Verizon Communications Inc. (NYSE:VZ)

Inventory Turnover

The inventory turnover ratio exhibited a decline from 28.51 in 2020 to 18.43 in 2021, followed by a recovery reaching 26.68 in 2023, before decreasing slightly to 24.08 in 2024. This pattern indicates fluctuations in inventory management efficiency, with a notable dip in 2021 but overall maintenance of relatively high turnover levels thereafter.

Receivables Turnover

The receivables turnover ratio displayed modest fluctuations, rising from 5.36 in 2020 to 5.6 in 2021, then slightly declining to 5.16 by 2024. This suggests stable but slightly weakening collection efficiency over the examined period.

Payables Turnover

The payables turnover ratio steadily decreased from 7.68 in 2020 to 5.19 in 2024. This trend implies a lengthening of payment periods to suppliers, indicating potentially improved cash retention or changes in payment practices.

Working Capital Turnover

Data for working capital turnover is incomplete, with a reported value of 8.59 only for 2020. Therefore, no trend analysis is possible for this metric over the given period.

Average Inventory Processing Period

The average inventory processing period extended from 13 days in 2020 to 20 days in 2021, then shortened to stabilize around 14-15 days by 2024. This corroborates the inventory turnover trend, showing a temporary slowdown in inventory movement followed by more efficient handling.

Average Receivable Collection Period

The average receivable collection period decreased from 68 days in 2020 to 65 days during 2021 and 2022 but increased again to 71 days in 2024. This increase towards the end of the period suggests a slight delay in receivables collection.

Operating Cycle

The operating cycle experienced minor variations, rising from 81 days in 2020 to 86 days in 2024, with fluctuations in between. This indicates a slight overall extension in the total time between inventory acquisition and cash collection from sales.

Average Payables Payment Period

The average payables payment period lengthened consistently from 48 days in 2020 to 70 days in 2024, reflecting a strategic increase in the time taken to settle obligations, which aligns with the decreasing payables turnover ratio.

Cash Conversion Cycle

The cash conversion cycle showed a significant improvement, dropping from 33 days in 2020 and 2021 to 15 days in 2023, with a slight increase to 16 days in 2024. This improvement indicates enhanced efficiency in managing working capital, reducing the time to convert resources into cash.

Cost of Services and Wireless Equipment

The cost of services and wireless equipment exhibited an overall increasing trend from 2020 to 2022, growing from 51,201 million US dollars in 2020 to 59,133 million in 2022. However, this trend reversed in the following years, with costs declining to 54,887 million in 2023 and further slightly reducing to 54,097 million in 2024. This pattern suggests initial growth in expenses associated with services and equipment, followed by a phase of cost moderation or efficiency improvement in the latter periods.

Inventories

Inventory levels showed notable fluctuations over the five-year period. Starting at 1,796 million US dollars in 2020, inventories rose sharply to 3,055 million in 2021, indicating a substantial buildup of stock. Subsequently, inventories declined to 2,388 million in 2022 and continued to fall to 2,057 million in 2023 before slightly increasing again to 2,247 million in 2024. The initial inventory accumulation followed by reduction could reflect adjustments in supply chain management or responses to market demand changes.

Inventory Turnover Ratio

The inventory turnover ratio demonstrated variability across the years. It started high at 28.51 in 2020, then decreased significantly to 18.43 in 2021, implying a slower rate of inventory movement relative to the prior year. The ratio improved over the next two years, climbing to 24.76 in 2022 and reaching 26.68 in 2023, indicating increasingly efficient inventory utilization. In 2024, the ratio slightly decreased to 24.08 but remained above the 2021 low. This pattern suggests fluctuating inventory management effectiveness, with a notable dip in 2021 followed by recovery.

Operating Revenues

The operating revenues exhibited an overall upward trend from 2020 through 2024, increasing from US$128,292 million in 2020 to US$134,788 million in 2024. However, the growth was not entirely consistent. Revenues rose steadily between 2020 and 2022, reaching a peak of US$136,835 million in 2022. This was followed by a slight decline in 2023 to US$133,974 million, after which the revenues marginally increased again in 2024. This pattern suggests a period of growth with some volatility in the final years analyzed.

Accounts Receivable, Net

Net accounts receivable showed a consistent upward trend over the five-year period. The values increased steadily each year, from US$23,917 million in 2020 to US$26,109 million in 2024. This gradual increase indicates a growing amount of credit sales or extended credit terms to customers, which may have implications for cash flow management.

