Phillips 66 (PSX)

Inventory turnover

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Cost of revenue	US$ in thousands	132,325,000	136,246,000	151,561,000	103,707,000	59,102,000
Inventory	US$ in thousands	3,995,000	3,750,000	3,276,000	3,394,000	3,893,000
Inventory turnover		33.12	36.33	46.26	30.56	15.18

December 31, 2024 calculation

Inventory turnover = Cost of revenue ÷ Inventory
= $132,325,000K ÷ $3,995,000K
= 33.12

To analyze Phillips 66's inventory turnover, we will look at the data provided for the years 2020 to 2024. Inventory turnover is a measure of how efficiently a company manages its inventory by indicating how many times a company sells and replaces its inventory during a specific period.

From the data provided, we see that the inventory turnover for Phillips 66 has been on an increasing trend over the years, starting at 15.18 in 2020 and reaching 33.12 in 2024. This indicates that the company has been able to sell and replace its inventory at a faster rate each year.

A higher inventory turnover ratio is generally considered favorable as it suggests that inventory is efficiently managed and the company is able to convert its inventory into sales more quickly.

However, a very high inventory turnover ratio may also indicate that the company is running out of inventory too quickly, possibly leading to stockouts and lost sales opportunities. Therefore, it is essential for the company to strike a balance in managing inventory levels effectively to meet customer demand while avoiding excess or obsolete inventory.

Overall, Phillips 66's increasing inventory turnover ratio over the years reflects positively on its inventory management efficiency, but the company should continue monitoring and adjusting its inventory levels to optimize its operations and financial performance.