Procter & Gamble Co. (NYSE:PG)

The financial data reveals several notable trends in the company's operational efficiency and liquidity management over the analyzed periods.

Inventory Turnover

The inventory turnover ratio demonstrates a generally declining trend, decreasing from 6.93 in 2019 to 5.82 in 2024. This gradual decrease suggests that inventory is being sold and replaced less frequently over time, which may indicate slower movement of goods or changes in inventory management strategies.

Receivables Turnover

Receivables turnover showed an initial increase from 13.67 in 2019 to a peak of 16.98 in 2020, followed by a gradual decline to 13.74 in 2024. This pattern indicates initial improvement in collecting receivables efficiently, which later reversed, implying longer collection periods or more credit sales.

Payables Turnover

The payables turnover ratio fluctuated over the years, dropping from 3.09 in 2019 to a low of 2.66 in 2024, with intermittent increases. The declining trend suggests that the company is taking longer to pay its suppliers, reflected in the subsequent increase in the average payables payment period.

Average Inventory Processing Period

The average inventory processing period increased from 53 days in 2019 to 63 days in 2024, consistent with the declining inventory turnover ratio. This elongation suggests the company holds inventory for longer periods before sale.

Average Receivable Collection Period

The average receivable collection period decreased from 27 days in 2019 to 21 days in 2020, then progressively increased to 27 days by 2024. This variation aligns with the trends in receivables turnover, indicating fluctuating effectiveness in collecting receivables.

Operating Cycle

The operating cycle, which represents the time between inventory acquisition and cash collection, showed an overall upward trend from 80 days in 2019 to 90 days in 2024. This increase suggests a lengthening duration for the company’s core operational processes.

Average Payables Payment Period

The average payables payment period increased notably from 118 days in 2019 to 137 days in 2024, with some year-to-year variation. This points to a tendency to extend payment terms to suppliers, possibly reflecting negotiated longer terms or cash flow management initiatives.

Cash Conversion Cycle

The cash conversion cycle remained negative throughout the period, ranging from -38 days in 2019 to -47 days in 2024 with fluctuations in between. A negative cash conversion cycle indicates that the company collects cash from customers before it needs to pay its suppliers, suggesting strong short-term liquidity and efficient working capital management despite the lengthening operating cycle.

Cost of Products Sold

The cost of products sold exhibited an overall increasing trend from USD 34,768 million in 2019 to a peak of USD 42,760 million in 2023, representing a cumulative increase over this period. However, in 2024, there was a noticeable decline to USD 40,848 million, indicating a potential reduction in production costs or sales volume during the latest period.

Inventories

Inventories consistently increased from USD 5,017 million in 2019 to USD 7,073 million in 2023, showing steady growth in inventory holdings. In 2024, inventories marginally decreased to USD 7,016 million, suggesting stabilization or a slight reduction in stock levels after several years of growth.

Inventory Turnover

The inventory turnover ratio showed a declining trend from 6.93 times in 2019 to 5.82 times in 2024. This gradual decrease suggests that the company is turning over its inventory less frequently over time, which could imply slower sales, increased inventory levels, or changes in inventory management efficiency.

Net Sales

Net sales have demonstrated a consistent upward trend over the six-year period, increasing from $67,684 million in 2019 to $84,039 million in 2024. The growth appears steady year over year, with no significant fluctuations or periods of decline, indicating stable revenue expansion.

Accounts Receivable

Accounts receivable experienced a decrease from $4,951 million in 2019 to $4,178 million in 2020 but subsequently increased each year, reaching $6,118 million in 2024. This rise in receivables in recent years suggests a higher amount of credit extended to customers or slower collections compared to earlier periods.

Receivables Turnover

The receivables turnover ratio peaked at 16.98 in 2020 and then showed a gradual decline to 13.74 by 2024. This downward trend indicates that the company's efficiency in collecting receivables has decreased over time, meaning it takes longer to convert receivables into cash despite growing sales. The reduction in turnover coupled with increasing receivables aligns with the observed pattern of rising outstanding balances.

Cost of Products Sold

The cost of products sold shows an overall upward trend from 2019 to 2023, starting at 34,768 million US dollars in 2019 and increasing to a peak of 42,760 million US dollars in 2023. This represents a steady growth in production or procurement costs over the five-year period. However, in 2024, there is a noticeable decrease to 40,848 million US dollars, indicating a reduction in costs compared to the previous year.

