Arrow Electronics Inc (ARW)
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 | 69.79 | 65.38 | 60.13 | 50.66 | 47.09 |
| Days of sales outstanding (DSO) | days | 170.33 | 134.92 | 121.15 | 117.77 | 117.18 |
| Number of days of payables | days | 163.71 | 126.93 | 118.25 | 115.95 | 113.70 |
| Cash conversion cycle | days | 76.42 | 73.38 | 63.04 | 52.48 | 50.57 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 69.79 + 170.33 – 163.71
= 76.42
The cash conversion cycle for Arrow Electronics Inc has shown a gradual increase over the years, from 50.57 days as of December 31, 2020, to 76.42 days as of December 31, 2024. This trend indicates that the company is taking longer to convert its investments in inventory into cash. A longer cash conversion cycle can potentially signal inefficiencies in managing inventory, accounts receivable, and accounts payable.
The increase in the cash conversion cycle may be attributed to various factors such as changes in customer payment terms, inventory management practices, or supplier payment terms. It is crucial for Arrow Electronics Inc to closely monitor and manage its cash conversion cycle to ensure optimal working capital management and liquidity.
A longer cash conversion cycle can tie up valuable resources and impact the company's cash flow and profitability. Arrow Electronics Inc should consider implementing strategies to streamline its operations, improve inventory turnover, and accelerate the collection of receivables to shorten its cash conversion cycle and enhance overall financial performance.
Peer comparison
Dec 31, 2024