United Parcel Service Inc. (NYSE:UPS)

Inventory Turnover

The inventory turnover ratio shows a declining trend from 136.5 in 2020 to 97.28 in 2023, followed by a slight recovery to 110.25 in 2024. This indicates a decrease in the frequency at which inventory is sold and replaced during the period, suggesting potential changes in inventory management or sales efficiency over time.

Receivables Turnover

The receivables turnover ratio exhibits a gradual increase from 7.87 in 2020 to 8.38 in 2024. This indicates an improvement in the company's efficiency in collecting receivables, suggesting that customers are paying faster or more effectively over the years.

Payables Turnover

The payables turnover ratio slightly fluctuates but generally rises from 13.11 in 2020 to 14.45 in 2024. This suggests an increasing pace in the payment to suppliers, reflecting potential changes in supplier payment terms or company cash management strategy.

Working Capital Turnover

Working capital turnover shows significant variability, starting at 26.45 in 2020, dropping sharply to 13.21 in 2021, then peaking at 52.36 in 2023 before declining to 31.74 in 2024. Such volatility indicates fluctuating operational efficiency in utilizing working capital to generate sales, with a notable peak in 2023.

Average Inventory Processing Period

The average inventory processing period remains stable at 3 days for most years, with a slight increase to 4 days in 2023 before returning to 3 days in 2024. This suggests consistent inventory holding times with a minor, temporary extension in 2023.

Average Receivable Collection Period

The collection period slightly decreases from 46 days in 2020 to 44 days in 2024, indicating a gradual improvement in cash collection efficiency and faster conversion of receivables into cash.

Operating Cycle

The operating cycle remains relatively stable over the period, fluctuating marginally between 47 and 50 days. This consistency implies steady combined efficiency in inventory processing and receivables collection.

Average Payables Payment Period

The average payable payment period declines from 28 days in 2020 and 2021 to 25 days in 2023 and 2024, indicating faster payments to suppliers over time.

Cash Conversion Cycle

The cash conversion cycle shows minor fluctuations, increasing slightly from 21 days in 2020 to 24 days in 2023 before declining again to 22 days in 2024. This suggests that the net time to convert investments in inventory and other resources into cash has been relatively stable, with a brief extension in 2023.

Revenue

Revenue shows an increasing trend from 2020 to 2022, rising from approximately 84.6 billion US dollars to just over 100.3 billion US dollars. However, a decline is observed in 2023, with revenue decreasing to about 90.9 billion US dollars, followed by a slight stabilization in 2024 around 91.1 billion US dollars. This suggests a period of growth followed by contraction and subsequent stabilization.

Inventories

Inventories increased steadily from 620 million US dollars in 2020 to a peak of 935 million in 2023. In 2024, inventories decreased to 826 million US dollars. The upward trend in inventories until 2023 indicates increased stockholding, potentially to meet rising demand or in anticipation of future sales, with a recent reduction suggesting a possible inventory optimization or lower stock requirements.

Inventory Turnover

Inventory turnover exhibits a declining trend over the observed period, starting at approximately 136.5 in 2020 and decreasing significantly to a low of 97.28 in 2023 before a partial recovery to around 110.25 in 2024. The decline indicates that the company was turning over its inventory less frequently over these years, potentially reflecting slower sales relative to inventory levels or changes in inventory management efficiency. The partial recovery in 2024 may suggest an improvement in inventory management or sales activity.

Overall Analysis

The data reflects that while the company experienced revenue growth through 2022, subsequent years saw a decline and stabilization, accompanied by an increase in inventories and a decreasing inventory turnover ratio. This pattern may hint at challenges in converting inventory to sales at the previous pace, requiring attention to inventory management and sales strategies. The partial improvement in inventory turnover in 2024 could indicate initial efforts to address these issues.

Revenue Trends

The revenue demonstrated a generally positive trend from 2020 through 2022, increasing from 84,628 million US dollars in 2020 to 100,338 million US dollars in 2022. However, in 2023, there was a noticeable decline to 90,958 million US dollars, followed by a marginal increase to 91,070 million US dollars in 2024. This indicates a peak in 2022, with some degree of revenue contraction and stabilization in the following years.

