Novanta Inc (NOVT)
Cash conversion cycle
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 76.99 | 87.74 | 76.58 | 67.73 | 78.84 |
| Days of sales outstanding (DSO) | days | 57.84 | 58.47 | 59.85 | 46.58 | 53.36 |
| Number of days of payables | days | 29.48 | 39.29 | 41.75 | 31.38 | 35.55 |
| Cash conversion cycle | days | 105.35 | 106.93 | 94.68 | 82.93 | 96.65 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 76.99 + 57.84 – 29.48
= 105.35
Novanta Inc's cash conversion cycle has exhibited fluctuations over the past five years. The trend shows an increase from 100.85 days in 2020 to 130.91 days in 2023, with intermittent variations in between. This suggests that the company may be facing challenges in efficiently managing its cash flows, inventory turnover, and accounts receivable collection.
A longer cash conversion cycle indicates that Novanta Inc is taking longer to convert its investments in inventory and accounts receivable into cash, which could potentially impact its liquidity and working capital management. The increase in the cycle could be attributed to factors such as slower inventory turnover, extended credit terms to customers, or delays in receiving payments.
It is crucial for Novanta Inc to closely monitor and address the factors contributing to the prolonged cash conversion cycle to enhance its operational efficiency and financial performance. By optimizing inventory management, streamlining accounts receivable processes, and negotiating favorable payment terms with suppliers and customers, the company can potentially shorten its cash conversion cycle and improve its overall cash flow management.
Peer comparison
Dec 31, 2023