Chemed Corp (CHE)

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	2.34	2.16	2.11	1.51	1.67
Days of sales outstanding (DSO)	days	29.26	23.83	23.41	22.26	27.08
Number of days of payables	days	12.49	8.79	15.26	11.52	11.43
Cash conversion cycle	days	19.11	17.20	10.26	12.25	17.32

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 2.34 + 29.26 – 12.49
= 19.11

The cash conversion cycle of Chemed Corp. has fluctuated over the past five years. In 2023, the company's cash conversion cycle increased to 16.30 days from 15.41 days in 2022. This indicates that it took Chemed Corp. longer to convert its investments in inventory and accounts receivable into cash in 2023 compared to the previous year.

In 2021, the company's cash conversion cycle was at its lowest point at 6.64 days, suggesting that Chemed Corp. efficiently managed its working capital and converted its assets into cash quickly. However, in 2019, the cash conversion cycle increased significantly to 17.73 days, indicating potential challenges in converting assets into cash in a timely manner.

Overall, the trend in Chemed Corp.'s cash conversion cycle shows some variability, with fluctuations in the efficiency of the company's working capital management over the past five years. It is essential for the company to focus on optimizing its cash conversion cycle to ensure effective utilization of its resources and maintain healthy liquidity levels.