Verizon Communications Inc. (NYSE:VZ)

The financial ratios over the observed periods indicate several noteworthy trends regarding operational efficiency and working capital management.

Inventory Turnover

The inventory turnover ratio shows significant fluctuations. After an initial increase from 28.51 to a peak of 40.24 in mid-2020, the ratio declined steadily through 2021 and early 2022, reaching lows around 15.61 to 15.71. Subsequently, turnover rose again, peaking near 29.87 in late 2023 before oscillating between approximately 21 and 29 through early 2025. This dynamic suggests varying efficiency in inventory management, with periods of quick inventory movement followed by slower turnover.

Receivables Turnover

The receivables turnover ratio remained relatively stable, exhibiting minor fluctuations around a range from approximately 5.16 to 6.25. The highest turnover occurred in late 2020, indicating faster collection of receivables during that period. However, a gradual decline is observed toward early 2025, with turnover ratios near the lower bound of the range, signifying slightly slower collection over time.

Working Capital Turnover

Data on working capital turnover is limited, with a notably anomalous spike to 141.27 in June 2020 followed by a value of 8.59 in March 2020 and no further data reported. This indicates either a significant operational event or an outlier in data recording during mid-2020, preventing comprehensive trend analysis for this metric.

Average Inventory Processing Period

Corresponding inversely with inventory turnover, the average days to process inventory started low at 13 days in early 2020 and decreased to a minimum of 9 days in mid and late 2020. It then increased steadily through 2021 into 2022, reaching up to 23 days, before trending downward again to around 12 to 15 days toward 2025. These fluctuations denote periods where inventory was held longer, potentially reflecting slower sales or supply chain delays, followed by improved efficiency in later periods.

Average Receivable Collection Period

The days sales outstanding (DSO) exhibits a generally stable but gradually increasing pattern. Starting at 68 days in early 2020, it decreased to about 58 days by late 2020, indicating faster receivables collection at that time. However, from 2021 onward, the collection period extended slowly, reaching approximately 70 to 71 days by early 2025, suggesting a modest decline in collection efficiency.

Operating Cycle

The operating cycle aligns with the trends in inventory processing and receivables collection periods. It decreased from 81 days in early 2020 to a low of 67 days in late 2020, signifying a shorter overall operational period. Subsequently, the cycle lengthened steadily to the mid-80s by early 2022 and onwards, fluctuating slightly but remaining elevated around 82 to 88 days through early 2025. This indicates a lengthening in the time taken to convert inventory and receivables into cash.

Overall, the data reflect periods of improved efficiency in inventory management and receivables collection during 2020, followed by gradual declines in operational speed through 2021 and 2022. More recently, some improvements in inventory turnover and processing time are observed, but receivables collection periods and the operating cycle remain extended relative to early 2020, indicating room for enhanced working capital management.

The analysis of the quarterly financial data reveals distinct trends in cost of services and wireless equipment, inventories, and inventory turnover ratios over the observed periods.

Cost of Services and Wireless Equipment

This expense exhibits a fluctuating pattern across the quarters, with values ranging approximately between 11,749 million US$ and 15,762 million US$. Notably, there are peaks observed in the fourth quarters of 2020, 2021, and 2022, indicating possible seasonal increases in costs during these periods. While the cost tends to decrease somewhat in the first quarters of subsequent years, the general trend shows variability without a clear upward or downward long-term trajectory. The highest figures appear predominantly in the last quarters of each year, suggesting a cyclical demand or operational pattern impacting these costs.

Inventories

The inventory levels demonstrate an overall increasing trend from early 2020 through late 2022, rising from 1,633 million US$ at the start to a peak of 3,659 million US$ in the first quarter of 2022. After this peak, inventories decline notably in late 2022 and stabilize around 2,200 million US$ to 2,400 million US$ by early 2023. Further fluctuations occur throughout 2023 and 2024, with inventory levels generally oscillating between approximately 1,800 million US$ and 2,500 million US$. These movements imply a buildup of inventories leading up to 2022, followed by adjustments and a more moderated inventory management approach thereafter.

Inventory Turnover Ratio

The inventory turnover ratio, available from the fourth quarter of 2020, demonstrates significant variation over the subsequent periods. Initial ratios are relatively high, exceeding 28 in the early observations and peaking above 40 in the first quarter of 2021. Subsequently, the ratio declines markedly during the remainder of 2021 and into 2022, reaching lows near 15, indicating a slowdown in inventory movement relative to cost of services. After this dip, the ratio rises again in later quarters, approaching or exceeding values in the mid-20s, though it again exhibits some volatility toward the end of the series. This pattern suggests changes in operational efficiency or demand impacting how quickly inventory is utilized or sold relative to service costs.

