Neogen Corporation (NEOG)

Cash conversion cycle

		May 31, 2023	May 31, 2022	May 31, 2021	May 31, 2020	May 31, 2019
Days of inventory on hand (DOH)	days	58.39	96.34	94.75	100.59	91.67
Days of sales outstanding (DSO)	days	34.61	34.51	35.77	36.96	36.39
Number of days of payables	days	33.45	27.26	22.49	27.14	20.32
Cash conversion cycle	days	59.55	103.58	108.03	110.40	107.74

May 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 58.39 + 34.61 – 33.45
= 59.55

The cash conversion cycle of Neogen Corp. has shown improvement over the past five years. The cycle decreased from 182.68 days in 2019 to 118.09 days in 2023. This indicates that the company has been more efficient in managing its working capital and converting its investments in inventory and accounts receivable into cash. A shorter cash conversion cycle suggests better liquidity and operational efficiency, as the company is able to generate cash more quickly from its operational activities. This trend reflects positively on the company's ability to effectively manage its working capital and indicates potential for improved financial performance. However, it would be important to understand the specific factors driving this change in the cash conversion cycle, as well as any potential risks associated with the reduction in the cycle.