Analysis of Short-term (Operating) Activity Ratios
Quarterly Data
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Short-term Activity Ratios (Summary)
Reynolds American Inc., short-term (operating) activity ratios (quarterly data)
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
The analysis of the financial ratios highlights several noteworthy trends in the company's operational efficiency and liquidity management over the periods examined.
- Inventory Turnover
- The inventory turnover ratio demonstrated a gradual decline from 3.84 in the first quarter of 2013 to a low point of 2.45 in mid-2015, indicating slower inventory movement. Subsequently, there was partial recovery, with the ratio fluctuating around the low 3s in the most recent quarters. This suggests challenges in inventory management during the earlier periods, with some improvement toward the end of the timeframe.
- Receivables Turnover
- Receivables turnover exhibited considerable volatility, with values ranging from about 86 to over 450. Notably, there were spikes in the latter periods, such as 220.84 in the third quarter of 2015 and an exceptional increase to 454.27 in the first quarter of 2017. The generally high ratios imply efficient collection processes; however, the large fluctuations could indicate changes in credit policy or differences in sales concentration.
- Payables Turnover
- The payables turnover ratio fluctuated between about 19.88 and 36.25. Early in the period, the ratio declined to as low as 19.88, suggesting slower payment to suppliers, followed by periods of acceleration. Later quarters faced variability but generally showed a tendency toward moderate payables turnover, reflecting a balanced approach to payables management.
- Working Capital Turnover
- Data on working capital turnover, though incomplete, show extremely high and variable ratios, reaching as high as 132.75 in mid-2016 and 88.41 in mid-2014. Such elevated figures indicate significant efficiency in using working capital to generate sales during certain periods, but missing data in several quarters limit a full trend analysis.
- Average Inventory Processing Period
- The average inventory processing period increased substantially from 95 days in early 2013 to a peak of 149 days in mid-2015, indicating inventory was held longer before sale. Thereafter, it declined to around 119 days by early 2017, suggesting improvements in inventory turnover and management.
- Average Receivable Collection Period
- The receivable collection period remained consistently low, mostly between 1 to 4 days, indicating rapid collection of receivables throughout the analyzed timeframe. This stability supports the interpretation of strong credit and collection policies.
- Operating Cycle
- The operating cycle increased from 98 days in early 2013 to a high of 153 days in mid-2015, before gradually decreasing back to about 120 days by early 2017. This pattern reflects an initial elongation likely driven by slower inventory turnover and payables periods, followed by operational adjustments to shorten the cycle.
- Average Payables Payment Period
- The average payables payment period fluctuated between 10 and 18 days over the period, without a clear trend, suggesting variable payment policies toward suppliers. The shorter payables periods in some quarters could imply improved relations or stricter payment terms, while longer periods may indicate attempts to optimize cash flow.
- Cash Conversion Cycle
- The cash conversion cycle ranged between 85 and 137 days, peaking in mid-2015, which corresponds with the peak operating cycle. The subsequent decrease toward approximately 107 days indicates better synchronization between inventory management, receivables collection, and payables payment, enhancing liquidity.
Overall, the financial data depict periods of operational challenges, particularly concerning inventory management and cash conversion efficiency around 2014 and 2015, followed by incremental improvements. Receivables management showed consistently strong performance, whereas payables management was more variable. The trends suggest active efforts to optimize working capital components and enhance operational efficiency in the latter years.
Turnover Ratios
Average No. Days
Inventory Turnover
Reynolds American Inc., inventory turnover calculation (quarterly data)
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Cost of products sold, excludes excise taxes | 1,199) | 1,212) | 1,189) | 1,275) | 1,165) | 1,350) | 1,404) | 1,084) | 850) | 1,135) | 1,034) | 959) | 930) | 981) | 1,004) | 999) | 694) | ||||||
| Inventories | 1,592) | 1,645) | 1,604) | 1,541) | 1,658) | 1,734) | 1,596) | 1,677) | 1,268) | 1,281) | 1,108) | 1,059) | 1,117) | 1,127) | 1,085) | 1,026) | 1,046) | ||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Inventory turnover1 | 3.06 | 2.94 | 3.10 | 3.37 | 3.02 | 2.70 | 2.80 | 2.45 | 3.14 | 3.17 | 3.52 | 3.66 | 3.50 | 3.26 | 3.53 | 3.81 | 3.84 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Inventory Turnover, Competitors2 | |||||||||||||||||||||||
| Coca-Cola Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| PepsiCo Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Inventory turnover
= (Cost of products sold, excludes excise taxesQ1 2017
+ Cost of products sold, excludes excise taxesQ4 2016
+ Cost of products sold, excludes excise taxesQ3 2016
+ Cost of products sold, excludes excise taxesQ2 2016)
÷ Inventories
= (1,199 + 1,212 + 1,189 + 1,275)
