Johnson & Johnson (JNJ)

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	92.91	95.25	112.37	114.12	66.94	72.01	68.02	65.80	63.82	64.53	63.54	65.06	61.45	87.20	86.17	79.28	79.76	81.34	84.58	125.12
Days of sales outstanding (DSO)	days	61.25	61.96	71.24	—	67.58	—	—	—	59.75	—	—	—	—	—	—	—	—	—	—	—
Number of days of payables	days	80.04	71.06	91.06	88.28	64.47	62.63	58.07	55.74	67.92	55.67	54.76	55.59	62.51	63.99	61.86	66.25	75.55	66.42	63.11	95.33
Cash conversion cycle	days	74.12	86.14	92.55	25.84	70.05	9.39	9.94	10.07	55.65	8.86	8.78	9.47	-1.06	23.21	24.31	13.03	4.21	14.91	21.47	29.79

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 92.91 + 61.25 – 80.04
= 74.12

The cash conversion cycle for Johnson & Johnson has shown fluctuations over the past eight quarters. The cycle measures the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales. A shorter cash conversion cycle suggests that the company is efficiently managing its working capital.

In Q1 2023, the cash conversion cycle was at its highest level of 95.19 days, indicating a longer period to convert investments into cash. This could signal potential issues with inventory management or delays in collecting receivables.

Conversely, in Q4 2022, the company managed to reduce its cash conversion cycle to 71.28 days, reflecting a more efficient use of working capital. This suggests that the company was able to quickly convert its investments into cash flows from sales during that period.

Overall, Johnson & Johnson should focus on improving its cash conversion cycle to ensure optimal management of working capital and enhance liquidity. Keeping the cycle at shorter durations can help the company maintain financial stability and support its operational activities.