Mercer International Inc (MERC)
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 | 69.14 | 86.21 | 88.64 | 72.45 | 64.19 |
| Days of sales outstanding (DSO) | days | 58.74 | 57.72 | 81.63 | 62.45 | 49.62 |
| Number of days of payables | days | 12.36 | 18.78 | 15.96 | 15.06 | 19.44 |
| Cash conversion cycle | days | 115.52 | 125.14 | 154.31 | 119.84 | 94.37 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 69.14 + 58.74 – 12.36
= 115.52
Mercer International Inc.'s cash conversion cycle has shown a fluctuating trend over the past five years. The company's cash conversion cycle decreased from 83.90 days in 2019 to 115.50 days in 2020, before increasing to 139.04 days in 2021. However, there was a slight improvement in 2022, with the cycle decreasing to 127.53 days, followed by a further reduction to 118.77 days in 2023.
A shorter cash conversion cycle indicates that the company is able to efficiently convert its investments in inventory into cash. This can be seen as a positive outcome as it reflects the company's ability to manage its working capital effectively. However, the increase in the cycle in 2021 may indicate potential issues with inventory management or collection of receivables during that period.
Overall, Mercer International Inc. should continue to monitor and optimize its cash conversion cycle to ensure liquidity and operational efficiency.