Patrick Industries Inc (PATK)

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 60.77 57.73 62.52 51.50 44.44
Days of sales outstanding (DSO) days 17.25 12.92 15.46 19.58 13.71
Number of days of payables days 16.74 12.35 20.71 17.42 16.84
Cash conversion cycle days 61.28 58.29 57.27 53.66 41.31

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 60.77 + 17.25 – 16.74
= 61.28

The cash conversion cycle of Patrick Industries, Inc. has shown an increasing trend over the past five years, indicating a lengthening period for the company to convert its investments in inventory and other resources into cash. In 2019, the cash conversion cycle stood at 46.14 days, suggesting that the company was efficient in managing its working capital. However, this cycle has been on the rise since then, reaching 68.45 days by the end of 2023.

A longer cash conversion cycle may signify that Patrick Industries is taking more time to sell its inventory, collect receivables, and pay its suppliers, which can tie up cash and potentially impact liquidity and profitability. It is crucial for the company to monitor and manage this cycle effectively to ensure efficient working capital management and optimize cash flow.

Further analysis of the components of the cash conversion cycle, including days inventory outstanding, days sales outstanding, and days payables outstanding, would provide deeper insights into the specific areas influencing the overall cycle and help identify opportunities for improvement in working capital efficiency.