United Parcel Service Inc. (NYSE:UPS)

The analysis of the financial ratios over the observed periods reveals various trends in the company's operational efficiency and liquidity management.

Receivables Turnover Ratio

This ratio exhibits some fluctuation throughout the periods, generally oscillating between approximately 7.7 and 10.0. Initially, the ratio starts close to 8.8, slightly increasing and then declining toward the end of 2021. Post that period, there is a pattern of rising towards about 10.0 in the middle of 2023 before reducing again by mid-2025. This indicates some variability in how quickly receivables are collected, with periods of improved efficiency followed by slight slowdowns.

Payables Turnover Ratio

The payables turnover ratio shows a relatively stable upward trend, starting from around 14.2 and progressively increasing to peaks near 16.9 in mid-2024. Minor downward adjustments are observed subsequently, with the ratio mostly above 14.0 in recent periods. This suggests a generally increasing efficiency in paying suppliers, implying tighter management of accounts payable or possibly advantageous payment terms.

Working Capital Turnover Ratio

The working capital turnover ratio experiences notable volatility, with values ranging widely from about 11.3 to over 63.0. A downward trend is visible until early 2022, followed by sharp increases culminating in very high ratios near 52.4 and then 60.6 in late 2023 and early 2024, respectively. Later periods show a return to more moderate levels but still elevated compared to earlier years. These significant fluctuations warrant attention, as they indicate varying effectiveness in utilizing working capital to generate sales over time.

Average Receivable Collection Period (Days)

The collection period generally fluctuates between 36 and 47 days, with shorter periods often aligning with peaks in receivables turnover ratio. Notably, the duration decreases to as low as 36 days around mid-2023, suggesting improved collection efficiency. Conversely, periods near year-ends tend to show longer collection times approaching 45 to 47 days, indicating some seasonality or timing differences in collections.

Average Payables Payment Period (Days)

This metric remains relatively constant, varying moderately between 22 and 28 days. A slight reduction in the payment period is observed in more recent quarters, indicating a trend toward quicker payments to suppliers. This is consistent with the increasing payables turnover ratio and suggests improved payment practices or renegotiated terms.

In summary, the data reflect an overall pattern of improving efficiency in managing receivables and payables, with occasional fluctuations that may relate to operational cycles or external factors. The working capital turnover ratio's volatility points to changing dynamics in capital utilization, which should be further investigated to understand underlying causes. Average collection and payment periods align with turnover trends, reinforcing the observations on cash flow management.

The revenue of the company exhibits notable seasonal fluctuations, with a general pattern of increased revenue in the fourth quarter of each year followed by a decline in the first quarter of the subsequent year. For instance, revenue peaked at $27,771 million in December 2021, then fell to $24,378 million in March 2022. Similar patterns recur, with Q4 2022 and Q4 2024 showing higher revenues relative to Q1 of the following years. Over the full analyzed period, revenue does not display a consistent upward or downward trend but rather oscillates within a range between approximately $21,000 million and $27,000 million.

Accounts receivable, net, similarly shows a seasonal trend aligned with revenue, generally increasing towards the end of each year and declining thereafter. The highest balances are recorded in December 2021 and December 2022, at $12,541 million and $12,583 million respectively, with lower levels observed in the subsequent quarters. The figures suggest that the company’s receivables increase as revenues peak, likely due to higher sales volumes during those periods.

The receivables turnover ratio reveals insights about how efficiently the company collects its accounts receivable. The ratio tends to decline in the fourth quarter of each year, corresponding to periods when accounts receivable balances are highest and revenue peaks. For example, the turnover ratio fell to 7.76 in December 2021 and 7.97 in December 2022, indicating slower collection during those quarters. Conversely, the turnover ratio increases in the first and second quarters, such as 9.6 in March 2023 and 10.03 in June 2023, suggesting more rapid collection of receivables during periods of lower outstanding balances. This pattern is consistent across the years analyzed and illustrates a cyclical aspect of working capital management related to seasonal revenue trends.

