Kennametal Inc (KMT)
Cash conversion cycle
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 132.30 | 142.16 | 152.70 | 134.89 | 140.65 |
| Days of sales outstanding (DSO) | days | 54.00 | 53.97 | 53.57 | 60.05 | 46.07 |
| Number of days of payables | days | 49.24 | 51.84 | 60.96 | 50.31 | 44.32 |
| Cash conversion cycle | days | 137.06 | 144.30 | 145.31 | 144.63 | 142.40 |
June 30, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 132.30 + 54.00 – 49.24
= 137.06
The cash conversion cycle of Kennametal Inc has shown a slight improvement in efficiency over the past five years. The company's cash conversion cycle decreased from 142.40 days in 2020 to 137.06 days in 2024. This indicates that Kennametal has been able to manage its cash flows more effectively, potentially by reducing the time it takes to convert inventory and receivables into cash.
A lower cash conversion cycle generally indicates that a company is able to collect its accounts receivable more quickly, convert inventory into sales efficiently, and manage its payables effectively. This can be a positive sign of operational efficiency and liquidity management within the company.
Overall, the trend of decreasing cash conversion cycle over the years suggests that Kennametal Inc has been successful in optimizing its working capital management, which could potentially lead to improved financial performance and stability in the future. However, it would be prudent for the company to continue monitoring and fine-tuning its cash conversion cycle to ensure optimal efficiency in its cash flow operations.