÷ 1,592 = 3.06
2 Click competitor name to see calculations.
- Cost of Products Sold
-
The cost of products sold, excluding excise taxes, displays notable fluctuations over the reported periods. Initially, there is an upward trend from March 2013 through December 2013, increasing from 694 million to 981 million US dollars. This is followed by a period of moderate variability with values oscillating between 930 million and 1135 million US dollars throughout 2014. In 2015, a sharp increase is observed, peaking at 1404 million US dollars in September, before declining moderately towards the end of the year. The trend from 2016 into early 2017 shows relative stabilization, with costs generally fluctuating between approximately 1160 and 1275 million US dollars, ending slightly below this range in March 2017 at 1199 million.
- Inventories
-
Inventory levels exhibit a slow but steady rise from early 2013 through late 2014, increasing from 1046 million to a peak of 1734 million US dollars in December 2015. This reflects a near doubling over this 2.5-year period. In 2016 and early 2017, inventories remain elevated but display some variability, with values moving between approximately 1540 million and 1645 million US dollars, indicating a relatively stable but high inventory position compared to earlier years.
- Inventory Turnover Ratio
-
The inventory turnover ratio demonstrates a declining trend from March 2013 (3.84) through June 2015 (2.45), indicating a reduction in the frequency with which inventory is sold and replaced. This decline suggests that inventory management efficiency was weakening over this time period. From mid-2015 onward, the ratio shows signs of recovery, increasing up to 3.37 in June 2016 before experiencing minor fluctuations to around 3.06 by March 2017. This partial rebound could signal improvements in inventory utilization or sales relative to inventory levels during the latter periods.
- Overall Insights
-
The data points to rising inventory levels alongside generally increasing costs of products sold, particularly pronounced in the 2013-2015 timeframe. The inverse trend in the inventory turnover ratio during this period may indicate challenges in inventory management or changes in demand dynamics. The stabilization and moderate improvement in inventory turnover from mid-2015 through early 2017 suggest a potential adjustment in operations and inventory controls. However, inventory levels remain historically elevated, implying sustained higher working capital tied up in stock.
Receivables Turnover
Reynolds American Inc., receivables turnover calculation (quarterly data)
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Net sales, includes excise taxes | 3,931) | 4,254) | 4,330) | 4,315) | 3,947) | 4,216) | 4,381) | 3,390) | 2,897) | 3,024) | 3,202) | 3,089) | 2,781) | 2,959) | 3,107) | 3,162) | 2,738) | ||||||
| Accounts receivable | 55) | 66) | 37) | 89) | 80) | 68) | 62) | 145) | 118) | 116) | 89) | 98) | 100) | 106) | 84) | 105) | 104) | ||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Receivables turnover1 | 306.00 | 255.24 | 454.27 | 189.43 | 199.18 | 218.88 | 220.84 | 86.30 | 103.49 | 104.28 | 135.18 | 121.80 | 120.09 | 112.89 | 143.62 | 114.92 | 116.43 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Receivables Turnover, Competitors2 | |||||||||||||||||||||||
| Coca-Cola Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| PepsiCo Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Receivables turnover
= (Net sales, includes excise taxesQ1 2017
+ Net sales, includes excise taxesQ4 2016
+ Net sales, includes excise taxesQ3 2016
+ Net sales, includes excise taxesQ2 2016)
÷ Accounts receivable
= (3,931 + 4,254 + 4,330 + 4,315)
÷ 55 = 306.00
2 Click competitor name to see calculations.
The financial data reflects notable fluctuations in net sales, accounts receivable, and receivables turnover ratios over the examined periods. The analysis reveals several key trends and insights into the company's operational and financial performance.
- Net Sales
-
Net sales exhibited a seasonal pattern with some volatility across the quarters. In the early periods, sales fluctuated moderately between approximately $2.7 billion and just over $3 billion. A significant upward trend emerged around 2015, with sales peaking near $4.4 billion in September 2015, representing a substantial increase compared to previous years. Following this peak, net sales stabilized at a higher range between $3.9 billion and $4.3 billion through the end of 2016, before declining slightly to approximately $3.9 billion by March 2017. This pattern suggests a period of growth culminating in a strong sales peak, with some retrenchment thereafter.
