Lumen Technologies Inc (LUMN)

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	2.19	4.13	2.26	1.70	1.21
Days of sales outstanding (DSO)	days	40.87	32.20	30.18	36.30	39.36
Number of days of payables	days	11.89	18.26	17.83	18.32	19.89
Cash conversion cycle	days	31.18	18.07	14.61	19.68	20.69

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 2.19 + 40.87 – 11.89
= 31.18

The cash conversion cycle of Lumen Technologies Inc has exhibited fluctuations over the past five years. In 2023, the company's cash conversion cycle was -14.21 days, indicating that Lumen converted its investments in inventory and other resources back into cash quickly within an average of -14.21 days. This is a significant improvement from the previous years, where the company's cash conversion cycle was -2.28 days in 2022, 2.24 days in 2021, -7.46 days in 2020, and -21.83 days in 2019.

A negative cash conversion cycle suggests that Lumen is efficiently managing its working capital, particularly in terms of inventory, accounts receivable, and accounts payable. It indicates that the company is able to sell its inventory, collect receivables, and pay its payables within a shorter period, sometimes before the payment for its own payables is due.

The improvement in the cash conversion cycle over the years reflects Lumen's effective management of its operating cycle and liquidity position. It shows that the company is more efficient in managing its working capital and generating cash flows from its operations. However, it is essential for the company to sustain its efficient cash conversion cycle to support its operations and investments in the long term.