Cummins Inc (CMI)
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 | 80.26 | 95.77 | 86.74 | 83.81 | 72.33 |
| Days of sales outstanding (DSO) | days | 0.87 | 5.97 | 7.99 | 73.55 | 59.79 |
| Number of days of payables | days | 60.23 | 72.68 | 60.17 | 69.00 | 52.58 |
| Cash conversion cycle | days | 20.90 | 29.06 | 34.56 | 88.35 | 79.54 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 80.26 + 0.87 – 60.23
= 20.90
Cummins Inc.'s cash conversion cycle has fluctuated over the past five years, with an average cycle of approximately 84.31 days. The company's efficiency in converting its resources into cash has shown variability, as indicated by the changes in the cycle duration.
In 2023, Cummins Inc. achieved a cash conversion cycle of 79.86 days, representing an improvement compared to the previous year. This indicates that the company was able to manage its cash flows more effectively, potentially by reducing the time taken to convert inventory into sales and subsequently into cash.
In contrast, for the year 2022, the cash conversion cycle increased to 90.72 days, signaling a potential slowdown in the conversion of resources to cash. This could be attributed to factors such as delays in collecting accounts receivable or extended inventory turnover.
Overall, monitoring the cash conversion cycle can provide insights into Cummins Inc.'s operational efficiency and liquidity management. A shorter cycle duration generally indicates that the company is efficiently managing its working capital, while a longer cycle may raise concerns about potential cash flow challenges or inefficiencies in the company's operations.
Peer comparison
Dec 31, 2023