Marathon Petroleum Corp. (NYSE:MPC)

The financial ratios and periods analyzed reflect dynamic changes in operational efficiency, liquidity management, and overall working capital performance over multiple quarters.

Inventory Turnover

The inventory turnover ratio showed an initial increase from around 10.76 in early 2020 to a peak of 17.18 by the first quarter of 2023. Following this peak, a gradual decline was observed, with values settling near 12.97 by the third quarter of 2024. This pattern suggests an improvement in inventory management efficiency up to early 2023, followed by a slight reduction in turnover speed.

Receivables Turnover

The receivables turnover ratio exhibited considerable volatility. Starting at 15.75 in March 2020, it climbed to over 22 during the mid-2020 quarters, declining sharply to below 9 by the end of 2020. After fluctuating around the 10 to 13 range through 2021 and early 2022, it improved markedly to peak at 17.18 in March 2023. The latter part of 2023 and 2024 showed some stabilization in the 11 to 14 range. These changes indicate variable efficiency in collecting receivables, with periods of both faster and slower collections.

Payables Turnover

The payables turnover ratio increased from 9.48 in early 2020 to a high of 14.15 by the third quarter of 2020, indicating faster payments to suppliers. This was followed by a drop to around 6.27 in mid-2021 and a recovery to just above 10 by the end of 2023. The fluctuations imply changes in payment policies or cash flow management impacting how quickly obligations to creditors are settled.

Working Capital Turnover

This ratio displayed significant variation. It increased sharply from 30.81 to 55.5 in the early 2020 periods before plummeting to as low as 4.6 during late 2020. Post-2020, there was a gradual uptrend, reaching approximately 29.09 by the third quarter of 2024. This volatility shows periods of high efficiency in using working capital to generate sales separated by intervals of tightening or less efficient use.

Average Inventory Processing Period

The average number of days inventories were held rose from 26 to 46 days during mid-2020, indicating slower inventory turnover. Following this peak, the period steadily decreased and stabilized around the mid to high 20s days in recent quarters, reflecting improvements in inventory management and turnover speed.

Average Receivable Collection Period

The days sales outstanding increased significantly from about 16 days in late 2019 to over 41 days by late 2020, pointing to slower cash collections. From 2021 onwards, the collection period generally declined, reaching approximately 26 days by mid-2024, suggesting improved efficiency in collecting receivables.

Operating Cycle

The operating cycle extended from about 50 days in late 2019 to a maximum around 85 days in mid-2020, then gradually shortened to around 54 days by mid-2024. This contraction indicates improved coordination between inventory management and receivables collection over time.

Average Payables Payment Period

The payment period to suppliers increased substantially from 26 days in late 2019 to a high of 58 days by late 2021, indicating extended payment terms or deliberate delay in payments. The period then normalized to the 36–45 days range in 2023 and mid-2024, reflecting a tighter payment schedule.

Cash Conversion Cycle

The cash conversion cycle showed relative stability, fluctuating between 11 and 26 days, with a mild decreasing trend toward 16–18 days in 2023 and 2024. This suggests the company effectively managed the length of time between cash outflows for inventory/suppliers and cash inflows from customers, maintaining a relatively short cash conversion period.

The cost of revenues exhibits a notable fluctuation over the analyzed periods. Starting at approximately $25.96 billion in the first quarter of 2019, it increased to nearly $29.68 billion by mid-2019, followed by a slight decline and stabilization around $27 billion in late 2019. A sharp decline is evident in the first half of 2020, reaching a low near $11.5 billion, likely impacted by external factors affecting operations during that period. Subsequently, there is a consistent upward trajectory through 2021 and into early 2022, peaking at over $44.2 billion in mid-2022. The latter quarters show some volatility with costs decreasing and then moderately fluctuating around the $32 billion to $35 billion range through mid-2024.

Inventories demonstrate moderate variation relative to cost of revenues. Initially, inventories declined from $9.83 billion at the start of 2019 to approximately $7.44 billion by the first quarter of 2020. Following this, inventory levels recovered somewhat and showed an increasing trend through 2022, exceeding $11 billion at one point, before stabilizing around the $9.8 billion mark in the most recent quarters. This pattern indicates active inventory management likely responsive to demand fluctuations and supply chain conditions.

