Eli Lilly and Company (LLY)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Inventory turnover	2.37	2.53	3.14	3.71	2.99
Receivables turnover	3.39	3.01	4.14	4.24	4.18
Payables turnover	5.56	5.62	7.00	8.62	7.41
Working capital turnover	10.32	—	31.84	8.33	4.93

For Eli Lilly and Company, let's analyze the activity ratios using the provided data:

1. Inventory Turnover:
- The inventory turnover ratio measures how quickly a company sells its inventory within a given period. Eli Lilly's inventory turnover has improved over the years, increasing from 2.99 in 2020 to 3.71 in 2021, but then slightly declining to 2.37 in 2024. This implies that the company is selling its inventory more efficiently in 2021 compared to 2020, but there was a decrease in efficiency by 2024.

2. Receivables Turnover:
- The receivables turnover indicates how efficiently a company collects its outstanding receivables. Eli Lilly's receivables turnover has fluctuated over the years, with a slight increase from 4.18 in 2020 to 4.24 in 2021 before declining to 3.39 in 2024. A higher turnover ratio generally indicates better collection efficiency.

3. Payables Turnover:
- Payables turnover ratio measures how quickly a company pays its suppliers. Eli Lilly's payables turnover has been gradually decreasing from 7.41 in 2020 to 5.56 in 2024. A lower ratio may indicate that the company is taking longer to pay its suppliers, which could impact supplier relationships.

4. Working Capital Turnover:
- The working capital turnover ratio evaluates how efficiently a company generates revenue from its working capital. Eli Lilly's working capital turnover significantly increased from 4.93 in 2020 to 31.84 in 2022 before data was not available for 2023. A higher turnover ratio suggests that the company is effectively utilizing its working capital to generate sales.

In summary, Eli Lilly has shown varying trends in its activity ratios over the years. The company has demonstrated improvements in inventory turnover and receivables turnover, while experiencing a decline in payables turnover. The significant increase in working capital turnover in 2022 indicates efficient utilization of working capital. Monitoring these ratios can provide insights into the company's operational efficiency and effectiveness in managing its resources.

Average number of days

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Days of inventory on hand (DOH)	days	154.20	144.35	116.34	98.50	121.96
Days of sales outstanding (DSO)	days	107.58	121.25	88.19	86.01	87.39
Number of days of payables	days	65.60	64.98	52.11	42.35	49.23

Eli Lilly and Company's activity ratios provide insights into the efficiency of the company's operations in managing its inventory, collecting receivables, and paying its payables.

1. Days of Inventory on Hand (DOH):
- The DOH measures how many days, on average, the company holds its inventory before selling it.
- Eli Lilly's DOH has fluctuated over the years, with a peak of 154.20 days in December 2024.
- A decreasing trend in DOH, as seen from 2021 to 2022, indicates improved inventory management efficiency, but the subsequent increase might suggest challenges in controlling inventory levels or changes in demand.

2. Days of Sales Outstanding (DSO):
- The DSO ratio reflects the average number of days it takes for the company to collect its accounts receivable.
- Eli Lilly's DSO ranged from 86.01 days in 2021 to a high of 121.25 days in 2023, before declining to 107.58 days in 2024.
- A lower DSO indicates faster collection of receivables and better liquidity management, which can be seen in the decrease from 2023 to 2024.

3. Number of Days of Payables:
- This ratio reveals the average number of days the company takes to pay its suppliers.
- Eli Lilly's days of payables saw an increase from 42.35 days in 2021 to 65.60 days in 2024.
- A longer period of payables could indicate liquidity constraints or changing supplier terms.

In summary, analyzing these activity ratios for Eli Lilly and Company provides valuable insights into its inventory management, receivables collection efficiency, and payables payment practices over the years. Variations in these ratios can help assess the company's operational efficiency and working capital management strategies.

Long-term

	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Fixed asset turnover	2.63	2.64	2.81	3.15	2.83
Total asset turnover	0.57	0.53	0.58	0.58	0.53

The Fixed Asset Turnover ratio for Eli Lilly and Company has shown a fluctuating trend over the past five years, starting at 2.83 in 2020, peaking at 3.15 in 2021, and then declining to 2.63 in 2024. This ratio indicates the company's ability to generate sales from its investment in fixed assets, such as property, plant, and equipment.

On the other hand, the Total Asset Turnover ratio has been relatively stable, ranging between 0.53 and 0.58 during the same period. This ratio reflects how efficiently the company utilizes all its assets to generate revenue.

Overall, while the Fixed Asset Turnover ratio has shown some volatility, the Total Asset Turnover ratio suggests that Eli Lilly and Company has been consistently effective in generating sales relative to its total asset base across the years under review.