Abbott Laboratories (ABT)

Cash conversion cycle

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	76.40	68.44	58.89	68.09	63.19
Days of sales outstanding (DSO)	days	60.77	52.67	55.66	68.71	63.54
Number of days of payables	days	49.95	51.08	50.34	53.61	47.61
Cash conversion cycle	days	87.23	70.03	64.21	83.20	79.12

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 76.40 + 60.77 – 49.95
= 87.23

The cash conversion cycle for Abbott Laboratories has shown fluctuations over the past five years. The cycle increased from 91.42 days in 2019 to 93.58 days in 2020, before significantly decreasing to 69.72 days in 2021. However, in the following years, the cycle increased again to 81.85 days in 2022 and further to 105.94 days in 2023.

A longer cash conversion cycle indicates that Abbott Laboratories is taking more time to convert its investments in inventory and other resources into cash inflows from sales. This could be a sign of inefficiencies in managing inventory, accounts receivable, or accounts payable.

The increasing trend in the cash conversion cycle from 2021 to 2023 suggests that Abbott Laboratories may be facing challenges in optimizing its working capital management. The company may need to focus on streamlining its operations, improving inventory turnover, and enhancing collection processes to shorten the cash conversion cycle and boost liquidity.

Overall, a careful analysis of the factors contributing to the fluctuations in the cash conversion cycle will be essential for Abbott Laboratories to enhance its cash flow efficiency and strengthen its financial performance in the long term.