Analysis of Short-term (Operating) Activity Ratios
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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- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Enterprise Value (EV)
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Price to Operating Profit (P/OP) since 2005
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Short-term Activity Ratios (Summary)
Trane Technologies plc, short-term (operating) activity ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
- Inventory Turnover Ratio
- The inventory turnover ratio revealed a fluctuating pattern over the period. It increased from 6.47 in 2018 to a peak of 7.27 in 2020, indicating improved efficiency in inventory management. However, it declined subsequently to 6.31 in 2021 and further to 5.53 in 2022, suggesting a slower rate of inventory movement in the latest year.
- Receivables Turnover Ratio
- The receivables turnover ratio remained relatively stable throughout the years, with minor fluctuations. It slightly increased from 5.85 in 2018 to 5.93 in 2019 but then decreased intermittently, ending at 5.75 in 2022. This stability implies consistent credit and collection policies over the period.
- Payables Turnover Ratio
- A downward trend was apparent in the payables turnover ratio, decreasing steadily from 6.36 in 2018 to 5.27 in 2022. This decline points to a longer payment period to suppliers over time, possibly aimed at managing cash flows more conservatively.
- Working Capital Turnover Ratio
- The working capital turnover ratio exhibited significant volatility. It increased from 11.06 in 2018 to 12.25 in 2019, then plunged sharply to 4.85 in 2020. The ratio recovered partially to 8.23 in 2021 and soared to 23.1 in 2022, indicating a substantial improvement in the efficiency of working capital utilization in the most recent year.
- Average Inventory Processing Period (days)
- There was a general increasing trend in the average inventory processing period, rising from 56 days in 2018 to 66 days in 2022, with a low of 50 days in 2020. This lengthening duration aligns with the decreasing inventory turnover ratio in later years, suggesting inventory is being held longer before sale.
- Average Receivable Collection Period (days)
- The average receivable collection period showed minimal fluctuations, maintaining around 62 to 65 days across the years, with 63 days in the latest reporting year. This consistency reflects stable credit terms and collection practices.
- Operating Cycle (days)
- The operating cycle, which combines inventory processing and receivables collection periods, remained fairly steady but showed a gradual increase from 118 days in 2018 to 129 days in 2022. This suggests a slightly slower overall conversion of raw materials to cash over time.
- Average Payables Payment Period (days)
- The average payables payment period increased consistently from 57 days in 2018 to 69 days in 2022. This trend indicates that the company is taking longer to settle its obligations, which could be a strategic decision to optimize working capital.
- Cash Conversion Cycle (days)
- The cash conversion cycle decreased from 61 days in 2018 to a low of 51 days in 2020 but then rose again to 60 days by 2022. Despite improving efficiency in 2020, the overall cycle lengthened toward the end of the period, reflecting the combined effects of longer inventory holding and payables payment periods.
Turnover Ratios
Average No. Days
Inventory Turnover
Trane Technologies plc, inventory turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cost of goods sold | ||||||
| Inventories | ||||||
| Short-term Activity Ratio | ||||||
| Inventory turnover1 | ||||||
| Benchmarks | ||||||
| Inventory Turnover, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Inventory Turnover, Sector | ||||||
| Capital Goods | ||||||
| Inventory Turnover, Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Inventory turnover = Cost of goods sold ÷ Inventories
= ÷ =
2 Click competitor name to see calculations.
- Cost of Goods Sold
- The cost of goods sold (COGS) exhibited a fluctuating trend over the five-year period. Initially, it increased from approximately 10.85 billion in 2018 to around 11.45 billion in 2019. A notable decline occurred in 2020, with COGS dropping to about 8.65 billion. This was followed by a gradual increase to 9.67 billion in 2021 and a further rise to approximately 11.03 billion in 2022, approaching the 2019 level. The data suggests a period of cost reduction or lower sales in 2020, likely influenced by external factors, with a recovery trend evident in subsequent years.
- Inventories
- Inventories demonstrated variability over the period, starting at roughly 1.68 billion in 2018 and experiencing a slight increase to about 1.71 billion in 2019. A significant reduction occurred in 2020, falling to approximately 1.19 billion, which may point to inventory management adjustments or reduced production. In 2021, inventories increased again to around 1.53 billion and continued rising to approximately 1.99 billion in 2022, surpassing the levels seen in earlier years. This upward trajectory from 2020 indicates a rebuilding or accumulation phase of inventory holdings.
- Inventory Turnover
- The inventory turnover ratio showed a mixed pattern. It increased from 6.47 in 2018 to a peak of 7.27 in 2020, indicating an improvement in efficiency in managing and selling inventory. However, the ratio declined to 6.31 in 2021 and further dropped to 5.53 in 2022. The decreasing turnover in the last two years suggests slower inventory movement, possibly due to increased inventory levels or changes in sales dynamics.
