General Motors Co. (NYSE:GM)

An examination of short-term operating activity ratios reveals several noteworthy trends between 2021 and 2025. Generally, the company demonstrates increasing efficiency in inventory management and supplier payments, though receivables management and overall working capital utilization exhibit more varied performance.

Inventory Management

Inventory turnover consistently increased from 7.74 in 2021 to 11.00 in 2025, indicating improved efficiency in converting inventory into sales. This is corroborated by a decreasing average inventory processing period, which shortened from 47 days in 2021 to 33 days in 2025. This suggests a reduction in the time inventory is held, potentially due to stronger sales, better inventory control, or both.

Receivables Management

Receivables turnover decreased from 15.36 in 2021 to 10.80 in 2022, before recovering to 12.74 in 2023 and peaking at 13.38 in 2024, then slightly declining to 12.87 in 2025. The average receivable collection period increased from 24 days in 2021 to 34 days in 2022, then decreased to 28 days by 2025. These fluctuations suggest some inconsistency in the speed at which the company collects its receivables, potentially influenced by changes in credit policies or customer payment behavior.

Payables Management

Payables turnover increased from 4.93 in 2021 to 6.65 in 2025, indicating the company is paying its suppliers more frequently. The average payables payment period decreased from 74 days in 2021 to 55 days in 2025, suggesting improved management of supplier credit terms and potentially stronger negotiation power.

Working Capital Utilization

Working capital turnover experienced significant volatility. It rose substantially from 14.76 in 2021 to 21.98 in 2023, then declined to 13.97 in 2024 and further to 10.89 in 2025. This suggests a changing relationship between working capital and sales, potentially reflecting shifts in operational strategies or investment in working capital components.

Cash Conversion Cycle

The cash conversion cycle was negative in 2021, 2022, and 2023, at -3, -1, and -1 days respectively, indicating the company received cash from customers before needing to pay its suppliers. However, the cycle lengthened to 6 days in 2025, suggesting a potential slowdown in the conversion of investments in inventory and other resources into cash. This shift warrants further investigation.

Overall, the company demonstrates improving efficiency in managing inventory and supplier relationships. However, fluctuations in receivables turnover and working capital turnover, coupled with the lengthening cash conversion cycle in the latest year, suggest areas requiring continued monitoring and potential strategic adjustments.

The analysis reveals a consistent upward trend in inventory turnover over the five-year period. Simultaneously, automotive and other cost of sales increased year-over-year, while inventory levels exhibited initial growth followed by a decline.

Inventory Turnover

Inventory turnover demonstrates a steady increase, rising from 7.74 in 2021 to 11.00 in 2025. This indicates an improving efficiency in managing inventory; the company is selling its inventory more quickly over time. The most significant increase occurred between 2023 and 2024, jumping from 8.59 to 10.37. The rate of increase slowed slightly between 2024 and 2025, moving from 10.37 to 11.00.

Cost of Sales

Automotive and other cost of sales increased consistently throughout the period, from US$100,544 million in 2021 to US$159,128 million in 2025. This growth suggests increased production volume or higher input costs, or a combination of both. The largest year-over-year increase in cost of sales was observed between 2022 and 2023, with an increase of US$14,438 million.

Inventories

Inventories increased from US$12,988 million in 2021 to a peak of US$16,461 million in 2023. However, inventories then decreased in both 2024 and 2025, falling to US$14,564 million and US$14,467 million respectively. This decrease in inventory, coupled with rising cost of sales, likely contributes to the observed increase in inventory turnover. The reduction in inventory levels from 2023 to 2025 suggests improved inventory management practices or a deliberate strategy to reduce holding costs.

The combined effect of increasing cost of sales and decreasing inventory levels has resulted in a positive trend in inventory turnover. This suggests the company is becoming more effective at converting its inventory into sales, potentially improving profitability and reducing the risk of obsolescence.

The receivables turnover ratio exhibited fluctuations over the five-year period. Automotive net sales and revenue generally increased from 2021 to 2024, followed by a slight decrease in 2025, while accounts and notes receivable remained relatively stable with some year-over-year variation. These movements impacted the receivables turnover ratio, revealing insights into the efficiency of collecting receivables.