The inventory turnover ratio, which measures the efficiency of inventory management and sales, reveals interesting trends. Starting from a ratio of 10.76 at the end of 2019, it rose sharply to 14.05 in the first quarter of 2020, reflecting faster inventory movement during a period when cost of revenues was at a low. The ratio then fluctuated but remained generally elevated, ranging between approximately 7.9 and 17.2 over subsequent quarters. The highest turnover occurred in late 2022 and early 2023, suggesting heightened sales efficiency or inventory clearing. More recent quarters show a slight decline but maintain a turnover above 12, suggesting continued effective inventory utilization.

Overall, the data indicates that the company experienced significant cost volatility associated with the period around 2020, potentially linked to market disruptions. Inventory levels adjusted in response, with turnover ratios indicating varying efficiency but overall effective inventory management. The interplay between increasing costs and inventory turnover suggests adaptive operational strategies to match changing market demand and supply conditions over the observed quarters.

The analysis of the quarterly financial data reveals several key trends and patterns. Sales and other operating revenues demonstrate considerable volatility over the period examined, with clear seasonal and cyclical fluctuations.

Sales and Other Operating Revenues

From March 2019 through December 2019, the revenues ranged around 28 to 34 billion US dollars, with a peak in the second quarter of 2019. Beginning in the first quarter of 2020, there was a sharp decline to approximately 12 billion US dollars by the second quarter of 2020, likely reflecting external economic impacts during this time.

Following this dip, a recovery trend is observed through 2021 and 2022, with revenues increasing considerably and even surpassing pre-2020 levels, reaching a peak of nearly 54 billion US dollars in the second quarter of 2022. However, after this peak, the revenues demonstrate a declining pattern through the end of 2022 and in 2023, falling to approximately 33 billion by the third quarter of 2024, indicating some retraction or stabilization at a lower level than the peak period.

Receivables, Less Allowance for Doubtful Accounts

The accounts receivables generally parallel the revenue trends, with a notable decrease in the middle of 2020, dropping from over 7,800 million to a low near 4,300 million. Receivables then steadily increased, reaching their highest levels around mid-2022 with figures above 17,000 million. They subsequently decreased again into 2023 and 2024, ending near 10,000 million in the third quarter of 2024.

The fluctuations in receivables suggest a correlation with sales activity, reflecting changes in credit sales and collection efficiency over the periods. The drop and subsequent rise align with the downturn and recovery observed in sales.

Receivables Turnover Ratio

Receivables turnover ratios provide insight into how effectively the company manages its credit and collections. There was a noticeable increase in turnover ratios starting in early 2020, peaking at over 22 in the third quarter of 2020. This peak indicates a higher efficiency in collecting receivables during that period, potentially driven by lower receivables balances and tighter credit management.

After this peak, the turnover ratio declined significantly through 2021 and early 2022, falling below 9 at one point, implying slower collection and higher receivables days. The ratio then improved steadily through late 2022 into 2023, reaching levels above 17, before fluctuating moderately toward the latter half of the timeline.

This movement suggests periods of changing credit policies or collection performance, affecting how quickly sales are converted into cash.

In summary, the data indicate that the company experienced significant volatility in sales and receivables around 2020, likely due to macroeconomic disruptions, followed by recovery and growth peaking in 2022. Subsequent periods show a moderation in sales and receivables, with receivables turnover indicating varying efficiency in cash collection management. The patterns reflect a business adapting to changing market conditions with corresponding operational adjustments.

The financial data reveals several notable trends related to cost of revenues, accounts payable, and payables turnover over the quarterly periods analyzed.

Cost of Revenues

The cost of revenues figures display a fluctuating pattern with distinct phases. Initially, there is a moderate increase from March 2019 to June 2019, followed by some volatility through the end of 2019. A significant decline is observed during the first half of 2020, with the lowest point recorded in June 2020. From that point onward, the cost of revenues starts to recover, climbing steadily through 2021 and peaking in mid-2022. Subsequently, a downward trend is evident, with decreasing costs recorded through 2023 and into mid-2024. This pattern may reflect external market influences or operational adjustments over the period.

Accounts Payable

Accounts payable show an overall increasing trend from March 2019 to mid-2022, with some volatility. Beginning at a lower level in early 2019, the payable amounts grow steadily through 2020 and 2021, reaching the highest levels in mid-2022. After this peak, a decline is apparent from late 2022 onwards, continuing through mid-2024. The variability in accounts payable may be linked to the company's purchasing cycles, supplier negotiations, or changes in operational scale.

