Analysis of Short-term (Operating) Activity Ratios
Quarterly Data
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Short-term Activity Ratios (Summary)
McKesson Corp., short-term (operating) activity ratios (quarterly data)
Based on: 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-K (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-K (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-K (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-K (reporting date: 2013-03-31), 10-Q (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-K (reporting date: 2012-03-31), 10-Q (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-K (reporting date: 2011-03-31), 10-Q (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30).
The analysis of the provided financial ratios and periods reveals several notable trends over the intervals examined.
- Inventory turnover
- This ratio exhibits a general stability with minor fluctuations throughout the periods. Initial values around 11.5 showed a slight decline starting in mid-2013, reaching a trough near 9.7 by late 2014, then gradually recovering to near 12 by late 2016. This pattern suggests varying efficiency in inventory management, with a dip indicating slower inventory movement in the 2013–2014 timeframe and improvement thereafter.
- Receivables turnover
- The receivables turnover remained relatively consistent around 12 units initially, with a notable decline to about 9.7 in mid-to-late 2014, suggesting longer collection periods and potential tightening of credit or collection challenges. Subsequently, a modest recovery is observed, stabilizing near 10.5–11 towards the end of the reported periods.
- Payables turnover
- This ratio generally trended downward, falling from about 7.5 to below 6 by the end of the data range. The decrease indicates the company is taking longer to pay its suppliers over time, with a distinct shift occurring around 2013–2014 leading to more extended payment periods through subsequent periods.
- Working capital turnover
- Considerable volatility characterizes this ratio, with sharp spikes notably around mid-2011 (peak near 64), early 2013, and mid-2016 (above 70), interspersed with declines back to the 30–40 range. Such fluctuations may indicate irregular operational efficiency or changes in asset and liability management impacting working capital utilization.
- Average inventory processing period
- This metric remained mostly stable around 31–33 days initially, increasing to approximately 37–38 days during 2013–2014, then reverting to about 30–32 days in later periods. The temporary increase implies slower inventory turnover in those middle years, consistent with the earlier noted inventory turnover dip.
- Average receivable collection period
- The collection period was steady around 29–30 days before rising to a peak near 38 days during 2013–2014, followed by a decrease to roughly 33–35 days later on. The evident increase during 2013–2014 aligns with declining receivables turnover, suggesting slower cash inflows during that phase.
- Operating cycle
- The operating cycle, combining inventory and receivables periods, remained around 60–63 days initially, expanded notably to near 76 days in early 2014, followed by a decline back to mid-60s by late 2016. This extension during 2013–2014 signals a longer asset conversion process before settling back.
- Average payables payment period
- There is a clear trend of lengthening payment duration to suppliers, with the average moving from around 48 days up to the low 60s by late 2016. The lengthening payment period may reflect strategic supplier payment terms management or cash flow considerations during the periods.
- Cash conversion cycle
- The cash conversion cycle generally contracted over time, decreasing from about 14 days to as low as 2 days by 2016, despite some periodic fluctuations. The shorter cash conversion cycle indicates improved efficiency in converting investments in inventory and other resources into cash flows, reflecting positively on liquidity management.
In summary, the financial ratios exhibit relative stability with significant disruptions primarily during 2013–2014, characterized by slower inventory turnover, longer collection and operating cycles, and extended payable durations. Post-2014, many indicators suggest a recovery and improved operational efficiency, particularly evident in the reduction of the cash conversion cycle towards the end of the timeframe.
Turnover Ratios
Average No. Days
Inventory Turnover
McKesson Corp., inventory turnover calculation (quarterly data)
| Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||||||||||||||||||||||||||||||
| Cost of sales | 47,201) | 46,826) | 43,826) | 45,027) | 45,917) | 44,698) | 42,008) | 43,586) | 41,296) | 40,744) | 35,601) | 32,466) | 30,945) | 30,288) | 28,624) | 29,519) | 28,130) | 29,198) | 29,854) | 29,273) | 28,569) | 28,471) | 27,102) | 26,786) | 26,168) | 26,058) | ||||||||
| Inventories, net | 15,273) | 15,500) | 15,335) | 16,411) | 15,587) | 14,932) | 14,296) | 15,378) | 14,063) | 14,124) | 13,308) | 11,462) | 10,484) | 10,332) | 10,335) | 10,390) | 10,070) | 10,059) | 10,073) | 10,376) | 9,426) | 9,530) | 9,225) | 9,547) | 8,763) | 9,429) | ||||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||||||||||||
| Inventory turnover1 | 11.97 | 11.72 | 11.70 | 10.83 | 11.30 | 11.49 | 11.73 | 10.48 | 10.67 | 9.89 | 9.72 | 10.67 | 11.39 | 11.28 | 11.17 | 11.23 | 11.56 | 11.62 | 11.53 | 10.93 | 11.77 | 11.39 | 11.50 | — | — | — | ||||||||
| Benchmarks | ||||||||||||||||||||||||||||||||||
| Inventory Turnover, Competitors2 | ||||||||||||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| CVS Health Corp. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
Based on: 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-K (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-K (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-K (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-K (reporting date: 2013-03-31), 10-Q (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-K (reporting date: 2012-03-31), 10-Q (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-K (reporting date: 2011-03-31), 10-Q (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30).
