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.
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- Income Statement
- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value (EV)
- Dividend Discount Model (DDM)
- Net Profit Margin since 2005
- Price to Sales (P/S) since 2005
- Analysis of Revenues
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Short-term Activity Ratios (Summary)
Time Warner Inc., short-term (operating) activity ratios (quarterly data)
Based on: 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 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).
The financial ratios and periods presented reveal notable trends in the company's operational efficiency and working capital management over the observed quarters.
- Inventory Turnover
- The inventory turnover ratio fluctuated across the periods, peaking at 10.52 around March 31, 2015, and then demonstrating a gradual decline afterward. The ratio dropped from above 10 in early 2015 to levels closer to 7.35 by December 31, 2017, before slightly recovering to 8.71 by March 31, 2018. This trend indicates a decrease in the frequency with which inventory is sold and replaced, suggesting a shift towards slower inventory movement over time.
- Receivables Turnover
- The receivables turnover ratio exhibited a modest decrease over time, starting at 4.02 in March 2014 and declining steadily to 3.07 by March 2018. This decline points to a slower collection of receivables, implying that customers are taking longer to pay, which could impact cash flow negatively.
- Working Capital Turnover
- The working capital turnover ratio showed variability, with significant peaks, particularly notable at 27.38 by December 31, 2017, followed by a decrease to 14.38 by March 31, 2018. Such a spike may indicate a sudden improvement in the efficiency of working capital usage during late 2017, though this was not sustained. Overall, the trend suggests inconsistent working capital management efficiency.
- Average Inventory Processing Period
- The average inventory processing period generally increased, beginning at 42 days in March 2014, reaching a low of about 35 days around March 2015, and then rising consistently to 50 days by December 2017, before falling back to 42 days in March 2018. This growth in days implies that inventory was held longer on average, potentially reflecting slower inventory turnover or changes in inventory policies.
- Average Receivable Collection Period
- The average receivable collection period extended from 91 days in early 2014 to 119 days by March 2018. This steady increase signals a lengthening of the credit period or weakening in collection processes, leading to longer cash conversion cycles.
- Operating Cycle
- The operating cycle, combining inventory processing and receivables collection periods, expanded from 133 days in March 2014 to 161 days by March 2018. This growth reflects an overall slower conversion of resources into cash flow, highlighting potential operational challenges or shifts in business conditions influencing liquidity and working capital efficiency.
Turnover Ratios
Average No. Days
Inventory Turnover
Time Warner Inc., inventory turnover calculation (quarterly data)
| Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | 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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Costs of revenues | |||||||||||||||||||||||
| Inventories | |||||||||||||||||||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Inventory turnover1 | |||||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||||
| Inventory Turnover, Competitors2 | |||||||||||||||||||||||
| Walt Disney Co. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 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).
1 Q1 2018 Calculation
Inventory turnover
= (Costs of revenuesQ1 2018
+ Costs of revenuesQ4 2017
+ Costs of revenuesQ3 2017
+ Costs of revenuesQ2 2017)
÷ Inventories
= ( + + + )
÷ =
2 Click competitor name to see calculations.
- Costs of Revenues
- The costs of revenues exhibit considerable fluctuations quarter over quarter but generally show an upward trend from 2014 through early 2018. The costs ranged from a low around 3,526 million dollars in Q3 2015 to a peak of approximately 5,181 million dollars in Q4 2017. This rising trend indicates increased expenses directly associated with generating revenue, reflecting either higher sales volumes, increased production or procurement costs, or changes in the cost structure.
- Inventories
- Inventories display a somewhat cyclical pattern with seasonal fluctuations, but overall there is a gradual increase over the period analyzed. Starting near 1,879 million dollars in Q1 2014, inventory levels reached above 2,400 million dollars by Q4 2017 before slightly declining to around 2,071 million dollars by Q1 2018. This implies that the company has been holding more inventory over time, possibly to support anticipated sales growth or as a result of changes in inventory management strategies.
- Inventory Turnover Ratio
- The inventory turnover ratio shows a general declining trend during this timeframe, varying from a high around 10.52 in Q1 2015 to lows near 7.35 in Q4 2017. This decline suggests that inventory is being sold and replaced less frequently toward the end of the period, implying either slower sales or increased inventory holdings relative to sales. Lower turnover could indicate potential inefficiencies in inventory management or changes in demand patterns.
