Organon & Co (OGN)
Cash conversion cycle
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 104.66 | 88.19 | 80.22 |
| Days of sales outstanding (DSO) | days | 101.64 | 87.20 | 80.02 |
| Number of days of payables | days | 104.58 | 99.54 | 121.17 |
| Cash conversion cycle | days | 101.72 | 75.86 | 39.07 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 104.66 + 101.64 – 104.58
= 101.72
The cash conversion cycle of Organon & Co. has fluctuated significantly over the past five years. In 2019 and 2020, the company had prolonged cash conversion cycles of 199.67 days and 163.40 days, respectively, indicating that it took a considerable amount of time to convert its investments in inventory back into cash from sales.
However, in 2021, Organon & Co. made a substantial improvement in managing its working capital efficiency, achieving a remarkably low cash conversion cycle of 8.46 days. This sharp decrease suggests that the company was able to streamline its operations, reduce inventory holding periods, and speed up the collection of accounts receivables.
In 2022, the cash conversion cycle increased to 66.68 days, indicating a slight deterioration in the company's working capital management compared to the previous year. Nonetheless, Organon & Co. still maintained a reasonable level of efficiency in converting its assets into cash during this period.
By the end of 2023, the cash conversion cycle rose further to 101.78 days, suggesting a lengthening of the cash conversion process compared to the prior year. This increase may indicate challenges in managing inventory levels, collecting receivables, or other factors affecting the company's cash flow dynamics.
Overall, Organon & Co.'s cash conversion cycle has shown notable fluctuations over the years, reflecting changes in the company's operational efficiency and effectiveness in managing working capital. Further analysis would be needed to determine the underlying reasons for these fluctuations and their impacts on the company's financial performance and liquidity.
Peer comparison
Dec 31, 2023