Encompass Health Corp (EHC)

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 4.42 7.47 8.14 7.19
Days of sales outstanding (DSO) days 47.89 46.94 37.96 46.87 41.60
Number of days of payables days 21.65 18.58 15.38 14.31 11.85
Cash conversion cycle days 26.24 32.77 30.06 40.70 36.94

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 47.89 – 21.65
= 26.24

The cash conversion cycle of Encompass Health Corp has shown some fluctuation over the past five years. The company's cash conversion cycle increased from 40.11 days in 2019 to 48.48 days in 2021 before decreasing slightly to 45.06 days in 2022. In the most recent year, 2023, the cash conversion cycle was 46.50 days.

The cash conversion cycle measures how long it takes for a company to convert its investments in inventory and other resources into cash. A longer cash conversion cycle can indicate inefficiencies in managing working capital, such as slow collection of receivables or high levels of inventory. On the other hand, a shorter cash conversion cycle suggests more efficient working capital management.

Encompass Health Corp's cash conversion cycle has been relatively stable in recent years, with minor fluctuations. However, management may want to focus on optimizing working capital processes to potentially reduce the cash conversion cycle further and improve cash flow efficiency.


Peer comparison

Dec 31, 2023

Company name
Symbol
Cash conversion cycle
Encompass Health Corp
EHC
26.24
Mednax Inc
MD
20.80
Select Medical Holdings
SEM
44.10