Illinois Tool Works Inc (ITW)

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	65.97	69.61	73.92	76.58	78.51	77.82	78.88	77.14	71.96	67.04	62.99	62.52	58.85	56.70	56.84	54.07	51.89	53.42	54.90	57.92
Days of sales outstanding (DSO)	days	72.13	72.90	74.14	73.99	73.62	71.68	75.74	77.92	72.77	70.65	73.44	76.30	73.65	73.33	62.53	64.93	64.44	64.92	67.41	68.28
Number of days of payables	days	22.45	22.44	22.70	22.93	22.70	23.96	27.12	28.51	24.85	24.85	27.31	28.50	26.43	25.71	19.58	22.27	21.04	21.78	22.38	24.44
Cash conversion cycle	days	115.64	120.07	125.36	127.63	129.42	125.53	127.50	126.55	119.89	112.84	109.12	110.31	106.06	104.32	99.78	96.73	95.29	96.56	99.93	101.76

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 65.97 + 72.13 – 22.45
= 115.64

The cash conversion cycle for Illinois Tool Works, Inc. has shown some fluctuation over the past eight quarters. In the most recent quarter, Q4 2023, the company's cash conversion cycle was 117.79 days, which indicates an improvement compared to the previous quarter. This trend of decreasing cash conversion cycle is a positive sign as it signifies that the company is managing its working capital more efficiently.

Looking at the historical data, it is evident that Illinois Tool Works, Inc. has been successful in gradually reducing its cash conversion cycle. This implies that the company is collecting cash from its sales, managing its inventory, and paying its suppliers more effectively. A lower cash conversion cycle indicates that the company is able to convert its investments in inventory and accounts receivable into cash more quickly, which is favorable for its overall financial health.

However, it should be noted that the cash conversion cycle increased in Q1 2023 and Q4 2022 compared to the previous quarters. This could be a result of seasonal factors or specific circumstances affecting the company during those periods. Overall, the decreasing trend in the cash conversion cycle demonstrates Illinois Tool Works, Inc.'s commitment to optimizing its working capital management, which can lead to improved liquidity and operational efficiency.