Powell Industries Inc (POWL)
Cash conversion cycle
| 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 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 37.82 | 36.97 | 39.94 | 37.74 | 37.62 | 35.50 | 36.18 | 33.62 | 28.28 | 23.52 | 23.12 | 24.55 | 22.60 | 21.44 | 22.10 | 21.11 | 22.84 | 21.33 | 21.93 | 18.74 |
| Days of sales outstanding (DSO) | days | 80.70 | 107.81 | 114.26 | 103.78 | 99.54 | 72.46 | 75.14 | 69.10 | 61.77 | 60.81 | 58.04 | 57.50 | 57.54 | 49.55 | 64.42 | 58.03 | 68.06 | 79.30 | 78.73 | 60.59 |
| Number of days of payables | days | 27.23 | 32.80 | 37.97 | 32.93 | 26.42 | 44.66 | 34.32 | 37.48 | 33.12 | 35.68 | 27.21 | 32.37 | 21.81 | 25.93 | 26.88 | 29.91 | 31.79 | 37.39 | 28.63 | 25.44 |
| Cash conversion cycle | days | 91.29 | 111.97 | 116.23 | 108.59 | 110.74 | 63.30 | 77.00 | 65.24 | 56.93 | 48.66 | 53.95 | 49.68 | 58.32 | 45.07 | 59.64 | 49.23 | 59.11 | 63.25 | 72.04 | 53.89 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 37.82 + 80.70 – 27.23
= 91.29
To analyze Powell Industries, Inc.'s cash conversion cycle, we will examine the trend and the implications of the values from the given table.
The cash conversion cycle (CCC) measures the time it takes for an organization to convert its investments in inventory and other resources into cash flows from sales. A shorter CCC is generally favorable as it indicates that the company is efficiently managing its working capital.
From the data provided, we observe a fluctuating trend in Powell Industries, Inc.'s cash conversion cycle over the period. The CCC ranged from a low of 62.19 days in the third quarter of 2022 to a high of 116.61 days in the second quarter of 2023. This variability may indicate inconsistencies in the company's management of inventory, accounts receivable, and accounts payable.
The significant increase in the CCC from the third quarter of 2022 to the second and third quarters of 2023 indicates a potential deterioration in Powell Industries, Inc.'s working capital efficiency. This could be attributed to factors such as extended collection periods for accounts receivable, delays in inventory turnover, or increasing payment periods for accounts payable.
It is imperative for Powell Industries, Inc. to assess and address the underlying reasons for the increasing CCC. By improving inventory management, optimizing accounts receivable collection, and negotiating favorable terms with suppliers, the company can work towards reducing its cash conversion cycle and enhancing its overall operational efficiency.
In conclusion, the fluctuating trend in Powell Industries, Inc.'s cash conversion cycle suggests the need for proactive measures to optimize working capital management and improve the company's overall liquidity position.
Peer comparison
Dec 31, 2023