Kellanova (K)

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	51.33	55.27	40.97	51.83	48.66
Days of sales outstanding (DSO)	days	43.62	50.08	38.32	40.74	42.37
Number of days of payables	days	95.55	106.01	75.40	99.74	94.73
Cash conversion cycle	days	-0.61	-0.66	3.89	-7.17	-3.71

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 51.33 + 43.62 – 95.55
= -0.61

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 negative cash conversion cycle indicates that the company is able to generate cash before having to pay its suppliers, which can be a positive sign of efficient working capital management.

Looking at Kellanova's cash conversion cycle over the past five years, we observe fluctuations in the metric. In 2019 and 2020, the company had negative cash conversion cycles of -3.71 days and -7.17 days, respectively, suggesting that it was able to convert its inventory and receivables into cash more quickly than it paid its suppliers.

However, in 2021, there was a significant increase in the cash conversion cycle to 3.89 days, indicating a potential delay in converting investments into cash. This could be a result of changes in the company's operating cycle, payment terms, or disruptions in the supply chain.

By 2022 and 2023, the cash conversion cycle improved to -0.66 days and -0.61 days, respectively, returning to negative territory. This could imply that Kellanova regained efficiency in its working capital management, allowing it to generate cash flows quicker and potentially improve its liquidity position.

Overall, a negative cash conversion cycle generally reflects a more efficient use of working capital and quicker cash generation. However, it is essential for Kellanova to monitor and manage its cash conversion cycle effectively to ensure the sustainability of its financial health and operational efficiency.