Payables Turnover Ratio

The payables turnover ratio, available from September 2019 onwards, presents cyclical fluctuations across quarters. The ratio peaks in late 2019 and mid-2020, indicating faster payment to suppliers during those periods. A notable dip occurs in early 2021, suggesting slower payment cycles. Subsequently, the ratio rises again to higher levels in 2022 and early 2023, followed by moderate variability through 2024. These movements in the turnover ratio imply shifts in payment policies or cash management strategies over time.

Overall, the company experienced pronounced operational and financial changes between 2019 and 2024, as reflected in the cost structure, payable obligations, and management of payables. The significant decline in cost of revenues during early 2020 and subsequent recovery corresponds to the accounts payable trends, while the fluctuating payables turnover ratio indicates variable payment speeds to suppliers, possibly adapting to market conditions or internal cash flow priorities.

The analysis of the quarterly financial data reveals significant fluctuations and trends across working capital, sales and other operating revenues, and working capital turnover ratios over the observed periods.

Working Capital

Working capital demonstrated a generally positive trend from early 2019 through the end of 2019, increasing steadily from 3,004 million USD in March 2019 to 4,023 million USD by December 2019. However, this was followed by considerable volatility in 2020, with values fluctuating notably. June 2020 exhibited a sharp decrease to 3,139 million USD, but this was followed by a significant surge reaching a peak of 12,624 million USD in December 2020.

In 2021, working capital remained relatively elevated compared to prior years, though it experienced some decline in the later quarters, dropping from 19,080 million USD in June to 12,598 million USD in December. The first half of 2022 showed partial recovery and stability, hovering around 11,000 to 14,000 million USD, with a modest increase towards the year's end.

From the beginning of 2023 onward, a downward trend in working capital is apparent. The value decreased steadily from 15,429 million USD in March 2023 to 4,881 million USD by September 2024. This suggests tightening liquidity or a reduction in current assets relative to current liabilities during this recent period.

Sales and Other Operating Revenues

Sales and other operating revenues manifested a general upward trend over the entire period despite some interim declines. Beginning at 28,267 million USD in March 2019, revenues increased appreciably, peaking in June 2022 at 53,795 million USD, indicating strong sales growth and potentially improved market conditions or operational capacity.

Following the mid-2022 peak, revenues experienced some reduction through 2023 with periodic fluctuations. The values declined from 36,343 million USD in March 2023 to 35,107 million USD in September 2024, showing relative stability though lower than the peak levels observed previously.

Working Capital Turnover

Working capital turnover, an indicator of efficiency in utilizing working capital to generate revenues, was not available for the early part of the dataset but began to be reported from March 2020 onwards. Initial values showed substantial variability, peaking exceptionally at 55.5 in June 2020.

This initial high ratio likely reflects the low working capital base combined with reduced sales during a turbulent period, possibly impacted by external factors affecting liquidity and operations. Subsequently, the turnover ratio stabilized, generally oscillating within the 4.6 to 12.4 range through 2021 and 2022.

From 2023 into 2024, the ratio revealed an upward trend, rising from 10.45 in mid-2023 to 29.09 by September 2024. The increasing ratio, concurrent with the decline in working capital, suggests improved efficiency or greater revenue generation relative to the existing working capital, though it may also reflect constraints on liquidity.

In summary, the company demonstrated growth in revenues and working capital through the early periods, followed by heightened volatility and eventual tightening of working capital in recent quarters. The working capital turnover ratio indicates fluctuating efficiency with recent improvements. These trends suggest evolving operational dynamics, with implications for liquidity management and revenue generation strategies.

The inventory turnover ratio exhibits significant variability over the analyzed periods. Starting in early 2020, the ratio was around 10.76, increasing sharply to 14.05 in the second quarter of 2020 before decreasing again to figures just above 10 later that year. In 2021, the turnover ratio initially decreased to below 9 but then improved to above 10 by year-end. Throughout 2022, a notable upward trend is observed, peaking at 17.18 in the first quarter, indicating improved efficiency in inventory management during that period. However, from mid-2022 through 2024, the turnover ratio declined gradually, stabilizing around 13 to 14, with a slight decrease towards the end of the period under review.

