Masimo Corporation (MASI)
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 | 115.75 | 111.89 | 170.66 | 196.69 | 137.02 |
| Days of sales outstanding (DSO) | days | 68.26 | 3.36 | 59.85 | 45.84 | 1.18 |
| Number of days of payables | days | 53.41 | 61.82 | 64.06 | 58.35 | 64.50 |
| Cash conversion cycle | days | 130.59 | 53.43 | 166.44 | 184.18 | 73.70 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 115.75 + 68.26 – 53.41
= 130.59
The cash conversion cycle is a financial metric that reflects the time it takes for a company to convert its investments in inventory and other resources into cash inflows from sales. A shorter cash conversion cycle indicates efficient management of working capital, whereas a longer cycle suggests potential issues with liquidity and operational efficiency.
Based on the data provided for Masimo Corporation:
- In 2023, the cash conversion cycle increased significantly to 130.59 days compared to the previous year, indicating a lengthening of the time required to convert investments into cash inflows. This increase may be attributed to factors like slower inventory turnover or delayed collection of accounts receivable.
- In 2022, the cash conversion cycle decreased to 53.43 days, reflecting a more efficient conversion of investments into cash inflows compared to 2021. This improvement suggests effective working capital management and quicker cash generation.
- In 2021, the cash conversion cycle was relatively high at 166.44 days, indicating a longer time required to convert investments to cash inflows. This may suggest challenges in managing working capital efficiently, such as slow inventory turnover or extended collection periods.
- In 2020, the cash conversion cycle was 184.18 days, pointing to a further delay in the conversion of investments into cash inflows compared to 2019. This longer cycle suggests potential liquidity challenges and inefficiencies in the company's operations.
- In 2019, the cash conversion cycle was 73.70 days, indicating a relatively shorter time required to convert investments into cash inflows compared to the following years. This suggests that Masimo Corporation was more efficient in managing its working capital and generating cash during that period.
Overall, fluctuations in Masimo Corporation's cash conversion cycle over the past five years reflect varying levels of efficiency in working capital management and cash generation. It is important for the company to analyze the underlying reasons behind these changes and implement strategies to optimize its cash conversion cycle for improved financial performance and operational effectiveness.
Peer comparison
Dec 31, 2023