Laboratory Corporation of America Holdings (LH)
Cash conversion cycle
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 19.18 | 19.69 | 21.06 | 13.96 | 17.11 |
| Days of sales outstanding (DSO) | days | 54.33 | 57.20 | 68.04 | 50.89 | 64.75 |
| Number of days of payables | days | 34.06 | 34.34 | 38.14 | 21.60 | 25.84 |
| Cash conversion cycle | days | 39.45 | 42.55 | 50.96 | 43.24 | 56.03 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 19.18 + 54.33 – 34.06
= 39.45
The cash conversion cycle of Laboratory Corporation of America Holdings has shown a decreasing trend over the past five years, dropping from 56.03 days as of December 31, 2020, to 39.45 days as of December 31, 2024. This indicates that the company has been managing its working capital more efficiently.
A lower cash conversion cycle suggests that the company takes less time to convert its investments in inventory and other resources into cash inflows from sales. This can be a positive sign of effective inventory management, billing, and collection processes. The steady improvement in the cash conversion cycle reflects an enhanced ability to optimize cash flow and liquidity.
However, it is important to note that a very low cash conversion cycle could also indicate aggressive credit policies or difficulty in managing inventory levels. Therefore, while the decreasing trend is generally positive, it is essential for the company to strike a balance to ensure sustainable operations and financial health.
Peer comparison
Dec 31, 2024