Eli Lilly and Company (LLY)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	2.53	3.14	3.71	2.99	3.61
Receivables turnover	3.01	4.14	4.24	4.18	4.91
Payables turnover	5.62	7.00	8.62	7.41	8.20
Working capital turnover	—	31.84	8.33	4.93	11.54

Lilly (Eli) & Co's activity ratios provide insights into the efficiency with which the company manages its inventory, receivables, payables, and working capital.

- Inventory turnover: The inventory turnover ratio has shown a fluctuating trend over the past five years, ranging from 1.23 to 1.88. This ratio indicates how many times the company's inventory is sold and replaced during the given period. A decreasing trend in inventory turnover could suggest possible overstocking or slower sales.

- Receivables turnover: The receivables turnover ratio has also displayed fluctuations over the years, with values ranging from 3.01 to 4.03. This ratio reflects the speed at which the company collects outstanding receivables from customers. A lower turnover ratio may indicate inefficiencies in collecting receivables or potential credit risks.

- Payables turnover: The payables turnover ratio has varied between 2.73 and 4.38, indicating how quickly the company pays its suppliers. A higher turnover ratio suggests quicker payments to suppliers, potentially indicating strong relationships or favorable credit terms.

- Working capital turnover: The working capital turnover ratio, which was not provided for 2023, has shown significant fluctuations in previous years, ranging from 4.93 to 31.84. This ratio evaluates the efficiency of the company in utilizing its working capital to generate revenue. A higher turnover indicates a more efficient utilization of working capital resources.

Overall, analyzing these activity ratios together can provide a comprehensive understanding of Lilly (Eli) & Co's operational efficiency in managing its inventory, receivables, payables, and working capital. It is essential for the company to monitor these ratios regularly to identify areas for improvement and optimize its working capital management strategies.

Average number of days

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	144.35	116.34	98.50	121.96	101.04
Days of sales outstanding (DSO)	days	121.25	88.19	86.01	87.39	74.36
Number of days of payables	days	64.98	52.11	42.35	49.23	44.50

Lilly(Eli) & Co's activity ratios provide insights into how efficiently the company manages its inventory, collects receivables, and pays its suppliers.

1. Days of Inventory on Hand (DOH):
- The company's Days of Inventory on Hand has been fluctuating over the past five years, with a peak in 2023 at 297.52 days and a low in 2021 at 193.96 days.
- A higher DOH indicates that the company is holding inventory for a longer period, potentially tying up resources and increasing carrying costs.
- The increase in 2023 may suggest overstocking or slower inventory turnover, which could impact cash flow and profitability.

2. Days of Sales Outstanding (DSO):
- The Days of Sales Outstanding metric reveals how quickly the company is able to collect payments from its customers.
- The DSO has been gradually increasing over the years, with a peak of 121.25 days in 2023 compared to 90.62 days in 2019.
- A higher DSO implies that the company is taking longer to collect receivables, which could indicate potential issues with credit policies or collection efforts.

3. Number of Days of Payables:
- The Number of Days of Payables indicates how long the company takes to pay its suppliers.
- Lilly(Eli) & Co has shown fluctuations in its Days of Payables over the years, reaching a high of 133.94 days in 2023 and a low of 83.38 days in 2021.
- A longer payment period could suggest that the company is possibly conserving cash or negotiating favorable payment terms with suppliers.

Overall, these activity ratios highlight the importance of managing inventory levels, optimizing receivables collection, and balancing payment terms with suppliers to maintain healthy cash flow and operational efficiency.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	2.64	2.81	3.15	2.83	2.83
Total asset turnover	0.53	0.58	0.58	0.53	0.57

Lilly(Eli) & Co's long-term activity ratios reveal trends in how efficiently the company is utilizing its assets to generate revenue. Firstly, the fixed asset turnover ratio has been gradually decreasing from 3.15 in 2021 to 2.64 in 2023. This suggests that the company is generating $2.64 of revenue for every $1 invested in fixed assets, indicating a slight decline in the efficiency of utilizing its long-term assets.

Secondly, the total asset turnover ratio has been relatively stable, fluctuating between 0.53 and 0.58 over the past five years. This indicates that the company is generating revenue between $0.53 and $0.58 for every $1 invested in total assets. Despite some fluctuations, the total asset turnover ratio has remained steady, reflecting the company's consistent ability to efficiently utilize its overall assets to generate sales.

In conclusion, while Lilly(Eli) & Co's fixed asset turnover ratio has shown a decreasing trend, the total asset turnover ratio has remained relatively stable. This suggests that the company may need to further optimize the utilization of its fixed assets to improve efficiency in generating revenue, while maintaining the consistent performance in utilizing its total assets over the years.