Receivables Turnover
Trane Technologies plc, receivables turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net revenues | ||||||
| Accounts and notes receivable, net | ||||||
| Short-term Activity Ratio | ||||||
| Receivables turnover1 | ||||||
| Benchmarks | ||||||
| Receivables Turnover, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Receivables Turnover, Sector | ||||||
| Capital Goods | ||||||
| Receivables Turnover, Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Receivables turnover = Net revenues ÷ Accounts and notes receivable, net
= ÷ =
2 Click competitor name to see calculations.
- Net Revenues
- The net revenues demonstrated a general upward trend over the five-year period, despite a notable dip in 2020. Starting from approximately $15.67 billion in 2018, revenues increased to around $16.60 billion in 2019. In 2020, there was a significant decline to roughly $12.45 billion, likely reflecting external factors impacting sales or demand. However, the revenues recovered in subsequent years, rising to $14.14 billion in 2021 and further increasing to nearly $15.99 billion by the end of 2022. This pattern indicates resilience and a recovery trajectory following the downturn observed in 2020.
- Accounts and Notes Receivable, Net
- The accounts and notes receivable, net, showed fluctuations aligning somewhat with the changes in net revenues but with less pronounced variation. Beginning at about $2.68 billion in 2018, receivables increased slightly in 2019 to $2.80 billion, then dropped to $2.20 billion in 2020, reflecting the revenue decline of the same year. Following this decrease, receivables rose again to $2.43 billion in 2021 and further to $2.78 billion in 2022. This movement suggests that the company managed its credit policies and collection efforts to adjust to changing sales volumes.
- Receivables Turnover Ratio
- The receivables turnover ratio remained relatively stable throughout the period, oscillating slightly between 5.66 and 5.93. Starting at 5.85 in 2018, it peaked at 5.93 in 2019, then decreased to its lowest point of 5.66 in 2020, coinciding with the drop in revenue and receivables. The ratio improved again to 5.82 in 2021 but slightly declined to 5.75 in 2022. The stability of this ratio indicates consistent efficiency in collecting receivables, suggesting that despite variations in sales and receivables amounts, the company maintained effective credit management and collection processes.
Payables Turnover
Trane Technologies plc, payables turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cost of goods sold | ||||||
| Accounts payable | ||||||
| Short-term Activity Ratio | ||||||
| Payables turnover1 | ||||||
| Benchmarks | ||||||
| Payables Turnover, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Payables Turnover, Sector | ||||||
| Capital Goods | ||||||
| Payables Turnover, Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Payables turnover = Cost of goods sold ÷ Accounts payable
= ÷ =
2 Click competitor name to see calculations.
- Cost of Goods Sold
- The cost of goods sold exhibited a fluctuating pattern over the analyzed period. Initially increasing from approximately 10.85 billion USD in 2018 to 11.45 billion USD in 2019, it then decreased sharply to 8.65 billion USD in 2020. This downward trend reversed in the subsequent years, rising to 9.67 billion USD in 2021 and further to 11.03 billion USD in 2022, nearly reaching the 2019 peak.
- Accounts Payable
- Accounts payable showed a general upward trajectory throughout the timeframe. Starting at 1.71 billion USD in 2018, the figure increased steadily each year to reach 2.09 billion USD in 2022. Notably, there was a slight dip in 2020 compared to 2019, but the overall trend remained positive across the period.
- Payables Turnover Ratio
- The payables turnover ratio demonstrated a consistent decline from 6.36 in 2018 to 5.27 in 2022, indicating a slower rate of paying suppliers over time. This decreasing ratio suggests that the company has been extending its payment terms or taking longer to settle accounts payable year over year.
Working Capital Turnover
Trane Technologies plc, working capital turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current assets | ||||||
| Less: Current liabilities | ||||||
| Working capital | ||||||
| Net revenues | ||||||
| Short-term Activity Ratio | ||||||
| Working capital turnover1 | ||||||
| Benchmarks | ||||||
| Working Capital Turnover, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Working Capital Turnover, Sector | ||||||
| Capital Goods | ||||||
| Working Capital Turnover, Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Working capital turnover = Net revenues ÷ Working capital
= ÷ =
2 Click competitor name to see calculations.
- Working Capital
- The working capital experienced fluctuations over the analyzed periods. It initially decreased from approximately 1.42 billion USD in 2018 to 1.36 billion USD in 2019. In 2020, there was a significant increase to about 2.57 billion USD, followed by a decline to 1.72 billion USD in 2021. By the end of 2022, working capital dropped sharply to roughly 692 million USD. This considerable reduction in 2022 may suggest changes in current assets or liabilities management.
