RTX Corp. (NYSE:RTX)

The short-term operating activity ratios exhibit varied trends over the observed period. Inventory turnover generally decreased from 5.33 to 4.60 between March 2022 and September 2023, before showing some recovery, reaching 5.30 by December 2025. Receivables turnover demonstrated more fluctuation, initially declining from 7.15 to 6.36, then increasing to 7.83 before settling at 6.03 in December 2025. Payables turnover showed a consistent decline from 6.28 to 4.46 over the entire period. A significant outlier is observed in working capital turnover, with exceptionally high values in September and December 2024, followed by a substantial decrease. The average inventory processing period increased from 69 days to 79 days between March 2022 and September 2023, then decreased to 69 days by December 2025. The average receivable collection period showed an increase from 51 to 57 days, followed by a decrease to 47 days, and then a rise to 61 days. The operating cycle generally increased before decreasing, while the average payables payment period consistently increased over the period. The cash conversion cycle showed initial stability, followed by fluctuations.

Inventory Management

Inventory turnover decreased overall, suggesting a potential slowdown in the rate at which inventory is sold. The increase in the average inventory processing period supports this observation, indicating inventory is taking longer to convert into sales. The slight recovery in turnover towards the end of the period may indicate improving inventory management practices or increased demand.

Receivables Management

Receivables turnover experienced volatility. The initial decline and subsequent increase suggest changes in credit policies or collection efficiency. The final decrease in December 2025 warrants further investigation. The average receivable collection period mirrored this volatility, with an overall lengthening before a decrease and then a final increase, potentially indicating challenges in collecting receivables promptly.

Payables Management

Payables turnover consistently decreased, while the average payables payment period increased. This suggests the company is taking longer to pay its suppliers, potentially to manage cash flow, but could also indicate strained relationships with suppliers if prolonged.

Working Capital Efficiency

The dramatic increase in working capital turnover in late 2024 is a significant anomaly. This suggests a substantial increase in sales relative to working capital during those quarters, potentially due to a large, one-time event or a change in accounting practices. The subsequent decline indicates a return to more typical levels. Further investigation is needed to understand the drivers behind this fluctuation.

Cash Conversion Cycle

The cash conversion cycle remained relatively stable for the first half of the period, then exhibited some fluctuation. The final value of 48 days suggests a moderate efficiency in converting investments in inventory and receivables into cash, but the trend should be monitored.

The inventory turnover ratio experienced fluctuations throughout the observed period, spanning from March 31, 2022, to December 31, 2025. An initial decline is noted, followed by periods of relative stability and subsequent increases.

Overall Trend

The inventory turnover ratio generally decreased from 5.33 in the first quarter of 2022 to a low of 4.60 in the third quarter of 2023. A subsequent upward trend commenced, reaching 5.30 in the final quarter of 2025. This indicates a potential improvement in inventory management efficiency towards the end of the period.

Initial Decline (2022-Q1 to 2023-Q3)

From March 31, 2022, through September 30, 2023, the ratio decreased from 5.33 to 4.60. This suggests a slowing in the rate at which inventory was sold and replenished during this timeframe. Potential contributing factors could include increased inventory levels, decreased sales velocity, or a combination of both. The decline, while present, was relatively gradual.

Stabilization and Recovery (2023-Q4 to 2025-Q4)

Beginning in December 2023, the inventory turnover ratio showed signs of stabilization and recovery. It increased from 4.83 to 5.30 by December 2025. This improvement suggests that efforts to optimize inventory management were potentially effective, or that external factors positively influenced sales. The ratio in the final quarter of 2025 exceeded the initial value recorded in the first quarter of 2022.

Quarterly Volatility

While the overall trend demonstrates a recovery, quarterly fluctuations were present. For example, a slight increase was observed between September and December 2023, followed by a minor decrease in the first quarter of 2024. These short-term variations could be attributable to seasonal sales patterns or temporary disruptions in the supply chain.

