WW Grainger Inc (GWW)
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 | 58.55 | 62.12 | 58.54 | 56.75 | 57.12 |
| Days of sales outstanding (DSO) | days | 48.82 | 51.43 | 49.49 | 46.39 | 45.57 |
| Number of days of payables | days | — | — | — | — | — |
| Cash conversion cycle | days | 107.37 | 113.56 | 108.02 | 103.13 | 102.69 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 58.55 + 48.82 – —
= 107.37
The cash conversion cycle of W.W. Grainger Inc. has shown some fluctuation over the past five years. The cycle was longest in Dec 31, 2022 at 98.06 days, indicating that it took a longer time for the company to convert its investments in inventory and other resources into cash during that year. However, this improved slightly in the following year to 96.53 days, although still higher compared to the preceding years.
In general, the trend indicates that it took W.W. Grainger Inc. around 90 to 100 days on average to convert its investments into cash over the past five years. A decreasing trend in the cash conversion cycle would typically indicate a more efficient use of resources and quicker conversion of inventory into sales and eventually into cash. Conversely, an increasing trend may suggest inefficiencies in managing inventory, collection from customers, or payment to suppliers.
It is important for the company to monitor and manage its cash conversion cycle effectively to ensure optimal working capital management and operational efficiency. This involves maintaining an optimal level of inventory, efficient collection of receivables, and strategic payment of payables to ensure a healthy cash flow position.