Zimmer Biomet Holdings Inc (ZBH)

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	148.20	130.61	115.63	128.08	139.27
Days of sales outstanding (DSO)	days	73.41	74.37	68.75	78.09	64.22
Number of days of payables	days	25.51	21.54	16.50	17.25	23.41
Cash conversion cycle	days	196.10	183.44	167.87	188.93	180.08

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 148.20 + 73.41 – 25.51
= 196.10

The cash conversion cycle for Zimmer Biomet Holdings Inc has shown fluctuations over the past five years, ranging from 384.02 days in 2021 to 439.18 days in 2020. In 2023, the cash conversion cycle stood at 417.07 days, indicating an increase compared to the previous year.

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A longer cash conversion cycle suggests that the company takes more time to turn its investments into cash, potentially indicating inefficiencies in managing inventory, collecting receivables, or paying suppliers.

Zimmer Biomet Holdings Inc should monitor its cash conversion cycle closely to identify the reasons behind the fluctuations and work on improving efficiency in managing working capital components. Reducing the cash conversion cycle can help the company free up cash, improve liquidity, and enhance overall financial performance.