3M Company (MMM)
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 | 95.26 | 101.95 | 96.81 | 93.18 | 88.05 |
| Days of sales outstanding (DSO) | days | 53.05 | 48.33 | 48.11 | 53.36 | 54.42 |
| Number of days of payables | days | 64.10 | 60.41 | 58.14 | 56.29 | 47.46 |
| Cash conversion cycle | days | 84.20 | 89.87 | 86.77 | 90.24 | 95.01 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 95.26 + 53.05 – 64.10
= 84.20
The cash conversion cycle of 3M Co. has shown a fluctuating trend over the past five years. The cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.
In 2023, the cash conversion cycle improved to 84.20 days from 89.87 days in the previous year, indicating that the company was able to manage its working capital more efficiently. This suggests that 3M Co. may have improved its inventory and receivables management or accelerated its collections of accounts receivable.
Comparing to 2021, the cycle decreased slightly from 86.77 days, and showed a significant improvement from 90.24 days in 2020. This indicates that in recent years, the company has been successful in optimizing its processes to boost cash flow and overall liquidity.
However, it is worth noting that the cash conversion cycle in 2019 was the highest at 95.01 days, which may have been reflective of challenges faced by the company in managing its working capital efficiency at that time.
Overall, the improving trend in the cash conversion cycle of 3M Co. suggests that the company has been making effective efforts in managing its working capital and converting its investments into cash more efficiently.
Peer comparison
Dec 31, 2023