Albemarle Corp (ALB)
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 | 93.56 | 178.48 | 125.11 | 128.32 | 120.38 |
| Days of sales outstanding (DSO) | days | 87.65 | 79.30 | 80.70 | 79.69 | 81.81 |
| Number of days of payables | days | — | 131.85 | 94.07 | 82.65 | 89.88 |
| Cash conversion cycle | days | 181.22 | 125.94 | 111.74 | 125.36 | 112.31 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 93.56 + 87.65 – —
= 181.22
The cash conversion cycle of Albemarle Corp. has shown a declining trend over the past five years, fluctuating between 72.82 days in 2023 and 120.07 days in 2020. This metric indicates the efficiency of the company in converting its investments in raw materials and other inputs into cash receipts from sales.
A lower cash conversion cycle is generally preferred as it signifies that the company is able to quickly sell its inventory, collect receivables, and pay off payables. Albemarle Corp.'s decreasing trend suggests improvements in managing inventories, collecting receivables, and paying suppliers more efficiently over time.
By reducing the cash conversion cycle, Albemarle Corp. can improve its working capital management, enhance liquidity, and potentially generate more cash flow for investment or other strategic initiatives. However, while the recent decrease is positive, it is important to monitor this ratio closely to ensure sustained operational efficiency and effective working capital management in the future.
Peer comparison
Dec 31, 2023