Thermo Fisher Scientific Inc (TMO)

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	165.87	179.51	185.72	170.05	155.25
Days of sales outstanding (DSO)	days	72.45	66.98	76.76	66.13	64.18
Number of days of payables	days	93.63	107.72	105.42	91.80	88.45
Cash conversion cycle	days	144.70	138.76	157.06	144.38	130.98

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 165.87 + 72.45 – 93.63
= 144.70

The cash conversion cycle of Thermo Fisher Scientific Inc. has fluctuated over the past five years.

In 2023, the cash conversion cycle stood at 101.42 days, indicating that, on average, it takes the company approximately 101 days to convert its investments in inventory and receivables into cash generated from sales. This represents a slight increase from the previous year's figure of 97.64 days, suggesting a slower conversion process in 2023.

Comparing the most recent data to earlier years, we observe a peak in the cash conversion cycle in 2021 at 114.98 days, followed by a decrease in 2022 and then a slight increase in 2023. This indicates that the company faced challenges in managing its inventory, receivables, and payables in 2021, leading to a longer cash conversion cycle.

Similarly, in 2020 and 2019, the cash conversion cycle was 106.78 days and 99.38 days, respectively. These figures imply that Thermo Fisher Scientific Inc. was able to convert its investments into cash more efficiently in 2019 compared to 2020 and subsequent years.

Overall, fluctuations in the cash conversion cycle can provide insights into the company's efficiency in managing its working capital and operations. An upward trend in the cycle may signify potential liquidity challenges or inefficiencies in managing inventory and receivables, while a downward trend may indicate improved working capital management.