Lockheed Martin Corporation (LMT)
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 | 19.35 | 19.54 | 18.77 | 22.80 | 25.68 |
| Days of sales outstanding (DSO) | days | 11.52 | 13.86 | 10.69 | 11.04 | 14.26 |
| Number of days of payables | days | 14.28 | 13.39 | 4.91 | 5.66 | 9.09 |
| Cash conversion cycle | days | 16.58 | 20.00 | 24.54 | 28.18 | 30.85 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 19.35 + 11.52 – 14.28
= 16.58
The cash conversion cycle of Lockheed Martin Corp. has shown a declining trend over the past five years, reflecting its efficiency in managing its working capital. The company's cash conversion cycle decreased from 30.85 days in 2019 to 16.59 days in 2023, indicating an improvement in its ability to convert its investments in inventory and receivables into cash.
A shorter cash conversion cycle suggests that Lockheed Martin is efficiently managing its inventory, collecting receivables, and managing its payables. This is favorable as it indicates the company is able to generate cash more quickly from its operational activities, improving its liquidity and overall financial health. This trend may be attributed to effective inventory and receivables management, as well as favorable payment terms with its suppliers.
Overall, the decreasing trend in the cash conversion cycle of Lockheed Martin Corp. reflects positively on its working capital management and operational efficiency, indicating an improvement in its cash flow and potentially enhancing its ability to meet financial obligations and fund future growth initiatives.