Smith AO Corporation (AOS)
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 | 62.02 | 58.06 | 60.65 | 55.55 | 44.35 |
| Days of sales outstanding (DSO) | days | 51.76 | 56.64 | 56.65 | 65.51 | 73.94 |
| Number of days of payables | days | 68.62 | 70.09 | 73.49 | 92.55 | 87.97 |
| Cash conversion cycle | days | 45.16 | 44.62 | 43.81 | 28.51 | 30.32 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 62.02 + 51.76 – 68.62
= 45.16
The cash conversion cycle of Smith AO Corporation has displayed fluctuating trends over the past five years. Starting at 30.32 days on December 31, 2020, the cycle decreased slightly to 28.51 days by the end of 2021, indicating a more efficient management of working capital. However, there was a noticeable increase in the cash conversion cycle to 43.81 days by December 31, 2022, and a further rise to 44.62 days by the end of 2023, signaling potential challenges in the company's ability to convert its resources into cash.
By December 31, 2024, the cash conversion cycle increased again to 45.16 days, indicating a prolonged time duration for Smith AO Corporation to convert its investments in inventory into cash from sales. This elongated cycle may suggest potential issues in managing inventory levels, accounts receivable, and accounts payable efficiently.
Overall, the increasing trend in the cash conversion cycle over the years highlights the importance for Smith AO Corporation to focus on streamlining its working capital management processes to enhance liquidity and optimize cash flow operations.
Peer comparison
Dec 31, 2024