Eli Lilly and Company (LLY)

Cash conversion cycle

		Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	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
Days of inventory on hand (DOH)	days	154.20	164.77	149.38	150.02	144.35	126.50	126.00	125.24	116.34	99.12	103.61	99.07	98.50	104.02	102.22	105.01	121.96	133.35	128.90	120.33
Days of sales outstanding (DSO)	days	107.58	107.65	122.65	101.72	121.25	117.94	113.42	118.92	88.19	103.92	96.33	97.16	86.01	92.37	94.27	95.36	87.39	91.90	91.86	100.43
Number of days of payables	days	65.60	63.75	67.41	60.82	64.98	62.85	64.97	55.55	52.11	43.55	44.09	36.47	42.35	41.71	42.70	47.03	49.23	53.64	48.51	46.84
Cash conversion cycle	days	196.18	208.66	204.62	190.92	200.62	181.60	174.45	188.61	152.41	159.49	155.85	159.75	142.16	154.68	153.79	153.34	160.12	171.61	172.24	173.92

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 154.20 + 107.58 – 65.60
= 196.18

The cash conversion cycle is a critical financial metric that reflects the efficiency with which Eli Lilly and Company manages its working capital. Based on the provided data:

- From March 2020 to December 2021, the cash conversion cycle decreased steadily, indicating an improvement in the company's ability to convert its investments in inventory and receivables into cash more quickly.
- The lowest point in the cash conversion cycle was observed at 142.16 days on December 31, 2021, suggesting that Eli Lilly was able to streamline its cash flow operations efficiently.
- However, from March 2022 to September 2024, there was a noticeable increase in the cash conversion cycle, with a peak of 208.66 days on September 30, 2024. This indicates a potential deterioration in the company's management of working capital during this period.
- The longer cash conversion cycle in the latter period could be a result of various factors such as inventory management challenges, delayed receivables collection, or extended payment cycles.
- It is crucial for Eli Lilly to monitor and address the lengthening trend in the cash conversion cycle to ensure optimal cash flow management and operational efficiency in the future.

In conclusion, the analysis of Eli Lilly and Company's cash conversion cycle highlights both positive and negative trends over the specified periods, underscoring the importance of continuous monitoring and improvement in working capital management practices.