Automatic Data Processing Inc (ADP)
Cash conversion cycle
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | — | — | 1,373.63 | 1,048.37 | 1,154.32 |
| Days of sales outstanding (DSO) | days | 65.16 | 60.99 | 70.14 | 66.34 | 61.08 |
| Number of days of payables | days | 2.48 | 2.52 | 3.05 | 4.24 | 4.41 |
| Cash conversion cycle | days | 62.68 | 58.46 | 1,440.72 | 1,110.47 | 1,210.99 |
June 30, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 65.16 – 2.48
= 62.68
The cash conversion cycle (CCC) of Automatic Data Processing Inc has shown significant fluctuations over the past five years. In particular, the CCC decreased from 1,440.72 days in 2022 to 62.68 days in 2024, indicating a marked improvement in the company's management of its cash conversion process. This reduction suggests that ADP has become more efficient in converting its resources, notably inventory and accounts receivable, into cash.
A lower CCC typically signifies that a company takes less time to generate cash from its operational activities, which can be attributed to improved inventory management and faster collection of receivables. However, it is important to note that a very low CCC may also indicate overly aggressive practices that could potentially impact relationship with suppliers or quality of service.
Overall, the recent improvement in ADP's CCC reflects positively on the company's operational efficiency and cash management practices, contributing to its overall financial health and performance.
Peer comparison
Jun 30, 2024