Norfolk Southern Corporation (NSC)
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 | 23.76 | 22.34 | 24.15 | 26.58 | 23.40 |
| Days of sales outstanding (DSO) | days | 36.61 | 34.76 | 33.94 | 33.78 | 31.41 |
| Number of days of payables | days | 147.44 | 114.19 | 149.66 | 122.19 | 136.95 |
| Cash conversion cycle | days | -87.06 | -57.08 | -91.57 | -61.83 | -82.14 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 23.76 + 36.61 – 147.44
= -87.06
The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash from sales. A longer cash conversion cycle indicates that the company takes more time to generate cash from its operating activities.
For Norfolk Southern Corp., we observe a trend of increasing cash conversion cycle over the past five years, from 29.73 days in 2019 to 34.44 days in 2023. This suggests that the company has been taking longer to convert its investments in inventory and other resources into cash from sales over this period.
The increase in the cash conversion cycle may be attributed to various factors such as slower inventory turnover, longer accounts receivable collection periods, or extended payment terms with suppliers. It is essential for Norfolk Southern Corp. to closely monitor and manage its cash conversion cycle to ensure efficient working capital management and sustainability in the long term.
Overall, the trend of a rising cash conversion cycle for Norfolk Southern Corp. indicates a potential need for the company to streamline its operating processes, enhance inventory management, and optimize its accounts receivable and payable practices to improve cash flow efficiency.
Peer comparison
Dec 31, 2023