Procter & Gamble Co. (NYSE:PG)

An analysis of short-term operating activity ratios reveals several trends over the observed period. Inventory turnover generally remained stable between 5.79 and 6.25, with a slight downward trend becoming more pronounced in the later periods, ending at 5.38. Receivables turnover exhibited a similar pattern of relative stability, fluctuating between 13.25 and 16.11, with a modest decline towards the end of the period. Payables turnover showed more variability, ranging from 2.66 to 3.11, with no clear directional trend.

Inventory Management

The average inventory processing period remained relatively consistent around 60 days for much of the period, increasing to 69 days by the end of the observation window. This suggests a potential slowing in the rate at which inventory is sold, potentially indicating challenges in demand or inventory management efficiency.

Receivables Management

The average receivable collection period remained consistently low, generally between 23 and 28 days. A slight increase is observed in the later periods, but remains within an acceptable range. This indicates efficient collection of receivables throughout the period.

Payables Management

The average payables payment period demonstrated considerable fluctuation, starting at 122 days and decreasing to 117 days before increasing again to 137 days. This variability could be due to changes in supplier terms or strategic decisions regarding payment timing. The period is consistently longer than both the inventory processing and receivable collection periods.

Overall Operating Cycle & Cash Conversion Cycle

The operating cycle, representing the time to convert raw materials into cash, generally ranged between 82 and 97 days. The cash conversion cycle, which measures the time funds are tied up in operations, was consistently negative for much of the period, indicating that the company generally receives cash from customers before it needs to pay its suppliers. However, the cash conversion cycle became less negative over time, moving from -53 days to -37 days, suggesting a potential lengthening of the cash conversion process.

In summary, the company demonstrates efficient receivables management and a generally effective operating cycle. However, the slight downward trends in inventory turnover and the increasing inventory processing period, coupled with the fluctuating payables payment period and diminishing negative cash conversion cycle, warrant further investigation to ensure continued operational efficiency and liquidity.

Inventory turnover exhibited a generally stable pattern over the observed period, with fluctuations occurring primarily between 5.30 and 6.25. An initial slight decline is noted from the September 2020 value of 6.25 to 6.05 in December 2020, followed by relative stability through June 2021 at approximately 6.0 to 6.20. A more pronounced downward trend emerges in the latter half of 2021, reaching a low of 5.79 in March 2022.

The period from March 2022 through March 2023 demonstrates considerable volatility. A rebound to 6.09 is seen in June 2022, but this is followed by a decline to 5.62 in September 2022. Subsequent quarters show fluctuations, with a peak of 5.74 in March 2023 before decreasing to 5.83 in December 2023. The most recent period, from March 2024 to December 2025, indicates a continuing downward trend, culminating in a value of 5.38 in December 2025.

Overall Trend

The overall trend suggests a gradual decrease in inventory turnover over the analyzed timeframe. While short-term fluctuations are present, the ratio consistently trends downward from approximately 6.25 in late 2020 to 5.38 in early 2025. This suggests a potential slowing in the rate at which inventory is sold.

Cost of Products Sold Influence

Cost of products sold generally increased from $9,142 million in September 2020 to $10,834 million in March 2025. However, the decrease in inventory turnover despite rising costs suggests that inventory levels have increased at a faster rate than sales, or that the composition of inventory has shifted towards slower-moving items.

Inventory Levels

Inventory levels demonstrate a clear upward trend, increasing from $5,707 million in September 2020 to $7,817 million in March 2025. This increase in inventory, coupled with the declining turnover ratio, reinforces the observation of a potential slowdown in inventory liquidation.

Recent Performance (2024-2025)

The most recent data points (2024-2025) show a continued decline in inventory turnover, reaching the lowest point in the observed period. This warrants further investigation to determine the underlying causes and potential implications for operational efficiency and profitability.

In conclusion, while the company maintained a relatively consistent inventory turnover for a significant portion of the analyzed period, a clear downward trend has emerged, particularly in the most recent quarters. This trend, coupled with increasing inventory levels, suggests a potential need to review inventory management strategies.

The receivables turnover ratio exhibits fluctuations over the observed period, generally remaining within a relatively narrow range. Initial values indicate a moderate level of efficiency in collecting receivables, followed by periods of both improvement and decline. A general observation is a slight downward trend in the most recent periods.