Accounts Receivable, Net

The net accounts receivable values rose from 10,750 million US dollars in 2020 to 12,583 million US dollars in 2022, indicating increased outstanding receivables during this period. Subsequently, it decreased to 11,216 million in 2023 and further to 10,871 million in 2024, suggesting improved collections or tighter credit policies after 2022.

Receivables Turnover Ratio

The receivables turnover ratio exhibited an upward trend over the five-year period, moving from 7.87 in 2020 to 8.38 in 2024. This increase reflects improved efficiency in collecting receivables, with a particularly strong increase in turnover from 2022 onward, aligning with the reduction in net accounts receivable observed during these years.

Revenue Trends

Revenue increased from 84,628 million US dollars in 2020 to a peak of 100,338 million in 2022. However, in the subsequent years, revenue declined to 90,958 million in 2023 and stabilized at a similar level of 91,070 million in 2024. This indicates a strong growth phase followed by a period of contraction and stabilization.

Accounts Payable Trends

Accounts payable rose from 6,455 million US dollars in 2020 to 7,523 million in 2021. It remained nearly flat in 2022 at 7,512 million, but then decreased in 2023 to 6,340 million and declined slightly further to 6,302 million in 2024. This downward trend in the most recent years suggests more efficient management or reduction of short-term liabilities.

Payables Turnover Analysis

The payables turnover ratio exhibited a generally increasing trend, moving from 13.11 in 2020 to 12.93 in 2021, then increasing to 13.36 in 2022, and further rising to 14.35 in 2023 and 14.45 in 2024. An increasing turnover ratio implies that the company is paying its suppliers faster, which could indicate improved operational efficiency or stronger relationships with vendors.

Overall Insights

The initial revenue growth until 2022 was accompanied by rising accounts payable, suggesting expanding business operations. Following 2022, the decline in revenue coincided with reductions in accounts payable, reflecting a possible contraction or tighter working capital management. The consistent increase in payables turnover ratio over the five-year period highlights an improvement in the company's payment efficiency. This combination of trends may suggest a strategic shift towards optimizing liquidity and supplier relationships amid changes in business volume.

The financial data reveals notable fluctuations in key metrics over the analyzed five-year period.

Working Capital

Working capital exhibited significant variability, increasing sharply from 3,200 million US$ in 2020 to 7,365 million US$ in 2021, before declining to 4,077 million US$ in 2022. The downward trend continued with a substantial drop to 1,737 million US$ by 2023, followed by a moderate recovery to 2,869 million US$ in 2024.

Revenue

Revenue demonstrated an overall growth trend from 84,628 million US$ in 2020, peaking at 100,338 million US$ in 2022. However, revenue decreased to 90,958 million US$ in 2023 and remained relatively stable into 2024 with a slight increase to 91,070 million US$.

Working Capital Turnover

The working capital turnover ratio, which measures how effectively the company uses its working capital to generate sales, showed considerable fluctuation. It dropped significantly from 26.45 in 2020 to 13.21 in 2021, rebounded to 24.61 in 2022, and then surged dramatically to 52.36 in 2023 before decreasing to 31.74 in 2024.

These observations suggest periods of evolving operational efficiency and changing asset management practices. The initial increase in working capital followed by a sharp decline could imply shifts in current asset and liability management or inventory policies. Meanwhile, revenue growth until 2022 followed by stabilization indicates a possible market saturation or external challenges affecting sales. The working capital turnover ratio's volatility reflects adjustments in how working capital supports sales generation, with the peak in 2023 potentially highlighting a more efficient use or a low level of working capital relative to sales during that year.

Inventory turnover

The inventory turnover ratio exhibits a declining trend from 136.5 in 2020 to a low of 97.28 in 2023, followed by a partial recovery to 110.25 in 2024. This indicates a decrease in the frequency with which inventory is sold and replaced over the analyzed period, suggesting potentially slower inventory movement or changes in inventory management efficiency. The initial decline could point to operational challenges or shifts in demand, whereas the uptick in 2024 may signal improvements or adjustments in inventory control.