Relationship to Cost of Sales

The cost of sales generally increased throughout the period, from US$12,560 million to US$19,521 million. Despite this increase, the inventory turnover ratio’s recovery indicates that inventory levels were managed effectively enough to avoid a proportional decrease in turnover. The ratio’s increase in later periods suggests improved efficiency in converting inventory into sales, even with higher costs of sales.

Inventory Levels

Net inventory also increased over the period, rising from US$9,749 million to US$13,364 million. The initial decline in the turnover ratio coincided with increasing inventory levels, supporting the hypothesis that slower sales or increased stock contributed to the initial downward trend. The subsequent increase in the turnover ratio, despite continued inventory growth, suggests improved inventory utilization.

The receivables turnover ratio exhibits fluctuations over the observed period, generally ranging between 6.03 and 7.83. An initial decline is noted from the March 2022 value of 7.15 to 6.28 in June 2022, followed by a return to 7.15 in September 2022. The ratio then modestly increased to 7.36 by December 2022 before decreasing to 6.81 in March 2023.

Trend Analysis (2022-2023)

Throughout 2023, the receivables turnover ratio remained relatively stable, fluctuating between 6.36 and 7.13. A noticeable dip occurred in September 2023, falling to 6.67, before recovering to 6.36 in December 2023. This period suggests consistent, though not improving, efficiency in collecting receivables.

A subsequent increase is observed in the first half of 2024, with the ratio rising from 6.91 in March 2024 to 7.83 in September 2024. This represents the highest point in the observed period. However, the ratio then decreased to 7.36 by December 2024.

Recent Performance (2024-2025)

The ratio continued to decline through 2025, reaching 6.03 in December 2025. This represents the lowest value in the observed period. The decline from the peak of 7.83 in September 2024 to 6.03 in December 2025 indicates a lengthening of the average collection period, potentially due to changes in credit policies, customer payment behavior, or an increase in uncollectible accounts. The ratio decreased from 7.15 in March 2025 to 6.03 in December 2025.

Overall, the receivables turnover ratio demonstrates cyclical behavior. While generally stable, the recent downward trend warrants further investigation to determine the underlying causes and potential impact on cash flow.

The accounts payable turnover ratio for the analyzed period demonstrates a generally declining trend, although with some fluctuation. Initially, the ratio exhibited a decrease from 6.28 in March 2022 to 5.36 in June 2022, followed by a slight recovery to 5.82 in September 2022 before settling around the 5.3 to 5.6 range through the end of 2023. A more pronounced downward trend is observed from March 2024 onwards, culminating in a ratio of 4.46 in December 2025.

Overall Trend

The overall trend in payables turnover is downward. The ratio decreased from a high of 6.28 to a low of 4.46 over the analyzed period. This suggests that the company is taking longer to pay its suppliers.

Initial Period (Mar 2022 - Dec 2022)

The initial period shows volatility, with a significant drop followed by partial recovery. This could be attributed to changes in purchasing patterns, supplier payment terms, or seasonal fluctuations in cost of sales. The ratio remained relatively stable between 5.31 and 6.28 during this timeframe.

Stabilization Period (Jan 2023 - Dec 2023)

From January 2023 through December 2023, the ratio remained relatively stable, fluctuating between 5.31 and 5.60. This suggests a period of consistent payment practices and supplier relationships.

Declining Trend (Jan 2024 - Dec 2025)

A clear downward trend emerges starting in January 2024. The ratio consistently decreased from 5.60 to 4.46, indicating a lengthening of the accounts payable cycle. This could be due to a deliberate strategy to conserve cash, difficulties in negotiating favorable payment terms, or potential issues with supplier relationships. The decline is particularly noticeable in the latter half of 2025.

Cost of Sales & Accounts Payable Relationship

While the payables turnover is declining, both cost of sales and accounts payable are generally increasing over the period. The increase in accounts payable is not keeping pace with the increase in cost of sales, which is the primary driver of the declining turnover ratio. This suggests that the company is not utilizing its credit terms as efficiently as it previously did.