- Accounts Receivable
-
The accounts receivable balances remained relatively stable in the early years, ranging mostly between $80 million and $118 million, with occasional dips and rises. A notable decline occurred in September 2015, where the balance dropped sharply to $62 million, followed by a moderate increase toward the end of 2016. The lowest point recorded was $37 million in March 2017. The variability in receivables may reflect changes in credit policy, collection efficiency, or variations in sales terms over time. The decline in accounts receivable despite high sales points to potentially improved collections or tighter credit controls in later periods.
- Receivables Turnover Ratio
-
The receivables turnover ratio displayed considerable volatility, particularly in the latter half of the dataset. Initially, the turnover ratio fluctuated between roughly 110 and 145, indicating a relatively consistent pace of receivables collection relative to sales. However, starting around September 2015, the ratio surged dramatically, reaching a peak of 454.27 in March 2017. This significant increase indicates a much faster conversion of receivables into cash, consistent with the observed reductions in accounts receivable balances. The elevated turnover suggests enhanced collection processes or changes in customer payment behaviors that improved liquidity.
Overall, the company demonstrated growth in net sales through 2015, followed by relative stabilization albeit with a modest decline at the end of the period. Concurrently, the management of accounts receivable appears to have become more efficient, as supported by the increased receivables turnover ratios and the decreasing accounts receivable balances in the latter quarters. These trends collectively indicate strengthened cash flow management and an improved working capital position during the final periods analyzed.
Payables Turnover
Reynolds American Inc., payables turnover calculation (quarterly data)
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Cost of products sold, excludes excise taxes | 1,199) | 1,212) | 1,189) | 1,275) | 1,165) | 1,350) | 1,404) | 1,084) | 850) | 1,135) | 1,034) | 959) | 930) | 981) | 1,004) | 999) | 694) | ||||||
| Accounts payable | 175) | 221) | 198) | 191) | 138) | 179) | 144) | 178) | 126) | 142) | 129) | 137) | 179) | 185) | 127) | 150) | 137) | ||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Payables turnover1 | 27.86 | 21.90 | 25.15 | 27.19 | 36.25 | 26.19 | 31.06 | 23.05 | 31.57 | 28.58 | 30.26 | 28.28 | 21.87 | 19.88 | 30.16 | 26.05 | 29.35 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Payables Turnover, Competitors2 | |||||||||||||||||||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Payables turnover
= (Cost of products sold, excludes excise taxesQ1 2017
+ Cost of products sold, excludes excise taxesQ4 2016
+ Cost of products sold, excludes excise taxesQ3 2016
+ Cost of products sold, excludes excise taxesQ2 2016)
÷ Accounts payable
= (1,199 + 1,212 + 1,189 + 1,275)
÷ 175 = 27.86
2 Click competitor name to see calculations.
- Cost of Products Sold, Excluding Excise Taxes
- The cost of products sold shows notable fluctuations over the analyzed periods. Starting at 694 million USD in March 2013, the figure rises sharply to 999 million USD in June 2013 and remains relatively elevated, peaking at 1404 million USD in September 2015. Following that peak, there is a general downward trend until March 2017, with intermittent increases. The range throughout the period spans from 694 million USD to 1404 million USD, indicating significant variability in production costs.
- Accounts Payable
- Accounts payable values exhibit moderate fluctuations with a tendency to increase over time. Beginning at 137 million USD in March 2013, the amount reaches a high point of 221 million USD in December 2016, before decreasing to 175 million USD by March 2017. This indicates a gradual accumulation of payables with some seasonal or operational variability influencing the quarterly amounts.
- Payables Turnover Ratio
- The payables turnover ratio displays significant variability throughout the periods, reflecting changes in how quickly the company settles its payables relative to cost of goods sold. The ratio starts high at 29.35 in March 2013, dips to a low of 19.88 in December 2013, and then exhibits a pattern of ups and downs. A notable increase occurs in March 2016, reaching 36.25, the highest observed ratio, suggesting faster payment cycles during that quarter. However, fluctuations continue, and by March 2017 the ratio settles around 27.86.