Average inventory processing period

The average inventory processing period remains relatively stable at around 3 days for most years, with a slight increase to 4 days in 2023 before returning to 3 days in 2024. This consistency demonstrates effective inventory handling times, with only a minor deviation seen in 2023 that corresponds to the drop in inventory turnover that year.

Receivables Turnover

The receivables turnover ratio shows a consistent upward trend over the period analyzed, increasing from 7.87 in 2020 to 8.38 in 2024. This indicates a gradual improvement in the company's efficiency in collecting its receivables, suggesting more effective credit management or stronger cash flow collection processes.

Average Receivable Collection Period

Correspondingly, the average receivable collection period decreases steadily from 46 days in 2020 to 44 days in 2024. This decline supports the observation of enhanced receivables management, reflecting quicker conversion of receivables into cash, which benefits the company's liquidity position.

Overall Analysis

The inverse relationship between the receivables turnover ratio and the average collection period is consistent throughout the years. The simultaneous improvement in both metrics demonstrates the company's progressive optimization of its accounts receivable process, potentially contributing to improved working capital efficiency and reduced credit risk.

Average inventory processing period

The average inventory processing period remained relatively stable, holding at 3 days for 2020 through 2022. It increased slightly to 4 days in 2023 before returning to 3 days in 2024, indicating a generally consistent inventory turnover pace with a minor temporary delay.

Average receivable collection period

There was a gradual decrease in the average receivable collection period over the five years. Starting at 46 days in 2020, it peaked at 47 days in 2021, then progressively declined to 44 days by 2024. This trend indicates improving efficiency in receivables collection and potentially stronger cash flow management.

Operating cycle

The operating cycle remained stable around 49 to 50 days for most years, slightly dipping to 49 days in 2022 and 49 days in 2023 before dropping to 47 days in 2024. This slight reduction aligns with the improvement in receivable collection period and reflects an overall enhanced operational efficiency.

Payables Turnover

The payables turnover ratio exhibits a generally increasing trend over the five-year period. Starting at 13.11 in 2020, there was a slight dip in 2021 to 12.93, followed by a consistent rise in subsequent years, reaching 14.45 by the end of 2024. This upward movement indicates an improving efficiency in managing payables, with the company settling its payables more frequently as time progresses.

Average Payables Payment Period

The average payables payment period shows a decreasing trend from 2020 through 2024. It remained stable at 28 days for the first two years, then reduced to 27 days in 2022, and further declined to 25 days in both 2023 and 2024. This shortening of the payment period aligns with the increase in payables turnover, reflecting quicker payments to suppliers and possibly a stronger cash position or a strategic choice to improve supplier relationships.

Overall Insights

The data imply enhanced operational efficiency in managing accounts payable over the period. The reduction in payment days combined with increased turnover ratio suggests the company's improved liquidity management or a shift toward faster payment strategies. This trend could positively influence supplier trust and possibly negotiation power on payment terms.

Average Inventory Processing Period

The average inventory processing period remained stable at 3 days from 2020 through 2022, increased to 4 days in 2023, and reverted to 3 days in 2024. This indicates a generally efficient inventory turnover with a minor disruption in 2023.

Average Receivable Collection Period

There is a gradual downward trend in the average receivable collection period, decreasing from 46 days in 2020 to 44 days in 2024. This suggests an improvement in the company's ability to collect receivables faster over the five-year span.

Average Payables Payment Period

The payables payment period shows a declining trend, shortening from 28 days in 2020 and 2021 to 25 days by 2023 and 2024. This indicates a shift towards faster payments to suppliers during this timeframe.

Cash Conversion Cycle

The cash conversion cycle remained relatively stable, fluctuating between 21 and 24 days over the period. It rose slightly in 2023 to 24 days but returned to 22 days in 2024, reflecting consistent operational cash flow efficiency with minimal variation.