Vertex Pharmaceuticals Inc (VRTX)

Cash conversion cycle

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Days of inventory on hand (DOH)	days	144.45	110.37	80.98	71.75	65.79
Days of sales outstanding (DSO)	days	53.43	58.21	59.39	55.33	52.67
Number of days of payables	days	49.49	54.51	53.43	39.63	36.34
Cash conversion cycle	days	148.39	114.07	86.94	87.46	82.12

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 144.45 + 53.43 – 49.49
= 148.39

The cash conversion cycle of Vertex Pharmaceuticals Inc has shown a fluctuating trend over the past five years. In 2020, the company had a cash conversion cycle of 82.12 days, indicating that it took Vertex 82.12 days on average to convert its investments in inventory into cash flows from sales.

By the end of 2021, the cash conversion cycle increased to 87.46 days, suggesting a slight deterioration in the company's efficiency in managing its working capital. However, in 2022, there was a slight improvement as the cash conversion cycle decreased to 86.94 days.

In 2023, there was a notable increase in the cash conversion cycle to 114.07 days, signifying a potential challenge for Vertex in efficiently managing its working capital and converting sales into cash. The most significant spike in the cash conversion cycle was observed in 2024, reaching 148.39 days, indicating a prolonged period for the company to convert its investments in inventory back into cash from sales.

Overall, the increasing trend in the cash conversion cycle for Vertex Pharmaceuticals Inc suggests a need for the company to assess and potentially streamline its working capital management processes to enhance efficiency and cash flow generation in the future.