In summary, the data demonstrates a recurring seasonal cycle in revenue and accounts receivable, with peaks typically in the last quarter of each year and subsequent declines in the early months of the following year. The receivables turnover ratio inversely follows this pattern, reflecting the impact of seasonal sales cycles on the company’s collection efficiency. There is no evident long-term trend in revenue or receivables turnover, indicating stable seasonal dynamics rather than sustained growth or deterioration in these financial metrics over the period analyzed.

Revenue Trends

The revenue exhibits a cyclical quarterly pattern with fluctuations across the periods. There is a noticeable peak in revenue near the end of each year, with the highest values recorded in December quarters (e.g., $27,771 million in Dec 2021 and $27,033 million in Dec 2022). Conversely, lower revenue values tend to occur in the subsequent first quarter of the year, often showing a decline compared to prior quarters. From 2021 through the first half of 2024, revenue maintains a general range between approximately $21,000 million and $27,000 million, without a clear long-term upward or downward trend. However, some softening is observed in several quarters of 2023 and early 2024 when compared to the earlier years.

Accounts Payable Dynamics

Accounts payable follows a pattern broadly consistent with the revenue cycle, increasing notably during the year-end quarters and decreasing in the first quarters of each year. Peaks in accounts payable are observed in December quarters, for example, $7,523 million in Dec 2021 and $7,512 million in Dec 2022. A decline is seen in March quarters, such as $6,305 million in Mar 2021 and dropping to $5,397 million in Mar 2024. While the fluctuations persist, there is no consistent trend of rising or falling payables beyond typical seasonal variation. The data suggests effective management of payables aligned with revenue seasonality.

Payables Turnover Ratio Analysis

The payables turnover ratio shows variability across quarters, ranging approximately from 12.93 to 16.89. The ratio tends to decline toward the end of calendar years and increase in the earlier quarters. Higher turnover ratios in the first quarters (e.g., 16.63 in Mar 2024 and 15.69 in Mar 2023) indicate a faster payment cycle during those periods, whereas lower ratios (e.g., 12.93 in Dec 2021 and 13.36 in Dec 2022) suggest a slower payment cycle at year-end. This cyclical pattern aligns inversely with the accounts payable balances, reflecting strategic payment timing to manage cash flow and supplier terms throughout the fiscal year.

Overall Insights

The financial data reveals a consistent seasonal cadence in revenue, accounts payable, and payables turnover ratio. Year-end periods consistently represent peaks in both revenue and payables, while early-year periods show contractions. The payables turnover ratio's cyclical behavior signifies deliberate financial management to optimize cash flow in response to seasonal business fluctuations. No significant deviations from these patterns emerge, and no clear long-term upward or downward trend in revenue or payables management is evident over the analyzed periods.

Working Capital

The working capital values exhibit noticeable fluctuations over the analyzed periods. Starting at 4,679 million USD in March 2021, it increased steadily through the end of 2021, reaching a peak of 8,759 million USD in March 2022. Subsequently, a downward trend is observed through 2022, with a significant drop to 1,737 million USD by December 2022. Moving into 2023 and 2024, the working capital demonstrates volatility, with values fluctuating between approximately 1,400 and 3,700 million USD. The final data points in 2025 show some recovery, with an increase to 4,610 million USD in June 2025.

Revenue

Revenue shows a cyclical pattern with modest variation in each quarter. Initially, revenue remained relatively stable in 2021, fluctuating around 22,000 to 27,700 million USD. The highest quarterly revenue within the dataset appears in December 2021 with 27,771 million USD. Following this, revenue levels oscillate moderately but generally show a slight downward tendency, dipping to around 21,000 million USD in the most recent quarters of 2025. Despite the fluctuations, revenue maintains a narrow range without drastic declines or growth.

Working Capital Turnover Ratio

The working capital turnover ratio, which measures revenue generated per unit of working capital, presents marked variability. Starting at 19.13 in March 2021, it declined to a low of 11.27 in March 2022 amid the peak working capital figure, illustrating lower efficiency in utilizing working capital during this period. From late 2022 onward, the ratio rises sharply, reaching exceptionally high levels such as 52.36 in December 2023 and up to 63.57 in March 2025. These elevated turnover ratios suggest improved working capital efficiency, likely due to the reduced working capital base combined with relatively stable revenue. However, the wide swings in the ratio also imply volatility in working capital management or timing effects.