- Overall Observations
- The data indicate that cost of products sold has experienced significant quarter-to-quarter changes, impacting accounts payable and its turnover. Despite the variability in costs, accounts payable generally trend upward until late 2016, implying potentially longer payment terms or increased purchasing activity. The payables turnover ratio's volatility points to changing payment behaviors, with some periods reflecting faster payment settlements and others slower, suggesting possible operational adjustments or cash flow management strategies over time.
Working Capital Turnover
Reynolds American Inc., working capital turnover calculation (quarterly data)
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Current assets | 5,103) | 4,238) | 4,962) | 4,905) | 7,529) | 6,187) | 6,423) | 7,451) | 3,989) | 3,323) | 3,456) | 3,458) | 4,005) | 3,655) | 4,839) | 3,824) | 5,029) | ||||||
| Less: Current liabilities | 5,891) | 4,985) | 5,069) | 4,778) | 7,604) | 5,291) | 5,678) | 6,442) | 4,225) | 3,544) | 3,286) | 3,323) | 3,680) | 3,076) | 4,010) | 2,953) | 4,145) | ||||||
| Working capital | (788) | (747) | (107) | 127) | (75) | 896) | 745) | 1,009) | (236) | (221) | 170) | 135) | 325) | 579) | 829) | 871) | 884) | ||||||
| Net sales, includes excise taxes | 3,931) | 4,254) | 4,330) | 4,315) | 3,947) | 4,216) | 4,381) | 3,390) | 2,897) | 3,024) | 3,202) | 3,089) | 2,781) | 2,959) | 3,107) | 3,162) | 2,738) | ||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Working capital turnover1 | — | — | — | 132.75 | — | 16.61 | 18.38 | 12.40 | — | — | 70.77 | 88.41 | 36.95 | 20.67 | 14.55 | 13.85 | 13.70 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Working Capital Turnover, Competitors2 | |||||||||||||||||||||||
| Coca-Cola Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| PepsiCo Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Working capital turnover
= (Net sales, includes excise taxesQ1 2017
+ Net sales, includes excise taxesQ4 2016
+ Net sales, includes excise taxesQ3 2016
+ Net sales, includes excise taxesQ2 2016)
÷ Working capital
= (3,931 + 4,254 + 4,330 + 4,315)
÷ -788 = —
2 Click competitor name to see calculations.
- Working Capital
- The working capital shows a general downward trend over the periods observed. Starting at 884 million US dollars in March 2013, there is a gradual decline through to negative territory by December 2014, where it reaches -221 million. This negative trend continues with fluctuations and a notable recovery in mid-2015, peaking again at 1009 million in June 2015. However, thereafter, it falls dramatically once more, entering significant negative values by the end of 2016 and into early 2017, reaching -788 million by March 2017. This pattern indicates increasing challenges in managing short-term assets relative to short-term liabilities over time.
- Net Sales, Includes Excise Taxes
- Net sales exhibit a somewhat fluctuating but generally stable pattern across the periods. Starting at 2,738 million US dollars in March 2013, sales increased to 3,162 million by June 2013 and then showed periods of incremental growth and minor decreases. There is a peak observed around the third quarter of 2015 with sales reaching 4,381 million, followed by slight decreases thereafter, settling around 3,931 million by March 2017. This suggests an overall growth phase with some periods of volatility or potential market adjustments.
- Working Capital Turnover
- The working capital turnover ratio varies significantly across the observed quarters. Initially, it increased from 13.7 in March 2013 to a peak of 88.41 in June 2014. The ratio then fluctuates, reaching 70.77 in September 2014, followed by missing data in late 2014 and early 2015. It resumes with lower turnover figures in 2015 and 2016, with an exceptionally high spike to 132.75 observed in June 2016, indicating a period of highly efficient use of working capital relative to sales. However, missing values preclude a complete understanding of recent trends. The fluctuations reflect considerable variability in how effectively working capital is being utilized over the periods.
- Summary and Insights
- Working capital experienced a notable decline over the reporting periods with intermittent recovery phases but ultimately deteriorated to substantial negative figures by early 2017. This downward trend could point to liquidity pressures or shifts in asset and liability structure. Net sales demonstrated growth overall, with a notable peak in 2015, signifying periods of expansion and strong revenue generation, albeit with some volatility. The working capital turnover ratios indicate fluctuating efficiency in using working capital to generate sales, with pronounced peaks suggesting moments of improved operational efficiency. The combination of declining working capital and fluctuating turnover ratios suggests that while the company was able to generate sales, it faced challenges in managing its short-term financial resources consistently. Further analysis could focus on the causes of negative working capital and the operational factors influencing turnover variability.
