Packaging Corp of America (PKG)
Cash conversion cycle
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 62.21 | 60.59 | 55.85 | 56.24 | 54.55 |
| Days of sales outstanding (DSO) | days | 50.25 | 48.53 | 45.96 | 50.92 | 45.91 |
| Number of days of payables | days | 23.80 | 24.06 | 23.45 | 28.19 | 26.79 |
| Cash conversion cycle | days | 88.66 | 85.06 | 78.35 | 78.97 | 73.67 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 62.21 + 50.25 – 23.80
= 88.66
Packaging Corp of America's cash conversion cycle has shown a gradual increase from 54.38 days as of December 31, 2020, to 62.21 days as of December 31, 2024. The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash from sales.
The trend indicates that the company may be taking longer to convert its investments into cash over the years. A longer cash conversion cycle could imply inefficiencies in managing inventory, collecting receivables, or paying off payables. It may also suggest potential liquidity challenges or inefficiencies in working capital management.
It is essential for Packaging Corp of America to analyze the factors contributing to the increase in the cash conversion cycle to identify areas for improvement and enhance operational efficiency. The company may consider strategies to streamline inventory management, optimize accounts receivable collection processes, and negotiate favorable payment terms with suppliers to shorten the cash conversion cycle and improve overall financial performance.
Peer comparison
Dec 31, 2024