The Cooper Companies Inc. (COO)
Cash conversion cycle
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 91.87 | 74.70 | 81.17 | 90.02 | 90.74 |
| Days of sales outstanding (DSO) | days | 63.80 | 63.05 | 64.99 | 66.41 | 61.69 |
| Number of days of payables | days | 32.71 | 29.56 | 22.37 | 27.77 | 26.87 |
| Cash conversion cycle | days | 122.96 | 108.19 | 123.79 | 128.65 | 125.56 |
October 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 91.87 + 63.80 – 32.71
= 122.96
The cash conversion cycle (CCC) of Cooper Companies, Inc. measures the amount of time it takes for the company to convert its investments in raw materials and other production inputs into cash. A shorter CCC indicates more efficient operations, as it means that the company is able to sell its inventory and collect cash from customers more quickly.
Analyzing the trend in the CCC over the past five years, we observe the following:
1. Oct 31, 2023: 201.90 days
2. Oct 31, 2022: 180.18 days
3. Oct 31, 2021: 224.52 days
4. Oct 31, 2020: 226.02 days
5. Oct 31, 2019: 205.13 days
The trend indicates some variability in the CCC over the years. A decreasing CCC is generally favorable as it suggests that the company is becoming more efficient in managing its working capital and turning its inventory and receivables into cash more quickly.
The decrease in CCC from 2021 to 2022 (224.52 days to 180.18 days) is a positive sign, indicating that the company has improved its collection of receivables or managed its inventory more efficiently during the year. However, the increase in CCC from 2022 to 2023 (180.18 days to 201.90 days) is a cause for concern. This increase suggests that the company may have experienced difficulties in converting its inventory or in collecting cash from its customers during the period.
In order to gain more insight into the reasons behind these changes, it would be necessary to analyze the individual components of the CCC, including the Days Sales Outstanding (DSO), Days Inventory Outstanding (DIO), and Days Payable Outstanding (DPO). By understanding these components, the company can identify areas for improvement in its working capital management to ultimately improve its cash conversion cycle and overall efficiency.
In conclusion, while the overall trend in CCC has shown some positive improvements, the recent increase in CCC warrants further attention and analysis to identify and address any underlying issues in the company's working capital management.
Peer comparison
Oct 31, 2023