Average Inventory Processing Period
Reynolds American Inc., average inventory processing period calculation (quarterly data)
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||||||||||||
| Inventory turnover | 3.06 | 2.94 | 3.10 | 3.37 | 3.02 | 2.70 | 2.80 | 2.45 | 3.14 | 3.17 | 3.52 | 3.66 | 3.50 | 3.26 | 3.53 | 3.81 | 3.84 | ||||||
| Short-term Activity Ratio (no. days) | |||||||||||||||||||||||
| Average inventory processing period1 | 119 | 124 | 118 | 108 | 121 | 135 | 130 | 149 | 116 | 115 | 104 | 100 | 104 | 112 | 103 | 96 | 95 | ||||||
| Benchmarks (no. days) | |||||||||||||||||||||||
| Average Inventory Processing Period, Competitors2 | |||||||||||||||||||||||
| Coca-Cola Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| PepsiCo Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 3.06 = 119
2 Click competitor name to see calculations.
- Inventory Turnover Ratio
- The inventory turnover ratio exhibits a declining trend from the beginning of the period in March 2013 through the end of 2016, with some fluctuations. Initially, it starts at 3.84 and decreases over time, reaching its lowest point around the middle of 2015 at 2.45. Following this low, there is a modest recovery toward the end of the period, with values rising back to slightly above 3 in early 2017. This pattern indicates a general slowdown in the frequency with which inventory is sold and replaced during the timeframe analyzed.
- Average Inventory Processing Period
- The average inventory processing period, expressed in number of days, corresponds inversely with the inventory turnover ratio. It begins at 95 days and steadily increases over the years, peaking at 149 days in June 2015. After this peak, the period decreases somewhat but remains elevated compared to earlier years, fluctuating between 108 and 124 days towards the end of the period in early 2017. This lengthening of the inventory processing period suggests that inventory is taking longer to move through the supply chain and be sold.
- Overall Analysis
- The inverse relationship between the inventory turnover ratio and the average inventory processing period is evident throughout the series. The data indicates an overall trend of slower inventory movement over the reported years, with the company holding inventory for longer durations as reflected by both a reduced turnover ratio and an increased processing period. The mid-2015 period marks the most pronounced changes, where turnover is lowest and processing period is highest. Post-2015, there is a partial improvement in inventory efficiency, though the figures do not return to the initial levels observed in 2013. This suggests that while some operational adjustments may have been made to enhance inventory management, the company continues to experience significant challenges in optimizing inventory cycle times compared to the earlier part of the period analyzed.
Average Receivable Collection Period
Reynolds American Inc., average receivable collection period calculation (quarterly data)
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||||||||||||
| Receivables turnover | 306.00 | 255.24 | 454.27 | 189.43 | 199.18 | 218.88 | 220.84 | 86.30 | 103.49 | 104.28 | 135.18 | 121.80 | 120.09 | 112.89 | 143.62 | 114.92 | 116.43 | ||||||
| Short-term Activity Ratio (no. days) | |||||||||||||||||||||||
| Average receivable collection period1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 4 | 4 | 4 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | ||||||
| Benchmarks (no. days) | |||||||||||||||||||||||
| Average Receivable Collection Period, Competitors2 | |||||||||||||||||||||||
| Coca-Cola Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| PepsiCo Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 306.00 = 1
2 Click competitor name to see calculations.
The analyzed financial data reveals insights into receivables management over a sequence of quarterly periods.
- Receivables Turnover
- The receivables turnover ratio exhibits variability across the periods observed. Initially, values hover around the 110 to 145 range between early 2013 and the end of 2014, indicating a relatively stable rate of collections per year during this timeframe. There is a noticeable decline starting in early 2015, with the ratio dipping to the 80s, followed by a sharp surge in late 2015 to high levels exceeding 200, reaching as high as 454 in one period. Post-peak, the turnover remains elevated but presents fluctuations, settling to a level above 250 in early 2017. Such volatility suggests changes in receivables management efficiency or potentially significant shifts in credit policies or sales terms during these periods.