- Summary of Trends
- Overall, the financial data suggest that while costs associated with revenues have increased significantly, inventory levels have also grown, reaching their highest point in late 2017. The decreasing inventory turnover ratio further supports the observation of slower inventory movement or increased stock levels relative to sales. Together, these patterns point to shifting operational dynamics, where rising costs and higher inventory holdings may require attention to maintain efficiency and profitability.
Receivables Turnover
Time Warner Inc., receivables turnover calculation (quarterly data)
| Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | 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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Receivables, less allowances | |||||||||||||||||||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Receivables turnover1 | |||||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||||
| Receivables Turnover, Competitors2 | |||||||||||||||||||||||
| Alphabet Inc. | |||||||||||||||||||||||
| Comcast Corp. | |||||||||||||||||||||||
| Meta Platforms Inc. | |||||||||||||||||||||||
| Trade Desk Inc. | |||||||||||||||||||||||
| Walt Disney Co. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 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).
1 Q1 2018 Calculation
Receivables turnover
= (RevenuesQ1 2018
+ RevenuesQ4 2017
+ RevenuesQ3 2017
+ RevenuesQ2 2017)
÷ Receivables, less allowances
= ( + + + )
÷ =
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals distinct trends in revenues, receivables, and receivables turnover ratios over the examined periods.
- Revenues
- Revenues exhibit fluctuations throughout the quarters, with an overall slight growth trend observed when comparing the beginning to the end of the period. Initial revenues around 6,803 million US dollars in the first quarter of 2014 demonstrate moderate declines in some quarters, notably in September 2014 with a drop to 6,243 million US dollars. However, there are recurrent rebounds in the fourth quarters, indicating possible seasonality or cyclical factors impacting sales. By March 2018, revenues reach 7,996 million US dollars, which is a noticeable increase indicating positive business development over the entire timeframe. Quarter-to-quarter variations are present but the general trajectory suggests revenue growth.
- Receivables, less allowances
- Receivables show a clear upward trend across the quarters, increasing from 7,371 million US dollars in early 2014 to 10,279 million US dollars by the first quarter of 2018. This steady increase may reflect expanding credit sales, extended payment terms, or slower collections. The growth in receivables outpaces the growth in revenues, indicating a potential build-up in outstanding amounts due from customers. The consistent rise suggests a need for careful monitoring to ensure that receivables remain collectible and do not adversely affect cash flows.
- Receivables Turnover Ratio
- The receivables turnover ratio trends downward over the period, decreasing from 4.02 in the first quarter of 2014 to 3.07 by the first quarter of 2018. This decline suggests that the company is collecting its receivables at a slower pace over time. Lower turnover ratios are indicative of longer collection periods and may raise concerns regarding liquidity or credit management. The steady decrease in this ratio aligns with the rising receivables balance and signals a potential deterioration in the efficiency of the collections process.
Overall, while revenues show gentle growth with cyclical fluctuations, the notable increase in receivables combined with the decreasing receivables turnover ratio points toward a lengthening collection cycle. This pattern suggests that cash conversion from sales is becoming slower, which may impact working capital and liquidity if the trend continues. The company may need to evaluate its credit policies and collection effectiveness to mitigate risks associated with extending customer payment terms.
Working Capital Turnover
Time Warner Inc., working capital turnover calculation (quarterly data)
| Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | 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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Current assets | |||||||||||||||||||||||
| Less: Current liabilities | |||||||||||||||||||||||
| Working capital | |||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Working capital turnover1 | |||||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||||
| Working Capital Turnover, Competitors2 | |||||||||||||||||||||||
| Alphabet Inc. | |||||||||||||||||||||||
| Comcast Corp. | |||||||||||||||||||||||
| Meta Platforms Inc. | |||||||||||||||||||||||
| Netflix Inc. | |||||||||||||||||||||||
| Trade Desk Inc. | |||||||||||||||||||||||
| Walt Disney Co. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 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).
