Haynes International Inc (HAYN)
Cash conversion cycle
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 285.43 | 301.68 | 264.92 | 238.29 | 201.12 |
| Days of sales outstanding (DSO) | days | 68.20 | 71.02 | 64.33 | 52.86 | 58.82 |
| Number of days of payables | days | 36.40 | 46.31 | 50.83 | 17.00 | 26.81 |
| Cash conversion cycle | days | 317.22 | 326.39 | 278.41 | 274.15 | 233.13 |
September 30, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 285.43 + 68.20 – 36.40
= 317.22
The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. Looking at the data for Haynes International Inc. from 2019 to 2023, the trend in the cash conversion cycle reflects the efficiency of the company's working capital management.
We observe that the cash conversion cycle has increased from 251.39 days in 2019 to 341.83 days in 2023. The rising trend indicates a lengthening cycle, which suggests that the company has been taking longer to convert its investments in inventory into cash. This could be due to increased inventory holdings or a delay in collecting cash from customers.
The longer cash conversion cycle may raise concerns about the company's liquidity and working capital management. It is essential for the company to focus on optimizing its inventory management and streamlining its receivables collection process to shorten the cycle and free up cash resources for other uses. Additionally, the company should monitor its payables to ensure that it is maximizing the available credit terms without negatively impacting supplier relationships.
Overall, the increasing trend in Haynes International Inc.'s cash conversion cycle highlights the importance of efficient working capital management to ensure liquidity and optimize the use of resources.
Peer comparison
Sep 30, 2023