Builders FirstSource Inc (BLDR)

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	29.38	27.03	33.22	35.60	29.65
Days of sales outstanding (DSO)	days	36.88	27.06	36.04	40.83	34.76
Number of days of payables	days	21.08	15.23	22.34	27.24	23.08
Cash conversion cycle	days	45.17	38.87	46.92	49.18	41.33

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 29.38 + 36.88 – 21.08
= 45.17

The cash conversion cycle of Builders Firstsource Inc has exhibited some fluctuation over the past five years. From 2019 to 2022, the company saw a relatively stable trend with the cycle ranging between 42.20 days to 43.28 days. However, in 2021 and 2023, there was a slight increase in the cash conversion cycle to 49.88 days and 48.30 days, respectively.

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A longer cash conversion cycle indicates that the company is taking longer to generate cash from its operations, which can potentially lead to liquidity challenges.

Overall, while the fluctuations in the cash conversion cycle of Builders Firstsource Inc are within a reasonable range, management should monitor the trend closely to ensure efficient working capital management and timely conversion of resources into cash flows.