Overall Trend

The receivables turnover ratio decreased from 15.36 in 2021 to 10.80 in 2022, indicating a lengthening of the collection period. The ratio then recovered, increasing to 13.38 in 2024 before slightly declining to 12.87 in 2025. This suggests an initial weakening in collection efficiency followed by improvement, with a minor pullback in the most recent year.

2021-2022

The significant decrease in the receivables turnover ratio from 2021 to 2022 coincided with a substantial increase in automotive net sales and revenue (36.8% increase) and a considerable rise in accounts and notes receivable (80.2% increase). The increase in receivables outpaced the growth in sales, resulting in a lower turnover ratio. This could indicate a more lenient credit policy, slower collection efforts, or a shift in the customer mix towards those with longer payment terms.

2022-2025

From 2022 to 2025, the receivables turnover ratio demonstrated a generally improving trend, despite fluctuations in both sales and receivables. While sales continued to grow in 2023 and 2024, the growth in receivables was more moderate. The slight decrease in the ratio in 2025, despite a small decrease in sales, suggests a potential slowing of collection efforts or a build-up in outstanding receivables at the end of the period.

Relationship to Sales

The correlation between sales and the receivables turnover ratio is not consistently strong. The largest sales increase occurred between 2021 and 2022, but this was accompanied by the largest decrease in the turnover ratio. The subsequent years show a more positive correlation, where increases in sales are generally associated with increases in the turnover ratio, though the relationship is not perfectly linear.

In conclusion, the receivables turnover ratio indicates a dynamic collection environment. While improvements were observed following the initial decline, ongoing monitoring is recommended to ensure efficient receivables management and to understand the factors influencing collection periods.

The accounts payable activity demonstrates a fluctuating pattern over the five-year period. Automotive and other cost of sales consistently increased, while accounts payable exhibited more variability. This interplay significantly impacted the payables turnover ratio.

Cost of Sales

Automotive and other cost of sales increased steadily from US$100.544 billion in 2021 to US$159.128 billion in 2025. This consistent growth suggests expanding operational activity and potentially increasing procurement needs.

Accounts Payable

Accounts payable, principally trade, increased from US$20.391 billion in 2021 to US$27.486 billion in 2022, representing a substantial rise. It then plateaued at US$28.114 billion in 2023 before declining to US$25.680 billion in 2024 and further to US$23.919 billion in 2025. This suggests a period of increased supplier credit followed by a deliberate reduction in outstanding payables.

Payables Turnover

The payables turnover ratio initially decreased from 4.93 in 2021 to 4.62 in 2022, coinciding with the increase in accounts payable relative to cost of sales. A slight recovery to 5.03 was observed in 2023. However, the ratio then increased notably to 5.88 in 2024 and reached 6.65 in 2025. This upward trend indicates that the company is increasingly efficient in paying its suppliers, potentially benefiting from improved cash management or negotiating favorable payment terms, or simply reflecting the decline in accounts payable.

The increasing payables turnover ratio in the latter years, despite the continued growth in cost of sales, suggests improved efficiency in managing short-term liabilities. The company appears to be effectively balancing its payment obligations with its operational expansion.

The working capital turnover ratio exhibited considerable fluctuation over the five-year period. Initial values demonstrated a moderate increase, followed by a substantial rise and subsequent decline.

Working Capital

Working capital increased from US$7,695 million in 2021 to US$9,278 million in 2022, representing a growth of approximately 20.5%. A decrease to US$7,173 million was observed in 2023. Subsequent years saw significant increases, reaching US$12,280 million in 2024 and US$15,425 million in 2025.

Automotive Net Sales and Revenue

Automotive net sales and revenue increased consistently from US$113,590 million in 2021 to US$143,975 million in 2022, and further to US$157,658 million in 2023. Growth continued into 2024, reaching US$171,606 million, before experiencing a slight decrease to US$167,971 million in 2025.

Working Capital Turnover

The working capital turnover ratio began at 14.76 in 2021 and rose to 15.52 in 2022, indicating a slightly improved efficiency in utilizing working capital to generate sales. A substantial increase was then recorded in 2023, with the ratio reaching 21.98. This suggests a significant improvement in the efficiency of working capital usage. However, the ratio decreased to 13.97 in 2024 and further declined to 10.89 in 2025. This downward trend suggests a diminishing efficiency in converting working capital into sales revenue in the latter two years of the observed period.