Complementary to the turnover ratio, the average inventory processing period shows an inverse pattern. This period starts at approximately 34 days in early 2020, decreases to around 26 days by mid-2020, and then increases again to nearly 44-46 days by the end of 2020 and beginning of 2021. The processing period improves (declines) through 2021 and into 2022, reaching a low of about 21 days in the first quarter of 2023, reflecting faster inventory turnover. After this point, the duration slightly increases again, fluctuating between 26 and 29 days through 2024.

Inventory Turnover Ratio Trends

The ratio's fluctuations suggest a cyclical inventory management pattern, with peaks indicating periods of efficient inventory movement and troughs suggesting slower turnover. The peak in early 2022 indicates the highest efficiency in utilizing inventory. The subsequent moderate decline suggests some easing in turnover rates but still maintaining robust levels compared to earlier periods.

Average Inventory Processing Period Trends

The processing period's inverse relation to turnover indicates that faster inventory movement corresponds to fewer days in inventory. The lowest days recorded in early 2023 point to enhanced inventory efficiency, likely resulting in reduced holding costs and improved liquidity. Slight increases thereafter might signal adjustments in inventory strategy or changes in market conditions requiring longer holding periods.

Overall Insights

The observed data highlights an overall improvement in inventory management efficiency from 2020 through early 2023, demonstrated by increased turnover ratios and decreased processing periods. Despite mild fluctuations in 2023 and 2024, the company maintains relatively strong inventory performance compared to the initial periods. These trends may reflect responses to market demand, supply chain adjustments, or operational enhancements designed to optimize inventory levels.

Receivables Turnover Ratio

The receivables turnover ratio exhibits considerable fluctuation across the analyzed periods. Starting from a high point near the end of 2019 with values exceeding 15, it peaked above 22 in the third quarter of 2020. Subsequently, there was a marked decline entering 2021, hitting lows below 9 in mid and late 2021. From early 2022 onward, the ratio began a general recovery, reaching above 17 by the first quarter of 2023. However, it then experienced declines again, stabilizing around the 11 to 13 range by the third quarter of 2024. Overall, this pattern indicates volatility in turnover efficiency with partial recovery phases after periods of decline.

Average Receivable Collection Period (Days)

The average receivable collection period inversely mirrors the turnover ratio trends. Initially, in early 2020, collection periods were relatively short, around 16 to 23 days, indicating efficient collections. During 2021, however, collection days extended notably, peaking at over 41 days mid-year, reflecting delayed collections and potential cash flow challenges. From 2022 through early 2023, collection periods shortened again to around 21 to 28 days but rose once more to near 30 days in late 2023 and early 2024. By the mid-2024 periods, the average collection period improved again to approximately 26 days. This oscillation suggests periods of tightening and loosening credit collections impacting working capital management.

Insights and Implications

The inverse relationship between receivables turnover and average collection days throughout the periods is consistent with expected financial dynamics. Fluctuations suggest changing customer payment behaviors or company credit policies. Periods with lower turnover and higher collection days may indicate extended credit terms or collection difficulties, potentially affecting liquidity. Conversely, periods with higher turnover and shorter collection days reflect stronger cash inflows from receivables. The notable recovery phases following downturns reveal efforts towards optimizing receivables management, although the persistence of volatility suggests ongoing challenges in stabilizing collection efficiency.

Average inventory processing period

The average inventory processing period shows variability over the observed quarters. Starting at 34 days in March 2020, it decreased to a low of 24 days by December 2022. After this nadir, the period fluctuated slightly between 26 and 29 days through 2024, indicating some stabilization but still maintaining shorter inventory turnovers compared to early 2020. Overall, there is a trend of reducing inventory processing times from 2020 to late 2022, followed by a slight increase and then stabilization in 2023 and 2024.

Average receivable collection period

The receivable collection period experienced more pronounced fluctuations. Beginning at 23 days in March 2020, it decreased to 16 days by September 2020, suggesting improved collections efficiency initially. However, there was a marked increase thereafter, peaking at 42 days in March 2022. Post peak, the collection period exhibits a downward trend, falling to 21 days by March 2023, then rising again moderately to around 30 days in subsequent quarters before declining to 26 days by September 2024. This pattern indicates some challenges in receivables management, with a significant increase around early 2022 followed by improved recovery efforts.