1 Q2 2017 Calculation
Inventory turnover
= (Cost of salesQ2 2017
+ Cost of salesQ1 2017
+ Cost of salesQ4 2016
+ Cost of salesQ3 2016)
÷ Inventories, net
= (47,201 + 46,826 + 43,826 + 45,027)
÷ 15,273 = 11.97
2 Click competitor name to see calculations.
The financial data reveals distinct patterns in cost of sales, inventories, and inventory turnover over the examined periods. The cost of sales demonstrates a generally upward trajectory from mid-2010 through late 2016, with notable acceleration in later years. Specifically, the cost of sales increased from approximately $26 billion in the second quarter of 2010 to over $46 billion by the third quarter of 2016, reflecting consistent growth with intermittent quarterly fluctuations.
Net inventories display some volatility but overall present a gradual increase over the same timeframe. Beginning at around $9.4 billion in mid-2010, inventories declined slightly toward the end of 2010 but then resumed growth, reaching a peak of approximately $16.4 billion by the end of 2015. After this peak, inventories experienced a mild reduction, ending near $15.3 billion in the third quarter of 2016. The upward trend in inventories suggests an expansion in stockholding possibly aligned with business growth or changes in inventory management strategy.
Inventory turnover ratios, available from the fourth quarter of 2010 onwards, oscillate within a relatively narrow band, predominantly between 9.7 and 11.9 times per period. The ratio began near 11.5, demonstrating slight fluctuations but generally remaining stable. A decline is observed around 2013 to 2014, where the ratio dropped to lows around 9.7, potentially indicating slower inventory movement during this period. Following this, turnover ratios recovered towards the end of 2014 and remained relatively steady near 11.7 to 12 times by 2016, indicating improved efficiency in converting inventory into sales.
- Cost of Sales
- Consistent increase over seven years, doubling approximately from about $26 billion to $46 billion, with periodic fluctuations.
- Inventories, Net
- Gradual increase with some volatility, peaking around $16.4 billion at the end of 2015, followed by a minor decrease by late 2016.
- Inventory Turnover
- Generally stable with variation between 9.7 and 11.9, showing a dip around 2013-2014 and a recovery to previous efficiency levels by 2016.
The combined movement of these indicators may suggest that while sales volumes and inventory holdings increased, the company managed to sustain relatively stable inventory efficiency over time, notwithstanding the temporary decline. The increasing cost of sales along with rising inventories indicates scaling operations but with some periods of potential inventory build-up or slower sales relative to stock levels, especially during 2013-2014. The subsequent recovery in turnover ratio implies remedial inventory management actions or improved sales execution following that period.
Receivables Turnover
McKesson Corp., receivables turnover calculation (quarterly data)
| Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||||||||||||||||||||||||||||||
| Revenues | 49,957) | 49,733) | 46,678) | 47,899) | 48,761) | 47,546) | 44,925) | 46,484) | 44,160) | 43,476) | 38,141) | 34,306) | 32,954) | 32,208) | 30,620) | 31,187) | 29,850) | 30,798) | 31,699) | 30,839) | 30,216) | 29,980) | 28,853) | 28,247) | 27,534) | 27,450) | ||||||||
| Receivables, net | 18,308) | 18,334) | 17,980) | 17,402) | 16,798) | 16,684) | 15,914) | 16,581) | 15,391) | 14,920) | 14,193) | 10,750) | 10,321) | 10,013) | 9,975) | 9,962) | 9,823) | 9,564) | 9,977) | 9,673) | 9,525) | 9,372) | 9,187) | 8,647) | 8,175) | 7,832) | ||||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||||||||||||
| Receivables turnover1 | 10.61 | 10.53 | 10.62 | 10.87 | 11.17 | 10.98 | 11.25 | 10.39 | 10.40 | 9.98 | 9.70 | 12.10 | 12.30 | 12.37 | 12.28 | 12.40 | 12.54 | 12.92 | 12.30 | 12.39 | 12.31 | 12.23 | 12.20 | — | — | — | ||||||||
| Benchmarks | ||||||||||||||||||||||||||||||||||
| Receivables Turnover, Competitors2 | ||||||||||||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| CVS Health Corp. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Elevance Health Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| UnitedHealth Group Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
Based on: 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-K (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-K (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-K (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-K (reporting date: 2013-03-31), 10-Q (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-K (reporting date: 2012-03-31), 10-Q (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-K (reporting date: 2011-03-31), 10-Q (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30).
