Danaher Corp. (NYSE:DHR)

The financial ratios demonstrate varying trends in the company's operational efficiency and working capital management over multiple quarters.

Inventory Turnover

The inventory turnover ratio showed a general decline from 4.28 in April 2020 to around 3.6-3.8 in recent quarters, indicating a slower rate of inventory movement. The ratio experienced fluctuations but mostly remained below the initial figure observed in early 2020, suggesting potential challenges in inventory management or changes in sales dynamics.

Receivables Turnover

Receivables turnover improved significantly from 5.51 in April 2020 to higher levels around 6.7 to 7.1 in several quarters, peaking at 7.15 in September 2024. This indicates enhanced efficiency in collecting receivables, reflecting better credit and collection policies or stronger cash inflows from customers.

Payables Turnover

Payables turnover displayed moderate variability. Starting around 4.79 in April 2020, it increased to approximately 5.5–6.0 from late 2021 onward. The upward trend suggests the company was paying its suppliers somewhat faster over time, which might imply improved supplier relationships or changes in payment terms.

Working Capital Turnover

The working capital turnover ratio showed significant volatility. After an initial figure of about 3.48, it spiked to nearly 8.4 in early 2021, then fluctuated downwards with some quarters reflecting sharp declines to around 2.18 by late 2022. Subsequently, the ratio surged again to levels above 8.0 in late 2024, before decreasing towards mid-2025. This volatility indicates varying efficiency in utilizing working capital, possibly due to changes in operational scale, inventory management, or receivables and payables dynamics.

Average Inventory Processing Period

The days inventory outstanding (DIO) gradually increased from 85 days in April 2020 to a peak near 104 days by early 2023, indicating longer inventory holding periods. There was some mild improvement toward late 2024, with values dropping closer to 88-96 days, although still elevated compared to earlier periods. This suggests increased capital tied in inventory over the years, with some recent improvements.

Average Receivable Collection Period

Receivable collection periods shortened from 66 days in April 2020 to a range mostly between 51 and 60 days in later quarters, demonstrating better collection efficiency. This aligns with the upward trend in receivables turnover, reflecting enhanced cash flow management related to account receivables.

Operating Cycle

The operating cycle length remained relatively stable, fluctuating between approximately 140 and 165 days across the periods. These fluctuations reflect the combined effects of changes in inventory processing and receivable collection periods, with no clear long-term improvement or deterioration pattern.

Average Payables Payment Period

The average payables payment period initially shortened from 76 days in April 2020 to the mid-60s in subsequent quarters, reaching as low as 60 days around mid-2024. This shortening indicates quicker payments to suppliers, impacting the cash outflows and working capital cycle.

Cash Conversion Cycle

The cash conversion cycle (CCC) showed considerable variation, starting around 75 days in early 2020, decreasing briefly to 63 days in early 2021, and then increasing to a peak around 98-95 days during 2022-2023. Toward 2024 and 2025, it again declined closer to 76-90 days. The fluctuating CCC indicates varying efficiency in converting investments in inventory and receivables back into cash, influenced by the movements in inventory, receivables, and payables periods.

Cost of sales

The cost of sales exhibits a fluctuating pattern over the presented quarters. From April 2020 to December 2021, there is a general increasing trend, rising from $1,900 million to a peak of $3,205 million. This increase is somewhat erratic but mostly upward. Following December 2021, values show volatility, with both rises and declines through June 2025. Notably, substantial drops appear in March 2023 and March 2025, with corresponding recoveries in subsequent quarters. The pattern suggests variability potentially tied to operational factors or market conditions.

Inventories

Inventory levels have increased over the entire period but with more stability than cost of sales. Starting at $2,575 million in April 2020, inventories fluctuate modestly, reaching a high of $3,383 million in March 2023, then declining to a lower range around $2,532 million to $2,689 million by mid-2025. The inventory trend suggests an initial buildup which could be indicative of stockpiling or anticipated demand, followed by a controlled reduction in more recent periods.

Inventory turnover ratio

The inventory turnover ratio, available from late 2020 onwards, remains relatively stable but shows a slight downward trend overall. In the last quarters of 2020 and the first half of 2021, turnover ratios hover slightly above 4.0, indicating efficient inventory management. However, from late 2021 through mid-2025, the ratio mostly ranges between 3.5 and 3.8, with minor fluctuations. This decrease suggests that inventory is moving more slowly relative to sales, possibly reflecting changes in sales efficiency or inventory management practices.

