Hormel Foods Corporation (HRL)
Cash conversion cycle
| Oct 29, 2023 | Oct 30, 2022 | Oct 31, 2021 | Oct 25, 2020 | Oct 27, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 55.22 | 55.92 | 48.35 | 45.71 | 45.55 |
| Days of sales outstanding (DSO) | days | 25.01 | 25.77 | 29.10 | 28.32 | 22.84 |
| Number of days of payables | days | 25.35 | 26.61 | 28.01 | 27.47 | 25.79 |
| Cash conversion cycle | days | 54.88 | 55.08 | 49.43 | 46.57 | 42.61 |
October 29, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 55.22 + 25.01 – 25.35
= 54.88
The cash conversion cycle of Hormel Foods Corp. has shown an increasing trend over the past five years, from 44.53 days in 2019 to 57.67 days in 2023. This indicates that the company's ability to efficiently convert its resources into cash has slightly deteriorated over the period.
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. A longer cycle suggests that the company is taking longer to sell its inventory and collect cash from customers, which can tie up working capital and potentially indicate operational inefficiencies.
Hormel Foods Corp. may need to focus on streamlining its inventory management, improving sales collection processes, and optimizing payment terms with suppliers and customers to reduce the cash conversion cycle and enhance its cash flow efficiency in the future.