1 Q2 2017 Calculation
Receivables turnover
= (RevenuesQ2 2017
+ RevenuesQ1 2017
+ RevenuesQ4 2016
+ RevenuesQ3 2016)
÷ Receivables, net
= (49,957 + 49,733 + 46,678 + 47,899)
÷ 18,308 = 10.61
2 Click competitor name to see calculations.
The analysis of the quarterly financial data over the observed periods reveals several significant trends related to revenues, net receivables, and receivables turnover.
- Revenues
- Revenues exhibited a general upward trajectory from June 2010 through June 2016, indicating expanded business operations or increased sales volumes. Starting at approximately $27.45 billion in mid-2010, revenues increased steadily with some fluctuations, reaching a peak of about $49.96 billion in September 2016. Notably, revenues experienced marked acceleration during the periods from early 2014 to early 2015, where quarterly revenues rose from about $38.14 billion to $46.48 billion, and again around mid-2015 to late 2015. Despite minor quarter-to-quarter decreases at times, the overall pattern points to sustained growth.
- Receivables, net
- Net receivables followed an increasing trend over the same timeframe, growing from approximately $7.8 billion in June 2010 to about $18.3 billion by September 2016. The modest increases in earlier years gave way to sharper rises starting around mid-2013, with significant growth observed through 2014 and 2015. The substantial jump in receivables during this period suggests either more extended credit terms, increased sales on credit, or changes in collections policy. The growth of receivables is somewhat proportionate to the growth in revenues but appears to escalate more sharply in later years.
- Receivables Turnover
- Receivables turnover ratios, which indicate how efficiently the company collects its receivables, show a declining trend from 2011 onwards. Initially stable around 12.2 to 12.92 times per year in 2010 and early 2011, the ratio declines significantly beginning in 2014, falling to approximately 9.7 in early 2014. There is a partial recovery thereafter, with turnover ratios fluctuating between roughly 10.4 and 11.25 through 2016. The decreases imply that receivables are being collected less frequently, which may indicate slower collections or more lenient credit policies, possibly reflecting the growing receivables balance reported.
In summary, while revenues grew substantially over the period, net receivables increased at a relatively faster rate especially in later years, coinciding with a noticeable decline in receivables turnover. This trend suggests a potential loosening in credit controls or changes in customer payment patterns, which may warrant close monitoring to ensure cash flow is not adversely impacted. The correlation between rising revenues and receivables is expected in a growing business but the slowing turnover ratio highlights the importance of effective receivables management to maintain liquidity and operational efficiency.
Payables Turnover
McKesson Corp., payables turnover calculation (quarterly data)
| Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||||||||||||||||||||||||||||||
| Cost of sales | 47,201) | 46,826) | 43,826) | 45,027) | 45,917) | 44,698) | 42,008) | 43,586) | 41,296) | 40,744) | 35,601) | 32,466) | 30,945) | 30,288) | 28,624) | 29,519) | 28,130) | 29,198) | 29,854) | 29,273) | 28,569) | 28,471) | 27,102) | 26,786) | 26,168) | 26,058) | ||||||||
| Drafts and accounts payable | 31,037) | 30,424) | 28,585) | 26,854) | 27,151) | 26,319) | 25,166) | 25,205) | 22,656) | 22,812) | 21,429) | 16,638) | 16,435) | 16,654) | 16,108) | 15,047) | 15,501) | 15,151) | 16,114) | 15,677) | 14,895) | 14,547) | 14,090) | 13,581) | 12,834) | 13,296) | ||||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||||||||||||
| Payables turnover1 | 5.89 | 5.97 | 6.28 | 6.62 | 6.49 | 6.52 | 6.66 | 6.40 | 6.63 | 6.13 | 6.03 | 7.35 | 7.26 | 7.00 | 7.17 | 7.76 | 7.51 | 7.72 | 7.21 | 7.23 | 7.45 | 7.46 | 7.53 | — | — | — | ||||||||
| Benchmarks | ||||||||||||||||||||||||||||||||||
| Payables Turnover, Competitors2 | ||||||||||||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| CVS Health Corp. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Elevance Health Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| UnitedHealth Group Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
Based on: 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-K (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-K (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-K (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-K (reporting date: 2013-03-31), 10-Q (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-K (reporting date: 2012-03-31), 10-Q (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-K (reporting date: 2011-03-31), 10-Q (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30).
1 Q2 2017 Calculation
Payables turnover
= (Cost of salesQ2 2017
+ Cost of salesQ1 2017
+ Cost of salesQ4 2016
+ Cost of salesQ3 2016)
÷ Drafts and accounts payable
= (47,201 + 46,826 + 43,826 + 45,027)
÷ 31,037 = 5.89
2 Click competitor name to see calculations.
The financial data exhibits several key trends in cost of sales, drafts and accounts payable, and payables turnover over the periods under review.
- Cost of Sales
- The cost of sales demonstrated a generally increasing trend from June 2010 through September 2016. Starting at 26,058 million USD in June 2010, it rose steadily with periodic fluctuations, peaking at 47,201 million USD in September 2016. Notable increments occurred particularly from March 2014 onward, where values surged from 35,601 million USD up to over 47,000 million USD by the end of the timeline. The overall upward trend suggests increased purchasing or production expenses over the periods analyzed.