General insights

Cost of sales increases alongside rising inventory levels initially, which is consistent with growth or increased operational scale. The subsequent decrease and fluctuation in cost of sales juxtaposed with a moderate decline in inventories and a slight drop in inventory turnover may signal adjustments in business operations or demand cycles. The overall trends imply that while inventory management remains steady, sales dynamics and associated costs experience more volatility, which may warrant closer monitoring to optimize profitability and capital use.

The sales figures exhibit a general upward trajectory from April 2020 through December 2021, increasing from 4,343 million USD to 8,148 million USD. Following this period, sales demonstrate noticeable fluctuations, with declines observed in early 2023 and again into mid-2024, before showing a mild recovery by mid-2025. This indicates periods of volatility after the initial growth phase.

The trade accounts receivable, net of doubtful accounts, maintain a somewhat stable but slightly fluctuating pattern over the entire period. The values range from 3,433 million USD in April 2020 to a peak near 4,918 million USD in December 2022, followed by a gradual decline to around 3,564 million USD by mid-2025. This suggests that while receivables increased alongside sales growth initially, cautious management or collection efforts may have contributed to the subsequent decline in receivables despite sales variability.

The receivables turnover ratio, which is available from the last quarter of 2020, reflects the efficiency of collection efforts. It displays an upward trend from 5.51 in October 2020 to a peak of approximately 7.15 in June 2024, signaling improving turnover and quicker collection cycles over time. There is minor variability, but the overall improvement suggests enhanced credit management and liquidity positions.

Sales Summary

Initial strong growth through 2021, reaching a peak over 8 billion USD, followed by volatility and some decline through early 2024, with partial recovery late in the analyzed period.

Trade Accounts Receivable

Increased in line with sales growth initially, peaking near the end of 2022, before a consistent downward adjustment in subsequent quarters, possibly reflecting tighter credit policies or improved collections.

Receivables Turnover

Consistent improvement in turnover ratio, indicating more efficient receivables management and faster cash conversion post-2020, peaking in mid-2024.

The data reveals several noteworthy trends over the observed quarterly periods. Cost of sales exhibits a fluctuating pattern, with notable peaks and troughs rather than a smooth trajectory. Beginning at $1,900 million in April 2020, cost of sales increased significantly, reaching a peak around the end of 2021 at about $3,205 million. This peak is followed by periods of decline and moderate recovery, with figures varying between approximately $2,230 million and $2,626 million from early 2023 through mid-2025.

Trade accounts payable demonstrate a generally declining trend over time, particularly from the fourth quarter of 2020 onward. Starting at around $1,748 million in April 2020, payables initially fluctuated mildly and experienced a peak near the end of 2021 at roughly $2,569 million. Subsequently, a downward movement is evident, with payables reduced to values closer to $1,600-$1,700 million by mid-2025.

The payables turnover ratio, available from the fourth quarter of 2020, generally trends upward with some oscillations. Starting near 4.79, the ratio increases steadily, crossing the 5.5 threshold multiple times from mid-2021 onward and reaching values around 6.0 in late 2024. This upward trend suggests faster turnover of payables relative to cost of sales over time, indicating improving efficiency in settling obligations or changes in payment terms.

Cost of sales

Shows significant volatility with pronounced increases through 2020 and 2021, peaking at over $3 billion at the end of 2021, followed by a gradual decline and stabilization in the $2.2-$2.6 billion range from 2023 onwards.

Trade accounts payable

Exhibits an initial increase leading to a peak at the end of 2021 (~$2.57 billion), then declines consistently towards mid-2025, reflecting possibly tighter control or reduced credit terms with suppliers.

Payables turnover ratio

Records a clear rising trend from Q4 2020 onward, moving from just below 5 to values consistently above 5.5 and approaching 6, denoting improved payment processing speed or more efficient management of payables relative to purchases.

Working Capital

The working capital shows significant fluctuations over the periods analyzed. Initially, there is a marked increase from 2,677 million USD in April 2020 to a peak of 8,567 million USD in July 2021. Following this peak, a sharp decline is apparent by October 2021, with values dropping to 3,519 million USD. The working capital then demonstrates a generally upward trend, reaching a peak of 11,838 million USD in September 2023. However, subsequent quarters show a notable reduction, decreasing to 2,699 million USD by March 2025. This pattern indicates variability in the company's short-term liquidity position, with periods of both strengthening and weakening working capital.