The observed decrease in payables turnover warrants further investigation to determine the underlying causes and potential implications for the company’s financial health and supplier relationships. A sustained decline could indicate increasing financial strain or a shift in procurement strategies.

The working capital turnover ratio exhibits considerable fluctuation throughout the observed period. Initial values demonstrate an increasing trend from March 2022 to December 2022, followed by significant volatility and a subsequent stabilization with a notable spike in the latter quarters.

Initial Increasing Trend (Mar 31, 2022 – Dec 31, 2022)

From March 31, 2022, to December 31, 2022, the working capital turnover ratio increased from 11.41 to 20.15. This suggests a growing efficiency in utilizing working capital to generate sales during this period. The company was able to support higher sales volumes with a relatively stable level of working capital investment.

Volatility and Decline (Mar 31, 2023 – Sep 30, 2023)

The ratio experienced a substantial decline from 12.76 in March 2023 to 44.25 in September 2023, followed by 41.62 in December 2023. This indicates a significant shift in the relationship between working capital and net sales. The large increase in the ratio suggests either a dramatic decrease in working capital or a substantial increase in sales, or a combination of both. The subsequent decrease, while still high, suggests a partial return towards more typical levels.

Significant Spike and Subsequent Normalization (Mar 31, 2025 – Dec 31, 2025)

A dramatic increase is observed in the ratio, reaching 279.93 in March 2025 and 257.23 in June 2025. This is followed by a decrease to 22.14 in September 2025 and 57.24 in December 2025. This extreme volatility warrants further investigation to understand the underlying drivers. The initial spike could be attributed to a temporary reduction in working capital, potentially through aggressive inventory management or accelerated collections, while the subsequent decline suggests a rebuilding of working capital or a slowdown in sales growth.

Working Capital Trend

The working capital itself shows a fluctuating pattern. It decreased significantly from March 2022 to June 2022, remained relatively stable through December 2022, increased in early 2023, then experienced a sharp decline in the second half of 2023, and became negative in the first half of 2024. It then rebounded significantly in the latter half of 2025. These changes in working capital levels directly influence the turnover ratio, contributing to the observed volatility.

Net Sales Trend

Net sales generally increased from March 2022 to December 2022, experienced a dip in the first half of 2023, and then showed a consistent upward trend through December 2025. The fluctuations in net sales, combined with the changes in working capital, explain the observed patterns in the working capital turnover ratio.

The observed fluctuations in the working capital turnover ratio suggest a dynamic operating environment. The significant spikes and declines require further investigation to determine the underlying causes and assess their impact on the company’s financial health and operational efficiency.

The average inventory processing period exhibited an increasing trend throughout most of the observed period, followed by a recent decline. Initially, the metric rose from 69 days in March 2022 to 79 days by September 2023. Subsequently, the period decreased to 69 days by December 2025, indicating improved inventory management efficiency towards the end of the analyzed timeframe.

Overall Trend

The average inventory processing period generally increased from March 2022 through September 2023, suggesting a lengthening of the time required to convert inventory into sales. This was then reversed, with a consistent decrease observed from December 2023 to December 2025.

Period of Increase

The period between March 2022 and September 2023 saw a consistent, albeit gradual, increase in the average inventory processing period. This suggests potential inefficiencies in inventory management, increased holding costs, or a slowdown in sales during this time. The increase from 69 days to 79 days represents a 14.5% lengthening of the processing period.

Period of Decrease

From September 2023 to December 2025, the average inventory processing period decreased. The metric fell from 79 days to 69 days, representing a 12.7% reduction. This indicates improved efficiency in managing inventory, potentially due to better forecasting, streamlined supply chains, or increased sales velocity.

Inventory Turnover Relationship

The observed trend in the average inventory processing period aligns with the trend in inventory turnover. As the processing period increased, inventory turnover decreased, and vice versa. This inverse relationship is expected, as a longer processing period implies slower inventory movement and fewer turnovers within the same timeframe.