- Drafts and Accounts Payable
- Drafts and accounts payable exhibited a general upward trajectory from 13,296 million USD in June 2010 to 31,037 million USD in September 2016. The growth was consistent, with occasional periods of relative stability, such as between June 2012 and September 2013 where values fluctuated mildly between approximately 15,000 million USD and 16,654 million USD. A marked increase began around March 2014, in line with the rise observed in cost of sales, reaching a peak of 31,037 million USD by the close of the data set.
- Payables Turnover Ratio
- The payables turnover ratio, available only from December 2010 onward, showed a gradual decline throughout the periods. Initially high in late 2010 at 7.53, it trended downward over the years, falling to approximately 5.89 by September 2016. This declining ratio indicates that the company took longer to pay its suppliers over time, possibly reflecting changes in payment policies or cash management strategies.
In summary, both cost of sales and drafts/accounts payable increased considerably over the observed periods, indicating growth in operations and obligations. However, the declining payables turnover ratio suggests a deceleration in payment speed to suppliers, which may warrant further examination regarding working capital management. The synchronous rise in cost of sales and payables suggests an expansion phase, but the lengthening payment cycle might impact supplier relationships or liquidity.
Working Capital Turnover
McKesson Corp., working capital turnover calculation (quarterly data)
| Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||||||||||||||||||||||||||||||
| Current assets | 41,338) | 39,038) | 38,437) | 38,261) | 38,749) | 38,571) | 36,670) | 37,141) | 33,879) | 33,973) | 32,573) | 25,234) | 24,545) | 24,067) | 23,170) | 23,439) | 23,091) | 22,054) | 23,603) | 24,569) | 23,262) | 22,374) | 22,357) | 21,693) | 20,244) | 20,791) | ||||||||
| Less: Current liabilities | 37,051) | 36,574) | 35,071) | 34,479) | 34,775) | 34,673) | 33,497) | 32,778) | 29,337) | 29,245) | 29,501) | 21,904) | 21,379) | 21,481) | 21,357) | 20,208) | 20,750) | 20,097) | 21,686) | 20,715) | 19,845) | 19,142) | 18,726) | 19,685) | 16,385) | 16,890) | ||||||||
| Working capital | 4,287) | 2,464) | 3,366) | 3,782) | 3,974) | 3,898) | 3,173) | 4,363) | 4,542) | 4,728) | 3,072) | 3,330) | 3,166) | 2,586) | 1,813) | 3,231) | 2,341) | 1,957) | 1,917) | 3,854) | 3,417) | 3,232) | 3,631) | 2,008) | 3,859) | 3,901) | ||||||||
| Revenues | 49,957) | 49,733) | 46,678) | 47,899) | 48,761) | 47,546) | 44,925) | 46,484) | 44,160) | 43,476) | 38,141) | 34,306) | 32,954) | 32,208) | 30,620) | 31,187) | 29,850) | 30,798) | 31,699) | 30,839) | 30,216) | 29,980) | 28,853) | 28,247) | 27,534) | 27,450) | ||||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||||||||||||
| Working capital turnover1 | 45.32 | 78.36 | 56.71 | 50.01 | 47.24 | 46.98 | 56.43 | 39.48 | 35.25 | 31.49 | 44.79 | 39.07 | 40.10 | 47.90 | 67.54 | 38.23 | 52.62 | 63.13 | 64.02 | 31.11 | 34.33 | 35.46 | 30.87 | — | — | — | ||||||||
| Benchmarks | ||||||||||||||||||||||||||||||||||
| Working Capital Turnover, Competitors2 | ||||||||||||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| CVS Health Corp. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Elevance Health Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| UnitedHealth Group Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
Based on: 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-K (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-K (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-K (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-K (reporting date: 2013-03-31), 10-Q (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-K (reporting date: 2012-03-31), 10-Q (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-K (reporting date: 2011-03-31), 10-Q (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30).
1 Q2 2017 Calculation
Working capital turnover
= (RevenuesQ2 2017
+ RevenuesQ1 2017
+ RevenuesQ4 2016
+ RevenuesQ3 2016)
÷ Working capital
= (49,957 + 49,733 + 46,678 + 47,899)
÷ 4,287 = 45.32
2 Click competitor name to see calculations.
The working capital exhibited notable fluctuations over the observed periods. Initially, values hovered around the 3,000 to 3,800 million USD range but showed several dips, notably in late 2010 and early 2012, with figures falling to near 1,900 million USD. Some recovery phases followed these declines, reaching peaks approximately around 4,700 million USD in mid-2014. However, subsequent measurements indicate a general downward trend with intermittent rises, ending with a value close to 4,300 million USD in late 2016. This pattern suggests periods of tightening and loosening in working capital management, possibly reflecting operational adjustments or changes in current asset and liability structures.
