Pool Corporation (POOL)
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 | 128.40 | 136.76 | 132.87 | 101.60 | 112.69 |
| Days of sales outstanding (DSO) | days | 9.60 | 7.57 | 10.70 | 11.34 | 8.74 |
| Number of days of payables | days | 47.83 | 34.96 | 39.56 | 34.70 | 42.04 |
| Cash conversion cycle | days | 90.17 | 109.38 | 104.01 | 78.23 | 79.40 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 128.40 + 9.60 – 47.83
= 90.17
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. Pool Corporation's cash conversion cycle has varied over the past five years, with fluctuations observed in the efficiency of its cash conversion process.
In 2023, the cash conversion cycle decreased to 103.15 days compared to the prior year, indicating an improvement in the company's ability to convert its investments into cash. This trend suggests that Pool Corporation may have managed its inventory and accounts receivable more effectively, resulting in a shorter cycle.
Conversely, in 2022 and 2021, the cash conversion cycle increased to 122.56 days and 119.27 days, respectively, signaling a slowdown in the cash conversion process. This could be attributed to challenges in managing inventory levels, collection of accounts receivable, or delays in payment from customers.
In 2020 and 2019, the cash conversion cycle was 93.71 days and 96.50 days, respectively, indicating relatively efficient cash conversion processes during those years.
Overall, Pool Corporation's cash conversion cycle has fluctuated over the past five years, with improvements in some years and challenges in others. Monitoring and managing the cash conversion cycle is crucial for optimizing working capital and ensuring the company's liquidity position.