Johnson Controls International PLC (JCI)
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 | 39.44 | 39.54 | 34.69 | 28.99 | 28.34 |
| Days of sales outstanding (DSO) | days | 83.07 | 83.83 | 88.81 | 91.56 | 105.58 |
| Number of days of payables | days | 60.64 | 64.80 | 63.18 | 51.02 | 55.95 |
| Cash conversion cycle | days | 61.87 | 58.57 | 60.32 | 69.53 | 77.97 |
September 30, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 39.44 + 83.07 – 60.64
= 61.87
The cash conversion cycle (CCC) is a crucial measure of a company's efficiency in managing its working capital, encompassing the time it takes to convert inventory and other resources into cash from sales. Johnson Controls International plc's CCC over the past five years is as follows:
- Sep 30, 2023: 51.26 days
- Sep 30, 2022: 42.49 days
- Sep 30, 2021: 47.07 days
- Sep 30, 2020: 53.60 days
- Sep 30, 2019: 48.22 days
A rising CCC indicates a longer time it takes for the company to sell inventory and collect cash, which can tie up funds and potentially lead to liquidity issues. On the other hand, a declining CCC implies improved efficiency in managing working capital.
Over the five-year period, Johnson Controls International plc experienced fluctuations in its CCC. The increase in CCC from 2022 to 2023 may indicate a longer cash conversion cycle, which could be attributed to slower inventory turnover or lengthier collection periods from customers. This could potentially result in a higher need for working capital and tie up cash in the operating cycle.
Conversely, the decrease in CCC from 2021 to 2022 suggests improved efficiency in working capital management, leading to a shorter cash conversion cycle. This improvement may be indicative of streamlined inventory management or faster collection of receivables, allowing for quicker conversion of resources into cash.
It is important for Johnson Controls International plc to monitor its CCC closely to ensure optimal management of working capital and efficient cash flow generation. If the trend continues, the company should focus on strategies to enhance inventory turnover, accelerate receivables collection, and optimize payment cycles to improve its CCC and overall liquidity position.
Peer comparison
Sep 30, 2023