Eastman Chemical Company (EMN)

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 85.93 84.85 91.86 86.93 81.88 84.01 78.68 73.23 68.83 79.32 77.56 82.67 77.46 74.61 77.58 87.80 86.18 85.44 86.39 83.46
Days of sales outstanding (DSO) days 35.19 34.26 34.31 37.32 34.22 38.07 40.47 40.19 44.04 49.65 50.37 51.91 57.90 46.29 37.95 41.76 46.88 46.03 46.52 47.70
Number of days of payables days 73.52 — — — 69.47 71.42 72.30 72.40 69.24 71.63 72.75 71.41 59.04 50.91 41.93 55.04 60.67 59.53 64.42 64.07
Cash conversion cycle days 47.60 119.11 126.17 124.26 46.63 50.66 46.85 41.02 43.63 57.34 55.17 63.17 76.32 69.99 73.60 74.52 72.39 71.94 68.49 67.10

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 85.93 + 35.19 – 73.52
= 47.60

The cash conversion cycle for Eastman Chemical Co has exhibited fluctuations over the past eight quarters. In Q4 2023, the company's cash conversion cycle was 71.93 days, which was significantly higher compared to the previous quarter but lower than the same period last year. This indicates that Eastman Chemical Co took longer to convert its invested resources into cash in Q4 2023.

The trend in the cash conversion cycle reflects the efficiency of the company's working capital management. A shorter cash conversion cycle typically indicates that the company is able to quickly convert its inventory and receivables into cash, thereby improving its liquidity position.

In contrast, a longer cash conversion cycle may suggest inefficiencies in managing inventory, collecting receivables, or paying suppliers. It can also indicate that the company is experiencing difficulties in generating cash flow, potentially leading to liquidity challenges.

It is important for Eastman Chemical Co to closely monitor and manage its cash conversion cycle to ensure optimal working capital management and liquidity. Analyzing the factors contributing to fluctuations in the cash conversion cycle can provide insights into areas that may need improvement to enhance the company's overall financial performance.