AGCO Corporation (AGCO)
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 | 92.54 | 103.24 | 106.43 | 97.27 | 87.92 |
| Days of sales outstanding (DSO) | days | 41.82 | 40.67 | 17.63 | 16.25 | 17.09 |
| Number of days of payables | days | 27.55 | 36.23 | 46.22 | 40.44 | 38.08 |
| Cash conversion cycle | days | 106.82 | 107.69 | 77.83 | 73.08 | 66.93 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 92.54 + 41.82 – 27.55
= 106.82
AGCO Corporation's cash conversion cycle, which represents the time it takes for the company to convert its investments in inventory and other resources into cash inflows from sales, has shown a fluctuating trend over the years based on the provided data.
As of December 31, 2020, the cash conversion cycle stood at 66.93 days, indicating that AGCO Corporation was able to efficiently convert its resources into cash within a relatively short period. However, by December 31, 2021, the cash conversion cycle had lengthened to 73.08 days, suggesting a slower conversion of investments into cash inflows.
The trend continued to increase over the following years, reaching 77.83 days by December 31, 2022, and further stretching to 107.69 days by December 31, 2023. This significant increase in the cash conversion cycle indicates a potential inefficiency in managing inventory and accounts receivable, leading to a longer period for cash generation.
By December 31, 2024, the cash conversion cycle slightly decreased to 106.82 days but remained at a relatively high level compared to the earlier years. This prolonged cash conversion cycle may imply challenges in working capital management, impacting the company's liquidity and operational efficiency.
In conclusion, the fluctuating and increasing trend in AGCO Corporation's cash conversion cycle highlights the need for the company to focus on improving inventory management, accounts receivable collection, and overall working capital efficiency to enhance cash flow generation and operational performance.
Peer comparison
Dec 31, 2024