Cal-Maine Foods Inc (CALM)
Cash conversion cycle
| Jun 1, 2024 | Jun 3, 2023 | May 28, 2022 | May 29, 2021 | May 30, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 47.39 | 47.53 | 58.57 | 57.90 | 58.30 |
| Days of sales outstanding (DSO) | days | 25.49 | 21.72 | 44.94 | 34.35 | 26.57 |
| Number of days of payables | days | 13.73 | 13.80 | 18.25 | 14.00 | 17.41 |
| Cash conversion cycle | days | 59.15 | 55.45 | 85.26 | 78.25 | 67.46 |
June 1, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 47.39 + 25.49 – 13.73
= 59.15
The cash conversion cycle of Cal-Maine Foods Inc has shown fluctuations over the past five years. In the most recent fiscal year ending on June 1, 2024, the company's cash conversion cycle was 59.15 days, indicating that it took the company approximately 59 days to convert its investments in inventory into cash receipts from customers.
Comparing this to the prior years, we observe variability in the cash conversion cycle. While the cycle decreased to 55.45 days in June 3, 2023, it increased significantly in May 28, 2022, to 85.26 days, and in May 29, 2021, to 78.25 days. Notably, in May 30, 2020, the cycle was recorded at 67.46 days.
The cash conversion cycle is a crucial metric for assessing efficiency in managing working capital. A shorter cycle generally indicates that the company is able to quickly convert its investments in inventory into cash, reflecting strong operational efficiency. Conversely, a longer cycle may signify inefficiencies in managing inventory, accounts receivable, and accounts payable, which could lead to cash flow challenges.
In conclusion, while Cal-Maine Foods Inc has experienced fluctuations in its cash conversion cycle over the past five years, it is essential for the company to focus on maintaining an optimal cycle length to ensure efficient working capital management and sustainable cash flow.