Overall Insights

The analysis highlights a period of working capital accumulation through early 2022, followed by significant contractions in subsequent periods. Revenue remains fairly steady with slight downward pressure towards the end of the timeframe. The inverse relationship observed between working capital levels and turnover ratios points to increased efficiency in capital use as working capital declines. Such fluctuations could indicate strategic adjustments in asset and liability management or changing operational conditions. Close attention to the sustainability of these working capital shifts would be critical to understanding long-term financial health.

The analysis of the receivables turnover ratio and average receivable collection period over multiple quarters reveals notable fluctuations that reflect changes in the efficiency of collecting receivables.

Receivables Turnover Ratio

The ratio demonstrates an oscillating pattern across the observed periods. Initially, the ratio was approximately 8.84, followed by a mild increase to above 9.0 in mid-2021, then a dip towards the end of 2021 reaching 7.76. This is indicative of a temporary slowdown in collection efficiency during that quarter. The first half of 2022 saw a rebound with ratios climbing back near or above 9.0, but a brief decline occurs again at the end of that year, dropping to 7.97.

From 2023 onward, the turnover ratio generally remains around 9.0 to 10.0 at its peaks, albeit with intermittent declines towards 8.0 to 8.4 near the end of each year. By mid-2025, the ratio settles slightly lower at around 8.66, which is marginally below the early 2021 levels. Overall, the turnover ratio indicates variability with a trend of moderate fluctuation rather than clear improvement or deterioration.

Average Receivable Collection Period

This metric inversely mirrors the turnover ratio, as expected. The period fluctuates between approximately 36 and 47 days across the quarters. It initially stood around 41 days and improved to roughly 40 days in mid-2021 before rising to 47 days at the end of 2021, suggesting slower collection during that quarter.

Throughout 2022, the average collection period decreased again to near 40 days but rose toward 46 days by year-end. The quarters in 2023 show some improvement with periods dropping near 36-38 days in mid-year and increasing again towards the end. Into 2024 and 2025, the average collection days stay within a range of 37 to 44 days, indicating a relatively stable but somewhat inconsistent collection cycle.

Insights

The company experiences cyclical fluctuations in both metrics—turnover ratio and collection period—which may be influenced by seasonality, changes in credit policies, or customer payment behavior. The periods of lower turnover and higher collection days often correspond with quarter ends, suggesting possible recurring collection challenges towards those times.

Despite these fluctuations, the overall efficiency in receivables management does not show a definitive worsening trend but rather a pattern of periodic tightening and loosening with moderate variation. Maintaining or improving collection efficiency could benefit from strategies aimed at stabilizing these fluctuations to optimize cash flow.

The payables turnover ratio exhibits fluctuations over the observed periods, reflecting changes in how efficiently the company manages its payments to suppliers. Initially, the ratio remains fairly stable around the mid-14 range from March 2021 through June 2022, with a slight dip to 12.93 in December 2021. Subsequently, the ratio increases, reaching peaks exceeding 16 in several quarters during 2023 and 2024, indicating a higher frequency of payables turnover during these times. However, a decline to around 14.45 is noted towards the end of 2024, followed by a modest increase and another decline by mid-2025. This pattern suggests variability in payment strategies or supplier terms over the periods.

Correspondingly, the average payables payment period, measured in days, generally aligns inversely with the payables turnover ratio. The number of days ranges between 22 and 28 throughout the periods, with an initial stability near 25-26 days from early 2021 to mid-2022. A trend towards shorter payment periods appears in late 2022 and persists through much of 2023 and 2024, with values as low as 22 days, indicating quicker payments. Occasional increases back to 25 or more days occur sporadically, such as in December 2021, December 2022, and late 2024. These shifts may correspond to operational adjustments or strategic considerations in managing supplier obligations.

Overall, the data reveals a dynamic approach to accounts payable management, with periods of accelerated payment cycles alternating with relative extensions in payment durations. This variability could be influenced by cash flow management priorities, negotiations with suppliers, or broader economic conditions impacting payment policies.