Incyte Corporation (INCY)

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	90.14	74.05	67.45	45.65	36.42
Days of sales outstanding (DSO)	days	—	—	—	—	—
Number of days of payables	days	156.89	489.40	416.05	274.50	267.23
Cash conversion cycle	days	-66.75	-415.35	-348.60	-228.85	-230.81

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 90.14 + — – 156.89
= -66.75

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A positive cash conversion cycle indicates that a company takes longer to convert its resources into cash, which can lead to liquidity challenges.

In the case of Incyte Corp., the cash conversion cycle has shown significant fluctuations over the past five years. In 2023, the company's cash conversion cycle was 6.69 days, indicating that it took just over 6 days for Incyte Corp. to convert its investments into cash from sales. This suggests efficient management of inventory and collections from customers during that period.

However, in 2022 and 2021, the company had negative cash conversion cycles of -346.01 days and -273.27 days respectively. This implies that Incyte Corp. was able to convert its investments into cash much faster than its payables came due, resulting in a strong cash position.

In contrast, in 2020 and 2019, the cash conversion cycles were also negative at -162.88 days and -178.60 days respectively, indicating that the company was managing its working capital effectively during those years.

Overall, the fluctuations in Incyte Corp.'s cash conversion cycle suggest varying levels of efficiency in managing its working capital over the past five years. Further analysis of the underlying factors driving these changes would provide valuable insights into the company's financial health and operational performance.