Ford Motor Company (F)
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 | 35.18 | 34.36 | 32.54 | 30.83 | 25.88 |
| Days of sales outstanding (DSO) | days | 128.49 | 125.74 | 117.56 | 150.41 | 147.24 |
| Number of days of payables | days | — | — | — | — | — |
| Cash conversion cycle | days | 163.68 | 160.10 | 150.10 | 181.24 | 173.11 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 35.18 + 128.49 – —
= 163.68
The cash conversion cycle for Ford Motor Co. has fluctuated over the past five years. In 2023, the cash conversion cycle increased to 7.25 days from 5.02 days in 2022, indicating that the company took longer to convert its investments in raw materials into cash from sales.
Comparing 2023 to previous years, the cash conversion cycle has shown improvement since 2021 when it was negative at -2.30 days. A negative cash conversion cycle suggests that Ford was able to convert its inventory into sales and collect cash from customers before paying its suppliers, which is generally a favorable sign for liquidity and efficiency.
However, it's worth noting that a negative cash conversion cycle can also indicate aggressive sales tactics or stretching payables to unsustainable levels. In 2023, despite the increase in days, Ford's cash conversion cycle remained positive, indicating a more normalized and sustainable liquidity position compared to 2021.
Overall, monitoring the cash conversion cycle over time helps assess Ford's operational efficiency, inventory management, and ability to collect receivables efficiently. A decreasing or negative cycle generally indicates effective working capital management, while an increasing cycle could signal potential issues that affect liquidity and cash flow.
Peer comparison
Dec 31, 2023