Sales

Sales figures exhibit a general upward trajectory from April 2020 through December 2021, rising from 4,343 million USD to 8,148 million USD. Post-December 2021, sales experience more volatility, with a decline beginning in March 2023, reaching a low of 5,624 million USD in September 2023. Subsequent quarters show some recovery, although sales remain below the peak levels observed in late 2021. The fluctuations suggest impacts on revenue generation, possibly related to external market factors or internal operational changes.

Working Capital Turnover

The working capital turnover ratio presents notable variability throughout the periods for which data is available. Starting at 3.48 in December 2020, it increases sharply to 8.4 by December 2021, indicating improved efficiency in using working capital to generate sales during that time. After this peak, the ratio exhibits a declining trend, dropping to 2.18 by September 2023, which may suggest reduced efficiency or greater investment in working capital relative to sales. Following this dip, turnover ratios increase again, reaching values above 8.0 towards the end of the data series before a final decline to 5.71 in June 2025. The fluctuating ratio highlights changing dynamics in operational efficiency and working capital management over the analyzed quarters.

Inventory Turnover

The inventory turnover ratio shows a general declining trend over the observed quarterly periods starting from April 2, 2021 through June 27, 2025. Initially, the ratio was 4.28 and peaked slightly at 4.34 in July 2, 2021, then progressively decreased, reaching its lowest points around 3.5 to 3.6 during several quarters in 2023 and mid-2024. There is a notable rebound to 4.15 in March 28, 2025, followed by declines again toward the last reported quarters. This pattern suggests that the company is experiencing a slower rate of inventory turnover over time, with some intermittent improvements.

Average Inventory Processing Period

The average inventory processing period, expressed as the number of days inventory is held, demonstrates an inverse pattern relative to the inventory turnover ratio. Early in the dataset, around April 2, 2021, the inventory processing period stood at 85 days, then it gradually increased, peaking around 104 days in March 31, 2023 and again in September 29, 2023. After these peaks, the period shows some variability but remains elevated compared to the earlier values, with measurements mostly above 90 days. There is a temporary decline to 88 days by March 28, 2025 but it increases again shortly after. This overall increase in inventory days indicates that the company is holding inventory for longer durations, possibly reflecting slower movement of goods or changes in inventory management policies.

Relationship Between Metrics

The observed inverse relationship between inventory turnover and average inventory processing period is consistent and typical, where a lower turnover ratio correlates with a higher number of days inventory is held. The fluctuations in these two metrics suggest ongoing adjustments in either demand, supply chain efficiency, or inventory control practices. The modest recovery in turnover ratios toward the end of the period may indicate efforts to optimize inventory management, but persistent elevated inventory days imply that inventory clearance might still be less efficient than in earlier periods.

Receivables Turnover

The receivables turnover ratio demonstrates an overall positive trend from the initial value of 5.51 in April 2021 to a peak around 7.15 in June 2024, indicating an improved efficiency in collecting receivables over time. The ratio fluctuates slightly but generally remains within a range of approximately 6.15 to 7.15. This suggests a relatively stable ability to convert receivables into cash promptly, with some periods of enhanced collection speed particularly evident between mid-2022 and mid-2024.

Average Receivable Collection Period

Corresponding to the turnover pattern, the average receivable collection period in days shows a decrease from 66 days in April 2021 to a low near 51 days in late 2022 and mid-2024. This reduction reflects shorter outstanding receivables and quicker collection times. Despite some minor variations, the collection period remains mostly within a band of 51 to 60 days. The overall downward movement suggests improvements in credit and collection policies or operational efficiencies that reduce the time needed to collect outstanding receivables.

Correlation and Insights

There is an inverse relationship evident between the receivables turnover ratio and the average collection period, as expected theoretically. Higher turnover ratios coincide with shorter collection periods, signaling effective receivables management. The data imply sustained improvements in the company's credit control processes over the reported periods, resulting in faster conversion of receivables to cash. These trends contribute positively to liquidity management and operational cash flow.

The analysis of the provided quarterly financial data reveals notable trends in the inventory processing period, receivable collection period, and operating cycle over time.

Average Inventory Processing Period

The inventory processing period exhibits fluctuations throughout the observed quarters. Starting from the available data in the second quarter of 2021 at 85 days, it remains relatively stable around the mid-80s to low 90s for several quarters. There is a noticeable increase reaching a peak of 104 days in the first quarter of 2023 and again in the third quarter of 2023. Following these peaks, the period slightly decreases and fluctuates around the mid-90s to low 100s range toward the most recent quarters. Overall, this indicates some variability with an upward trend in 2023, followed by moderate stabilization.