Recent Performance

The most recent data points, from March 2025 to December 2025, show a stabilization and then a return to the initial processing period of 69 days. This suggests that the improvements in inventory management implemented during the decreasing phase are being sustained.

The average receivable collection period exhibited fluctuations over the observed timeframe, generally remaining within a relatively narrow range. An initial period of stability is followed by a slight increase, then a return to more consistent levels, and a final increase at the end of the period.

Overall Trend

The average collection period began at 51 days in March 2022. It increased to 58 days by June 2022, before decreasing back to 51 days in September 2022 and remaining at 50 days in December 2022. A slight increase was then observed through December 2023, reaching 57 days. The period then decreased to 47 days by September 2024, before stabilizing around 50-54 days through September 2025, and finally increasing to 61 days in December 2025.

Short-Term Fluctuations

A notable increase in the average collection period occurred between March and June 2022, suggesting a potential slowdown in collecting receivables during that quarter. This was then reversed in the subsequent quarter. A similar, though less pronounced, increase occurred between March 2023 and December 2023. The most significant increase occurred in the final quarter of the period, from 54 days in September 2025 to 61 days in December 2025.

Recent Performance

The most recent quarters show a slight upward trend in the average collection period, moving from 47 days in September 2024 to 61 days in December 2025. This warrants further investigation to determine if this represents a systemic issue or a temporary anomaly. The collection period remained relatively stable between 51 and 54 days for much of 2023 and 2024.

The observed variations in the average receivable collection period suggest potential shifts in credit policies, customer payment behavior, or the efficiency of the collection process. Continued monitoring of this metric is recommended to identify any developing trends and their potential impact on cash flow.

The operating cycle of the company exhibits fluctuations over the observed period, with discernible trends in both its component parts and the aggregate measure. Generally, the operating cycle lengthened from early 2022 through late 2023 before showing some signs of contraction in 2024 and 2025. A closer examination of the individual components reveals the drivers of this overall pattern.

Average Inventory Processing Period

The average inventory processing period demonstrates a consistent upward trend from 69 days in March 2022 to 79 days in September 2023. This indicates a lengthening time required to convert inventory into finished goods and make them available for sale. A slight decrease to 71 days was observed in December 2022, but the overall trajectory remained positive. From late 2023 through the end of the observation period, the period decreased, reaching 69 days in December 2025, suggesting improved inventory management efficiency in the latter part of the analyzed timeframe. The fluctuations, while present, are relatively contained.

Average Receivable Collection Period

The average receivable collection period shows more volatility than the inventory processing period. It increased from 51 days in March 2022 to 58 days in June 2022, then decreased to 50 days by December 2022. A subsequent increase occurred through December 2023, peaking at 57 days. The period then decreased to 47 days in September 2024, before increasing again to 61 days in December 2025. This suggests potential inconsistencies in the company’s credit and collection policies or changes in customer payment behavior. The period’s fluctuations are more pronounced than those observed in the inventory processing period.

Operating Cycle

The operating cycle, calculated as the sum of the inventory processing and receivable collection periods, generally increased from 120 days in March 2022 to 134 days in September 2023. This lengthening cycle implies that the company required a longer time to convert its investments in inventory and receivables into cash. A decrease was observed in late 2024 and early 2025, with the cycle reaching 121 days in December 2024. However, it increased again to 130 days in December 2025. The operating cycle’s movements closely mirror the combined trends of its constituent components, with the receivable collection period contributing more significantly to the observed volatility.

In summary, the company experienced an extended operating cycle through much of the analyzed period, driven primarily by increases in both inventory processing and receivable collection times. Recent periods suggest a potential stabilization or slight improvement, but the receivable collection period remains a source of fluctuation. Continued monitoring of these ratios is recommended to assess the sustainability of any improvements and to identify potential areas for operational efficiency gains.

