ON Semiconductor Corporation (ON)
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 | 176.41 | 138.89 | 125.08 | 129.06 | 126.92 |
| Days of sales outstanding (DSO) | days | 41.37 | 36.92 | 43.83 | 46.95 | 46.63 |
| Number of days of payables | days | 60.61 | 73.20 | 57.59 | 59.08 | 55.98 |
| Cash conversion cycle | days | 157.16 | 102.61 | 111.33 | 116.93 | 117.57 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 176.41 + 41.37 – 60.61
= 157.16
The cash conversion cycle for ON Semiconductor Corp. has varied over the past five years as follows:
- Dec 31, 2019: 117.57 days
- Dec 31, 2020: 116.93 days
- Dec 31, 2021: 111.33 days
- Dec 31, 2022: 102.61 days
- Dec 31, 2023: 157.16 days
The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash inflows from sales. A longer cash conversion cycle indicates a longer period between upfront spending on inventory and the collection of cash from sales.
The increase in the cash conversion cycle from 102.61 days in 2022 to 157.16 days in 2023 is concerning, as it suggests that ON Semiconductor Corp. took more time to convert its investments into cash inflows during that year. This could be due to factors such as slower inventory turnover, longer accounts receivable collection periods, or delays in accounts payable payments.
It is essential for the company to closely monitor and manage its cash conversion cycle to ensure efficient use of resources and maintain healthy cash flows. Identifying and addressing the reasons for the lengthening cash conversion cycle can help improve the company's liquidity and overall financial performance.
Peer comparison
Dec 31, 2023