Salesforce Inc. (NYSE:CRM)

The analysis of the quarterly financial ratios reveals several noteworthy trends and fluctuations over the observed periods.

Receivables Turnover Ratio

The receivables turnover ratio exhibits a recurring pattern of sharp declines followed by substantial recoveries. Periods such as January 2021, January 2022, January 2023, and January 2025 show significant drops to values approximately around 2.7 to 3.2, indicating slower collection efficiency during these quarters. Conversely, the quarters immediately following these lows tend to rebound strongly, often exceeding values of 6.5 and reaching up to 8.86 by April 2025, demonstrating a quick improvement in collection effectiveness. This cyclical behavior suggests seasonal or operational factors influencing the ability to convert receivables into cash promptly.

Working Capital Turnover Ratio

The working capital turnover ratio experiences considerable volatility, with some extreme peaks and troughs. Initially, the ratio decreases from approximately 9.75 in April 2020 to as low as around 4.36 by April 2021. Subsequently, it shows an abrupt increase, peaking at 99.31 in July 2023, followed by further sharp fluctuations. This heightened variability might indicate changes in working capital management, seasonal impacts on sales relative to current assets and liabilities, or possible one-time adjustments affecting this metric markedly. Such erratic movement suggests an unstable efficiency in using working capital to generate sales and warrants closer scrutiny to understand underlying causes.

Average Receivable Collection Period

The average receivable collection period inversely mirrors the patterns observed in the receivables turnover ratio, as expected. It shows periods of significant elongation to over 120 days during January 2021, January 2022, January 2023, and January 2025, corresponding to lower turnover ratios. Between these peaks, the collection period generally tightens, fluctuating typically between 41 and 65 days. This oscillation underscores intermittent challenges in receivables collection during specific quarters, alternating with improved efficiencies immediately afterward. The downward trend towards the latter periods, such as April to July 2025, suggests some improvement in receivable management over time.

Overall, the data indicates that the company experiences cyclical variability in both receivables management and working capital utilization, with certain quarters consistently underperforming in terms of turnover and collection efficiency. The working capital turnover's high volatility suggests further investigation to identify operational or market-driven causes. Continuous monitoring of these ratios is recommended to mitigate risk and enhance financial performance stability.

The analysis of the quarterly financial data reveals several key trends in the company's financial performance and efficiency related to revenues and accounts receivable.

Revenues

The revenues have demonstrated a consistent upward trend across the observed periods. Starting at approximately $4.87 billion, the revenues increased steadily, reaching over $10.23 billion by the last recorded quarter. This indicates sustained growth in sales or service income, with periodic fluctuations but an overall positive trajectory.

Accounts Receivable, Net

Accounts receivable exhibit a pattern of substantial variability, particularly noticeable with certain quarters showing abrupt spikes, notably in January of 2021, 2022, 2023, and 2024. These spikes correspond with the end of fiscal quarters or years and suggest possible timing differences in collections or revenue recognition practices. Outside these spikes, the accounts receivable amounts generally trend upward over time, moving from around $3.08 billion to above $5.59 billion, signaling increased credit extended to customers or longer collection periods.

Receivables Turnover Ratio

The receivables turnover ratio presents a cyclical pattern corresponding inversely to the spikes in accounts receivable. High spikes in accounts receivable coincide with significant drops in turnover ratio, for example, falling to levels around 2.7-3.2 during peak receivables quarters, indicating slower collection during these periods. Conversely, turnover ratios rebound strongly in subsequent quarters to levels consistently above 6 and often approaching or exceeding 7, reflecting efficient collection of receivables outside of peak accumulation periods. Notably, there is a gradual improvement in peak turnover ratios over time, reaching 8.86 in the most recent full quarter, which may suggest enhanced credit management or collection processes.

In summary, the revenue growth showcases a robust business expansion, while the accounts receivable data points to seasonal or cyclical billing and collection dynamics typical of the company's operations. The fluctuating receivables turnover ratio aligned with the accounts receivable spikes indicates predictable liquidity cycles, but an overall improvement in turnover suggests the company is managing its credit and collections more effectively over the evaluated period.

The financial data reflects several evolving trends relating to working capital, revenues, and working capital turnover over multiple quarterly periods.

Working Capital

The working capital exhibited notable volatility over the observed timeframe. Initially, there was a meaningful increase from 1,870 million USD to a peak of 5,121 million USD around April 2021. This was followed by a sharp decline into negative territory at -1,137 million USD in mid-2021. Subsequent quarters showed recovery back into positive values, although the figures fluctuated considerably thereafter, ranging between approximately 300 million USD to 2,799 million USD in later periods. The irregular pattern suggests periods of significant operational or investment activity impacting current assets and liabilities.

Revenues

Revenues demonstrated consistent growth throughout the quarters, beginning at 4,865 million USD and rising steadily to over 10,200 million USD by the last quarter. Growth appeared relatively stable without abrupt declines, indicating sustained demand and effective sales performance. Some quarters showed increments less pronounced than others, but the overall trajectory remained upward, signaling expansion and increasing market presence.

Working Capital Turnover

The working capital turnover ratio was highly erratic across the timeline. Early periods showed a gradual decline, dropping from approximately 9.75 to 4.36, with some missing data points afterward. In later quarters, extraordinarily high turnover ratios appeared, reaching values above 90 at certain points, followed by declines to mid and lower double-digit figures. Such high turnovers generally indicate efficient use of working capital relative to revenue, while the variations may reflect shifts in working capital position rather than just operating efficiency. The volatility suggests changing management strategies, possibly responding to working capital fluctuations and revenue growth dynamics.

In summary, while revenue growth remained steadily positive, the working capital experienced significant fluctuations. The erratic working capital turnover ratios further underscore this instability, which could signal operational adjustments or changing asset-liability management practices. Continued monitoring would be essential to assess the impact of these fluctuations on financial stability and operational efficiency.

The analysis of the quarterly data for receivables turnover and average receivable collection period reveals notable cyclical fluctuations and overall trends spanning the observed periods.

Receivables Turnover

The receivables turnover ratio demonstrates a repeating pattern where higher values alternate with significantly lower ones approximately every four quarters. High turnover ratios generally range from about 5.6 to 8.9, indicating effective collection in those periods, whereas the low points drop sharply to around 2.7 to 3.2, reflecting a slower turnover during those times. Despite this periodic fluctuation, the peak turnover values show a gradual tendency to increase over the timeline, moving from the mid-6 range in early periods to closer to 8.9 in later quarters. This suggests an improving efficiency in credit management or stronger cash collection in peak seasons or fiscal quarters.

Average Receivable Collection Period

The average receivable collection period inversely mirrors the turnover ratio with an oscillating pattern in days outstanding. The lower values of collection period, typically around 40 to 60 days, represent periods of quicker cash collection. In contrast, the higher spikes reach between 115 to 134 days, indicating a significant delay in collecting receivables during these intervals. Over the observed timeframe, there is a slight downward trend in the maximum collection periods at peak times, decreasing from about 134 to 115 days, suggesting some improvement in managing overdue receivables. Meanwhile, the minimum days remain relatively stable around 40 to 60 days, demonstrating consistent quick collection during those cycles.

Overall Observations

The cyclical nature of both metrics suggests seasonality or recurring quarterly factors impacting receivables management. The inverse relationship between receivables turnover and collection period aligns with expected financial behavior, where an increase in turnover corresponds to a decrease in collection days. The gradual improvement in peak turnover ratios and reduction in maximum collection periods indicate enhanced operational effectiveness over time. However, the pronounced quarterly swings imply that short-term liquidity and credit risk management might require attention during certain periods to smooth out cash flow variability.