The peak in the working capital turnover ratio in 2023 coincided with a period of strong revenue growth, while the subsequent decline in 2024 and 2025 occurred despite continued, albeit slower, revenue growth. This suggests that increases in working capital outpaced revenue increases in those years, potentially indicating increased investment in inventory or slower collection of receivables.

An examination of the provided financial information reveals a consistent trend in inventory management performance over the five-year period. Specifically, the inventory turnover ratio and the average inventory processing period demonstrate notable changes, indicating increasing efficiency in inventory handling.

Inventory Turnover

The inventory turnover ratio exhibits an upward trajectory, increasing from 7.74 in 2021 to 11.00 in 2025. This suggests a growing ability to convert inventory into sales within the observed timeframe. The increase is particularly pronounced between 2023 and 2025, with a rise from 8.59 to 11.00. This acceleration may be attributable to improved sales strategies, enhanced supply chain management, or a combination of factors.

Average Inventory Processing Period

Corresponding with the increase in inventory turnover, the average inventory processing period demonstrates a decreasing trend. Starting at 47 days in 2021, it steadily declines to 33 days by 2025. This indicates that the time required to sell inventory is shortening, which is a positive indicator of operational efficiency. The most significant reduction occurs between 2022 and 2024, falling from 44 days to 35 days. This suggests successful implementation of strategies aimed at accelerating the inventory sales cycle.

The observed patterns suggest a strengthening of inventory management practices. The combined increase in inventory turnover and decrease in the average inventory processing period imply reduced holding costs, minimized risk of obsolescence, and improved overall capital utilization. Continued monitoring of these ratios is recommended to assess the sustainability of these improvements and identify potential areas for further optimization.

The average receivable collection period exhibited fluctuations over the five-year period. While the receivables turnover ratio showed volatility, the average collection period demonstrated a more moderate pattern of change.

Average Receivable Collection Period

In 2021, the average receivable collection period was 24 days. This increased to 34 days in 2022, representing a substantial lengthening of the collection cycle. A subsequent decrease was observed in 2023, with the period falling to 29 days. This downward trend continued into 2024, reaching 27 days, and stabilized at 28 days in 2025.

The increase in 2022 suggests a potential slowdown in collecting payments from customers during that year. The subsequent declines in 2023, 2024, and 2025 indicate improved efficiency in collecting receivables, or a change in credit terms offered to customers. The stabilization in 2025 suggests the collection process reached a new equilibrium.

The receivables turnover ratio generally moved in a direction opposite to the average collection period. A decrease in turnover in 2022 corresponded with the increase in the collection period, and vice versa in subsequent years. This inverse relationship is expected, as these ratios are mathematically linked.

Relationship to Receivables Turnover

The receivables turnover ratio decreased from 15.36 in 2021 to 10.80 in 2022, aligning with the extended collection period. The ratio then increased to 12.74 in 2023, 13.38 in 2024, and settled at 12.87 in 2025, mirroring the decreasing and stabilizing trends in the average collection period.

Overall, the company experienced a temporary disruption in its receivable collection cycle in 2022, followed by a recovery and stabilization in subsequent years. Continued monitoring of these ratios is recommended to ensure ongoing efficiency in managing credit and collections.

The operating cycle exhibited fluctuations over the five-year period. Initial observations indicate a generally decreasing trend in the components of the operating cycle, though not consistently. A closer examination of the individual elements reveals more nuanced patterns.

Average Inventory Processing Period

The average inventory processing period demonstrated a consistent decline from 47 days in 2021 to 33 days in 2025. This suggests increasing efficiency in managing inventory, potentially through improved supply chain management or faster production processes. The most significant reduction occurred between 2022 and 2023, followed by a further decrease between 2023 and 2024.

Average Receivable Collection Period

The average receivable collection period showed more variability. It increased from 24 days in 2021 to 34 days in 2022, before decreasing to 29 days in 2023. The period remained relatively stable at 27 and 28 days in 2024 and 2025, respectively. The initial increase in 2022 could indicate a loosening of credit terms or difficulties in collecting receivables, while the subsequent decline suggests a return to more efficient collection practices.

