DR Horton Inc (DHI)

Cash conversion cycle

		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	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	330.78	312.76	333.02	344.31	350.69	344.03	361.35	340.87	324.53	302.27	308.41	296.49	298.13	290.55	305.54	313.16	309.04	300.12	321.19	338.22
Days of sales outstanding (DSO)	days	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Number of days of payables	days	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Cash conversion cycle	days	330.78	312.76	333.02	344.31	350.69	344.03	361.35	340.87	324.53	302.27	308.41	296.49	298.13	290.55	305.54	313.16	309.04	300.12	321.19	338.22

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 330.78 + — – —
= 330.78

The cash conversion cycle (CCC) measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. It is calculated by adding the days inventory outstanding (DIO) to the days sales outstanding (DSO) and then subtracting the days payable outstanding (DPO). A shorter cash conversion cycle indicates that the company is able to generate cash more quickly from its operations, while a longer cycle suggests a potential inefficiency in managing working capital.

Based on the data provided for D.R. Horton Inc., the cash conversion cycle has fluctuated over the past eight quarters. In the most recent period, as of December 31, 2023, the CCC was 316.45 days, indicating the company took an average of 316.45 days to convert its investment in inventory into cash from sales and pay its suppliers. This represents a slight increase from the previous quarter's CCC of 298.77 days, but a slight decrease from the CCC of 335.30 days in the same period a year ago.

The trend in the CCC suggests that D.R. Horton Inc. has been relatively stable in managing its working capital efficiency. However, the company should continue to monitor and potentially improve its CCC, as a longer cycle may tie up cash and increase the risk of liquidity challenges. Conversely, a shorter cycle could free up cash for investment opportunities or debt reduction.

Overall, the CCC provides valuable insight into D.R. Horton Inc.'s operational efficiency in managing its working capital and converting investments in inventory into cash flows, which is crucial for sustaining and growing its operations.