Garmin Ltd (GRMN)

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	170.30	187.22	188.43	203.43	193.35	208.58	197.98	181.70	173.79	149.81	129.88	126.79	120.40	137.31	141.90	136.46	132.87	138.81	122.96	114.51
Days of sales outstanding (DSO)	days	56.71	51.65	52.95	—	49.43	47.84	51.46	43.27	62.17	47.51	55.44	46.30	74.20	61.12	51.29	47.75	68.82	56.95	61.55	48.65
Number of days of payables	days	32.11	34.85	34.11	28.72	27.11	36.55	43.51	40.56	52.39	42.87	42.06	37.95	40.90	39.36	33.71	34.59	42.50	43.60	40.74	32.62
Cash conversion cycle	days	194.90	204.02	207.28	174.71	215.67	219.87	205.93	184.42	183.57	154.46	143.26	135.14	153.70	159.07	159.48	149.62	159.19	152.15	143.76	130.53

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 170.30 + 56.71 – 32.11
= 194.90

The cash conversion cycle of Garmin Ltd fluctuated over the periods examined. It measures the time it takes for a company to convert its investment in inventory back to cash. A shorter cash conversion cycle is generally preferable as it indicates faster turnover of inventory and collection of accounts receivable.

Garmin Ltd's cash conversion cycle ranged from 130.53 days to 219.87 days over the past five years. During some periods, the company managed to convert its cash more efficiently, with the cycle as short as 130.53 days, likely indicating effective inventory management and speedy collection of receivables.

Conversely, there were periods where the cash conversion cycle was longer, peaking at 219.87 days. This could suggest challenges in managing inventory levels efficiently or delays in collecting accounts receivable, which could potentially impact cash flow and liquidity.

Overall, Garmin Ltd should aim to reduce its cash conversion cycle to improve cash flow and operational efficiency. Analyzing the components of the cycle, such as inventory turnover and accounts receivable collection, could help the company identify areas for improvement and implement strategic changes to shorten the cycle.