Colgate-Palmolive Company (CL)

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	86.82	98.07	87.65	94.61	80.24
Days of sales outstanding (DSO)	days	29.75	30.55	27.17	28.01	33.49
Number of days of payables	days	76.22	73.34	76.62	78.78	70.90
Cash conversion cycle	days	40.35	55.28	38.21	43.85	42.84

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 86.82 + 29.75 – 76.22
= 40.35

The cash conversion cycle of Colgate-Palmolive Co. has fluctuated over the past five years, indicating changes in its efficiency in managing cash flows related to operations.

In 2023, the cash conversion cycle decreased to 40.35 days from 55.28 days in 2022, reflecting an improvement in the company's ability to convert its investments in inventory and accounts receivable into cash. This reduction suggests that Colgate-Palmolive was able to optimize its working capital management and generate cash more rapidly from its operating activities.

In 2021, the cash conversion cycle was at 38.21 days, representing the lowest point in the past five years. This indicates that the company was highly efficient in managing its cash flows and converting its assets into cash during that period.

However, in 2022 and 2020, the cash conversion cycle increased to 55.28 days and 43.85 days, respectively, which suggests a slowdown in Colgate-Palmolive's cash conversion process. A higher number of days indicates that the company took longer to convert its investments into cash, potentially indicating issues with inventory management or collection from customers.

Overall, the trend in Colgate-Palmolive's cash conversion cycle shows variations in its operational efficiency over the years, with fluctuations in the time taken to convert investments in inventory and accounts receivable into cash. Monitoring and improving this cycle can help the company enhance liquidity, optimize working capital, and streamline its operations for better cash flow management.