Copart Inc (CPRT)

Cash conversion cycle

Jul 31, 2024 Jul 31, 2023 Jul 31, 2022 Jul 31, 2021 Jul 31, 2020
Days of inventory on hand (DOH) days 5.89 6.05 9.98 10.41 6.12
Days of sales outstanding (DSO) days 67.38 65.38 65.88 67.94 62.38
Number of days of payables days 26.09 27.23 31.77 37.80 40.50
Cash conversion cycle days 47.18 44.20 44.09 40.55 28.00

July 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 5.89 + 67.38 – 26.09
= 47.18

Over the past five years, Copart Inc's cash conversion cycle has shown a general upward trend, indicating a lengthening period required to convert its investments in inventory into cash. The company took 47.18 days on average to convert its investments into cash as of July 31, 2024, compared to 28.00 days as of July 31, 2020.

A longer cash conversion cycle may imply inefficiencies in managing inventory, accounts receivable, and accounts payable. It suggests that Copart may be taking longer to sell its inventory and collect cash from customers while also potentially delaying payments to suppliers.

While an increasing cash conversion cycle can indicate issues with liquidity and operational efficiency, it's important to consider industry norms and the company's specific business model when evaluating the significance of these trends. Monitoring and managing the cash conversion cycle is crucial for optimizing working capital management and sustaining financial health.