Johnson & Johnson (JNJ)

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	75.09	74.17	62.71	61.24	59.22
Days of sales outstanding (DSO)	days	64.61	74.26	59.75	60.30	64.87
Number of days of payables	days	64.69	71.43	66.75	62.30	56.09
Cash conversion cycle	days	75.01	77.00	55.72	59.25	68.00

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 75.09 + 64.61 – 64.69
= 75.01

The cash conversion cycle for Johnson & Johnson has exhibited fluctuations over the past five years. The cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

In 2023, the cash conversion cycle increased to 85.04 days from the prior year's figure of 71.28 days. This suggests that there was a lengthening in the time it took for the company to convert its resources into cash during the year.

Comparing 2023 to 2022 and 2021, we observe a significant increase in the cash conversion cycle. In 2022, the cycle was 51.32 days, reflecting a substantial improvement over the previous year's cycle of 57.94 days in 2021.

However, the cycle increased to 57.94 days in 2021 from 70.72 days in 2020, indicating a reversal in the trend of decreasing cycle lengths observed in the previous year. This fluctuation suggests potential challenges in managing inventory and accounts receivable efficiently during that period.

Overall, Johnson & Johnson's cash conversion cycle has displayed some volatility over the past five years, impacting the efficiency of its working capital management. Further analysis of the company's operational and financial performance may be necessary to identify the underlying factors driving these fluctuations.