GE Aerospace (NYSE:GE)

Inventory Turnover

The inventory turnover ratio shows a declining trend over the five-year period, decreasing from 3.8 in 2020 to 2.49 in 2024. This indicates that the company is turning over its inventory less frequently each year, which may suggest slower inventory movement or increased inventory levels relative to sales.

Receivables Turnover

Receivables turnover remained fairly stable with minor fluctuations, starting at 4.37 in 2020, peaking slightly at 4.55 in 2021, and then declining to 3.77 by 2024. This suggests some reduction in the efficiency of collecting receivables over time.

Payables Turnover

Payables turnover displayed a slight downward trend from 3.67 in 2020 to 3.07 in 2024, though with some variability. The ratio dropped through 2022 but increased in 2023 before decreasing again. This pattern may indicate some variability in the company’s payment practices or supplier terms.

Working Capital Turnover

Working capital turnover showed a strong upward trend, starting at 2.26 in 2020 and rising significantly to 10.83 in 2024. This suggests improved efficiency in using working capital to generate revenue, indicating better management or a change in the company’s operational scale or structure.

Average Inventory Processing Period

The average inventory processing period steadily increased each year from 96 days in 2020 to 147 days in 2024. This reinforces the earlier observation of slower inventory turnover, reflecting longer holding periods for inventory.

Average Receivable Collection Period

The receivable collection period fluctuated slightly but generally increased from 83 days in 2020 to 97 days in 2024. This extension suggests that customers are taking longer to pay, potentially affecting cash inflows.

Operating Cycle

The operating cycle lengthened over the period, from 179 days in 2020 to 244 days in 2024, indicating that the combined duration of inventory processing and receivables collection is increasing, potentially tying up capital for longer periods.

Average Payables Payment Period

The payables payment period generally increased from 100 days in 2020 to 119 days in 2024, with a peak at 123 days in 2022. This suggests the company is on average taking longer to pay its suppliers, which could be a strategic move to manage cash flow or reflect changing supplier agreements.

Cash Conversion Cycle

The cash conversion cycle extended from 79 days in 2020 to 125 days in 2024, indicating that the time between outlaying cash to suppliers and receiving cash from customers has increased. This longer cycle could impact liquidity and working capital requirements.

Cost of equipment and services sold

The cost of equipment and services sold demonstrates a generally declining trend from 2020 to 2024. Starting at approximately 60,421 million US$ in 2020, there was a decrease to 53,896 million US$ in 2021, followed by a slight increase to 55,535 million US$ in 2022. However, from 2022 onward, the cost continued to decline more sharply, reaching 24,308 million US$ by the end of 2024. This substantial reduction in the latter years may suggest a strategic shift, cost optimization efforts, or changes in sales volume or product offerings.

Inventories, including deferred inventory costs

Inventories showed some fluctuations but an overall declining trend after 2022. Inventory levels were fairly stable around 15,800 million US$ in 2020 and 2021, rising modestly to 17,403 million US$ in 2022. After this peak, inventories decreased to 16,528 million US$ in 2023 and further to 9,763 million US$ in 2024. This reduction in inventory levels in the later years could indicate improved inventory management, a decrease in production or procurement, or an alignment with reduced sales activity.

Inventory turnover ratio

The inventory turnover ratio steadily declined throughout the period observed. It started at 3.8 in 2020 and decreased consistently each year, reaching 2.49 by 2024. This decreasing turnover ratio suggests that inventory is being sold and replaced less frequently over time, reflecting a potential reduction in sales velocity or an accumulation of slower-moving inventory relative to sales volume. The trend aligns with the observed decreases in cost of goods sold and inventory levels, potentially indicating a broader deceleration in business activity or strategic repositioning.

Sales of equipment and services

The sales figures exhibit a fluctuating trend over the five-year period. Initial sales were 73,022 million USD at the end of 2020, followed by a slight decrease to 71,090 million USD in 2021. There was a recovery in 2022 with sales increasing to 73,602 million USD. However, a notable decline occurred in 2023, with sales falling to 64,565 million USD, and a further sharp drop to 35,121 million USD in 2024. Overall, sales show a significant downward trajectory in the latter years, suggesting challenges in maintaining previous revenue levels.

Current receivables

Current receivables have shown variability but generally follow a downward movement parallel to sales trends. Receivables started at 16,691 million USD in 2020, dipping to 15,620 million USD in 2021, then increasing to 17,976 million USD in 2022. In 2023, receivables decreased again to 15,466 million USD, and then declined significantly to 9,327 million USD in 2024. This pattern indicates a possible tightening in credit policies or reduced credit sales consistent with declining sales.

