Allete Inc (ALE)

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	71.34	281.32	84.87	68.29	167.44
Days of sales outstanding (DSO)	days	31.26	38.83	38.17	41.46	34.28
Number of days of payables	days	41.57	63.56	96.42	101.24	379.95
Cash conversion cycle	days	61.03	256.60	26.61	8.51	-178.24

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 71.34 + 31.26 – 41.57
= 61.03

The cash conversion cycle of Allete, Inc. has exhibited significant fluctuations over the past five years. In 2023, the cash conversion cycle decreased to 54.58 days from 208.91 days in 2022, indicating an improvement in the company's ability to convert its resources into cash. This reduction suggests that Allete was able to manage its working capital more efficiently in 2023.

Comparing 2023 to 2021, there was a substantial increase in the cash conversion cycle from 24.12 days to 208.91 days. This indicates a significant deterioration in Allete's working capital management during that period, reflecting potential issues with cash flow and liquidity.

In 2020, the cash conversion cycle was 4.21 days, indicating that the company was able to convert its investments into cash relatively quickly. However, in 2019, the cash conversion cycle was negative at -43.20 days, suggesting that Allete was able to collect cash from its customers even before paying its suppliers, a favorable position reflecting efficient working capital management.

Overall, the trend observed in the cash conversion cycle of Allete, Inc. highlights the importance of closely monitoring and managing working capital to ensure optimal cash flow and liquidity in the company's operations.