Revenues demonstrated a consistent upward trajectory throughout the timeframe. Starting at approximately 27,450 million USD in mid-2010, the revenue steadily increased with minor fluctuations, achieving peaks above 49,700 million USD by late 2016. This growth appears largely stable and suggests successful expansion or enhanced sales performance over the years, despite occasional slight declines in some quarters.
The working capital turnover ratio, although not reported in earlier periods, when available, showed significant variability. Early ratios exceeded 30 times and reached very high levels, including values surpassing 60 and even approaching 80 in some quarters (e.g., mid-2016). These elevated turnover ratios indicate periods where the company was generating substantial revenues relative to its working capital base, which might signal efficient utilization of working capital or reduced investment in current assets. Nevertheless, the ratio's volatility over the periods points to inconsistent working capital management or shifts in operational dynamics affecting this efficiency measure.
- Working Capital
- Displayed considerable variation, with low points near 1,900 million USD and highs exceeding 4,700 million USD, indicating fluctuating liquidity conditions and asset-liability management across the quarters.
- Revenues
- Exhibited a clear growth trend from approximately 27.5 billion USD to nearly 50 billion USD over six years, reflecting sustained business expansion.
- Working Capital Turnover
- Varied widely, sometimes reaching extremely high levels above 70, suggesting both strong revenue generation relative to capital invested and periods of potentially lean working capital allocation.
Average Inventory Processing Period
McKesson Corp., average inventory processing period calculation (quarterly data)
| Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||||||||||||||||||||||||||||||
| Inventory turnover | 11.97 | 11.72 | 11.70 | 10.83 | 11.30 | 11.49 | 11.73 | 10.48 | 10.67 | 9.89 | 9.72 | 10.67 | 11.39 | 11.28 | 11.17 | 11.23 | 11.56 | 11.62 | 11.53 | 10.93 | 11.77 | 11.39 | 11.50 | — | — | — | ||||||||
| Short-term Activity Ratio (no. days) | ||||||||||||||||||||||||||||||||||
| Average inventory processing period1 | 30 | 31 | 31 | 34 | 32 | 32 | 31 | 35 | 34 | 37 | 38 | 34 | 32 | 32 | 33 | 32 | 32 | 31 | 32 | 33 | 31 | 32 | 32 | — | — | — | ||||||||
| Benchmarks (no. days) | ||||||||||||||||||||||||||||||||||
| Average Inventory Processing Period, Competitors2 | ||||||||||||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| CVS Health Corp. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
Based on: 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-K (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-K (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-K (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-K (reporting date: 2013-03-31), 10-Q (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-K (reporting date: 2012-03-31), 10-Q (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-K (reporting date: 2011-03-31), 10-Q (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30).
1 Q2 2017 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 11.97 = 30
2 Click competitor name to see calculations.
- Inventory Turnover Ratio
- The inventory turnover ratio exhibits moderate fluctuations over the analyzed quarters, beginning at 11.5 in June 2010. The ratio generally oscillates around the 11 to 12 range, with occasional declines dipping below 10. It peaked repeatedly around 11.7 to 11.9 in late 2012, early 2013, and mid-2016 periods. The lowest observed values occurred in the late 2013 to 2014 timeframe, showing a dip to approximately 9.72. Overall, the ratio shows no clear upward or downward long-term trend but demonstrates periodic variability within a relatively narrow range.
- Average Inventory Processing Period
- The average inventory processing period, expressed in days, corresponds inversely to the turnover ratio, varying generally between 30 and 38 days. Starting at 32 days in mid-2010, the number of days increased gradually to a peak near 38 days around late 2013 and early 2014, reflecting slower inventory movement during that period. Following this peak, the period decreased back toward the low 30s, settling at approximately 30 days by late 2016. The fluctuations in processing days indicate changes in inventory management efficiency, with some periods of slower turnover aligned with lower inventory turnover ratios.
- Relationship Between Metrics
- The observed inverse relationship between the inventory turnover ratio and average inventory processing period aligns with typical inventory management principles: an increase in processing days is associated with a decrease in turnover ratio, and vice versa. This dynamic suggests the company experienced variable inventory efficiency over time but maintained a relatively stable operational range. Periods around 2013 to early 2014 show a notable deviation with increased processing times and reduced turnover, indicating temporary inventory handling challenges or strategic shifts.
- Summary
- In summary, the financial data reflect consistent inventory management with minor fluctuations over the observed period. While occasional deviations occurred—particularly in late 2013 and early 2014—they seem to be temporary as the metrics gradually returned to previous levels. The data indicate the company sustained its inventory turnover and processing periods within a relatively stable band, suggesting steady operational performance in managing inventory assets.