- Net Revenues
- Net revenues showed varied trends over the years. A moderate increase occurred from about 15.67 billion USD in 2018 to 16.60 billion USD in 2019, followed by a significant contraction to 12.45 billion USD in 2020. Revenues then rebounded reaching 14.14 billion USD in 2021 and further increased to nearly 16.00 billion USD in 2022, nearing pre-2020 levels. This pattern indicates a strong recovery after the 2020 decline.
- Working Capital Turnover
- The working capital turnover ratio, indicative of how efficiently the company uses its working capital to generate sales, showed considerable variations. It increased from 11.06 in 2018 to 12.25 in 2019, suggesting improved efficiency. However, it dropped sharply to 4.85 in 2020, reflecting decreased efficiency amid higher working capital or lower sales. In 2021, the ratio improved to 8.23 and then surged dramatically to 23.10 in 2022. The high ratio in 2022, combined with the reduced working capital, suggests significantly enhanced turnover efficiency or tighter working capital management relative to net revenues.
Average Inventory Processing Period
Trane Technologies plc, average inventory processing period calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Inventory turnover | ||||||
| Short-term Activity Ratio (no. days) | ||||||
| Average inventory processing period1 | ||||||
| Benchmarks (no. days) | ||||||
| Average Inventory Processing Period, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Average Inventory Processing Period, Sector | ||||||
| Capital Goods | ||||||
| Average Inventory Processing Period, Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ =
2 Click competitor name to see calculations.
- Inventory Turnover
- The inventory turnover ratio showed an overall declining trend from 6.47 in 2018 to 5.53 in 2022. It increased initially, reaching a peak of 7.27 in 2020, indicating an improvement in the efficiency of inventory management in that year. However, this was followed by a decline in the subsequent two years, suggesting a slower movement of inventory through the business.
- Average Inventory Processing Period
- The average inventory processing period, expressed in days, exhibited an inverse pattern relative to inventory turnover. It decreased from 56 days in 2018 to 50 days in 2020, reflecting faster inventory processing during this period. After 2020, the processing period increased substantially, reaching 66 days in 2022. This elongation signals a slowing down in inventory turnover and potentially less efficient inventory management.
- Overall Insights
- The inverse relationship between inventory turnover and the inventory processing period is consistent throughout the data. The improvement in inventory turnover up to 2020 coincided with a reduction in the processing period, suggesting enhanced operational efficiency. Post-2020, the reversal in these metrics may indicate challenges such as slower sales, supply chain disruptions, or changes in inventory policy, all warranting further investigation.
Average Receivable Collection Period
Trane Technologies plc, average receivable collection period calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Receivables turnover | ||||||
| Short-term Activity Ratio (no. days) | ||||||
| Average receivable collection period1 | ||||||
| Benchmarks (no. days) | ||||||
| Average Receivable Collection Period, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Average Receivable Collection Period, Sector | ||||||
| Capital Goods | ||||||
| Average Receivable Collection Period, Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ =
2 Click competitor name to see calculations.
- Receivables Turnover
- The receivables turnover ratio exhibited limited fluctuation from 2018 through 2022. Starting at 5.85 in 2018, it saw a slight increase to 5.93 in 2019, followed by a decline to 5.66 in 2020. Subsequently, the ratio rose to 5.82 in 2021 before experiencing a minor decrease to 5.75 in 2022. This pattern indicates relatively stable receivables management over the period with minor volatility, suggesting consistency in the frequency of collecting receivables.
- Average Receivable Collection Period
- The average collection period in days remained fairly consistent, ranging between 62 and 65 days throughout the five-year span. The period held steady at 62 days in both 2018 and 2019, increased slightly to 65 days in 2020, and then decreased back to 63 days in 2021 and 2022. These slight variations align inversely with the receivables turnover ratio fluctuations, demonstrating consistent credit and collection policies with no significant deterioration or improvement in the time taken to collect receivables.
- Overall Trends and Insights
- Overall, the data reflect stable management of accounts receivable, with little deviation in turnover ratios and collection periods. The minor changes observed likely correspond to normal operational variances rather than structural changes in credit policies or debtor quality. This stability suggests effective receivables management practices and a steady cash conversion cycle within the organization during the reported periods.
