Otis Worldwide Corp (OTIS)
Cash conversion cycle
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 110.42 | 118.65 | 108.01 | 110.90 |
| Days of sales outstanding (DSO) | days | 97.44 | 95.71 | 88.38 | 100.25 |
| Number of days of payables | days | 338.84 | 330.19 | 270.19 | 244.51 |
| Cash conversion cycle | days | -130.98 | -115.83 | -73.81 | -33.37 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 110.42 + 97.44 – 338.84
= -130.98
The cash conversion cycle for Otis Worldwide Corp has shown fluctuations over the past five years. In particular:
- The company's cash conversion cycle was 44.75 days as of December 31, 2023, showing an improvement from the previous year.
- In 2022, the cycle was 48.42 days, a slight decrease from 48.77 days in 2021.
- The cash conversion cycle was notably higher at 57.79 days at the end of 2020, compared to 49.75 days at the end of 2019.
A lower cash conversion cycle indicates that Otis Worldwide Corp is taking less time to convert its investments in inventory and other resources into cash from sales, which is generally seen as a positive indicator of efficiency in managing working capital. Conversely, a longer cash conversion cycle may suggest inefficiencies in managing inventory levels, receivables, and payables, leading to cash being tied up in the operating cycle for an extended period.
Overall, Otis Worldwide Corp has made progress in optimizing its cash conversion cycle, though a continued focus on working capital management could potentially further enhance operational efficiency and cash flow generation.
Peer comparison
Dec 31, 2023