Armstrong World Industries Inc (AWI)

Cash conversion cycle

		Dec 31, 2024	Sep 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	19.17	27.21	25.64	25.19	26.95	27.50	28.56	28.13	29.88	28.72	28.02	24.57	26.34	25.37	26.48	27.13	26.44	25.06	22.42	22.15
Days of sales outstanding (DSO)	days	36.06	35.69	36.22	32.47	33.39	34.02	35.47	33.35	36.28	40.58	36.91	36.30	36.11	34.11	36.34	31.31	34.33	39.65	33.74	29.92
Number of days of payables	days	28.66	33.54	27.50	28.65	30.07	30.47	29.09	32.58	33.70	34.95	31.50	34.35	33.95	32.15	30.17	32.62	27.40	24.35	24.48	28.91
Cash conversion cycle	days	26.56	29.36	34.37	29.01	30.27	31.05	34.94	28.90	32.47	34.35	33.43	26.52	28.50	27.33	32.65	25.82	33.37	40.36	31.67	23.16

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 19.17 + 36.06 – 28.66
= 26.56

The cash conversion cycle of Armstrong World Industries Inc has shown fluctuations over the reporting periods. The company's cash conversion cycle, which represents the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales, ranged from 23.16 days to 40.36 days in the observed periods.

Overall, the trend indicates that the company's efficiency in managing its working capital improved initially in 2020, as the cash conversion cycle decreased, reaching a low of 23.16 days in December 2019. However, there was an upward trend in the cycle in mid-2020, peaking at 40.36 days in June 2020. This could suggest potential challenges in managing inventory or collecting receivables during that period.

Subsequently, the cash conversion cycle fluctuated but generally remained within a range, indicating a certain level of stability in managing working capital. Notably, the cycle decreased to 25.82 days by December 2020 but returned to around 30 days in 2021. It continued to fluctuate around this level, with some peaks and troughs until September 2024.

The lower the cash conversion cycle, the better it is for the company, as it implies that the company is efficient in managing its working capital and generating cash flows from its operations. On the other hand, a longer cash conversion cycle may indicate inefficiencies in managing inventory, accounts receivables, or payables.

It is essential for Armstrong World Industries Inc to consistently monitor and optimize its cash conversion cycle to ensure efficient working capital management, liquidity, and overall financial health. By addressing any inefficiencies and maintaining a reasonable cycle length, the company can improve its cash flow generation and financial performance over time.