The operating revenues exhibit a fluctuating but generally upward trend over the reported periods. Starting at 31,610 million US dollars in the first quarter of 2020, revenues showed a slight decline in mid-2020 followed by a recovery through the end of that year. The revenues peaked again towards the end of 2022 and early 2023, with some variability observed in 2023 and early 2024. The latest quarter recorded operating revenues of 33,485 million US dollars, which indicates a recovery compared to some earlier quarters but still remaining below the highest levels observed in late 2022 and 2023.

Accounts receivable, net also shows a dynamic pattern across the quarters. Initially, the figure decreased from 23,797 million US dollars in early 2020 to a low near 21,257 million US dollars mid-2021, before starting a sustained increase that continued through subsequent periods. By the end of 2024, accounts receivable reached approximately 26,109 million US dollars, representing the highest level in the reported timeline. This rise in accounts receivable points to increased credit extended to customers or slower collections over time.

Receivables turnover, which measures how efficiently the company collects its receivables, reflects some declining efficiency after peaking in 2021. The ratio reached its highest calculated level near 6.25 in the third quarter of 2020 and maintained relatively high values above 5.5 until early 2022. From 2022 onwards, the ratio gradually declined, reaching a low of 5.16 in the first quarter of 2025. This decline suggests that the company is taking longer to collect receivables, which aligns with the observed increase in accounts receivable balances.

Summary of Key Trends

Operating revenues show resilience with a general trend towards recovery and growth after initial pandemic-related impacts, despite short-term fluctuations.

Accounts receivable increased notably in the latter periods, indicating potentially extended credit terms or slower cash collections.

Receivables turnover decreased gradually in recent quarters, implying a reduction in the efficiency of receivables collection which may warrant management attention to credit and collection policies.

Working Capital

The working capital figures demonstrate significant volatility throughout the observed periods. In early 2020, the values fluctuate from negative (-352 million USD) to positive (2387 million USD), followed by a substantial increase reaching 14,934 million USD by the end of 2020. However, starting in 2021, working capital turns negative consistently, with deepening deficits reaching a peak negative value of -24,248 million USD in September 2024. This suggests increasing short-term liquidity pressure or shifts in current assets and liabilities management over the recent years, especially marked by pronounced negative values from 2021 onward.

Operating Revenues

Operating revenues show relatively stable behavior with minor fluctuations across the quarters. The values mostly range between approximately 30,000 million USD and 35,000 million USD per quarter. There is a slight upward trend from late 2022 into early 2025, peaking at 35,681 million USD in December 2024. Despite some quarters showing small declines (e.g., March 2023 and June 2023), revenues generally maintain consistency, indicating steady operational sales or service income without significant disruption.

Working Capital Turnover

The working capital turnover data is sparse, with only two values recorded in late 2020: 8.59 and notably 141.27. The extreme jump in this ratio suggests an anomalous event or exceptional working capital efficiency in that specific timeframe, although the absence of subsequent data limits a comprehensive trend analysis. This high variability implies either data irregularities or rapid operational dynamics impacting working capital utilization during that short period.

General Observations

The persistent negative working capital from 2021 onward, coinciding with relatively stable operating revenues, may indicate structural changes in asset-liability composition rather than immediate revenue-driven effects. Such persistent negative working capital typically warrants further investigation into current asset management, payables strategies, or changes in supplier/customer credit terms. Meanwhile, the stable operating revenue suggests the company maintains its market presence and revenue inflows, despite working capital challenges.

Inventory Turnover

The inventory turnover ratio exhibits significant fluctuations over the observed quarters, beginning at a high point of 28.51 and rising to a peak of 40.24 before showing a gradual decline. From the peak, it decreases steadily to 15.61, indicating a slowing in how quickly inventory is sold or used. There is a slight recovery in subsequent quarters with values oscillating between approximately 18 and 30. The later quarters show some volatility, with the ratio moving between 21.31 and 29.31, ending with a moderate level near 24.71, suggesting an irregular but generally moderate rate of inventory turnover.