Average Receivable Collection Period

The receivable collection period demonstrates a trend of gradual improvement (shortening) from approximately 66 days in the second quarter of 2021 to mid-50s days in late 2021 and early 2022, implying enhanced efficiency in collecting receivables. A brief increase occurs in late 2022 and into 2023, peaking near 60 days, before returning to the low 50s range in more recent quarters. Despite occasional upward fluctuations, the overall trend suggests a positive trajectory towards quicker receivable collection after mid-2021, with some volatility in 2023.

Operating Cycle

The operating cycle, defined as the sum of inventory processing and receivable collection periods, reflects similar dynamics. From the early data points in mid-2021 at approximately 151 days, the cycle experiences mild variability with values hovering between 140 and 160 days. A gradual increase is observed through 2022 and into early 2023, reaching a peak of 163 days in the first quarter of 2023, coinciding with the inventory processing period peak. Subsequently, the cycle shows signs of slight decline toward mid-2023 but remains elevated compared to earlier periods. This pattern indicates some lengthening in operational duration, influenced primarily by the increased inventory processing period.

In summary, the data reflect moderate fluctuations in inventory management efficiency, as indicated by the inventory processing period, with notable increases during 2023. The receivable collection period tends toward improved efficiency, with shorter durations after mid-2021, although it experienced some volatility in 2023. Consequently, the operating cycle shows corresponding variation, shaped predominantly by inventory trends, suggesting the need for ongoing focus on inventory turnover to optimize overall operational efficiency.

Payables Turnover Ratio

The payables turnover ratio exhibits a fluctuating trend over the analyzed periods, beginning at 4.79 and increasing to a peak of 6.04 before slightly decreasing toward the end of the timeline. Notably, there was a decline from 5.54 to 5.2 during late 2020, followed by an overall upward movement with minor oscillations. The highest ratio recorded is 6.04, indicating a faster rate of accounts payable turnover at that point compared to other periods.

Average Payables Payment Period

The average payables payment period, measured in number of days, shows an inverse pattern relative to the payables turnover ratio. Initially recorded at 76 days, it decreases steadily to a low of 60 days, which corresponds with the periods of higher payables turnover ratio. There is some variability with occasional increases, such as a rise to 82 days early in 2022, but the general trend indicates improved efficiency in settling payables over time, with the payment period shortening overall.

General Insights

Across the reported quarters, the data suggest an overall improvement in the management of accounts payable. The increasing payables turnover coupled with the decreasing average payment period signifies a tendency toward quicker payments to suppliers. The fluctuations in both metrics, however, imply some variability in payment practices, possibly influenced by operational or market conditions.

Inventory Processing Period

The average inventory processing period shows an increasing trend over the observed quarters, with a starting value near 85 days in early 2021 and peaking at 104 days in several quarters during 2023. The period fluctuates marginally but generally remains elevated around the 96 to 104 days mark towards the end of the timeline. This indicates a tendency for inventory to be held longer before processing, which could imply increasing inventory levels or slower turnover.

Receivable Collection Period

The average receivable collection period demonstrates a gradual decline from 66 days at the beginning of 2021 to a lower range around 51 to 54 days in the latter quarters. Notably, occasional rises to 59 and 60 days are observed near late 2022 to early 2023. Despite these short-term increases, the overall decline suggests improved efficiency in collecting receivables, shortening the time customers take to pay.

Payables Payment Period

The average payables payment period shows variability without a clear directional trend. It decreases from a high of 76 days at the beginning of 2021 to lows near 60 days in mid-2024, but also experiences intermittent increases up to 82 days in early 2022. The payment period stabilizes around the mid-60 day mark towards the end of the timeline, indicating fluctuating yet relatively consistent supplier payment timing.

Cash Conversion Cycle

The cash conversion cycle exhibits notable fluctuations, with initial values around 75 days rising to a peak of 98 days in late 2023. After peaking, the cycle declines to approximately 76 days by early 2025, before slightly increasing again towards 90 days. The extension of the cash conversion cycle in the middle periods reflects a longer duration for the company to convert its investments in inventory and other resources into cash flows from sales, possibly linked to the rising inventory processing and variable payment periods.

Summary of Overall Trends

Over the observed periods, there is a discernible increase in inventory holding times combined with an improved receivables collection period, suggesting some operational efficiency in receivables but challenges or strategic changes affecting inventory turnover. Payables period does not follow a consistent pattern, reflecting possible strategic supplier payment management or external supplier factors. The cash conversion cycle's volatility mainly mirrors these movements, showing a longer cycle during the mid-term quarters and a partial recovery thereafter, indicating fluctuations in working capital efficiency.