The average payables payment period exhibited a generally increasing trend over the observed period, spanning from March 31, 2022, to December 31, 2025. While fluctuations occurred, the overall movement suggests a lengthening in the time taken to settle obligations to suppliers.

Initial Period (Mar 31, 2022 – Dec 31, 2022)

The average payables payment period began at 58 days in March 2022, increased to 68 days in June 2022, slightly decreased to 63 days in September 2022, and then returned to 68 days by the end of the year. This initial period demonstrates some volatility but establishes a baseline around the 63-68 day range.

2023 Performance

Throughout 2023, the average payables payment period remained relatively stable, fluctuating between 66 and 69 days. The period started at 67 days in March, peaked at 69 days in December, and remained consistently within a narrow band. This suggests a period of consistent payment practices.

Increasing Trend (2024-2025)

Beginning in 2024, a more pronounced upward trend became evident. The average payables payment period increased from 65 days in March to 72 days by the end of the year. This trend continued into 2025, reaching 75 days in March, 77 days in September, and culminating in 82 days by December 31, 2025. This represents a significant lengthening of the payment period compared to earlier periods.

Overall Change

From the beginning of the observed period to the end, the average payables payment period increased by 24 days, moving from 58 days to 82 days. This indicates a substantial shift in the company’s payment practices over the four-year timeframe.

The observed increase in the average payables payment period could be attributable to several factors, including changes in supplier negotiations, internal cash management strategies, or shifts in the timing of invoice processing. Further investigation would be required to determine the specific drivers behind this trend.

The short-term operating activity of the company, as measured by its cash conversion cycle and component ratios, exhibits several notable trends over the observed period. Generally, the company demonstrates a relatively stable cash conversion cycle, with fluctuations occurring primarily due to changes in individual component ratios. A review of these components reveals varying patterns in inventory management, receivables collection, and payables disbursement.

Average Inventory Processing Period

The average inventory processing period generally increased from 69 days in March 2022 to 79 days in September 2023. A slight decrease to 71 days was observed in December 2022, followed by a return to increasing values. From December 2023 through December 2025, the period decreased, ending at 69 days. This suggests potential inefficiencies in inventory management during the earlier part of the period, followed by improvements in the latter part. The fluctuations may be attributable to changes in sales volume, supply chain disruptions, or inventory control policies.

Average Receivable Collection Period

The average receivable collection period showed an initial increase from 51 days in March 2022 to 58 days in June 2022, then decreased to 50 days by December 2022. It subsequently increased to 61 days in December 2023, before decreasing to 47 days in September 2024. The period then increased again, reaching 61 days in December 2025. These variations could indicate changes in credit policies, customer payment behavior, or the mix of credit sales. The recent increase warrants further investigation to determine if it signals potential issues with collecting receivables.

Average Payables Payment Period

The average payables payment period demonstrated a consistent upward trend from 58 days in March 2022 to 82 days in December 2025. This indicates the company is taking longer to pay its suppliers over time. This could be a strategic decision to manage cash flow, but it also carries the risk of strained supplier relationships if extended too far. The increase appears relatively steady, suggesting a deliberate policy shift rather than isolated incidents.

Cash Conversion Cycle

The cash conversion cycle remained relatively stable between 61 and 66 days for much of the period, with a low of 49 days in December 2024. The cycle began at 62 days in March 2022, fluctuated, and ended at 48 days in December 2025. The decrease in the cycle towards the end of the period is likely due to the combined effect of decreasing inventory processing and receivable collection periods, despite the increasing payables payment period. The overall stability suggests effective management of working capital, although the individual component trends require ongoing monitoring.

In conclusion, while the overall cash conversion cycle has remained relatively consistent, the underlying components reveal dynamic shifts in inventory, receivables, and payables management. The increasing payables payment period is a key trend to monitor, as is the recent fluctuation in the receivable collection period. The observed improvements in inventory processing towards the end of the period are positive, and continued focus on these areas could further optimize the company’s working capital efficiency.