Middlesex Water Company (MSEX)

Cash conversion cycle

		Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	21.93	46.06	46.72	48.61	46.64	47.01	47.45	45.15	45.32	46.53	41.90	46.72	46.21	45.32	50.61	50.91	52.72	52.09	54.11	55.09
Days of sales outstanding (DSO)	days	65.28	70.46	60.30	56.18	55.89	68.65	61.81	54.72	60.93	70.10	59.32	53.99	58.95	67.56	60.75	50.05	54.78	65.00	56.42	47.28
Number of days of payables	days	86.87	205.72	205.52	204.74	187.62	209.98	201.62	151.88	178.67	156.47	207.64	219.65	275.20	236.58	218.81	232.69	225.65	203.73	181.78	140.54
Cash conversion cycle	days	0.34	-89.19	-98.49	-99.94	-85.08	-94.32	-92.35	-52.00	-72.42	-39.85	-106.42	-118.94	-170.04	-123.70	-107.45	-131.73	-118.15	-86.65	-71.24	-38.16

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 21.93 + 65.28 – 86.87
= 0.34

The cash conversion cycle of Middlesex Water Co. fluctuated over the past eight quarters, having varied from a low of 53.70 days in Q1 2023 to a high of 270.68 days in Q3 2023. This ratio measures the number of days it takes for the company to convert its investments in inventory back to cash through sales to customers, taking into account the average time to sell inventory, collect receivables, and pay suppliers.

A longer cash conversion cycle can indicate inefficiencies in managing working capital, potentially due to slow inventory turnover, extended accounts receivable collection periods, or delayed payments to suppliers. Conversely, a shorter cycle may suggest improved liquidity and efficient operations.

The significant increase in Q3 2023 is a concern, as it reflects a substantial delay in converting investments into cash, potentially indicating operational challenges or issues with working capital management during that period. Conversely, the lower cycles in Q1 and Q2 2023, compared to previous quarters, are positive signs of improved efficiency in cash conversion.

Analyzing trends in the cash conversion cycle can provide insights into the company's operational effectiveness, working capital management, and overall financial health. Further investigation into the underlying factors influencing these fluctuations is recommended to assess the company's performance and identify areas for improvement.