Smith AO Corporation (AOS)
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 | 58.06 | 60.65 | 55.55 | 44.35 | 43.48 |
| Days of sales outstanding (DSO) | days | 56.64 | 56.65 | 65.51 | 73.94 | 72.16 |
| Number of days of payables | days | 70.09 | 73.49 | 92.55 | 87.97 | 73.13 |
| Cash conversion cycle | days | 44.62 | 43.81 | 28.51 | 30.32 | 42.51 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 58.06 + 56.64 – 70.09
= 44.62
The cash conversion cycle of A.O. Smith Corp. has fluctuated over the past five years. In 2023, the company's cash conversion cycle increased to 40.59 days from 40.04 days in 2022. This indicates that it took the company longer to convert its investments in inventory and accounts receivable into cash during the most recent year.
Comparing to 2021, where the cash conversion cycle was 16.58 days, there was a significant increase in 2023. This implies that, in 2023, A.O. Smith Corp. took more time to sell its inventory and collect cash from customers compared to 2021.
In 2020, the cash conversion cycle was 13.48 days, which was lower than in 2023. This indicates that A.O. Smith Corp. was more efficient in converting its investments into cash in 2020 compared to 2023.
Looking back at 2019, where the cash conversion cycle was 30.28 days, the company's efficiency in managing its cash conversion cycle has improved over the years. However, compared to 2019, the cycle increased in 2023.
Overall, the trend in A.O. Smith Corp.'s cash conversion cycle shows some fluctuations over the years, with the most recent year experiencing a longer cycle, suggesting a potential need to focus on improving the efficiency of managing its working capital.
Peer comparison
Dec 31, 2023