Reliance Steel & Aluminum Co (RS)
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 | 57.97 | 50.83 | 63.06 | 85.88 | 78.58 |
| Days of sales outstanding (DSO) | days | 37.18 | 34.35 | 43.59 | 38.46 | 36.75 |
| Number of days of payables | days | 11.64 | 10.51 | 13.86 | 15.68 | 13.13 |
| Cash conversion cycle | days | 83.50 | 74.67 | 92.79 | 108.66 | 102.20 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 57.97 + 37.18 – 11.64
= 83.50
The cash conversion cycle of Reliance Steel & Aluminum Co. has shown fluctuations over the past five years. In 2023, the company's cash conversion cycle was 95.27 days, indicating an improvement from the previous year. This suggests that the company was able to manage its cash flows more efficiently and convert inventory and receivables into cash more quickly.
In 2022, the cash conversion cycle was 83.42 days, reflecting a decrease compared to 2021. This implies that the company was able to shorten the time it takes to convert its resources into cash, potentially indicating more effective working capital management.
On the other hand, in 2021, the cash conversion cycle increased to 104.82 days from 108.66 days in 2020. This suggests that the company took longer to convert its investments in inventory and receivables into cash, which may have put pressure on its liquidity.
In 2020 and 2019, the cash conversion cycle was 108.66 days and 102.20 days, respectively. These figures indicate relatively stable performance in terms of cash conversion efficiency during those years.
Overall, the trend in the cash conversion cycle of Reliance Steel & Aluminum Co. shows some variability, with fluctuations in the efficiency of managing cash flows and working capital over the past five years. It is essential for the company to focus on improving its cash conversion cycle to optimize liquidity and enhance overall financial performance.