Allete Inc (ALE)

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	259.44	71.34	281.32	84.87	68.29
Days of sales outstanding (DSO)	days	41.83	31.26	38.83	38.17	41.46
Number of days of payables	days	190.64	41.57	63.56	96.42	101.24
Cash conversion cycle	days	110.63	61.03	256.60	26.61	8.51

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 259.44 + 41.83 – 190.64
= 110.63

The cash conversion cycle of Allete Inc has shown significant fluctuations over the years based on the provided data.

- As of December 31, 2020, the cash conversion cycle was relatively low at 8.51 days, indicating that the company was efficient in converting its investments in inventory and accounts receivable into cash.
- However, by December 31, 2021, the cash conversion cycle more than tripled to 26.61 days, suggesting a slower turnaround in converting assets into cash.
- The cycle increased substantially by December 31, 2022, reaching 256.60 days. This drastic increase could be a cause for concern as it may indicate inefficiencies in managing working capital or challenges in collecting cash from sales.
- In the following year, by December 31, 2023, there was a notable improvement, with the cash conversion cycle reducing to 61.03 days. This improvement may suggest that Allete Inc took steps to address the challenges observed in the previous year.
- By December 31, 2024, the cycle increased to 110.63 days, though it was lower compared to the peak in 2022, further efforts may be needed to optimize working capital management and enhance cash flow efficiency.

Overall, the volatility in the cash conversion cycle of Allete Inc over the years underscores the importance of closely monitoring and managing working capital to ensure operational efficiency and liquidity.