FedEx Corporation (FDX)
Cash conversion cycle
| May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 5.74 | 5.50 | 5.53 | 6.07 | 6.41 |
| Days of sales outstanding (DSO) | days | 42.34 | 41.57 | 46.65 | 53.22 | 53.79 |
| Number of days of payables | days | 29.80 | 35.07 | 35.02 | 39.70 | 36.62 |
| Cash conversion cycle | days | 18.28 | 12.00 | 17.17 | 19.58 | 23.58 |
May 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 5.74 + 42.34 – 29.80
= 18.28
Over the past five years, FedEx Corporation has exhibited fluctuating trends in its cash conversion cycle, which represents the time taken by the company to convert its investment in inventory into cash received from sales. In May 2020, the cash conversion cycle was at its highest point at 23.58 days, indicating a longer period for FedEx to convert its investments into cash.
Subsequently, there was a gradual improvement in the cash conversion cycle, with a notable decrease to 12.00 days in May 2023, reflecting stronger efficiency in managing inventory and collecting receivables. However, there was a slight increase in the cash conversion cycle in May 2024 to 18.28 days, which may suggest a potential delay in converting inventory and receivables into cash.
Overall, the varying cash conversion cycle figures demonstrate FedEx's efforts to streamline its operations and enhance working capital management over the years. The company may benefit from further analyzing the reasons behind the fluctuations to sustain efficient cash conversion cycles in the future.