1 Q1 2018 Calculation
Working capital turnover
= (RevenuesQ1 2018
+ RevenuesQ4 2017
+ RevenuesQ3 2017
+ RevenuesQ2 2017)
÷ Working capital
= ( + + + )
÷ =
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals notable fluctuations and trends in working capital, revenues, and working capital turnover over the observed periods.
- Working Capital
- Working capital exhibited variability across the quarters, starting at 5,716 million US dollars and peaking at 6,976 million US dollars in June 2014. Subsequently, it experienced a downward trend reaching its lowest point of 1,142 million US dollars in December 2017 before slightly recovering to 2,193 million US dollars by March 2018. This volatility suggests changes in the company’s short-term financial health and liquidity management during the periods under review.
- Revenues
- Revenues displayed a less volatile pattern compared to working capital, fluctuating within a range of approximately 6,243 million to 8,611 million US dollars. After a low in September 2014, revenues generally showed a growth trend into 2016 and 2017, peaking at 8,611 million US dollars in December 2017. This upward movement indicates an overall positive sales performance, despite some quarter-to-quarter variation.
- Working Capital Turnover
- The working capital turnover ratio, which measures the efficiency in utilizing working capital to generate revenues, varied substantially. Initial figures around 5.19 to 7.68 suggested moderate efficiency. However, a stark increase was observed in December 2017, when the ratio rose dramatically to 27.38 and remained elevated at 14.38 in March 2018. This surge correlates with the steep decline in working capital in the same periods, implying that while working capital was reduced considerably, revenue generation remained robust, leading to an apparent improvement in turnover efficiency. The spike may also reflect operational changes or shifts in capital management strategies.
In summary, the data indicate that the company experienced significant fluctuations in working capital levels while maintaining relatively stable and gradually growing revenues over the analyzed time frame. The efficiency of working capital use increased notably towards the end of the period, primarily driven by reduced working capital rather than increased revenue, which could be a point of focus for financial strategy assessment.
Average Inventory Processing Period
Time Warner Inc., average inventory processing period calculation (quarterly data)
| Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | 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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||||||||||||
| Inventory turnover | |||||||||||||||||||||||
| Short-term Activity Ratio (no. days) | |||||||||||||||||||||||
| Average inventory processing period1 | |||||||||||||||||||||||
| Benchmarks (no. days) | |||||||||||||||||||||||
| Average Inventory Processing Period, Competitors2 | |||||||||||||||||||||||
| Walt Disney Co. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 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).
1 Q1 2018 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ =
2 Click competitor name to see calculations.
- Inventory Turnover Trend
- The inventory turnover ratio exhibits fluctuations over the observed periods from March 2014 to March 2018. Initially, it increased from 8.69 to a peak of 10.52 by March 2015, indicating an improvement in the frequency with which inventory was sold and replaced. However, subsequent quarters show a decline, reaching a low of 7.35 in December 2017 before a slight recovery to 8.71 in March 2018. This pattern suggests variability in inventory management efficiency, with a notable decrease during late 2016 through 2017.
- Average Inventory Processing Period Trend
- The average inventory processing period, measured in days, inversely correlates with the inventory turnover ratio as expected. Starting at 42 days in March 2014, it decreased to a low of 35 days by March 2015, consistent with the period of higher turnover. From this point, the processing period lengthened substantially, reaching up to 50 days in December 2017. By the final quarter observed, there is a reduction to 42 days, aligning with the slight increase in turnover. The expansion in the processing period during 2016 and 2017 indicates slower inventory movement and potentially increased holding costs or changes in sales dynamics.
- Overall Insights
- The data reflects a cyclical trend in inventory management effectiveness. The initial phase up to early 2015 shows strong efficiency with high turnover and shorter processing periods. This is followed by a period of decreased efficiency where inventory takes longer to process and turnover declines. The slight improvement at the end of the period may indicate adjustments in inventory strategy or market conditions. Monitoring these metrics is crucial for managing costs and optimizing working capital.
