Topbuild Corp (BLD)
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 | 29.82 | 36.92 | 41.48 | 24.28 | 22.79 |
| Days of sales outstanding (DSO) | days | 56.95 | 61.64 | 70.87 | 58.07 | 60.54 |
| Number of days of payables | days | 38.39 | 41.00 | 54.31 | 49.90 | 47.08 |
| Cash conversion cycle | days | 48.38 | 57.56 | 58.04 | 32.44 | 36.25 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 29.82 + 56.95 – 38.39
= 48.38
The cash conversion cycle of TopBuild Corp has shown fluctuations over the past five years. In 2023, the company's cash conversion cycle was 45.48 days, indicating that it takes approximately 45 days for the company to convert its investment in inventory and accounts receivable into cash from sales. This represents an improvement from 2022, where the cycle was 55.90 days, but is slightly higher compared to 2021 when the cycle was 54.13 days.
The significant decrease in the cash conversion cycle from 2020 to 2021, from 25.85 days to 54.13 days, suggests a potential inefficiency in managing its working capital during that period. However, it improved in 2023 compared to the previous year.
Overall, the trend in TopBuild Corp's cash conversion cycle indicates some variability in how efficiently the company manages its working capital and converts its assets into cash. Further analysis of the components of the cash conversion cycle, such as days inventory outstanding, days sales outstanding, and days payables outstanding, could provide insights into the specific areas where the company may need to focus on improving its cash conversion efficiency.