Cummins Inc (CMI)
Cash conversion cycle
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | 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 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 81.67 | 86.81 | 82.65 | 81.61 | 80.26 | 85.46 | 89.57 | 93.58 | 95.77 | 101.48 | 92.51 | 90.12 | 86.74 | 86.38 | 85.13 | 86.67 | 83.81 | 86.08 | 87.66 | 77.59 |
| Days of sales outstanding (DSO) | days | 1.30 | — | — | — | 0.87 | — | — | 5.68 | 5.97 | 4.87 | 4.23 | 5.99 | 7.99 | — | — | — | 73.55 | 6.29 | 6.72 | 4.38 |
| Number of days of payables | days | 56.19 | 59.52 | 62.16 | 63.44 | 60.23 | 61.67 | 64.03 | 73.81 | 72.68 | 73.23 | 66.11 | 68.72 | 60.17 | 64.16 | 66.25 | 75.72 | 69.00 | 64.43 | 54.71 | 57.41 |
| Cash conversion cycle | days | 26.77 | 27.28 | 20.49 | 18.17 | 20.90 | 23.79 | 25.54 | 25.45 | 29.06 | 33.12 | 30.63 | 27.39 | 34.56 | 22.23 | 18.88 | 10.95 | 88.35 | 27.95 | 39.67 | 24.56 |
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 fluctuating trends over the analyzed periods. The cycle represents the time it takes for the company to convert its investments in inventory into cash flows from sales.
From March 31, 2020, to December 31, 2021, there was a significant increase in the cash conversion cycle from 24.56 days to 88.35 days. This prolonged cycle may indicate possible inefficiencies in managing inventory, collecting receivables, or paying suppliers.
However, from March 31, 2021, to December 31, 2024, there was a general improvement in the cash conversion cycle, starting at 10.95 days and reaching 26.77 days by the end of 2024. This trend suggests that Cummins Inc managed to streamline its operations, leading to a quicker conversion of inventory into cash during this period.
Overall, the management of the cash conversion cycle is critical for Cummins Inc to optimize its working capital and operational efficiency. The company should continue to monitor and improve this cycle to ensure a healthy cash flow position.
Peer comparison
Dec 31, 2024