MSC Industrial Direct Company Inc (MSM)
Cash conversion cycle
| Sep 2, 2023 | Sep 3, 2022 | Aug 28, 2021 | Aug 29, 2020 | Aug 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 101.39 | 109.30 | 104.54 | 95.56 | 105.65 |
| Days of sales outstanding (DSO) | days | 39.87 | 68.14 | 63.36 | 56.53 | 58.71 |
| Number of days of payables | days | 31.58 | 33.20 | 31.21 | 22.13 | 30.25 |
| Cash conversion cycle | days | 109.68 | 144.24 | 136.69 | 129.96 | 134.11 |
September 2, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 101.39 + 39.87 – 31.58
= 109.68
The cash conversion cycle (CCC) is a critical efficiency metric that reflects how quickly a company can convert its investments in inventory and other resources into cash flows from sales. A lower CCC indicates better efficiency in managing working capital and cash flows.
Looking at the data provided for MSC Industrial Direct Co., Inc., we can observe a trend in the cash conversion cycle over the past five years.
In the most recent fiscal year ending September 2, 2023, the company's CCC was 116.80 days, representing a significant improvement compared to the prior year. This indicates that the company's management of working capital and cash flows improved, as it took fewer days to convert its investments in inventory into cash.
Conversely, in the fiscal year ending September 3, 2022, the company's CCC was notably higher at 153.22 days, reflecting a less efficient management of working capital. This suggests that the company took longer to convert its investments in inventory into cash flows from sales, signifying potential inefficiencies in its operations.
In the fiscal years ending August 28, 2021, August 29, 2020, and August 31, 2019, the CCC values were 146.75 days, 138.60 days, and 134.11 days, respectively. These values indicate fluctuations in the efficiency of the company's working capital management over these years.
Overall, it is essential to note that a decreasing trend in the cash conversion cycle can signify improvements in operational efficiency and effective management of working capital. On the other hand, an increasing trend may indicate inefficiencies and potential liquidity constraints. Therefore, the company should continue to focus on optimizing its inventory management, accounts receivable, and accounts payable processes to maintain a healthy and efficient cash conversion cycle.
Peer comparison
Sep 2, 2023