Overall Trend

From September 2020 through June 2021, the receivables turnover ratio demonstrated a generally positive trend, increasing from 14.37 to 16.11. This suggests improving efficiency in converting credit sales into cash during this timeframe. However, this upward momentum was not sustained. The ratio then decreased to 13.62 by September 2021.

Cyclical Patterns

A cyclical pattern appears to be present. Following the decline in September 2021, the ratio experienced a recovery through June 2022, peaking at 15.59. Subsequently, it declined again, reaching 13.92 by December 2022. This pattern of increase followed by decrease repeats itself through the remainder of the observed period.

Recent Performance (2023-2025)

The period from September 2023 to June 2025 shows a slight downward trend. The ratio decreased from 13.40 in September 2023 to 13.58 in March 2025. While fluctuations exist within this period, the overall direction suggests a potential slowing in the rate of receivables collection. The ratio concludes the period at 13.58.

Relationship to Sales

While the receivables turnover ratio fluctuates, it generally remains correlated with net sales. Periods of higher sales do not consistently translate to higher turnover ratios, and vice versa, suggesting factors beyond sales volume influence the ratio. For example, the increase in net sales from September 2024 to June 2025 did not result in a corresponding increase in the receivables turnover ratio.

In conclusion, the receivables turnover ratio demonstrates a pattern of cyclical fluctuations with a subtle downward trend in the most recent periods. Further investigation may be warranted to understand the underlying causes of these fluctuations and the potential implications for cash flow management.

The accounts payable turnover ratio exhibits a generally stable pattern over the observed period, with some fluctuations. Initially, the ratio remained relatively consistent around 3.0x from September 2020 through December 2020, before experiencing a decline in the first half of 2021. A subsequent recovery and stabilization occurred through December 2021, followed by further variability in subsequent periods.

Overall Trend

The ratio generally fluctuates between 2.66x and 3.11x. There isn't a strong, sustained upward or downward trend across the entire timeframe. The period from September 2020 to December 2020 demonstrates the highest consistency, while the period from June 2024 to December 2025 shows increased volatility.

Short-Term Fluctuations

A noticeable decrease in payables turnover is observed between March 2021 and June 2021, falling from 2.99x to 2.70x. This suggests a potential lengthening of the time taken to pay suppliers during that period. A subsequent increase is seen in the latter half of 2021, reaching 2.81x by December 2021. Another dip occurs in June 2024, reaching a low of 2.66x, followed by a recovery.

Recent Performance (2024-2025)

The most recent period (June 2024 – December 2025) shows increased variability. The ratio decreased to 2.66x in June 2024, then recovered to 2.83x by September 2024, before fluctuating between 2.82x and 2.77x in the final quarters. This suggests potential shifts in supplier payment terms or purchasing patterns.

The observed fluctuations in the payables turnover ratio warrant further investigation to determine the underlying causes. These could include changes in supplier relationships, negotiation of payment terms, or alterations in the timing of purchases relative to cost of products sold. The recent volatility suggests a need for monitoring to understand if these changes represent a new trend or are temporary in nature.

The working capital turnover ratio exhibits a fluctuating pattern over the observed period. Initially, the working capital balance is negative throughout the entire timeframe, indicating that current liabilities consistently exceed current assets. This negative working capital position persists and generally worsens over the period examined, with a notable increase in the absolute value of negative working capital from approximately US$3.98 billion in September 2020 to US$16.88 billion in December 2022. A slight improvement is then observed, decreasing to US$10.11 billion by March 2025.

Working Capital Trend

Working capital demonstrates a consistent negative balance, deepening from 2020 through 2022. The most substantial declines occur between September 2020 and December 2022. Following December 2022, the negative working capital position moderates, though remains negative throughout the forecast period.

Net Sales Trend

Net sales fluctuate within a range of approximately US$18.11 billion to US$22.39 billion. A general upward trend in net sales is apparent from 2020 to 2023, peaking at US$22.39 billion in September 2025. However, sales experience a decrease in the final period, falling to US$22.21 billion in December 2025.

Working Capital Turnover Ratio

Due to the consistently negative working capital, the working capital turnover ratio cannot be meaningfully calculated or interpreted in the traditional sense. A negative working capital balance fundamentally alters the interpretation of this ratio. The ratio would typically measure how efficiently working capital is being used to generate sales; however, with negative working capital, it indicates the extent to which a company is financing its operations with liabilities rather than assets. The absence of calculated values for this ratio suggests it is not considered a useful metric given the company’s financial structure.

