Granite Construction Incorporated (GVA)
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 | 10.87 | 9.68 | 7.67 | 5.95 | 9.09 |
| Days of sales outstanding (DSO) | days | 31.32 | 25.65 | 27.95 | 22.47 | 28.99 |
| Number of days of payables | days | 42.74 | 37.28 | 40.13 | 30.62 | 41.01 |
| Cash conversion cycle | days | -0.55 | -1.95 | -4.51 | -2.19 | -2.92 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 10.87 + 31.32 – 42.74
= -0.55
Granite Construction Inc.'s cash conversion cycle has shown fluctuation over the past five years. The cycle indicates the number of days it takes for the company to convert its investments in inventory and other resources into cash flows from sales. A shorter cash conversion cycle is generally favorable as it indicates efficient management of working capital.
In 2023, the cash conversion cycle increased to 26.57 days from 20.48 days in 2022, and it was higher compared to the cycles in 2021 and 2019. This suggests a slowdown in the company's ability to convert its resources into cash during the year.
In 2022, there was a notable improvement as the cash conversion cycle decreased to 20.48 days from 20.93 days in 2021. This may indicate better management of inventory and accounts receivable during the year.
In 2021, the cash conversion cycle was slightly higher at 20.93 days compared to 2020, where it was 24.01 days. The decrease in the cycle from 2020 to 2021 suggests potential efficiency in managing working capital.
Overall, Granite Construction Inc. should continue to focus on optimizing its cash conversion cycle to ensure efficient utilization of its resources and timely conversion into cash flows from sales. Monitoring and improving this cycle can enhance the company's overall liquidity and operational performance in the long run.
Peer comparison
Dec 31, 2023