McKesson Corporation (MCK)

Cash conversion cycle

		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	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019
Days of inventory on hand (DOH)	days	25.21	26.93	27.87	26.72	26.33	27.73	26.77	26.57	25.87	26.54	27.05	28.88	28.78	28.78	28.97	26.45	26.67	29.17	28.42	29.48
Days of sales outstanding (DSO)	days	25.56	27.96	28.24	28.11	25.62	27.37	26.98	27.09	25.72	26.10	29.32	30.06	29.39	29.00	30.06	28.07	31.51	30.55	31.21	32.37
Number of days of payables	days	56.26	57.11	59.42	57.29	56.82	56.69	55.22	54.09	52.68	51.88	54.44	55.38	58.28	54.69	56.96	52.89	59.28	56.11	56.58	60.40
Cash conversion cycle	days	-5.50	-2.22	-3.31	-2.46	-4.87	-1.60	-1.47	-0.43	-1.09	0.76	1.93	3.56	-0.11	3.08	2.06	1.63	-1.10	3.61	3.05	1.45

March 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 25.21 + 25.56 – 56.26
= -5.50

The cash conversion cycle of McKesson Corporation has shown fluctuations over the past several quarters. Generally speaking, a negative cash conversion cycle indicates that the company is able to convert its investments in inventory back into cash quickly, which is considered favorable.

Looking at the trend, the cash conversion cycle has been generally decreasing from the positive range to negative values, with some variations. This signifies an improvement in the efficiency of the company's working capital management.

For the most recent quarter (ending March 31, 2024), the cash conversion cycle was at -5.50 days, indicating that McKesson Corporation was able to convert its investments in inventory into cash and then into sales within a relatively short period. This suggests effective management in terms of inventory turnover, accounts receivable collection, and accounts payable payment.

However, it's also worth noting that there were certain periods in the past where the cash conversion cycle was positive, indicating a longer period to convert inventory to sales and receivables into cash. The positive values seen in the past may warrant further investigation to understand potential factors impacting the efficiency of the company's working capital management during those periods.

In conclusion, the overall trend of a decreasing cash conversion cycle for McKesson Corporation reflects improved efficiency in managing its working capital, but it's important to monitor for any potential fluctuations or changes in the future.