Deluxe Corporation (DLX)
Cash conversion cycle
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 14.92 | 18.48 | 14.42 | 20.04 | 17.92 |
| Days of sales outstanding (DSO) | days | 39.24 | 41.01 | 44.53 | 37.77 | 29.69 |
| Number of days of payables | days | 54.90 | 55.54 | 63.18 | 58.43 | 50.38 |
| Cash conversion cycle | days | -0.74 | 3.96 | -4.24 | -0.62 | -2.76 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 14.92 + 39.24 – 54.90
= -0.74
The cash conversion cycle for Deluxe Corp. has exhibited significant fluctuations over the past five years. In 2023, Deluxe Corp. reported a negative cash conversion cycle of -3.83 days, indicating that the company's operating cycle was shorter than its cash cycle, resulting in a favorable position for cash flow. This marks a substantial improvement compared to the previous year when the company had a positive conversion cycle of 2.96 days.
In 2021, Deluxe Corp. experienced a highly negative cash conversion cycle of -7.55 days, suggesting that the company efficiently converted its investments in inventory and accounts receivable into cash within a shorter period. This significant improvement from the previous year's negative conversion cycle of -1.79 days indicates enhanced operational efficiency and liquidity management.
However, in 2019, Deluxe Corp. had a cash conversion cycle of 3.20 days, which signifies that the company took longer to convert its investments into cash compared to the subsequent years. This may indicate potential challenges in managing working capital and cash flow efficiency during that period.
Overall, the analysis of Deluxe Corp.'s cash conversion cycle demonstrates fluctuations over the past five years, with the company showing improvements in efficiency and liquidity management in some years and facing challenges in others. It is essential for the company to maintain a focus on optimizing its cash conversion cycle to ensure effective working capital management and sustainable cash flow generation in the future.