Accounts Payable

Accounts payable demonstrates consistent growth throughout the entire period, increasing from 11,260 million US dollars in 2019 to 15,364 million US dollars in 2024. The progression is relatively steady with no significant declines, suggesting that the company may be extending its payment terms or experiencing increased purchasing activity.

Payables Turnover Ratio

The payables turnover ratio fluctuates over the years without a clear upward or downward trend. It begins at 3.09 in 2019, declines to its lowest point at 2.7 in 2021, then rises to 2.93 in 2023 before declining again to 2.66 in 2024. This variability indicates changes in the rate at which the company pays off its suppliers. The lower ratio in recent years suggests a slower payment cycle compared to 2019.

The financial data for the analyzed periods reveals several noteworthy trends related to working capital, net sales, and working capital turnover ratios.

Working Capital

The company's working capital remained negative throughout the periods, indicating that current liabilities consistently exceeded current assets. Starting at -7,538 million US$ in June 2019, the working capital showed some improvement in June 2020, rising to -4,989 million US$. However, this improvement was temporary as working capital declined more significantly in the subsequent years, reaching -10,041 million US$ in June 2021, then deteriorating further to -11,428 million US$ in June 2022 and -13,108 million US$ in June 2023. The latest figure for June 2024 shows a partial recovery to -8,918 million US$, yet it remains substantially negative. These fluctuations suggest challenges in managing the company’s short-term assets and liabilities, with an overall trend of increasing current liabilities over much of the period followed by partial correction.

Net Sales

Net sales displayed a consistent upward trend over the six-year span. Beginning at 67,684 million US$ in June 2019, net sales steadily increased each year, reaching 70,950 million US$ in 2020 and 76,118 million US$ in 2021. This positive trend continued into 2022 with 80,187 million US$ and further growth in 2023 to 82,006 million US$. The most recent figure in June 2024 is 84,039 million US$, marking a continuous rise in revenue generation. The steady increase in net sales suggests sustained demand for the company’s products or successful expansion strategies driving revenue growth.

Working Capital Turnover

Data for working capital turnover ratio is not available for the periods analyzed, which limits insights into how efficiently the company is utilizing its working capital relative to sales. This ratio typically measures how well working capital supports sales, and its absence means direct assessment of operational efficiency relative to working capital cannot be made.

In summary, while net sales have grown consistently, indicating robust revenue performance, the persistent negative and volatile working capital raises concerns about liquidity and short-term financial health. The mixed signals suggest that revenue growth has not fully translated into improved working capital management, potentially creating pressure on liquidity that should be monitored closely. The lack of working capital turnover data constrains a thorough evaluation of operational efficiency in managing working capital alongside sales growth.

Inventory Turnover

The inventory turnover ratio demonstrates a gradual decline over the six-year period. Starting at 6.93 in June 2019, it decreases steadily each year, reaching 5.82 by June 2024. This trend indicates that the company is turning over its inventory less frequently, suggesting either slower sales or increased stock levels relative to sales volume.

Average Inventory Processing Period

The average inventory processing period shows a consistent increase during the same timeframe. Beginning at 53 days in June 2019, it rises incrementally to 63 days by June 2024. This lengthening duration implies that inventory remains held for a longer period before being sold, aligning with the trend observed in the declining inventory turnover ratio.

Overall Analysis

These two metrics, viewed together, suggest a shift towards slower inventory movement. A decrease in inventory turnover coupled with an increase in the days inventory is held could indicate potential challenges such as reduced demand, overstocking, or inefficiencies in inventory management. This pattern may warrant further investigation into sales trends, supply chain processes, and inventory policies to understand the underlying causes and mitigate any negative impacts on liquidity or operational efficiency.

Receivables Turnover Ratio

The receivables turnover ratio exhibited a general declining trend from 2019 to 2024. It peaked at 16.98 in 2020, indicating the highest efficiency in collecting receivables during this period. After 2020, the ratio gradually decreased each year, falling to 13.74 by mid-2024, close to the level observed in 2019. This decline suggests a reduction in the effectiveness of receivables collection over the latter years.

