Enerpac Tool Group Corp (EPAC)
Cash conversion cycle
| Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | Aug 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 90.01 | 99.86 | 96.33 | 91.44 | 77.80 |
| Days of sales outstanding (DSO) | days | 59.58 | 68.21 | 71.27 | 62.28 | 70.17 |
| Number of days of payables | days | 60.78 | 86.55 | 79.21 | 59.58 | 77.53 |
| Cash conversion cycle | days | 88.82 | 81.51 | 88.39 | 94.14 | 70.45 |
August 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 90.01 + 59.58 – 60.78
= 88.82
The cash conversion cycle is a critical measure of the efficiency of a company's operations and its management of working capital. It indicates the time it takes for a company to convert its resources and investments into cash flow. A shorter cash conversion cycle is generally favorable, as it implies better efficiency in managing cash flow and working capital.
Based on the data provided, Enerpac Tool Group Corp's cash conversion cycle has fluctuated over the past five years. In 2019, the company had a relatively low cash conversion cycle of 70.45 days, indicating efficient management of working capital and cash flow. However, this figure increased to 94.14 days in 2020, suggesting a potential decline in efficiency in converting resources into cash.
In the subsequent years, there have been fluctuations in the cash conversion cycle, with values of 88.39 days in 2021, 81.51 days in 2022, and 88.82 days in 2023. These variations may indicate changes in the company's working capital management, inventory turnover, and accounts receivable/payable cycles.
Overall, the trend of Enerpac Tool Group Corp's cash conversion cycle has shown some volatility, with fluctuations above and below the 80-90 day range. An in-depth analysis would involve examining the components of the cash conversion cycle, such as days inventory outstanding, days sales outstanding, and days payable outstanding, to identify the specific areas where improvements could be made in working capital management.
The company may benefit from a review of its inventory levels, receivables collection process, and payment terms with suppliers to streamline its cash conversion cycle and improve overall operational efficiency. Additionally, comparing the company's cash conversion cycle to industry benchmarks and its historical performance can provide further insights into its working capital management.
Peer comparison
Aug 31, 2023