Operating Cycle

The operating cycle initially increased from 71 days in 2021 to 78 days in 2022, mirroring the increase in the receivable collection period. Subsequently, the operating cycle decreased to 72 days in 2023 and continued to decline to 62 days in 2024, and finally to 61 days in 2025. This overall downward trend, particularly from 2022 onwards, is primarily driven by the reduction in the average inventory processing period, partially offset by fluctuations in the average receivable collection period. The operating cycle’s reduction suggests an improvement in the overall efficiency of converting investments in inventory and receivables into cash.

In summary, while the receivable collection period experienced some volatility, the consistent reduction in the inventory processing period contributed to an overall decreasing trend in the operating cycle. This indicates improved working capital management over the observed period.

The average payables payment period exhibited a fluctuating pattern over the five-year period. Initially, the period increased before declining consistently. Simultaneously, payables turnover demonstrated an overall upward trend.

Average Payables Payment Period

The average payables payment period began at 74 days in 2021, increasing to 79 days in 2022. This suggests a lengthening in the time taken to settle obligations to suppliers during this period. Following 2022, a consistent decrease is observed, with the period falling to 73 days in 2023, 62 days in 2024, and further decreasing to 55 days in 2025. This indicates an improving efficiency in managing and paying suppliers over the latter part of the analyzed timeframe.

Payables Turnover

Payables turnover showed an initial decline from 4.93 in 2021 to 4.62 in 2022, aligning with the increase in the average payment period. However, from 2022 onwards, payables turnover increased steadily, reaching 5.03 in 2023, 5.88 in 2024, and 6.65 in 2025. This upward trend suggests the company is increasingly efficient in utilizing its credit period with suppliers, effectively managing its payables, and potentially benefiting from favorable supplier terms.

Relationship between Ratios

The inverse relationship between the average payables payment period and payables turnover is evident. As payables turnover increased, the average payment period decreased, and vice versa. This confirms that a more rapid turnover of payables corresponds to a shorter payment period, and a slower turnover corresponds to a longer payment period. The consistent decline in the payment period from 2022 to 2025, coupled with the increasing turnover, suggests improved working capital management and potentially stronger relationships with suppliers, allowing for more favorable payment terms.

The short-term operating activity of the company, as measured by key ratios, demonstrates evolving trends between 2021 and 2025. Specifically, the average inventory processing period, average receivable collection period, and average payables payment period all exhibit changes that impact the overall cash conversion cycle.

Average Inventory Processing Period

A consistent downward trend is observed in the average inventory processing period, decreasing from 47 days in 2021 to 33 days in 2025. This suggests increasing efficiency in managing inventory, potentially through improved supply chain management or faster inventory turnover. The rate of decrease appears to be accelerating in later years.

Average Receivable Collection Period

The average receivable collection period fluctuated over the observed period. It increased from 24 days in 2021 to 34 days in 2022, then decreased to 29 days in 2023 and stabilized around 27-28 days in 2024 and 2025. This indicates some variability in the company’s ability to collect payments from customers, with a general improvement towards the end of the period.

Average Payables Payment Period

The average payables payment period initially increased from 74 days in 2021 to 79 days in 2022, before declining to 55 days in 2025. This suggests a shift in the company’s payment terms with suppliers, potentially reflecting improved negotiation power or a strategic decision to optimize cash flow. The decrease is most pronounced in the later years of the period.

Cash Conversion Cycle

The cash conversion cycle initially stood at -3 days in 2021, indicating the company effectively converted its investments in inventory and receivables into cash before paying its suppliers. This negative cycle continued in 2022 and 2023 at -1 day. The cycle then became positive in 2024, with a value not reported, and reached 6 days in 2025. This shift suggests a lengthening of the time it takes to convert investments into cash, potentially due to slower receivable collection or increased inventory holding periods relative to payables.

Overall, the company demonstrated improvements in inventory management and payables management. However, the increasing cash conversion cycle in the later years warrants further investigation to determine the underlying causes and potential impact on liquidity.