Solventum Corp. (SOLV)
Cash conversion cycle
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 86.17 | 92.76 | 91.36 | — |
| Days of sales outstanding (DSO) | days | — | — | — | — |
| Number of days of payables | days | — | — | — | — |
| Cash conversion cycle | days | 86.17 | 92.76 | 91.36 | 0.00 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 86.17 + — – —
= 86.17
The cash conversion cycle of Solventum Corp. has shown a fluctuating trend over the past four years. In 2020, the company had a cash conversion cycle of 0.00 days, indicating that it was able to convert cash into inventory, sell inventory, and collect receivables all in the same day. However, this could also suggest aggressive liquidity management or potential inefficiencies in managing working capital.
In subsequent years, the cash conversion cycle increased, reaching 91.36 days in 2021, 92.76 days in 2022, and improved slightly to 86.17 days in 2023. This upward trend indicates that the company took longer to convert its investments in inventory and accounts receivable back into cash during these years.
A longer cash conversion cycle can imply challenges in managing inventory levels, collecting payments from customers, or negotiating favorable payment terms with suppliers. It may also suggest potential liquidity constraints if the cycle is prolonged, impacting the company's ability to meet its short-term obligations or invest in growth opportunities.
Overall, a decreasing trend in the cash conversion cycle from 2022 to 2023 shows some improvement in the efficiency of Solventum Corp.'s working capital management. However, it would be beneficial for the company to continuously monitor and optimize its cash conversion cycle to ensure healthy liquidity levels and sustainable operational efficiency.
Peer comparison
Dec 31, 2023