Receivables Turnover Ratio

The receivables turnover ratio, which measures the efficiency of credit sales collection, showed a declining trend after an initial increase. Starting at 5.36 in 2020, it increased slightly to 5.60 in 2021, then declined marginally to 5.58 in 2022, followed by further decreases to 5.34 in 2023 and 5.16 in 2024. This downward trend suggests a gradual slowdown in the rate at which accounts receivable are being converted to cash, implying longer collection periods or potentially less efficient credit management in recent years.

Overall Insights

The combination of rising net accounts receivable and decreasing receivables turnover ratio indicates that while revenues have increased, the company may be facing challenges in collecting receivables promptly. This may impact liquidity and necessitate closer monitoring of credit policies. The volatility in operating revenues around 2023 and 2024 should also be explored further to understand underlying causes.

Cost of Services and Wireless Equipment

Over the five-year period, the cost of services and wireless equipment initially increased from $51,201 million in 2020 to a peak of $59,133 million in 2022. Subsequently, it declined to $54,887 million in 2023 and further to $54,097 million in 2024. This pattern indicates a rising cost trend during the first three years followed by a gradual decrease in the last two years.

Accounts Payable

Accounts payable showed a consistent upward trend throughout the period, increasing from $6,667 million in 2020 to $10,425 million in 2024. This steady growth suggests an increasing reliance on credit from suppliers or delayed payments over time.

Payables Turnover Ratio

The payables turnover ratio declined continuously from 7.68 in 2020 to 5.19 in 2024. This downward trend indicates that the company is taking longer to pay its suppliers, which aligns with the observed increase in accounts payable. The decline in turnover ratio reflects a slower rate of settling payables relative to the cost of services and equipment purchased.

The financial data exhibits notable trends in working capital, operating revenues, and working capital turnover over the analyzed periods.

Working Capital

Working capital has displayed a consistent and significant decline over the five-year period. Starting from a positive value of 14,934 million US dollars at the end of 2020, it shifted to negative territory in 2021 with -10,432 million US dollars. This downward trajectory continued through 2022 and 2023, reaching -24,248 million US dollars by the end of 2024. This pattern indicates increasing current liabilities relative to current assets over time, potentially pointing to growing short-term liquidity pressures or strategic changes in asset and liability management.

Operating Revenues

Operating revenues showed an increasing trend from 2020 through 2022, rising from 128,292 million US dollars to 136,835 million US dollars. However, there was a slight decline in 2023 to 133,974 million US dollars, followed by a moderate recovery in 2024 to 134,788 million US dollars. Overall, revenues have grown but experienced some volatility in the most recent years, suggesting possible market challenges or operational factors impacting sales or service income.

Working Capital Turnover

The working capital turnover ratio is only available for the year ending 2020, reported at 8.59 times. The absence of data for subsequent years limits assessment of operational efficiency changes related to working capital. Given the deterioration in working capital, this ratio potentially could have changed unfavorably if calculated.

In summary, the pronounced decline in working capital coupled with relatively stable but slightly volatile operating revenues suggests increased reliance on current liabilities or cycle stretching which may impact liquidity. Monitoring working capital management and its impact on operational efficiency would be advisable to ensure financial stability.

Inventory Turnover

The inventory turnover ratio experienced a significant decline from 28.51 in 2020 to 18.43 in 2021, indicating slower inventory movement during that year. Following 2021, the ratio showed a recovery trend, increasing to 24.76 in 2022 and further to 26.68 in 2023. However, in 2024, there was a minor decline to 24.08. Overall, the turnover ratio suggests some fluctuation in inventory efficiency with a notable dip in 2021 and partial rebound thereafter.

Average Inventory Processing Period

The average number of days required to process inventory increased sharply from 13 days in 2020 to 20 days in 2021, reflecting slower inventory processing during that year. After 2021, the period decreased to 15 days in 2022 and remained relatively stable with 14 days in 2023 and slightly increased to 15 days in 2024. This pattern aligns with the inventory turnover ratio trends, confirming that inventory processing efficiency worsened in 2021 but improved in subsequent years, stabilizing around 14 to 15 days.

The data reflects the trends in receivables turnover and average receivable collection period over a five-year span.

Receivables Turnover

The receivables turnover ratio exhibited a slight fluctuation but generally maintained a stable range from 5.16 to 5.6 over the observed period. After rising from 5.36 in 2020 to a peak of 5.6 in 2021, it marginally decreased in subsequent years, reaching 5.16 by 2024. This suggests a minor decline in the efficiency of collecting receivables or a slight increase in outstanding credit sales over time.

Average Receivable Collection Period

The average receivable collection period showed an inverse trend to the receivables turnover ratio. Starting at 68 days in 2020, it improved to 65 days in 2021 and 2022, indicating faster collection during those years. However, it subsequently lengthened to 68 days in 2023 and further to 71 days in 2024, signaling that it took increasing amounts of time to collect receivables toward the end of the period.