- Average Receivable Collection Period
- This metric remains consistently low throughout the periods, beginning at 3 days in 2013 and generally maintaining 2 to 4 days across most quarters. Notably, the collection period shortens further to 1 day from late 2016 onward, indicating accelerated collection processes. The inverse relationship with the turnover ratio reinforces the view of improved efficiency in receivables collection, especially in the later time frames analyzed.
Overall, the data indicates strong and improving efficiency in collections as reflected by the decreasing average collection period and the generally increasing receivables turnover ratio, particularly culminating in significantly accelerated collections near the end of the timeline. However, the high volatility in turnover ratios during the 2015-2016 period warrants further examination to understand underlying operational or financial changes affecting receivables management.
Operating Cycle
Reynolds American Inc., operating cycle calculation (quarterly data)
No. days
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||||||||||||
| Average inventory processing period | 119 | 124 | 118 | 108 | 121 | 135 | 130 | 149 | 116 | 115 | 104 | 100 | 104 | 112 | 103 | 96 | 95 | ||||||
| Average receivable collection period | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 4 | 4 | 4 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | ||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Operating cycle1 | 120 | 125 | 119 | 110 | 123 | 137 | 132 | 153 | 120 | 119 | 107 | 103 | 107 | 115 | 106 | 99 | 98 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Operating Cycle, Competitors2 | |||||||||||||||||||||||
| Coca-Cola Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| PepsiCo Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= 119 + 1 = 120
2 Click competitor name to see calculations.
- Inventory Processing Period
- The average inventory processing period displays a generally increasing trend over the observed quarters. Starting at 95 days in early 2013, it peaks around 149 days in the second quarter of 2015, indicating a lengthening time to convert inventory. After this peak, the period declines somewhat but remains elevated above 100 days, fluctuating between 108 and 135 days in subsequent quarters. This suggests potential challenges or strategic changes affecting inventory turnover efficiency.
- Receivable Collection Period
- The average receivable collection period remains consistently low throughout the period, mostly around 2 to 4 days. There is a slight decrease in collection days from 4 days in late 2014 and early 2015 to 1 day from the first quarter of 2016 onwards. This indicates strong receivables management and quick collection practices, contributing positively to cash flow.
- Operating Cycle
- The operating cycle closely follows the trend of the inventory processing period, beginning at 98 days in early 2013 and rising to a maximum of 153 days in the second quarter of 2015. Subsequently, it decreases but remains elevated relative to early years, fluctuating between 110 and 125 days. The variations in the operating cycle are mainly driven by changes in the inventory period while the receivable collection period exerts minimal influence due to its consistently short duration.
Average Payables Payment Period
Reynolds American Inc., average payables payment period calculation (quarterly data)
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||||||||||||
| Payables turnover | 27.86 | 21.90 | 25.15 | 27.19 | 36.25 | 26.19 | 31.06 | 23.05 | 31.57 | 28.58 | 30.26 | 28.28 | 21.87 | 19.88 | 30.16 | 26.05 | 29.35 | ||||||
| Short-term Activity Ratio (no. days) | |||||||||||||||||||||||
| Average payables payment period1 | 13 | 17 | 15 | 13 | 10 | 14 | 12 | 16 | 12 | 13 | 12 | 13 | 17 | 18 | 12 | 14 | 12 | ||||||
| Benchmarks (no. days) | |||||||||||||||||||||||
| Average Payables Payment Period, Competitors2 | |||||||||||||||||||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ 27.86 = 13
2 Click competitor name to see calculations.
The analyzed data reveals fluctuations in the payables turnover ratio over the examined periods. The ratio demonstrates variability, with peaks and troughs occurring throughout the timeline. Notably, higher turnover values were observed in certain quarters, indicating periods when payables were settled more frequently within the accounting cycle. Conversely, there are quarters marked by declines in the turnover ratio, suggesting slower payment cycles or extended credit terms provided by suppliers.
Correspondingly, the average payables payment period exhibits an inverse pattern relative to the payables turnover ratio. Periods with higher turnover ratios coincide with shorter payment periods, ranging around 10 to 12 days. In contrast, quarters with lower turnover ratios show longer payment durations, sometimes extending up to 18 days. This oscillation suggests variability in the company's payment policies or operational cash flow management, potentially influenced by strategic supplier negotiations or internal liquidity considerations.
Overall, the data indicates a cyclical trend in accounts payable management, with the company alternating between more aggressive and more lenient payment schedules. Such variability might reflect adaptive financial strategies in response to external market conditions or internal cash flow requirements. It is important for the company to monitor these fluctuations closely, as consistent extensions of payment periods could impact supplier relationships, while excessively rapid payments could unduly constrain working capital.