Average Inventory Processing Period

The average inventory processing period inversely mirrors the pattern observed in inventory turnover. Starting at 13 days initially, it drops to a low of 9 days during the earlier periods, indicative of faster inventory processing. Subsequently, this metric rises considerably, peaking at around 23 days, which reflects a slower turnover of inventory on hand. After this peak, the period decreases again, fluctuating mostly between 12 and 17 days towards the latter periods. These variations imply changing efficiency levels in inventory management, with certain phases featuring longer holding times followed by improvements in processing speed.

Overall Inventory Management Trends

The data suggest a cyclical nature in inventory management efficiency, where periods of rapid turnover and shorter processing times alternate with phases of slower turnover and longer holding periods. This could potentially reflect adjustments to market demand, supply chain conditions, or internal inventory control strategies. The absence of a consistent linear trend points to reactive inventory management, possibly in response to external business environments or operational changes across the reporting periods.

Receivables Turnover

The receivables turnover demonstrates an initial rising trend from 5.36 to 6.25 between March and September 2020, indicating an improvement in the frequency of collections. This peak is followed by a slight decline towards the end of 2020, settling at 6.05 in December. The ratio then fluctuates moderately throughout 2021 and 2022, generally ranging between 5.58 and 5.96. Beginning in 2023, a gradual decreasing trend is noticeable, with turnover declining consistently from 5.82 in the first quarter to a low of 5.16 by the end of 2024. A slight uptick occurs at the beginning of 2025, rising to 5.23 in March. Overall, the recent trend points toward a slower turnover rate, suggesting a lengthening in the time taken to collect receivables.

Average Receivable Collection Period

The average receivable collection period mirrors the inverse behavior of the receivables turnover, beginning at 68 days in March 2020 and showing a downward trend to 58 days by September 2020, implying quicker collections. Thereafter, the period slightly increases and stabilizes around the mid-60 days range through 2021 and 2022, with minor fluctuations between 61 and 65 days. From 2023 onward, a steady elongation is observable, with the period increasing from 63 days in the first quarter to 71 days by the end of 2024, maintaining this higher level into early 2025. This prolonged collection period indicates a potential slowdown in the company's ability to collect receivables promptly.

Summary of Trends

The data reveals a period of improved receivables management through 2020, marked by higher turnover and decreasing collection days. However, beginning in 2023, trends suggest a weakening in collection efficiency, as evidenced by declining receivables turnover and a rising average collection period. This shift may warrant closer attention to receivables management practices to mitigate potential cash flow impacts.

The data reveal patterns in three key operating cycle metrics over multiple quarterly periods: average inventory processing period, average receivable collection period, and operating cycle, measured in number of days.

Average Inventory Processing Period

This metric shows some fluctuations over the quarters analyzed. Starting from 13 days in early 2020 periods, it decreased to a low of 9 days in mid and late 2020. Subsequently, the period increased steadily, peaking at 23 days in mid and late 2022, indicating a slowdown in inventory turnover during that time. From late 2022 to early 2023, it improved noticeably down to around 12-15 days, showing better inventory management or faster processing. The period then stabilized between 14 and 17 days through 2024 to early 2025, reflecting a generally consistent inventory processing duration at a moderately elevated level compared to the lowest points observed.

Average Receivable Collection Period

This timeframe generally exhibited a rising trend over the periods presented. Beginning around 68 days early on, it decreased to a low of 58 days in late 2020, suggesting a relatively quicker collection cycle at that time. However, from early 2021 onward, the collection period mostly increased or remained elevated, reaching values around 70-71 days from late 2023 through early 2025. This indicates a lengthening in the time taken to collect receivables, which could imply changes in credit policies, customer payment behaviors, or challenges in collections.

Operating Cycle

The operating cycle, which is the sum of inventory processing and receivable collection periods, showed corresponding movements reflecting the trends in its components. It was shorter in late 2020, reaching a minimum near 67 days, and then extended over subsequent periods. The cycle lengthened up to 88 days in mid and late 2022, consistent with the rise in inventory and receivable days. Following this peak, there was some improvement, with the cycle decreasing to mid-70s to low 80s days in early 2023, before gradually increasing again to the high 80s in late 2024. The slight reductions observed were temporary, and overall, the operating cycle became longer over the analyzed periods compared to the starting values.

In summary, the trends suggest that while inventory processing times have fluctuated and shown periods of improvement, the receivable collection period has generally increased over time, contributing to an elongated operating cycle. This elongation could have implications for working capital management and cash flow, indicating a need to monitor credit and inventory policies closely.