Operating Cycle
Trane Technologies plc, operating cycle calculation, comparison to benchmarks
No. days
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Average inventory processing period | ||||||
| Average receivable collection period | ||||||
| Short-term Activity Ratio | ||||||
| Operating cycle1 | ||||||
| Benchmarks | ||||||
| Operating Cycle, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Operating Cycle, Sector | ||||||
| Capital Goods | ||||||
| Operating Cycle, Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= + =
2 Click competitor name to see calculations.
- Inventory Processing Period
- The average inventory processing period exhibited a generally fluctuating trend over the five-year span. It started at 56 days in 2018, slightly decreased to 55 days in 2019, then further declined more notably to 50 days in 2020. However, there was a subsequent increase to 58 days in 2021, followed by a continued rise to 66 days in 2022. This indicates a slowdown in inventory turnover in the latter years after a period of improvement.
- Receivable Collection Period
- The average receivable collection period remained relatively stable throughout the period analyzed. It was 62 days in both 2018 and 2019, saw a slight increase to 65 days in 2020, then decreased marginally to 63 days in both 2021 and 2022. These minor fluctuations suggest consistent management of receivables with no significant deterioration or improvement.
- Operating Cycle
- The operating cycle, which combines inventory processing and receivable collection periods, showed a modest upward trend. Starting at 118 days in 2018, it decreased slightly to 117 days in 2019 and 115 days in 2020. However, it increased to 121 days in 2021 and further to 129 days in 2022. The increase in the operating cycle in recent years aligns with the increased inventory processing period, indicating a lengthening overall operating cycle and potentially slower cash conversion.
Average Payables Payment Period
Trane Technologies plc, average payables payment period calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Payables turnover | ||||||
| Short-term Activity Ratio (no. days) | ||||||
| Average payables payment period1 | ||||||
| Benchmarks (no. days) | ||||||
| Average Payables Payment Period, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Average Payables Payment Period, Sector | ||||||
| Capital Goods | ||||||
| Average Payables Payment Period, Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ =
2 Click competitor name to see calculations.
- Payables Turnover
- The payables turnover ratio shows a declining trend from 6.36 in 2018 to 5.27 in 2022. This gradual decrease indicates that the frequency with which the company pays its suppliers is reducing over the years, suggesting a slower payment rate or longer credit terms being utilized by the company.
- Average Payables Payment Period
- The average payables payment period has increased steadily from 57 days in 2018 to 69 days in 2022. This reflects a lengthening in the duration the company takes to settle its outstanding payables, consistent with the decreasing payables turnover ratio observed.
Cash Conversion Cycle
Trane Technologies plc, cash conversion cycle calculation, comparison to benchmarks
No. days
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Average inventory processing period | ||||||
| Average receivable collection period | ||||||
| Average payables payment period | ||||||
| Short-term Activity Ratio | ||||||
| Cash conversion cycle1 | ||||||
| Benchmarks | ||||||
| Cash Conversion Cycle, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Cash Conversion Cycle, Sector | ||||||
| Capital Goods | ||||||
| Cash Conversion Cycle, Industry | ||||||
| Industrials | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= + – =
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period exhibited a general increase over the five-year span. It started at 56 days in 2018, slightly decreased to 55 days in 2019, then further reduced to 50 days in 2020. However, this trend reversed with a rise to 58 days in 2021, followed by a more pronounced increase to 66 days in 2022. This indicates a lengthening in the time inventory remains in process towards the end of the period.
- Average Receivable Collection Period
- This period remained relatively stable throughout the analyzed years. It was 62 days in both 2018 and 2019, increased marginally to 65 days in 2020, then slightly decreased to 63 days in 2021 and remained unchanged in 2022. The stability suggests consistent efficiency in collecting receivables.
- Average Payables Payment Period
- The average payables payment period showed a consistent upward trend. Starting at 57 days in 2018, it increased steadily each year to reach 69 days in 2022. This indicates the company took progressively longer to pay its suppliers over the period examined.
- Cash Conversion Cycle
- The cash conversion cycle reflected some variation but stayed within a relatively narrow range. It began at 61 days in 2018, declined to 59 days in 2019, then dropped more notably to 51 days in 2020. It increased to 54 days in 2021 and rose again to 60 days in 2022. Overall, the cycle was lowest in 2020 and increased towards the end of the period, suggesting fluctuations in the working capital efficiency.
- Summary Insights
- The data reveals that while receivable collection periods remained stable, inventory processing periods increased notably in the last two years, coinciding with longer payables payment periods. The elongation of the payable period may indicate an effort to optimize cash flow by delaying payments. The cash conversion cycle experienced variability, with improvement around 2020 followed by a gradual increase, indicating changes in the balance of inventory, receivables, and payables management. The lengthening inventory and payable periods in recent years could point to operational challenges or strategic adjustments in working capital management.