Receivables turnover

The receivables turnover ratio remained relatively stable from 2020 to 2023, fluctuating between 4.09 and 4.55. The highest turnover was recorded in 2021 at 4.55, reflecting faster collection of receivables during that year. However, in 2024, the turnover ratio decreased to 3.77, indicating a slower collection period or potential difficulties in receivables management during the latest period. This decrease may impact liquidity.

Cost of Equipment and Services Sold

The cost of equipment and services sold shows a general declining trend from 2020 to 2024. Starting at $60,421 million in 2020, the cost decreased to $53,896 million in 2021, with a slight increase to $55,535 million in 2022. Thereafter, the cost declined again to $50,392 million in 2023 and sharply decreased to $24,308 million in 2024. This significant decrease in the final year may indicate a major reduction in sales volume, cost optimization, or changes in the product or service mix.

Accounts Payable

Accounts payable fluctuated over the five-year period, with values of $16,476 million in 2020, slightly decreasing to $16,243 million in 2021, then rising to $18,644 million in 2022. It dropped again to $15,408 million in 2023 and further decreased to $7,909 million in 2024. The downward movement in the last two years parallels the reduction in cost of goods sold, possibly indicating lower procurement needs or improved payment practices.

Payables Turnover Ratio

The payables turnover ratio exhibited a declining trend from 3.67 in 2020 to 2.98 in 2022, followed by a recovery to 3.27 in 2023, and a slight decrease to 3.07 in 2024. This suggests that the company was paying off its suppliers more slowly in the initial years and then increased payment speed in 2023, with a minor slowdown afterward. The ratio's fluctuations reflect changing payment terms or cash management strategies in response to operational conditions.

Working Capital

The working capital shows a consistent declining trend from 32,343 million US dollars at the end of 2020 to 3,243 million US dollars by the end of 2024. This significant reduction suggests a potential tightening of short-term liquidity or a change in the management of current assets and liabilities.

Sales of Equipment and Services

Sales revenue demonstrates fluctuations over the years. Starting at 73,022 million US dollars in 2020, it slightly decreases to 71,090 million in 2021, then rises again to 73,602 million in 2022. However, sales decline noticeably to 64,565 million in 2023 and sharply drop to 35,121 million in 2024, indicating a substantial contraction in sales volume or pricing in the last reported year.

Working Capital Turnover

The working capital turnover ratio exhibits a clear increasing pattern, moving from 2.26 in 2020 up to 10.83 in 2024. This rise indicates an enhanced efficiency in using working capital to generate sales. Despite the lower working capital, the company manages to achieve higher sales relative to that capital, especially in 2024, suggesting improvements in operational efficiency or a shift toward less capital-intensive sales.

Summary Insights

Overall, the data depicts a scenario where working capital has sharply decreased over the five-year period while sales have been volatile and ultimately much lower in the final year. The increasing working capital turnover ratio reflects improved utilization of available working capital to drive sales performance. However, the steep decline in sales and working capital in the most recent period may require further investigation into underlying causes such as market conditions, operational changes, or strategic decisions impacting performance and liquidity.

The analysis of the given financial metrics from 2020 to 2024 reveals a consistent downward trend in inventory turnover alongside a corresponding increase in the average inventory processing period.

Inventory Turnover

The inventory turnover ratio steadily declined from 3.8 in 2020 to 2.49 in 2024. This indicates that the company is turning over its inventory less frequently over the years, potentially signaling slower sales or increased inventory levels relative to sales.

Average Inventory Processing Period

The average number of days to process inventory increased consistently from 96 days in 2020 to 147 days in 2024. This extended duration suggests that inventory is held for longer periods before being sold or used, which could impact working capital and operational efficiency negatively.

The inverse relationship between the decreasing inventory turnover ratio and the increasing inventory processing period indicates a lengthening cycle in inventory management. This trend may point to challenges such as slower demand, excess stock buildup, or inefficiencies in inventory control. Such changes merit further investigation to understand underlying causes and to implement strategies that optimize inventory levels and turnover rates.

The financial data reflects trends in receivables turnover and average receivable collection period over a five-year span. The receivables turnover ratio starts at 4.37 in 2020, slightly increases to 4.55 in 2021, but then experiences a gradual decline each subsequent year, dropping to 3.77 in 2024. This downward movement in turnover ratio suggests a decreasing efficiency in collecting receivables over time.

