Eaton Corporation PLC (ETN)
Cash conversion cycle
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 100.35 | 93.63 | 90.30 | 81.52 | 62.04 |
| Days of sales outstanding (DSO) | days | — | — | — | — | — |
| Number of days of payables | days | — | — | — | — | — |
| Cash conversion cycle | days | 100.35 | 93.63 | 90.30 | 81.52 | 62.04 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 100.35 + — – —
= 100.35
The cash conversion cycle of Eaton Corporation PLC has shown a fluctuating trend over the past five years. Starting at 62.04 days in 2020, the cycle increased to 81.52 days in 2021, reflecting a potential delay in the conversion of investment into cash. This trend continued with further increases to 90.30 days in 2022, 93.63 days in 2023, and 100.35 days in 2024, indicating a lengthening period for the company to convert its investments in inventory and accounts receivable into cash.
The steady increase in the cash conversion cycle suggests potential challenges in managing working capital efficiency and liquidity. A longer cash conversion cycle may indicate inefficiencies in inventory management, extended credit terms offered to customers, or delays in collecting receivables, which could impact the company's cash flow and overall financial health.
It is essential for Eaton Corporation PLC to closely monitor and optimize its cash conversion cycle to ensure adequate liquidity levels and operational efficiency. By addressing factors contributing to the lengthening cycle, such as improving inventory turnover, managing accounts receivable effectively, and renegotiating payment terms with suppliers, the company can enhance its working capital management and strengthen its financial position in the long term.
Peer comparison
Dec 31, 2024