LGI Homes (LGIH)
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 | 525.52 | 547.26 | 341.09 | 324.60 | 390.50 |
| Days of sales outstanding (DSO) | days | — | — | — | — | — |
| Number of days of payables | days | — | — | — | — | — |
| Cash conversion cycle | days | 525.52 | 547.26 | 341.09 | 324.60 | 390.50 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 525.52 + — – —
= 525.52
The cash conversion cycle of LGI Homes Inc has exhibited fluctuations over the past five years. In 2023, the cycle was 624.52 days, showing a slight improvement compared to 2022 when it was 636.51 days. However, the cycle has been historically higher than the levels observed in 2021, 2020, and 2019, indicating a longer period required to convert inputs into cash flows.
The cash conversion cycle metric represents the time taken for a company to convert its investments in inventory and other resources into cash inflows from sales. A longer cash conversion cycle may indicate inefficiencies in the company's operations, such as slow inventory turnover or extended payment periods to suppliers, affecting the company's liquidity and profitability.
LGI Homes Inc should focus on reducing its cash conversion cycle to improve its working capital management and overall financial performance. Strategies to achieve this may include optimizing inventory management, negotiating favorable payment terms with suppliers, and enhancing the efficiency of the company's sales and collection processes.
Peer comparison
Dec 31, 2023