Estee Lauder Companies Inc (EL)

Cash conversion cycle

		Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020
Days of inventory on hand (DOH)	days	51.40	71.74	69.84	63.68	51.85
Days of sales outstanding (DSO)	days	41.21	33.76	33.88	38.81	30.77
Number of days of payables	days	34.03	40.22	43.58	43.01	29.60
Cash conversion cycle	days	58.58	65.28	60.14	59.48	53.02

June 30, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 51.40 + 41.21 – 34.03
= 58.58

The cash conversion cycle of Estee Lauder Companies Inc has shown some fluctuation over the past five years. In fiscal year 2024, the cash conversion cycle decreased to 58.58 days from 65.28 days in the previous year. This indicates that the company took less time to convert its investments in inventory into cash during the most recent fiscal year. However, compared to fiscal year 2020, when the cash conversion cycle was 53.02 days, it has increased over the five-year period.

A lower cash conversion cycle suggests that Estee Lauder is managing its working capital more efficiently, as it is able to quickly convert inventory into sales and then into cash. This can indicate effective inventory management and strong sales practices. On the other hand, a higher cash conversion cycle may imply inefficiencies in managing working capital, potentially leading to slower cash flows.

Overall, despite fluctuations over the years, Estee Lauder Companies Inc's cash conversion cycle indicates the company's ability to convert its investments in inventory into cash, reflecting its operational efficiency and effectiveness in managing its working capital. Further examination and comparison with industry benchmarks could provide additional insights into the company's performance.