Lear Corporation (LEA)

Cash conversion cycle

		Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	28.64	29.71	28.97	29.65	28.25	29.17	30.79	31.97	30.70	46.60	60.32	68.48	72.60	39.20	27.89	26.47	24.32	25.19	24.14	22.86
Days of sales outstanding (DSO)	days	28.68	33.07	35.30	—	29.68	—	—	—	28.37	—	—	—	—	—	—	—	—	—	—	—
Number of days of payables	days	55.95	59.09	61.96	63.30	57.56	59.99	59.38	62.48	57.67	75.72	109.48	146.46	162.79	91.16	42.61	49.90	54.55	58.14	59.57	58.93
Cash conversion cycle	days	1.38	3.69	2.31	-33.66	0.37	-30.82	-28.59	-30.52	1.41	-29.13	-49.16	-77.98	-90.19	-51.97	-14.72	-23.43	-30.23	-32.95	-35.43	-36.07

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 28.64 + 28.68 – 55.95
= 1.38

The cash conversion cycle measures the time it takes for a company like Lear Corp. to convert its investments in inventory and other resources into cash inflows from sales. A lower cash conversion cycle typically indicates better liquidity and operational efficiency.

From the data provided, Lear Corp.'s cash conversion cycle has fluctuated over the past eight quarters, ranging from 86.75 days to 100.82 days. In Q4 2023, the cash conversion cycle was 86.75 days, showing improvement compared to the previous quarter at 94.76 days.

However, it is important to note that the cash conversion cycle increased in the first three quarters of 2023 compared to the corresponding quarters in 2022. This suggests that Lear Corp. may be taking longer to convert its investments into cash inflows, potentially facing challenges in managing inventory, accounts receivable, and accounts payable efficiently.

Overall, further analysis is needed to understand the reasons behind these fluctuations and to assess the impact on Lear Corp.'s liquidity and working capital management.