MillerKnoll Inc (MLKN)
Cash conversion cycle
| Jun 3, 2023 | May 28, 2022 | May 29, 2021 | May 30, 2020 | Jun 1, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 45.13 | 55.90 | 38.21 | 29.15 | 29.17 |
| Days of sales outstanding (DSO) | days | 16.38 | 17.73 | 16.42 | 14.68 | 17.98 |
| Number of days of payables | days | 24.96 | 33.80 | 29.82 | 19.03 | 28.14 |
| Cash conversion cycle | days | 36.56 | 39.83 | 24.81 | 24.80 | 19.01 |
June 3, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 45.13 + 16.38 – 24.96
= 36.56
The cash conversion cycle (CCC) measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. It is a vital indicator of operational efficiency and liquidity management.
For MillerKnoll Inc, the trend in the cash conversion cycle over the past five years shows some fluctuations. In 2019, the company had a relatively low CCC of 37.32 days, indicating efficient management of inventory and a quicker conversion of sales into cash. This suggests that MillerKnoll was able to sell its inventory and collect cash relatively faster.
However, in 2020, the CCC increased to 45.15 days, indicating a lengthening of the cycle. This could be attributed to a decrease in sales, an increase in inventory holding period, or a delay in collecting receivables from customers. The increase in CCC may have negatively impacted the company's liquidity and working capital management.
In 2021, there was a significant improvement in the cash conversion cycle, with a decrease to 41.21 days. This suggests that MillerKnoll was able to improve its inventory turnover, collect receivables more efficiently, or manage its payables effectively.
In the most recent period, the CCC increased to 67.91 days, signifying a reversal in the trend of improvement observed in the previous year. This increase may raise concerns about the company's operational efficiency and its ability to convert investments in inventory and receivables into cash.
The latest year, 2023, shows a further increase in the CCC to 62.39 days, indicating ongoing challenges in efficiently managing the cash conversion cycle.
Overall, the fluctuation in MillerKnoll's cash conversion cycle over the past five years suggests that the company may need to focus on improving its inventory management, collections from customers, and payment to suppliers in order to enhance its working capital efficiency and maintain a healthy cash flow position. This will be crucial in sustaining the company's liquidity and financial health.