Lindsay Corporation (LNN)
Days of sales outstanding (DSO)
| Aug 31, 2023 | Aug 31, 2022 | Aug 31, 2021 | Aug 31, 2020 | Aug 31, 2019 | ||
|---|---|---|---|---|---|---|
| Receivables turnover | 4.66 | 5.58 | 6.06 | 5.61 | 5.88 | |
| DSO | days | 78.39 | 65.45 | 60.19 | 65.05 | 62.10 |
August 31, 2023 calculation
DSO = 365 ÷ Receivables turnover
= 365 ÷ 4.66
= 78.39
Days Sales Outstanding (DSO) is a crucial financial ratio that measures the average number of days a company takes to collect revenue after making a sale. The DSO can indicate the efficiency of a company's credit and collections policies, as well as its ability to manage cash flow. Here is a comprehensive analysis of Lindsay Corporation's DSO based on the provided data:
The trend in Lindsay Corporation's DSO over the past five years shows some fluctuation. In 2019, the DSO was 62.10 days, and it increased to 65.05 days in 2020. This rise might indicate a potential issue with the company's accounts receivable management, as it took longer to collect payments from customers.
However, in 2021, there was a significant improvement as the DSO decreased to 60.19 days, reflecting an enhanced collections process or a shift in sales terms. This lower DSO suggests that the company was able to collect payments more efficiently, indicating a positive impact on cash flow and working capital management.
The trend continued in 2022, with the DSO decreasing further to 65.45 days. This reversal of the previous increase could suggest that the company made efforts to streamline its credit and collections process, resulting in faster receipt of sales proceeds.
Nevertheless, in 2023, the DSO increased to 78.39 days, surpassing the levels of the previous year. This elevation may raise concerns about the company's accounts receivable management, as it took longer to convert sales into cash. It could also imply a potential risk of liquidity issues if this trend persists.
In conclusion, while there have been fluctuations in Lindsay Corporation's DSO over the past five years, it is essential for the company to closely monitor and manage its accounts receivable to ensure efficient cash flow and optimize working capital. Further investigation into the factors driving these fluctuations, and potential measures to improve collections efficiency, may be necessary to mitigate any negative impacts on the company's financial health.
Peer comparison
Aug 31, 2023