Average Receivable Collection Period
McKesson Corp., average receivable collection period calculation (quarterly data)
| Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||||||||||||||||||||||||||||||
| Receivables turnover | 10.61 | 10.53 | 10.62 | 10.87 | 11.17 | 10.98 | 11.25 | 10.39 | 10.40 | 9.98 | 9.70 | 12.10 | 12.30 | 12.37 | 12.28 | 12.40 | 12.54 | 12.92 | 12.30 | 12.39 | 12.31 | 12.23 | 12.20 | — | — | — | ||||||||
| Short-term Activity Ratio (no. days) | ||||||||||||||||||||||||||||||||||
| Average receivable collection period1 | 34 | 35 | 34 | 34 | 33 | 33 | 32 | 35 | 35 | 37 | 38 | 30 | 30 | 30 | 30 | 29 | 29 | 28 | 30 | 29 | 30 | 30 | 30 | — | — | — | ||||||||
| Benchmarks (no. days) | ||||||||||||||||||||||||||||||||||
| Average Receivable Collection Period, Competitors2 | ||||||||||||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| CVS Health Corp. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Elevance Health Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| UnitedHealth Group Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
Based on: 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-K (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-K (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-K (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-K (reporting date: 2013-03-31), 10-Q (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-K (reporting date: 2012-03-31), 10-Q (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-K (reporting date: 2011-03-31), 10-Q (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30).
1 Q2 2017 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 10.61 = 34
2 Click competitor name to see calculations.
The analysis of the receivables turnover ratio and the average receivable collection period over the observed quarters reveals several notable trends and patterns.
- Receivables Turnover Ratio
- The receivables turnover ratio initially demonstrates a relatively high and stable level from June 2010 to March 2014, fluctuating within a narrow range mostly between approximately 12.1 and 12.9. This suggests consistent efficiency in collecting receivables during this extended period.
- Beginning in mid-2014, there is a marked decline in this ratio, dropping sharply from approximately 12.1 to a low of 9.7 by June 2014. After this dip, the ratio starts to recover gradually but remains below the earlier levels, oscillating around the 10.5 to 11.25 range up to September 2016.
- This downward shift indicates a reduction in collection efficiency or potentially changes in credit policies or customer payment behavior starting in mid-2014.
- Average Receivable Collection Period
- The average number of days to collect receivables remains fairly consistent around 28 to 30 days from June 2010 to early 2014, indicating steady payment periods during this time.
- In line with the trends seen in the turnover ratio, this metric increases significantly starting in mid-2014, rising from around 30 days to reach approximately 38 days by June 2014. Subsequently, it slightly declines but remains elevated relative to earlier periods, fluctuating between roughly 32 and 35 days through to September 2016.
- This increase in collection period reflects slower customer payments or a strategic extension of payment terms, contributing to the observed decline in receivables turnover.
- Summary Insights
- The inverse correlation between the receivables turnover ratio and the average collection period is evident, where declines in turnover coincide with increases in collection days.
- The stability observed prior to mid-2014 suggests relatively consistent credit and collection management, whereas the changes from mid-2014 onward indicate a shift in dynamics that could warrant further investigation.
- Overall, the data suggest more challenging receivables management conditions or policy changes beginning in mid-2014 that have persisted over multiple quarters, resulting in less efficient cash collection cycles.
Operating Cycle
McKesson Corp., operating cycle calculation (quarterly data)
No. days
| Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||||||||||||||||||||||||||||||
| Average inventory processing period | 30 | 31 | 31 | 34 | 32 | 32 | 31 | 35 | 34 | 37 | 38 | 34 | 32 | 32 | 33 | 32 | 32 | 31 | 32 | 33 | 31 | 32 | 32 | — | — | — | ||||||||
| Average receivable collection period | 34 | 35 | 34 | 34 | 33 | 33 | 32 | 35 | 35 | 37 | 38 | 30 | 30 | 30 | 30 | 29 | 29 | 28 | 30 | 29 | 30 | 30 | 30 | — | — | — | ||||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||||||||||||
| Operating cycle1 | 64 | 66 | 65 | 68 | 65 | 65 | 63 | 70 | 69 | 74 | 76 | 64 | 62 | 62 | 63 | 61 | 61 | 59 | 62 | 62 | 61 | 62 | 62 | — | — | — | ||||||||
| Benchmarks | ||||||||||||||||||||||||||||||||||
| Operating Cycle, Competitors2 | ||||||||||||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| CVS Health Corp. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
Based on: 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-K (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-K (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-K (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-K (reporting date: 2013-03-31), 10-Q (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-K (reporting date: 2012-03-31), 10-Q (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-K (reporting date: 2011-03-31), 10-Q (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30).
1 Q2 2017 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= 30 + 34 = 64
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals distinct patterns in the operational efficiency indicators over the observed periods.
- Average Inventory Processing Period
- The inventory processing period remained relatively stable around the low 30s (number of days) for much of the timeline. Starting from 32 days in mid-2010, it fluctuated slightly but showed a gradual increasing trend peaking at 38 days by mid-2014. This increase suggests a slight extension in the time taken to process inventory during this period. Following the peak, the period gradually decreased, falling back to 30-31 days by late 2016, indicating a potential improvement in inventory management leading to faster processing times toward the end of the data set.
