Thermo Fisher Scientific Inc (TMO)

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	177.10	185.40	191.85	191.02	200.39	204.64	206.84	206.49	203.60	207.06	204.97	196.95	188.44	192.21	184.47	178.24	175.02	144.95	141.91	138.25
Days of sales outstanding (DSO)	days	72.45	72.34	68.84	—	66.98	—	—	—	76.76	—	—	—	—	—	—	—	—	—	—	—
Number of days of payables	days	99.97	86.04	82.20	94.36	120.26	88.37	94.37	100.44	115.57	97.12	92.98	97.34	101.73	85.49	70.04	82.52	99.72	72.69	61.51	64.70
Cash conversion cycle	days	149.59	171.70	178.49	96.65	147.11	116.27	112.47	106.05	164.79	109.95	111.99	99.61	86.71	106.72	114.44	95.73	75.31	72.26	80.39	73.55

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 177.10 + 72.45 – 99.97
= 149.59

Thermo Fisher Scientific Inc.'s cash conversion cycle over the past eight quarters has shown fluctuations. The cash conversion cycle measures the time taken for a company to convert its investments in inventory and other resources into cash inflows from sales. A shorter cash conversion cycle indicates effective management of working capital and quicker turnover of assets.

In Q4 2023, the cash conversion cycle decreased to 101.42 days from Q3 2023, indicating improved efficiency in converting inventory and receivables into cash. This trend is positive as it suggests the company may be managing its working capital more effectively.

Compared to the same quarter in the previous year (Q4 2022), the cash conversion cycle also improved, demonstrating progress in operational efficiency. Although there were fluctuations in the cycle throughout the quarters, the overall trend seems to show a gradual improvement.

It is crucial for Thermo Fisher Scientific Inc. to continue monitoring and managing its cash conversion cycle to ensure optimal utilization of resources and maintain healthy cash flows. Further analysis of the components contributing to the cycle, including inventory turnover and accounts receivable collection periods, could provide more insights into the company's working capital management strategies.