Packaging Corp of America (PKG)
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 | 55.23 | 51.07 | 51.31 | 49.33 | 49.04 |
| Days of sales outstanding (DSO) | days | 49.07 | 46.59 | 52.60 | 46.75 | 46.89 |
| Number of days of payables | days | 21.94 | 21.45 | 25.72 | 24.23 | 21.73 |
| Cash conversion cycle | days | 82.36 | 76.21 | 78.19 | 71.85 | 74.20 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 55.23 + 49.07 – 21.94
= 82.36
Packaging Corp Of America's cash conversion cycle has shown a fluctuating trend over the past five years. In 2023, the cash conversion cycle increased to 85.06 days from 78.35 days in 2022. This indicates that the company took longer to convert its investments in raw materials into cash during the most recent year. Comparing to 2021 and 2019, the cash conversion cycle was slightly higher in 2023.
The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales, and then back into cash. A longer cash conversion cycle may suggest inefficiencies in managing inventory levels, collecting receivables, or managing payables, which could lead to higher working capital requirements.
Overall, Packaging Corp Of America may need to focus on improving its working capital management to reduce the cash conversion cycle and optimize its cash flow processes for better financial performance and liquidity management.
Peer comparison
Dec 31, 2023