Average Receivable Collection Period

The average collection period inversely mirrors the pattern observed in the receivables turnover ratio. It improved significantly in 2020, reaching the shortest collection period of 21 days, indicating faster conversion of receivables into cash. From 2021 onwards, the collection period increased steadily, returning to 27 days by 2024, which matches the starting point in 2019. This increase implies that the company is taking longer to collect its receivables in recent years.

Overall Analysis

The data points to an initial improvement in receivables management in 2020, with faster turnover and a shorter collection period. However, from 2021 to 2024, the trends indicate a gradual decline in collection efficiency, with turnover ratios declining and collection periods lengthening. By 2024, these metrics approximate the levels seen in 2019, suggesting a reversion to previous collection performance standards.

Average Inventory Processing Period

The average inventory processing period exhibits a gradual upward trend over the six-year span. Starting at 53 days in mid-2019, it increased steadily each year, reaching 63 days by mid-2024. This indicates a lengthening in the time inventory remains in stock before being sold, which may suggest slower inventory turnover or strategic changes in inventory management.

Average Receivable Collection Period

The average receivable collection period shows some fluctuation throughout the observed periods. It began at 27 days in mid-2019, decreased notably to 21 days in mid-2020, then moderately increased, ultimately returning to 27 days by mid-2024. This pattern suggests some variability in credit management efficiency, with a temporary improvement during 2020 followed by a return to previous collection period levels.

Operating Cycle

The operating cycle shows a rising trend overall. It decreased slightly from 80 days in mid-2019 to 78 days in mid-2020, but then resumed a consistent increase through to 90 days by mid-2024. This reflects lengthening combined durations of inventory processing and receivable collection periods, potentially indicating slower overall operational turnover.

Payables Turnover

The payables turnover ratio demonstrates a gradual decline over the six-year period observed. Starting at 3.09 in mid-2019, it decreased to 2.92 in 2020 and further dipped to 2.7 in 2021. Although there was a slight recovery to 2.83 in 2022 and 2.93 in 2023, the ratio declined again to 2.66 in 2024. This trend suggests that the company is taking longer to pay its suppliers over time, reflecting a slower turnover of payables.

Average Payables Payment Period

The average payables payment period in days increased from 118 days in 2019 to 125 days in 2020, followed by a more noticeable rise to 135 days in 2021. There was a minor decrease to 129 days in 2022 and then to 125 days in 2023. However, in 2024, the payment period extended again to 137 days, reaching its highest point in the analyzed span. This indicates an elongation in the timeframe the company takes to settle its outstanding payables, corroborating the trend seen in the payables turnover ratio.

Overall Insight

Both metrics reflect a consistent pattern toward longer payment cycles to suppliers over the analyzed years. The initial rise in payment days up to 2021, followed by slight adjustments and a renewed increase in 2024, may indicate shifts in payment policies or cash management strategies. The fluctuations suggest that while there was an attempt to reduce payment periods temporarily, the prevailing direction favors extended payment durations. This could have implications for supplier relationships and working capital management.

Average Inventory Processing Period

The average inventory processing period shows a gradual increase over the six-year span, beginning at 53 days in mid-2019 and rising to 63 days by mid-2024. This indicates that inventory is being held slightly longer over time, which may suggest slower turnover or changes in inventory management practices.

Average Receivable Collection Period

The average receivable collection period exhibits some fluctuation, starting at 27 days in 2019, decreasing to a low of 21 days in 2020, then gradually increasing to 27 days by 2024. This pattern suggests an initial improvement in receivables collection efficiency in 2020, followed by a gradual return to the initial level, possibly reflecting changes in credit policies or customer payment behavior.

Average Payables Payment Period

The average payables payment period generally increases over the period analyzed. It rises from 118 days in 2019 to 137 days in 2024, with minor fluctuations in intervening years. The increase indicates that the company is taking longer, on average, to pay its suppliers, which could be a strategy to manage cash outflows or negotiate longer credit terms.

Cash Conversion Cycle

The cash conversion cycle remains negative throughout the period, ranging from -38 days in 2019 to reaching its most negative point of -53 days in 2021 before fluctuating modestly to -47 days in 2024. A consistently negative cash conversion cycle suggests that the company is able to collect cash from customers and pay suppliers such that it effectively finances its operations through supplier credit, with some variations in efficiency over the years.