BorgWarner Inc (BWA)

Cash conversion cycle

		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	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	32.76	32.01	43.98	44.36	30.62	44.38	46.02	46.04	42.18	42.39	43.04	43.70	49.84	39.28	41.78	39.37	36.51	36.58	36.92	36.12
Days of sales outstanding (DSO)	days	71.71	74.20	83.54	80.93	57.07	80.13	77.79	78.35	71.10	69.67	78.41	96.68	104.75	81.97	63.98	64.09	68.96	71.08	74.05	73.09
Number of days of payables	days	—	—	—	—	67.54	—	—	—	62.58	—	—	—	—	—	—	—	59.95	—	—	—
Cash conversion cycle	days	104.47	106.21	127.51	125.29	20.15	124.51	123.81	124.39	50.69	112.07	121.45	140.38	154.60	121.25	105.76	103.46	45.52	107.66	110.96	109.22

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 32.76 + 71.71 – —
= 104.47

The trend in BorgWarner Inc's cash conversion cycle over the past eight quarters has shown fluctuations. 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.

In Q2 2023, the cash conversion cycle increased significantly to 60.24 days, reaching its highest point in the period under review. This extended timeline suggests that BorgWarner Inc took a longer time to convert its investments in inventory into sales revenue and cash inflows during that quarter.

In contrast, the cash conversion cycle decreased to 41.23 days in Q4 2023 compared to the previous quarter. This suggests that the company improved its efficiency in managing its inventory and collecting payments from customers, resulting in a quicker conversion of investments into cash.

Overall, BorgWarner Inc should aim to continuously monitor and optimize its cash conversion cycle to ensure efficient use of resources and maximize cash flow generation. An upward trend in the cash conversion cycle indicates inefficiencies in working capital management, which could potentially impact the company's liquidity and profitability in the long run.