Chemed Corp (CHE)

Cash conversion cycle

		Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	2.34	2.46	2.33	2.18	2.16	2.22	2.27	2.21	2.11	1.76	1.56	1.43	1.51	1.60	1.61	1.61	1.67	1.70	1.50	1.51
Days of sales outstanding (DSO)	days	29.26	27.56	20.08	25.94	23.83	20.86	23.27	19.99	23.41	20.24	21.22	18.28	22.26	19.56	23.93	24.68	27.08	22.30	27.04	24.17
Number of days of payables	days	12.49	11.10	8.20	8.25	8.79	16.37	15.69	13.57	15.26	12.60	11.77	11.71	11.52	8.34	7.90	8.33	11.43	10.19	12.08	9.53
Cash conversion cycle	days	19.11	18.92	14.21	19.87	17.20	6.70	9.85	8.63	10.26	9.40	11.01	8.00	12.25	12.82	17.64	17.95	17.32	13.82	16.46	16.16

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 shown variability over the past eight quarters. The cycle measures the amount of time it takes for a company to convert its investments in inventory and other resources into cash from sales.

In Q4 2023, the cash conversion cycle stood at 16.30 days, slightly lower than Q3 2023's 16.54 days. This indicates that Chemed Corp. was able to manage its inventory, receivables, and payables efficiently compared to the previous quarter, resulting in a quicker conversion of its resources into cash.

Q2 2023 had the lowest cash conversion cycle of 12.64 days over the analyzed period. This suggests that Chemed Corp. was efficient in managing its working capital during that quarter, leading to a faster cash conversion process.

On the other hand, Q1 2023 and Q4 2022 had relatively longer cash conversion cycles of 18.24 days and 15.41 days, respectively. This could indicate potential issues in managing inventory levels, collecting receivables, or delaying payments to suppliers during those quarters.

Overall, it is essential for Chemed Corp. to closely monitor its cash conversion cycle to ensure optimal management of working capital and efficient cash flow operations. Consistent improvements in this cycle can lead to better financial performance and liquidity for the company.