Applied Industrial Technologies (AIT)
Cash conversion cycle
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 58.00 | 56.71 | 58.52 | 60.72 | 57.52 |
| Days of sales outstanding (DSO) | days | 61.56 | 60.10 | 58.59 | 62.88 | 58.24 |
| Number of days of payables | days | 32.15 | 31.00 | 35.23 | 35.03 | 33.03 |
| Cash conversion cycle | days | 87.41 | 85.80 | 81.89 | 88.57 | 82.74 |
June 30, 2025 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 58.00 + 61.56 – 32.15
= 87.41
The analysis of Applied Industrial Technologies' cash conversion cycle (CCC) over the period from June 30, 2021, to June 30, 2025, reveals certain trends and stability in the company's working capital management efficiencies.
On June 30, 2021, the CCC was approximately 82.74 days, indicating the average duration, in days, it took for the company to convert its investments in inventory and other resources into cash flows from sales, accounting for the time taken to sell inventory and collect receivables minus the period of payable deferrals.
By June 30, 2022, the CCC increased to approximately 88.57 days, signifying a lengthening of the cycle by roughly 5.83 days. This suggests either an extension in inventory holding periods, longer receivables collection periods, or a shorter payable deferral period during this year.
Subsequently, by June 30, 2023, the CCC adjusted downward to approximately 81.89 days, reflecting an improvement or reduction in cycle duration by about 6.68 days from the previous year, moving closer to or even below the 2021 baseline, indicating enhanced efficiency in managing inventory, receivables, or payables.
However, the cycle again lengthened slightly, reaching approximately 85.80 days on June 30, 2024, an increase of approximately 3.91 days, which may be associated with longer collection periods, inventory turnover issues, or changes in payment terms.
The most recent data point, as of June 30, 2025, shows a CCC of approximately 87.41 days, continuing the upward trend, with an increase of approximately 1.61 days from the prior year. This suggests a slight elongation in the working capital cycle, potentially reflecting a stabilization at a higher cycle duration relative to the earlier years.
Overall, the company's cash conversion cycle exhibits fluctuations within a range of about 81.89 to 88.57 days over the four-year period. These fluctuations indicate variations in operational and financial efficiencies but generally hover around an average cyclical duration of approximately 85 days. The cyclical trend suggests periods of operational adjustments, possibly due to changes in sales, inventory management, receivables collection strategies, or payment policies. The observed pattern underscores the importance of operational and financial control measures to optimize working capital efficiency and reduce the cycle duration, thereby improving liquidity and cash flow management over time.