- Payables Turnover Ratio
- Displayed notable variability, ranging roughly from 19.88 to 36.25 over the quarters.
- Higher turnover ratios correlate with more frequent payment of payables, signifying efficient payables management during those periods.
- Periods of declining turnover may indicate less frequent payments or longer supplier credit terms.
- Average Payables Payment Period (Days)
- Exhibited an oscillating trend inversely related to the payables turnover ratio.
- Shortest payment periods observed around 10 to 12 days during high turnover quarters.
- Extended payment periods up to 18 days occurred when the turnover ratio declined.
- Insights
- The alternating patterns suggest dynamic payables strategies, potentially tailored to optimize cash flow.
- Monitoring these metrics is crucial to maintaining supplier trust and balancing working capital efficiency.
Cash Conversion Cycle
Reynolds American Inc., cash conversion cycle calculation (quarterly data)
No. days
| Mar 31, 2017 | Dec 31, 2016 | Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||||||||||||
| Average inventory processing period | 119 | 124 | 118 | 108 | 121 | 135 | 130 | 149 | 116 | 115 | 104 | 100 | 104 | 112 | 103 | 96 | 95 | ||||||
| Average receivable collection period | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 4 | 4 | 4 | 3 | 3 | 3 | 3 | 3 | 3 | 3 | ||||||
| Average payables payment period | 13 | 17 | 15 | 13 | 10 | 14 | 12 | 16 | 12 | 13 | 12 | 13 | 17 | 18 | 12 | 14 | 12 | ||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Cash conversion cycle1 | 107 | 108 | 104 | 97 | 113 | 123 | 120 | 137 | 108 | 106 | 95 | 90 | 90 | 97 | 94 | 85 | 86 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Cash Conversion Cycle, Competitors2 | |||||||||||||||||||||||
| Mondelēz International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Philip Morris International Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2017-03-31), 10-K (reporting date: 2016-12-31), 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-Q (reporting date: 2016-03-31), 10-K (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-Q (reporting date: 2015-03-31), 10-K (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-Q (reporting date: 2014-03-31), 10-K (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-Q (reporting date: 2013-03-31).
1 Q1 2017 Calculation
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= 119 + 1 – 13 = 107
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals notable trends in the working capital management over the examined periods. The average inventory processing period displays fluctuations with a general upward trend from early 2013 to late 2015, peaking significantly around mid-2015, followed by a moderate decline and relative stabilization towards the first quarter of 2017. This indicates variability in inventory turnover efficiency, with some periods of slower inventory movement.
The average receivable collection period remains consistently low throughout the entire timeline, largely steady between 1 to 4 days. This stability suggests that the company's credit and collection policies have been effective in maintaining prompt receivable turnover, minimizing the time lag in collecting payments from customers.
Conversely, the average payables payment period shows more variability across the quarters. It oscillates roughly between 10 to 18 days, without a clear upward or downward trend. This variability implies fluctuating payment terms or changes in vendor payment strategies, potentially reflecting adjustments in supplier relationships or cash flow management practices.
The cash conversion cycle, an aggregate measure reflecting the time span between outlay of cash and cash recovery, mirrors the inventory period trends, with an upward movement reaching a maximum in mid-2015, followed by a downward correction and a degree of stabilization near the end of the examined period. The spike in the cash conversion cycle around mid-2015 indicates a longer duration in converting resources into cash, which could signify increased working capital tied up in operations during that time.
- Average Inventory Processing Period
- Demonstrates a rise from around 95 days in early 2013 to a peak above 140 days in mid-2015, then trends downward to about 119 days by early 2017. This pattern suggests varying inventory management effectiveness and possible challenges in inventory turnover during the middle of the period.
- Average Receivable Collection Period
- Maintains a narrow range between 1 and 4 days throughout, indicating consistent and efficient management of receivables with minimal delays in customer payments.
- Average Payables Payment Period
- Fluctuates moderately between 10 and 18 days without a definitive trend, reflecting variable payment timing to suppliers likely influenced by operational or strategic cash management decisions.
- Cash Conversion Cycle
- Follows a trajectory similar to inventory processing period, rising to a high point near mid-2015 before diminishing and stabilizing by early 2017. This reveals periods of heightened working capital commitment and subsequent improvement in cash flow efficiency.