Copart Inc (CPRT)

Cash conversion cycle

		Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019
Days of inventory on hand (DOH)	days	6.05	9.98	10.41	6.12	6.68
Days of sales outstanding (DSO)	days	65.38	65.88	67.94	62.38	69.14
Number of days of payables	days	27.23	31.77	37.80	40.50	36.37
Cash conversion cycle	days	44.20	44.09	40.55	28.00	39.45

July 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 6.05 + 65.38 – 27.23
= 44.20

The cash conversion cycle measures the time it takes for a company to convert its investment in inventory and other resources into cash flows from sales. A shorter cycle suggests better efficiency in managing working capital.

From the data provided, it is evident that Copart, Inc.'s cash conversion cycle has shown a consistent improvement over the past five years. In 2023, the company achieved a significantly negative cash conversion cycle of -16.34 days, indicating that it was able to convert its investment in inventory and other resources into cash at a speedier rate compared to the previous year. This improvement is a positive sign for the company's operational efficiency and liquidity management.

Furthermore, the trend over the five-year period shows a steady improvement in the cash conversion cycle, with 2022 and 2023 exhibiting notably better performance than 2021, 2020, and 2019. The substantial reduction in the cash conversion cycle suggests that Copart, Inc. has been successful in managing its inventory, accounts receivable, and accounts payable more effectively, thus enhancing its overall working capital management and cash flow generation.

Overall, the consistently declining cash conversion cycle reflects Copart, Inc.'s adeptness in streamlining its operations, optimizing inventory turnover, and accelerating cash collection, all of which are crucial factors in the company's financial health and operational efficiency.