Cummins Inc (CMI)
Cash conversion cycle
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 81.67 | 80.26 | 95.77 | 86.74 | 83.81 |
| Days of sales outstanding (DSO) | days | 1.30 | 0.87 | 5.97 | 7.99 | 73.55 |
| Number of days of payables | days | 56.19 | 60.23 | 72.68 | 60.17 | 69.00 |
| Cash conversion cycle | days | 26.77 | 20.90 | 29.06 | 34.56 | 88.35 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 81.67 + 1.30 – 56.19
= 26.77
The cash conversion cycle of Cummins Inc has shown a positive trend over the past five years. The cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash inflows from sales.
In December 2020, the cash conversion cycle was relatively high at 88.35 days, indicating a longer period to convert resources into cash. However, the company made significant improvements in managing its working capital as evidenced by the decreasing trend in subsequent years.
By December 2024, Cummins Inc had achieved a notable reduction in its cash conversion cycle to 26.77 days, reflecting a more efficient management of inventory and receivables. This decrease suggests that the company was able to optimize its operations, streamline its supply chain, and improve its cash flow efficiency over time.
Overall, the decreasing trend in Cummins Inc's cash conversion cycle indicates an improvement in the company's liquidity and working capital management, which may enhance its financial performance and strengthen its position in the industry.
Peer comparison
Dec 31, 2024