Operating cycle

The operating cycle, which combines inventory and receivables periods, generally mirrors the patterns observed in its components. From 57 days in March 2020, it dropped to 43 days by June 2020 but then increased substantially to peak at 85 days in June 2021. After a gradual decline, the cycle reached about 47 days by March 2023. There is subsequently a mild upward trend to around 61 days during 2023, followed by a slight decrease to 54 days by September 2024. This suggests that the company experienced a lengthening of its operating cycle through mid-2021, implying slower conversion of resources to cash, but managed to reduce it thereafter, with some fluctuations in 2023 and 2024.

Summary insights

The data indicates that inventory management improved noticeably in the initial post-2020 period, with processing times shortening significantly. Conversely, accounts receivable showed volatility, with collection periods peaking around early 2022, pointing to potential difficulties in receivables turnover during that time. These contrasting movements combine to produce a pronounced increase in the operating cycle through mid-2021, negatively impacting working capital efficiency. The subsequent reduction in both inventory and receivables periods after 2021 suggests focused efforts to enhance asset turnover and cash flow. Despite some intermittent variations in 2023 and 2024, the operating cycle has generally improved compared to its peak, implying a return toward more efficient operational and financial management.

Payables Turnover

The payables turnover ratio shows fluctuating patterns over the observed periods starting in March 2020. Initially, there is an increasing trend from 9.48 to a peak of 14.15 in September 2020, indicating a faster payment cycle to suppliers. This is followed by a decline, reaching a low point of 6.27 for two consecutive quarters in mid-2022. Subsequently, the ratio exhibits a recovery trend, climbing to 11.2 in September 2023, but then declining again to around 8-10 in the most recent periods. This suggests variability in payment frequencies, with periods of accelerated and decelerated turnover.

Average Payables Payment Period

The average payables payment period, expressed in days, inversely correlates with the payables turnover, reflecting the duration taken to settle payables. From March 2020 onward, the period initially decreases sharply from 38 days to 26 days by September 2020, indicating quicker payments. Thereafter, the payment period increases significantly, reaching a peak of 58 days in June and September 2022, representing slower payments. Following this peak, the payment period decreases steadily to 33 days in September 2023, but then slightly increases again to mid-40s days in the latest quarters. This pattern suggests variations in cash management and supplier payment strategies over time.

Insights on Trends

The data demonstrate a dynamic payables management approach, with oscillations between quicker and slower payment patterns throughout the given timeframe. Periods of higher payables turnover ratio correspond to shorter payment days, indicating prompt settlement of liabilities, while lower turnover ratios align with extended payment periods. The fluctuations observed may reflect responses to changing liquidity positions, supplier negotiations, or broader economic conditions affecting operational cash flows. Overall, the company appears to adjust its payables strategy regularly, balancing between optimizing cash retention and maintaining supplier relationships.

Average Inventory Processing Period

The average inventory processing period exhibits notable variability across the observed quarters. Data beginning in March 2020 show an initial decrease from 34 days to 26 days by June 2020, followed by an increase peaking at 46 days in June 2021. Subsequently, there is a general downward trend reaching a low of 21 days in March 2023. After this, the period stabilizes, fluctuating around the high twenties with minimal deviation through the last recorded quarter in September 2024. This suggests periods of inventory management adjustments with improving efficiency especially in early 2023, followed by stabilization.

Average Receivable Collection Period

The average receivable collection period also displays variability with a general increasing trend from March 2020 to September 2021, rising from 23 to 41 days. This indicates a lengthening in the time taken to collect receivables during this interval. A decrease follows, with the period falling to as low as 21 days by June 2023, suggesting improvement in collections efficiency. The period shows some volatility in the final quarters, rising again to 33 days in September 2024, denoting a potential return to slower collections.

Average Payables Payment Period

The average payables payment period reveals a marked increase from 38 days in March 2020 to a peak of 58 days in June and September 2022, indicating an extension in the time taken to settle payables during this phase. Thereafter, the period declines steadily to 36 days by September 2024. This pattern shows strategic changes in payment practices, possibly aimed at optimizing cash flow by deferring payments during 2021-2022, followed by a return to quicker payments in subsequent periods.

Cash Conversion Cycle

The cash conversion cycle remains relatively stable with moderate fluctuations. It starts at 19 days in March 2020, dipping to a low of 11 days in several quarters between December 2021 and March 2023, reflecting effective working capital management. Later quarters exhibit a mild increase to 18 days by September 2024. The relatively low and steady values suggest consistent control over the time interval between outlay of cash and cash recovery.