Supporting this observation, the average receivable collection period initially decreases from 83 days in 2020 to 80 days in 2021, indicating a brief improvement in the speed of collections. However, from 2021 onwards, there is a consistent increase in the number of days required to collect receivables, reaching 97 days by the end of 2024. This elongation of the collection period corresponds with the declining turnover ratio, implying that the company is taking increasingly longer to convert receivables into cash.

Receivables Turnover Ratio

Declined from 4.55 in 2021 to 3.77 in 2024, indicating reduced efficiency in receivable collections.

Average Receivable Collection Period

Increased from 80 days in 2021 to 97 days in 2024, signifying a lengthening in the average time to collect receivables.

Overall, the trends suggest a deterioration in receivables management efficiency over the analyzed period. This may have implications for cash flow and working capital management, highlighting a potential need to review credit policies and collection procedures to improve liquidity.

Inventory Management

The average inventory processing period has shown a consistent upward trend over the observed years, increasing from 96 days at the end of 2020 to 147 days by the end of 2024. This suggests a lengthening in the time inventory remains on hand before being processed or sold, possibly indicating slower inventory turnover or changes in inventory management strategies.

Receivables Collection

The average receivable collection period exhibits some variability but follows an overall increasing trend. It started at 83 days in 2020, decreased slightly to 80 days in 2021, then rose to 89 days in 2022, dipped slightly to 87 days in 2023, and increased again to 97 days in 2024. This pattern indicates fluctuations in the efficiency of gathering receivables, with a tendency towards longer collection times in recent years, which may impact cash flow.

Operating Cycle

The operating cycle, combining inventory processing and receivables collection periods, has steadily increased from 179 days in 2020 to 244 days in 2024. The extension of the operating cycle reflects the combined effect of slower inventory turnover and lengthening receivables collection periods, potentially signaling reduced operational efficiency or a strategic shift in working capital management.

The payables turnover ratio exhibits a declining trend from 3.67 in 2020 to 2.98 in 2022, indicating a slower rate of payables clearance during this period. Following this decline, a modest recovery is observed in 2023 with the ratio rising to 3.27 but slightly decreasing again to 3.07 in 2024. Overall, the payables turnover remains below the initial 2020 level throughout the subsequent years.

The average payables payment period shows an opposite movement to the payables turnover ratio. It increased steadily from 100 days in 2020 to a peak of 123 days in 2022, which suggests that the company took longer to settle its payables over this timeframe. However, in 2023 the payment period shortened to 112 days, indicating an improvement in payment speed, but then increased again to 119 days in 2024.

Payables Turnover Ratio

Decreased over the first three years, signaling slower payments to suppliers.

Partial recovery in 2023, but did not reach the initial 2020 level by 2024.

Average Payables Payment Period

Consistently lengthened from 2020 through 2022, indicating slower creditor payments.

Saw improvement in 2023 by shortening the payment period, but increased again in 2024.

The inverse relationship observed between the payables turnover ratio and the payment period is typical, as a declining turnover ratio corresponds with an increasing payment period. The fluctuations in these metrics suggest that the company's payment practices and liquidity management have undergone some inconsistency over the observed years, with some recovery in payment efficiency during 2023 but a slight reversal by 2024.

Average Inventory Processing Period

There is a clear upward trend in the average inventory processing period over the examined time frame. The period extended from 96 days in 2020 to 147 days by 2024, which indicates a lengthening time to convert inventory into sales. This prolonged duration could impact working capital efficiency negatively.

Average Receivable Collection Period

The average receivable collection period shows some fluctuations but an overall increase from 83 days in 2020 to 97 days in 2024. Despite a minor decline in 2021, the trend suggests that it is taking longer for the company to collect payments from customers, which might affect cash inflows.

Average Payables Payment Period

The average payables payment period exhibits variability but maintains an increasing trend from 100 days in 2020 to 119 days in 2024, with a peak of 123 days in 2022 before a dip in 2023. The extended payment period suggests the company is taking longer to pay its suppliers, potentially optimizing cash outflows or reflecting changing credit terms.

Cash Conversion Cycle

The cash conversion cycle, which reflects the net time between cash outflow for purchases and cash inflow from sales, increased significantly from 79 days in 2020 to 125 days in 2024. This increase, especially marked after 2022, points to a lengthening cash conversion process, combining the effects of longer inventory processing and receivable collection periods, despite the payment period also extending.