The combination of consistently negative working capital and fluctuating net sales suggests a reliance on short-term financing to support operations. The observed trend of increasing negative working capital, followed by a slight moderation, warrants further investigation into the company’s liquidity management and financing strategies.

The average inventory processing period exhibited a generally increasing trend over the observed timeframe, spanning from September 2020 to December 2025. While fluctuations occurred, a discernible shift towards longer processing times is evident, particularly in the latter half of the period.

Initial Period (Sep 30, 2020 – Dec 31, 2021)

The average inventory processing period remained relatively stable, fluctuating between 58 and 61 days. A slight increase is observed from 58 days in September 2020 to 61 days in December 2021, indicating a modest lengthening of the time required to convert inventory into sales.

Period of Increase (Mar 31, 2022 – Jun 30, 2023)

A more pronounced upward trend emerges during this period. The average processing period increased from 63 days in March 2022 to 61 days in June 2023, with a peak of 65 days in September 2022. This suggests potential challenges in inventory management or shifts in sales patterns.

Recent Trend (Sep 30, 2023 – Dec 31, 2025)

The most significant increase in the average inventory processing period is observed in the most recent portion of the timeframe. The period rose consistently from 63 days in September 2023 to 68 days in December 2025. This sustained increase warrants further investigation to determine the underlying causes, such as potential supply chain disruptions, changes in product mix, or decreased sales velocity. The period reached its highest point at 69 days in September 2025.

Overall Observation

The overall trend indicates a lengthening of the inventory processing cycle. While the initial changes were minimal, the period demonstrates a clear and consistent increase in the later quarters. This could potentially indicate inefficiencies in inventory control, slower sales, or an accumulation of obsolete inventory. Further analysis, considering factors such as cost of goods sold and sales revenue, is recommended to fully understand the implications of this trend.

The average receivable collection period exhibited relative stability over the observed period, ranging primarily between 23 and 28 days. While fluctuations occurred, no consistently strong upward or downward trend was apparent throughout the analyzed timeframe.

Overall Trend

The average collection period generally remained within a narrow band. Initial values in fiscal year 2020 and early 2021 were consistently at or below 25 days. A slight increase was observed in late 2021 and continued into 2022, with values reaching 26 to 28 days. This increase was not sustained, as the period returned to the 24-27 day range in 2023 and 2024, and remained largely consistent through the first half of 2025.

Short-Term Fluctuations

A minor dip to 23 days was recorded in the June 2021 quarter. Conversely, the September 2021, September 2022, September 2023, and September 2025 quarters all registered a collection period of 27 days, representing relative peaks within the series. The December 2021 and December 2022 quarters both showed a collection period of 26 days.

Recent Performance

The most recent reported periods, spanning from the beginning of 2024 through the first half of 2025, demonstrate a consistent average collection period of approximately 27 days. This suggests a stabilization of collection practices or external factors influencing payment timing. The period remained at 27 days for six consecutive quarters, indicating a sustained level of performance.

The observed fluctuations appear to be relatively minor and do not indicate a significant shift in the company’s ability to collect receivables. The consistency in the collection period suggests effective credit and collection policies are in place.

The operating cycle, average inventory processing period, and average receivable collection period exhibit discernible trends over the observed period spanning from September 2020 to June 2025. Generally, a lengthening of the operating cycle is apparent, driven by increases in both inventory processing and, to a lesser extent, receivable collection times.

Operating Cycle

The operating cycle demonstrates an overall increasing trend. Beginning at 83 days in September 2020, it generally fluctuates between 82 and 91 days for the next several quarters. A more pronounced upward trajectory begins in September 2022, reaching 91 days, and continues through June 2025, culminating in 97 days. This suggests a growing time required to convert investments in inventory and receivables into cash. The most significant increases occur between March 2024 and June 2025.

Average Inventory Processing Period

The average inventory processing period shows a gradual increase over the analyzed timeframe. Starting at 58 days in September 2020, it remains relatively stable around 60 days for the subsequent quarters. A noticeable increase begins in March 2022, reaching 63 days, and continues with fluctuations, peaking at 69 days in September 2025. This indicates a lengthening time to sell inventory, potentially due to factors such as shifts in demand, supply chain disruptions, or changes in inventory management strategies.

