Otter Tail Corporation (OTTR)

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	105.39	97.93	110.07	6,528.28	6,034.06
Days of sales outstanding (DSO)	days	43.06	36.27	53.88	48.43	44.21
Number of days of payables	days	66.48	70.05	100.13	8,543.68	7,447.69
Cash conversion cycle	days	81.97	64.16	63.81	-1,966.97	-1,369.42

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 105.39 + 43.06 – 66.48
= 81.97

The cash conversion cycle for Otter Tail Corporation has shown variability over the past five years. In 2023, the company's cash conversion cycle was 76.55 days, indicating that it took, on average, 76.55 days to convert its investments in inventory and other resources into cash inflows from sales. This represents an increase from the previous year's cycle of 57.50 days.

Comparing to 2021, where the cash conversion cycle was 61.33 days, the cycle has increased significantly in 2023. Additionally, in 2020 and 2019, the cash conversion cycle was notably lower at 14.48 days and 26.11 days, respectively.

The increasing trend in the cash conversion cycle may suggest potential inefficiencies in the company's working capital management, leading to delays in converting invested resources into cash. Otter Tail Corporation may need to review its inventory management, accounts receivable collection, and accounts payable strategies to optimize its cash conversion cycle and improve overall liquidity and efficiency.