MGP Ingredients Inc (MGPI)
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 | 197.02 | 174.57 | 178.78 | 150.81 | 158.41 |
| Days of sales outstanding (DSO) | days | 63.98 | 53.37 | 57.49 | 52.86 | 42.30 |
| Number of days of payables | days | 41.80 | 40.03 | 39.04 | 32.38 | 34.14 |
| Cash conversion cycle | days | 219.20 | 187.91 | 197.22 | 171.29 | 166.57 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 197.02 + 63.98 – 41.80
= 219.20
The cash conversion cycle for MGP Ingredients, Inc. has shown fluctuations over the past five years. In general, the company's ability to convert its resources into cash has improved from 2019 to 2023. However, in 2023, the cash conversion cycle increased to 251.02 days compared to the previous year.
The cash conversion cycle represents the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A longer cash conversion cycle may indicate inefficiencies in managing inventory, collecting receivables, or paying suppliers.
MGP Ingredients, Inc. should analyze the drivers behind the increase in the cash conversion cycle in 2023 and take steps to optimize its working capital management. By improving inventory turnover, receivables collection, and payables management, the company can potentially shorten its cash conversion cycle and enhance its liquidity and overall financial performance.