Combined Interpretation

The slight decline in receivables turnover ratio combined with the increase in the average collection period suggests a weakening in the efficiency of receivables management from 2022 onwards. This trend could indicate changes in credit policies, customer payment behavior, or other operational factors leading to slower cash inflows from receivables.

The analysis of the financial data reveals several notable trends in the company's operational efficiency metrics from the end of 2020 through the end of 2024.

Average Inventory Processing Period

The average inventory processing period exhibits fluctuations over the five-year span. The value increases from 13 days in 2020 to a peak of 20 days in 2021, indicating a longer inventory holding period during that year. Subsequently, it decreases to 15 days in 2022 and remains relatively stable around 14 to 15 days through 2023 and 2024. This suggests an initial disruption or change in inventory management in 2021, followed by improved or stabilized processing times in the ensuing years.

Average Receivable Collection Period

The average receivable collection period shows a slight decline from 68 days in 2020 to 65 days in both 2021 and 2022, implying improved efficiency in collecting receivables during those years. However, there is a reversal of this trend as the period increases to 68 days in 2023 and further extends to 71 days in 2024. The upward trend in the latter years may indicate increasing challenges in receivables collection or changes in credit policies.

Operating Cycle

The operating cycle, which represents the total time from inventory acquisition to cash collection, mirrors the fluctuations observed in the other two metrics. The cycle lengthens slightly from 81 days in 2020 to 85 days in 2021, then shortens to 80 days in 2022. However, it extends again to 82 days in 2023 and further to 86 days in 2024. These shifts suggest variability in the company's overall operational efficiency, with periods of both improvement and lengthening of the cycle over the observed timeframe.

In summary, the financial data indicates that while there was a temporary increase in inventory processing time and operating cycle length in 2021, these metrics generally stabilized or improved in 2022. However, subsequent years show signs of elongation, especially in receivables collection and the operating cycle, potentially signaling emerging inefficiencies or changes in operational practices. Monitoring these trends will be important for maintaining effective working capital management.

The analysis of the payables-related financial metrics over the five-year period reveals a notable trend in the company's payment efficiency and liquidity management.

Payables Turnover Ratio

The payables turnover ratio shows a consistent downward trend, decreasing from 7.68 in 2020 to 5.19 by 2024. This steady decline suggests that the company is turning over its payables less frequently each year, which may indicate slower payments to suppliers or extended credit terms.

Average Payables Payment Period

Correspondingly, the average payables payment period has increased from 48 days in 2020 to 70 days in 2024. This rise in days payable outstanding aligns with the decreasing payables turnover ratio, confirming that the company is taking a longer time to settle its payables over the years.

Together, these metrics indicate a strategic shift or operational change leading to lengthened payment terms or slower payments to creditors. While this may benefit cash flow in the short term by conserving cash, it could also affect supplier relationships or creditworthiness if the trend continues. Monitoring the impact of these changes on working capital management and supplier terms would be advisable.

Average Inventory Processing Period

The average inventory processing period experienced fluctuations over the observed years. It increased from 13 days in 2020 to a peak of 20 days in 2021, followed by a decline to 15 days in 2022. It then slightly decreased to 14 days in 2023 before rising marginally to 15 days in 2024. This pattern indicates some variability in inventory turnover efficiency, with a notable peak in 2021.

Average Receivable Collection Period

The receivable collection period showed a slight downward trend initially, decreasing from 68 days in 2020 to 65 days in both 2021 and 2022. However, it reversed course in 2023 and 2024, increasing to 68 and then to 71 days, respectively. This suggests a recent elongation in the collection cycle, implying that receivables are being collected more slowly in the most recent periods.

Average Payables Payment Period

The payables payment period exhibited a consistent upward trajectory throughout the reported years. It rose steadily from 48 days in 2020 to 52 days in 2021, then to 54 days in 2022. This upward trend accelerated with a notable increase to 67 days in 2023 and further to 70 days in 2024. This trend reflects a lengthening in the time taken to pay suppliers, which may be indicative of improved cash management or changing credit terms.

Cash Conversion Cycle

The cash conversion cycle demonstrated a marked improvement in operational efficiency over the period. It remained stable at 33 days for both 2020 and 2021, then decreased significantly to 26 days in 2022. This downward trend continued sharply to 15 days in 2023 and remained almost constant at 16 days in 2024. The reduction in the cash conversion cycle suggests an enhanced ability to convert investments in inventory and receivables into cash more rapidly.