pronounced increase to 44 days in 2023, before decreasing to 41 days in 2024 and stabilizing at 43 days in 2025. This suggests potential inefficiencies in inventory management in 2023, followed by some improvement, but not a return to the levels seen in the earlier period.

Average Receivable Collection Period

The average receivable collection period showed a decrease from 53 days in 2021 to 50 days in 2022, indicating improved efficiency in collecting receivables. This trend plateaued with 52 days in 2023 and 51 days in 2024, before returning to 53 days in 2025. The relative stability in this metric suggests consistent, though not improving, credit and collection policies.

Average Payables Payment Period

The average payables payment period decreased significantly from 73 days in 2021 to 56 days in 2022. It then increased to 63 days in 2023, decreased to 53 days in 2024, and rose again to 59 days in 2025. This fluctuation suggests a changing approach to supplier payment terms, potentially influenced by cash flow needs or supplier negotiations.

Cash Conversion Cycle

The cash conversion cycle increased from 16 days in 2021 to 31 days in 2022, reflecting the combined impact of changes in the other three ratios. It continued to rise to 33 days in 2023 and peaked at 39 days in 2024, before decreasing slightly to 37 days in 2025. The overall upward trend indicates that the company is taking longer to convert its investments in inventory and receivables into cash. While the 2025 value shows a slight improvement, the cycle remains considerably longer than in 2021.

In summary, the company experienced a lengthening of its cash conversion cycle, primarily driven by increases in the inventory processing period and fluctuations in the payables payment period, despite some improvements in receivable collection. These trends suggest a need for ongoing monitoring of working capital management practices.