- Average Receivable Collection Period
- The receivable collection period primarily ranged between 28 and 35 days, indicating a generally consistent collection effort. Early in the data series, it averaged around 29-30 days but experienced a noticeable increase starting mid-2013, peaking at 38 days in mid-2014. Subsequently, the collection period slightly declined, stabilizing around 33-35 days through to late 2016. The rise in the mid-period may reflect either extended credit terms or slower collection efficiency, while the later stabilization suggests an adjustment or recovery in receivable management practices.
- Operating Cycle
- The operating cycle, the sum of inventory processing and receivable collection periods, largely tracked the combined trends noted above. It hovered around 61-63 days during the early periods but showed a pronounced increase beginning in early 2013, reaching a maximum of 76 days around mid-2014. This lengthening of the cycle indicates a temporary slowdown in the overall cash conversion efficiency, driven by longer inventory and receivable periods. After mid-2014, the operating cycle progressively decreased, returning to the mid-60s by late 2016, suggesting an improvement in overall operational efficiency and cash flow timing.
In summary, the financial data indicates a period of increased duration in both inventory and receivables management efficiency around 2013-2014, followed by a corrective trend that improved operational metrics through the latter part of the analyzed timeline. These movements may warrant further investigation to correlate with company strategies, market conditions, or other relevant factors influencing working capital management.
Average Payables Payment Period
McKesson Corp., average payables payment period calculation (quarterly data)
| Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||||||||||||||||||||||||||||||
| Payables turnover | 5.89 | 5.97 | 6.28 | 6.62 | 6.49 | 6.52 | 6.66 | 6.40 | 6.63 | 6.13 | 6.03 | 7.35 | 7.26 | 7.00 | 7.17 | 7.76 | 7.51 | 7.72 | 7.21 | 7.23 | 7.45 | 7.46 | 7.53 | — | — | — | ||||||||
| Short-term Activity Ratio (no. days) | ||||||||||||||||||||||||||||||||||
| Average payables payment period1 | 62 | 61 | 58 | 55 | 56 | 56 | 55 | 57 | 55 | 60 | 60 | 50 | 50 | 52 | 51 | 47 | 49 | 47 | 51 | 50 | 49 | 49 | 48 | — | — | — | ||||||||
| Benchmarks (no. days) | ||||||||||||||||||||||||||||||||||
| Average Payables Payment Period, Competitors2 | ||||||||||||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| CVS Health Corp. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Elevance Health Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| UnitedHealth Group Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
Based on: 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-K (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-K (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-K (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-K (reporting date: 2013-03-31), 10-Q (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-K (reporting date: 2012-03-31), 10-Q (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-K (reporting date: 2011-03-31), 10-Q (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30).
1 Q2 2017 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ 5.89 = 62
2 Click competitor name to see calculations.
The analysis of the payables turnover ratio and the average payables payment period over the observed quarterly intervals reveals distinct trends and fluctuations between mid-2010 and late 2016.
- Payables Turnover Ratio
- Data for this ratio is available starting from the quarter ending June 30, 2010. Initially, the payables turnover ratio hovers around 7.5 to 7.7, indicating a relatively consistent rate at which the company pays off its suppliers.
- From mid-2010 through early 2013, the ratio remains generally stable, fluctuating narrowly between approximately 7 and 7.7. This stability suggests steady efficiency in managing accounts payable during this period.
- Beginning in 2013, a gradual decline in the payables turnover ratio is observed, dropping to a low of around 6.0 by the first quarter of 2014. This decreasing trend indicates that the company is taking longer to pay its suppliers or that purchases on credit are growing faster than payments.
- Post-2014, the ratio remains relatively stable but at a lower level, fluctuating mostly between 5.9 and 6.6. The decline compared to the earlier years reflects a slowdown in turnover, which may have implications for cash flow management and supplier relationships.
- Average Payables Payment Period (Days)
- The number of days it takes to pay suppliers starts at 48 days in mid-2010 and shows a general increasing trend over time.
- From 2010 to early 2013, the payment period lightly fluctuates between 47 and 52 days, mirroring the relatively stable turnover ratio seen in the same timeframe.
- A sharp increase is noted beginning in 2013, with periods extending to 60 days in early 2014. This change aligns inversely with the declining payables turnover ratio, confirming delayed payments to suppliers.
- Following this spike, the average payment period remains elevated, ranging between 55 and 62 days through to the third quarter of 2016, further confirming the trend toward longer payment durations.
- Overall Insights
- The inverse relationship between the payables turnover ratio and the average payment period is evident and consistent throughout the dataset.
- The trend toward longer payment periods and lower turnover ratios from 2013 onward suggests a strategic or operational shift in the management of payables, potentially to preserve liquidity or in response to market conditions.
- This change may affect supplier relations and warrants monitoring to balance cash flow optimization with supplier credit terms.