Average Receivable Collection Period

The average receivable collection period exhibits more stability than the other two metrics, but still shows a slight upward trend. It generally remains within a range of 23 to 28 days. While fluctuations occur, the period consistently trends higher from 2021 onwards, reaching 28 days in several instances between September 2023 and June 2025. This suggests a modest lengthening in the time taken to collect payments from customers.

The combined effect of the increasing inventory processing period and the receivable collection period contributes to the overall lengthening of the operating cycle. The more substantial increase in the inventory processing period appears to be the primary driver of this trend. Continued monitoring of these ratios is recommended to assess the underlying causes and potential impacts on liquidity and cash flow.

The average payables payment period exhibited relative stability over the observed period, with fluctuations primarily occurring between 117 and 137 days. An initial period of consistency is followed by a period of increased variability, then a return to a more stable range.

Overall Trend

From September 30, 2020, through December 31, 2021, the average payables payment period remained consistently at 122, 122, 122, 135, 135, and 130 days respectively. This suggests a stable relationship with suppliers during this timeframe. Following this period, the metric demonstrated increased fluctuation.

Fluctuations and Recent Performance

A decrease to 126 days was observed on March 31, 2022, followed by a slight increase to 129 days on June 30, 2022. The period then decreased to 120 days by December 31, 2022, reaching a low of 117 days on March 31, 2023. A subsequent increase to 125 days occurred on June 30, 2023, and remained at 124 and 125 days for the following two quarters. A notable increase to 137 days was recorded on June 30, 2024, persisting through September 30, 2024. The period then decreased to 129 and 130 days, before increasing again to 135 and 137 days by June 30, 2025.

Recent Period (2024-2025)

The most recent observations indicate a potential upward trend in the average payables payment period. The metric increased from 122 days in March 2024 to 137 days in June 2024, and has remained elevated through June 2025, fluctuating between 130 and 137 days. This could indicate a shift in supplier terms, changes in purchasing practices, or a deliberate strategy to manage cash flow.

The observed fluctuations warrant further investigation to determine the underlying causes and potential implications for the company’s financial health and supplier relationships.

The short-term operating activity of the company, as measured by its cash conversion cycle and component ratios, exhibits several notable trends over the observed period. Generally, the cash conversion cycle fluctuates, but demonstrates a tendency towards lengthening in recent quarters. A detailed examination of the individual components reveals the drivers behind these overall movements.

Average Inventory Processing Period

The average number of days to process inventory generally remained stable between 58 and 61 days from September 2020 through June 2023. A gradual increase is observed starting in March 2022, peaking at 69 days by September 2025, with some fluctuation. This suggests a potential slowing in the rate at which inventory is sold or a build-up of inventory levels over time. The increase in the latter part of the period warrants further investigation.

Average Receivable Collection Period

The average receivable collection period remained relatively consistent, fluctuating between 23 and 28 days throughout the analyzed timeframe. A slight upward trend is noticeable in the later periods, with the period consistently at 27 or 28 days from September 2021 onwards. This indicates a minor lengthening in the time taken to collect payments from customers, though the change is not substantial.

Average Payables Payment Period

The average payables payment period demonstrates more significant variability. It remained consistently high, around 122 days, from September 2020 to March 2021. A notable increase to 135 days occurred in June 2021, followed by a decline to 117 days by March 2022. The period then generally increased again, reaching 137 days in June 2024 and September 2025. This suggests the company has been strategically managing its payment terms with suppliers, potentially taking advantage of extended credit periods, but with some fluctuation.

Cash Conversion Cycle

The cash conversion cycle, representing the time between paying for inventory and receiving cash from sales, was consistently negative, ranging from -53 to -28 days. This indicates efficient management of working capital, with cash being generated before payments are due. However, the cycle has become less negative over time. From a low of -53 days in June 2021, it moved towards -37 days by March 2025. This shortening of the negative cycle is primarily driven by the increasing inventory processing period and receivable collection period, partially offset by changes in the payables payment period. The trend suggests a potential decrease in operational efficiency regarding inventory and receivables management, requiring attention.

In summary, while the company maintains a negative cash conversion cycle, indicating positive working capital management, recent trends suggest a potential deterioration in efficiency. The lengthening inventory processing period and slight increase in the receivable collection period are contributing factors. Continued monitoring of these ratios is recommended to identify any further adverse trends and implement appropriate corrective actions.