Parker-Hannifin Corporation (PH)

Cash conversion cycle

		Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019
Days of inventory on hand (DOH)	days	61.98	66.20	68.55	66.55	65.50	72.31	77.21	83.22	61.18	64.66	65.31	65.48	62.25	59.68	58.43	54.69	59.28	58.75	59.08	53.25
Days of sales outstanding (DSO)	days	3.98	3.82	3.51	3.15	3.39	4.13	4.45	5.41	4.19	4.48	3.85	4.37	4.39	4.24	3.88	3.56	3.69	62.29	56.03	55.97
Number of days of payables	days	44.29	43.83	43.70	44.75	46.20	49.04	49.05	53.66	47.85	48.07	45.21	47.31	49.66	48.78	41.94	38.52	33.55	41.54	38.48	38.30
Cash conversion cycle	days	21.66	26.18	28.35	24.94	22.69	27.40	32.61	34.98	17.53	21.07	23.96	22.53	16.98	15.14	20.37	19.73	29.42	79.50	76.63	70.92

June 30, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 61.98 + 3.98 – 44.29
= 21.66

The cash conversion cycle of Parker-Hannifin Corporation has fluctuated over the past few quarters, indicating varying efficiencies in managing its cash flow and working capital.

In the most recent quarter, ending June 30, 2024, the cash conversion cycle stood at 21.66 days, representing the time it takes for the company to convert its investments in inventory and other resources into cash from sales. Despite a slight decrease from the previous quarter, the company was able to operate with a relatively efficient cycle length.

Looking back over the past few years, the trend shows some variability in the cash conversion cycle, with notable peaks in the cycle occurring in the third and fourth quarters of 2019, with 79.50 days and 76.63 days respectively. These extended cycles suggest that the company may have faced challenges in managing its inventory, collecting receivables, or extending payables efficiently during those periods.

On the other hand, there are instances where the cash conversion cycle was significantly lower, such as in the first quarter of 2021, when it was just 15.14 days. These shorter cycles indicate that the company was able to swiftly convert its investments into cash, potentially indicating effective working capital management.

Overall, a lower cash conversion cycle is generally preferred as it signifies that a company is able to efficiently manage its working capital and generate cash. Parker-Hannifin Corporation should continue to focus on optimizing its inventory turnover, accounts receivable collection, and accounts payable management to maintain a healthy and efficient cash conversion cycle in the future.