Ecolab Inc (ECL)

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	40.41	51.27	48.45	44.78	30.05
Days of sales outstanding (DSO)	days	71.22	73.04	74.49	75.78	70.68
Number of days of payables	days	42.27	49.42	44.95	40.44	29.88
Cash conversion cycle	days	69.35	74.89	77.98	80.12	70.85

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 40.41 + 71.22 – 42.27
= 69.35

The cash conversion cycle measures how long it takes for a company to convert its investments in inventory and other resources into cash inflows from sales. A lower cash conversion cycle indicates a more efficient management of working capital.

Based on the data provided, Ecolab, Inc.'s cash conversion cycle has shown a decreasing trend over the last five years, which is a positive sign. In 2023, the cash conversion cycle decreased to 69.22 days from 76.82 days in 2022, indicating that the company is managing its working capital more effectively. This signifies that Ecolab is collecting cash sooner from its sales or paying its suppliers later.

Comparing to 2019, the company has been able to reduce its cash conversion cycle by around 11% over the past five years, reflecting improvements in its efficiency in managing its working capital.

Overall, the decreasing trend of Ecolab, Inc.'s cash conversion cycle suggests that the company is operating more efficiently in terms of managing its cash flows, inventory, and payables, which can positively impact its financial performance and liquidity position.