NiSource Inc (NI)
Cash conversion cycle
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 92.44 | 96.69 | 111.30 | 105.02 | 97.60 |
| Days of sales outstanding (DSO) | days | 75.00 | 65.31 | 71.20 | 68.75 | 108.38 |
| Number of days of payables | days | 205.06 | 143.99 | 133.15 | 146.94 | 143.32 |
| Cash conversion cycle | days | -37.61 | 18.00 | 49.35 | 26.83 | 62.65 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 92.44 + 75.00 – 205.06
= -37.61
The cash conversion cycle of NiSource Inc has shown significant fluctuations over the years. As of December 31, 2020, the company's cash conversion cycle was 62.65 days, indicating that it took approximately two months for the company to convert its investments in inventory and other resources into cash flows from sales.
By December 31, 2021, NiSource Inc managed to improve its cash conversion cycle to 26.83 days, showcasing a more efficient management of its working capital and quicker conversion of assets into cash. This significant reduction suggests enhanced liquidity and operational efficiency.
However, by December 31, 2022, the company's cash conversion cycle increased to 49.35 days, indicating a slower conversion of investments into cash, possibly due to changes in operating or market conditions affecting the company's working capital management.
Subsequently, as of December 31, 2023, NiSource Inc managed to remarkably reduce its cash conversion cycle to 18.00 days, reflecting a swift turnaround from investments to cash. This improvement suggests a more streamlined and effective management of inventory and accounts receivables.
Surprisingly, by December 31, 2024, the cash conversion cycle is reflected as -37.61 days, indicating a negative cycle. This unusual figure implies that NiSource Inc may be receiving cash from customers before paying suppliers or incurring costs related to inventory. While negative cash conversion cycles can be beneficial in terms of working capital efficiency, they should be evaluated in conjunction with other financial metrics to assess the sustainability and implications of such a scenario.
In conclusion, the analysis of NiSource Inc's cash conversion cycle highlights fluctuations in working capital efficiency over the years, showcasing instances of both improvement and challenges in managing cash flows from operations. Further evaluation is recommended to understand the underlying factors driving these fluctuations and their impact on the company's financial performance and liquidity position.
Peer comparison
Dec 31, 2024