Caterpillar Inc (CAT)
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 | 141.38 | 143.62 | 144.28 | 143.10 | 112.26 |
| Days of sales outstanding (DSO) | days | 102.44 | 109.75 | 124.42 | 146.71 | 51.89 |
| Number of days of payables | days | 67.47 | 76.70 | 83.81 | 76.91 | 59.36 |
| Cash conversion cycle | days | 176.34 | 176.67 | 184.90 | 212.90 | 104.79 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 141.38 + 102.44 – 67.47
= 176.34
The cash conversion cycle of Caterpillar Inc. has shown fluctuations over the past five years. In 2023, the company's cash conversion cycle increased to 124.57 days from 121.31 days in 2022, indicating a slight lengthening of the time it takes to convert resources into cash. However, compared to 2020 (130.16 days), there has been an improvement in efficiency.
The trend in the cash conversion cycle reflects the company's management of its working capital, including inventory turnover, accounts receivable collection, and accounts payable payments. A longer cash conversion cycle may suggest inefficiencies in managing cash flows or operations, while a shorter cycle implies better liquidity and operational efficiency.
It would be beneficial for Caterpillar Inc. to continue analyzing the components of the cash conversion cycle to identify areas for improvement and optimize working capital management, ultimately enhancing the company's financial performance and stability.
Peer comparison
Dec 31, 2023