Zoetis Inc (ZTS)

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	187.55	181.53	152.98	145.57	130.29
Days of sales outstanding (DSO)	days	58.18	58.09	55.39	58.02	65.48
Number of days of payables	days	30.06	31.35	34.69	40.86	27.81
Cash conversion cycle	days	215.67	208.27	173.69	162.72	167.96

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 187.55 + 58.18 – 30.06
= 215.67

The cash conversion cycle of Zoetis Inc has exhibited a fluctuating trend over the past five years. Starting from 266.53 days in 2019, it increased to 288.86 days in 2021, demonstrating a longer conversion cycle. However, in the following year, the cycle decreased to 263.18 days before rising again to 343.43 days in 2022. Most recently, the cycle further extended to 362.56 days by the end of 2023.

This increasing trend in the cash conversion cycle indicates that Zoetis Inc may be taking longer to convert its investments in inventory into cash. A longer cash conversion cycle can tie up more funds in working capital, potentially impacting the company's liquidity and cash flow. It may also suggest inefficiencies in managing inventory, receivables, and payables, which could lead to higher carrying costs and working capital requirements.

As such, Zoetis Inc may need to focus on optimizing its inventory management, improving collections from customers, and extending payment terms with suppliers to shorten its cash conversion cycle and enhance its overall cash flow efficiency.