Generac Holdings Inc (GNRC)
Cash conversion cycle
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | 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 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 106.16 | 116.45 | 123.36 | 125.51 | 122.90 | 136.28 | 147.72 | 141.42 | 133.17 | 136.83 | 126.42 | 138.46 | 136.45 | 130.22 | 117.35 | 110.46 | 114.19 | 106.60 | 111.72 | 115.12 |
| Days of sales outstanding (DSO) | days | 52.07 | 58.35 | 55.73 | 47.83 | 49.65 | 54.65 | 49.78 | 41.97 | 42.14 | 43.58 | 57.36 | 55.11 | 53.72 | 54.71 | 55.45 | 56.03 | 55.62 | 63.48 | 53.89 | 52.25 |
| Number of days of payables | days | 47.20 | 45.15 | 43.50 | 40.48 | 35.87 | 40.97 | 46.76 | 41.91 | 42.27 | 50.28 | 62.57 | 78.08 | 84.42 | 85.12 | 79.93 | 66.48 | 62.51 | 54.55 | 47.25 | 54.90 |
| Cash conversion cycle | days | 111.02 | 129.66 | 135.59 | 132.85 | 136.69 | 149.96 | 150.74 | 141.49 | 133.04 | 130.13 | 121.20 | 115.48 | 105.75 | 99.80 | 92.88 | 100.00 | 107.31 | 115.52 | 118.37 | 112.47 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 106.16 + 52.07 – 47.20
= 111.02
Generac Holdings Inc's cash conversion cycle has shown fluctuations over the years, ranging from a low of 92.88 days in June 2021 to a high of 150.74 days in June 2023. The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and accounts receivable into cash inflows from sales.
In general, a shorter cash conversion cycle is preferable as it indicates that the company is able to quickly convert its resources into cash, which can be reinvested or used for other purposes. Conversely, a longer cash conversion cycle may suggest inefficiencies in managing inventory or collecting accounts receivable, which could tie up cash and impact liquidity.
Analyzing Generac's data, we observe an increasing trend in the cash conversion cycle from 92.88 days in June 2021 to 135.59 days in June 2024. This prolonged cycle may signal potential challenges in managing working capital efficiently, potentially impacting the company's cash flow and overall financial health.
It is essential for Generac Holdings Inc to closely monitor and address factors contributing to the elongation of the cash conversion cycle to ensure optimal cash management and operational effectiveness. By improving inventory management, enhancing accounts receivable collection processes, and streamlining operations, Generac can work towards reducing its cash conversion cycle and enhancing its overall financial performance.
Peer comparison
Dec 31, 2024