Cash Conversion Cycle
McKesson Corp., cash conversion cycle calculation (quarterly data)
No. days
| Sep 30, 2016 | Jun 30, 2016 | Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Mar 31, 2014 | Dec 31, 2013 | Sep 30, 2013 | Jun 30, 2013 | Mar 31, 2013 | Dec 31, 2012 | Sep 30, 2012 | Jun 30, 2012 | Mar 31, 2012 | Dec 31, 2011 | Sep 30, 2011 | Jun 30, 2011 | Mar 31, 2011 | Dec 31, 2010 | Sep 30, 2010 | Jun 30, 2010 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||||||||||||||||||||||||||||||
| Average inventory processing period | 30 | 31 | 31 | 34 | 32 | 32 | 31 | 35 | 34 | 37 | 38 | 34 | 32 | 32 | 33 | 32 | 32 | 31 | 32 | 33 | 31 | 32 | 32 | — | — | — | ||||||||
| Average receivable collection period | 34 | 35 | 34 | 34 | 33 | 33 | 32 | 35 | 35 | 37 | 38 | 30 | 30 | 30 | 30 | 29 | 29 | 28 | 30 | 29 | 30 | 30 | 30 | — | — | — | ||||||||
| Average payables payment period | 62 | 61 | 58 | 55 | 56 | 56 | 55 | 57 | 55 | 60 | 60 | 50 | 50 | 52 | 51 | 47 | 49 | 47 | 51 | 50 | 49 | 49 | 48 | — | — | — | ||||||||
| Short-term Activity Ratio | ||||||||||||||||||||||||||||||||||
| Cash conversion cycle1 | 2 | 5 | 7 | 13 | 9 | 9 | 8 | 13 | 14 | 14 | 16 | 14 | 12 | 10 | 12 | 14 | 12 | 12 | 11 | 12 | 12 | 13 | 14 | — | — | — | ||||||||
| Benchmarks | ||||||||||||||||||||||||||||||||||
| Cash Conversion Cycle, Competitors2 | ||||||||||||||||||||||||||||||||||
| Abbott Laboratories | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| CVS Health Corp. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Intuitive Surgical Inc. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
| Medtronic PLC | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||
Based on: 10-Q (reporting date: 2016-09-30), 10-Q (reporting date: 2016-06-30), 10-K (reporting date: 2016-03-31), 10-Q (reporting date: 2015-12-31), 10-Q (reporting date: 2015-09-30), 10-Q (reporting date: 2015-06-30), 10-K (reporting date: 2015-03-31), 10-Q (reporting date: 2014-12-31), 10-Q (reporting date: 2014-09-30), 10-Q (reporting date: 2014-06-30), 10-K (reporting date: 2014-03-31), 10-Q (reporting date: 2013-12-31), 10-Q (reporting date: 2013-09-30), 10-Q (reporting date: 2013-06-30), 10-K (reporting date: 2013-03-31), 10-Q (reporting date: 2012-12-31), 10-Q (reporting date: 2012-09-30), 10-Q (reporting date: 2012-06-30), 10-K (reporting date: 2012-03-31), 10-Q (reporting date: 2011-12-31), 10-Q (reporting date: 2011-09-30), 10-Q (reporting date: 2011-06-30), 10-K (reporting date: 2011-03-31), 10-Q (reporting date: 2010-12-31), 10-Q (reporting date: 2010-09-30), 10-Q (reporting date: 2010-06-30).
1 Q2 2017 Calculation
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= 30 + 34 – 62 = 2
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period remained relatively stable around the low 30s range, fluctuating mostly between 30 to 38 days over the analyzed quarters. Notably, there was a slight upward trend observed around mid-2014, peaking at 38 days in June 2014, before gradually declining to 30 days by September 2016. This indicates that inventory turnover experienced moderate variability with a peak in processing time followed by an improvement towards the end of the period.
- Average Receivable Collection Period
- The receivable collection period showed marginal fluctuations around 29 to 35 days. Initial quarters maintained a consistent period near 30 days. However, starting mid-2014, there was a noticeable increase reaching 38 days in June 2014, indicating a delay in collecting receivables during that period. Afterward, this period gradually contracted to approximately 34 days by the latter part of 2016, reflecting some efficiency gains in receivable collections.
- Average Payables Payment Period
- This period demonstrated a general upward trend over time, increasing from the high 40s in 2010 (around 48 days) to the lower 60s by late 2016 (62 days). A sharp increase was particularly evident around mid-2014, with the period climbing to 60 days and maintaining at similar elevated levels through subsequent quarters. This suggests that payables were settled more slowly over time, possibly indicating extended credit terms or cash flow management strategies.
- Cash Conversion Cycle
- The cash conversion cycle (CCC) exhibited a fluctuating but overall declining trend during the entire timeframe. Initially recorded at 14 days in mid-2011, the CCC slightly increased to 16 days in early 2014 but then steadily declined, reaching a low of 2 days by the third quarter of 2016. The reduction in CCC indicates an improvement in operational efficiency, where the time between outlay for inventory and receipt from customers shortened substantially, enhancing the working capital cycle.