Merck & Company Inc (MRK)

Cash conversion cycle

		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	Mar 31, 2019
Days of inventory on hand (DOH)	days	78.64	76.17	74.39	73.36	70.85	69.01	69.33	76.22	81.90	67.65	66.34	76.77	68.08	85.57	80.45	76.08	78.52	75.96	79.17	77.60
Days of sales outstanding (DSO)	days	62.84	63.96	69.04	65.69	58.18	58.69	61.57	66.46	69.17	67.82	65.20	71.81	66.20	84.25	72.86	73.99	63.24	67.03	65.52	64.47
Number of days of payables	days	48.51	43.60	43.18	46.04	51.11	41.44	43.62	49.04	63.41	40.64	47.01	48.37	53.04	52.28	45.80	46.49	49.10	41.49	42.55	41.00
Cash conversion cycle	days	92.97	96.54	100.25	93.00	77.92	86.26	87.28	93.64	87.66	94.82	84.53	100.21	81.24	117.54	107.51	103.58	92.66	101.50	102.15	101.07

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 78.64 + 62.84 – 48.51
= 92.97

The cash conversion cycle of Merck & Co Inc has shown fluctuations over the past eight quarters. It ranged from a low of 92.71 days in Q4 2022 to a high of 126.65 days in Q2 2023. The cycle measures the average number of days it takes for the company to convert its resources, such as inventory, into cash through sales, and then to convert that cash back into resources. A shorter cash conversion cycle indicates that the company is able to efficiently manage its working capital and generate cash flow. Conversely, a longer cycle may suggest inefficiencies in managing inventory, collecting receivables, or paying suppliers.

In the recent quarters, Merck & Co Inc experienced an increase in the cash conversion cycle, reaching 126.65 days in Q2 2023. This suggests that the company took longer to convert its resources into cash during that period, potentially facing challenges in managing its working capital effectively. However, it improved slightly in Q4 2023 to 117.97 days.

Overall, monitoring the cash conversion cycle can provide insights into the company's operational efficiency and liquidity management. Merck & Co Inc may need to focus on optimizing its inventory management, streamlining its sales and collection processes, and negotiating better payment terms with suppliers to reduce the cash conversion cycle and improve cash flow.