Lithia Motors Inc (LAD)
Cash conversion cycle
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 62.29 | 59.16 | 47.39 | 41.10 | 73.19 |
| Days of sales outstanding (DSO) | days | 12.55 | 13.28 | 10.55 | 14.62 | 17.15 |
| Number of days of payables | days | 3.52 | 3.58 | 3.59 | 4.06 | 4.64 |
| Cash conversion cycle | days | 71.33 | 68.85 | 54.35 | 51.66 | 85.70 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 62.29 + 12.55 – 3.52
= 71.33
The cash conversion cycle of Lithia Motors Inc has shown variations over the years. In 2020, the company's cash conversion cycle was 85.70 days, indicating that it takes approximately 85.70 days to convert inventory into cash. However, there was a significant improvement in 2021, with the cash conversion cycle decreasing to 51.66 days. This suggests that the company was able to manage its inventory more efficiently and convert it into cash quicker.
In 2022 and 2023, there was a slight increase in the cash conversion cycle to 54.35 days and 68.85 days, respectively. This indicates a longer time taken to convert inventory into cash compared to the previous year. It could be a signal of inventory management challenges or changes in the company's sales and collection processes.
By the end of 2024, the cash conversion cycle further increased to 71.33 days, showing a continued trend of taking longer to convert inventory into cash. This might imply that the company is facing challenges in managing its working capital effectively or experiencing slower sales conversions.
Overall, fluctuations in the cash conversion cycle of Lithia Motors Inc highlight the importance of efficient inventory management, timely collection of receivables, and prudent cash flow management to optimize the company's operational efficiency and financial performance.
Peer comparison
Dec 31, 2024