National Presto Industries Inc (NPK)
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 | 254.16 | 208.37 | 180.21 | 184.73 | 198.30 |
| Days of sales outstanding (DSO) | days | 53.91 | 83.13 | 57.15 | 58.52 | 52.43 |
| Number of days of payables | days | 51.03 | 39.64 | 41.04 | 45.64 | 33.40 |
| Cash conversion cycle | days | 257.05 | 251.86 | 196.32 | 197.61 | 217.33 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 254.16 + 53.91 – 51.03
= 257.05
The cash conversion cycle of National Presto Industries Inc has exhibited fluctuations over the past five years. In particular, there was a notable increase in the cash conversion cycle from 2021 to 2023, reaching a peak of 257.05 days in 2023. This indicates that it takes the company longer to convert its investments in inventory and other resources back into cash during this period.
A longer cash conversion cycle can have implications for the company's liquidity and operational efficiency. It may suggest challenges in managing inventory levels, collecting accounts receivable, or paying suppliers promptly. On the other hand, a shorter cash conversion cycle is generally preferred as it reflects a more efficient use of the company's resources.
It would be beneficial for National Presto Industries Inc to investigate the factors contributing to the lengthening of its cash conversion cycle in recent years and identify opportunities for improvement. By addressing inefficiencies in inventory management, accounts receivable collection, or accounts payable processes, the company may be able to optimize its cash flow and enhance its overall financial performance.
Peer comparison
Dec 31, 2023