Average Receivable Collection Period
Time Warner Inc., average receivable collection period calculation (quarterly data)
| Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | 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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||||||||||||
| Receivables turnover | |||||||||||||||||||||||
| Short-term Activity Ratio (no. days) | |||||||||||||||||||||||
| Average receivable collection period1 | |||||||||||||||||||||||
| Benchmarks (no. days) | |||||||||||||||||||||||
| Average Receivable Collection Period, Competitors2 | |||||||||||||||||||||||
| Alphabet Inc. | |||||||||||||||||||||||
| Comcast Corp. | |||||||||||||||||||||||
| Meta Platforms Inc. | |||||||||||||||||||||||
| Trade Desk Inc. | |||||||||||||||||||||||
| Walt Disney Co. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 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).
1 Q1 2018 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ =
2 Click competitor name to see calculations.
- Receivables Turnover
- The receivables turnover ratio exhibits a general declining trend from March 31, 2014, through March 31, 2018. Starting at 4.02, the ratio experienced minor fluctuations but showed a noticeable decrease towards the end of the period, reaching a low of 3.07. This trend indicates a gradual slowdown in the frequency with which the company collects its receivables over the quarters analyzed.
- Average Receivable Collection Period
- The average receivable collection period, measured in days, inversely mirrors the trend of the receivables turnover ratio. Beginning at 91 days in March 31, 2014, this metric steadily increased over the analyzed timeframe, culminating in 119 days by March 31, 2018. This prolongation suggests that the company is taking progressively longer to collect payments from its customers.
- Insights and Implications
- The simultaneous decrease in receivables turnover and increase in collection period indicate a weakening in the efficiency of accounts receivable management. A rising collection period combined with a declining turnover ratio may lead to increased working capital requirements and potential liquidity constraints. It could also reflect changing credit policies, customer payment behavior, or other operational factors impacting cash flow timing.
Operating Cycle
Time Warner Inc., operating cycle calculation (quarterly data)
No. days
| Mar 31, 2018 | Dec 31, 2017 | Sep 30, 2017 | Jun 30, 2017 | 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 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | |||||||||||||||||||||||
| Average inventory processing period | |||||||||||||||||||||||
| Average receivable collection period | |||||||||||||||||||||||
| Short-term Activity Ratio | |||||||||||||||||||||||
| Operating cycle1 | |||||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||||
| Operating Cycle, Competitors2 | |||||||||||||||||||||||
| Walt Disney Co. | |||||||||||||||||||||||
Based on: 10-Q (reporting date: 2018-03-31), 10-K (reporting date: 2017-12-31), 10-Q (reporting date: 2017-09-30), 10-Q (reporting date: 2017-06-30), 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).
1 Q1 2018 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= + =
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals notable trends in the company's working capital management, specifically focusing on the inventory processing period, receivable collection period, and the overall operating cycle.
- Average Inventory Processing Period
- The average inventory processing period demonstrates moderate fluctuations over the observed intervals. Initially, there is a declining trend from 42 days at the start to a low of 35 days by March 31, 2015, indicating improved efficiency in inventory turnover. However, subsequent quarters observe an increase, peaking at 50 days in December 2017 before slightly receding to 42 days by March 2018. This pattern suggests variability in inventory management, with periods of both enhanced and reduced processing speed.
- Average Receivable Collection Period
- The average receivable collection period exhibits a gradual elongation throughout the periods analyzed. Starting from 91 days in March 2014, the period consistently lengthens, reaching 119 days by March 2018. This upward trend indicates that the company is taking progressively longer to collect receivables, which could impact cash flow and liquidity. The increase is relatively steady, with minor variances but no significant retrenchment, signaling a consistent trend toward extended collection times.
- Operating Cycle
- Corresponding closely with the changes in inventory and receivables, the operating cycle extends over the quarters reviewed. Beginning at 133 days in early 2014, the operating cycle experiences a gradual increase, culminating at 161 days by the first quarter of 2018. The lengthening of the operating cycle reflects the combined effects of inventory processing delays and slower receivable collections, signifying a longer duration between the outlay of cash for inventory and the receipt of cash from sales.
In conclusion, the data reflect a general trend toward longer durations in key working capital components, which may suggest challenges in operational efficiency or changes in credit policy. Attention to receivable management appears particularly warranted given its consistent increase, while the fluctuations in inventory processing suggest a need for investigation into inventory control practices to maintain optimal turnover rates.