Stepan Company (SCL)
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 | 44.08 | 58.41 | 52.87 | 48.91 | 44.72 |
| Days of sales outstanding (DSO) | days | 66.80 | 57.79 | 65.46 | 59.02 | 54.70 |
| Number of days of payables | days | 38.68 | 54.52 | 55.95 | 52.93 | 42.67 |
| Cash conversion cycle | days | 72.20 | 61.68 | 62.37 | 55.00 | 56.76 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 44.08 + 66.80 – 38.68
= 72.20
Stepan Co.'s cash conversion cycle measures the period required for the company to convert its investments in inventory into cash receipts from customers. Over the past five years, the trend in the cash conversion cycle has shown some fluctuations.
In 2023, the cash conversion cycle increased to 72.03 days from 61.67 days in 2022. This may indicate a slowdown in the company's ability to convert inventory into cash receipts, potentially leading to a longer operating cycle.
Comparing 2023 to earlier years, the cash conversion cycle was generally higher than in 2020 and 2019 but slightly lower than in 2021. This suggests that Stepan Co. may have faced challenges in efficiently managing its working capital and converting sales back into cash during the year.
Further analysis is recommended to identify the specific reasons behind the increase in the cash conversion cycle in 2023 and to implement strategies to optimize working capital management and improve cash flow efficiency in the future.
Peer comparison
Dec 31, 2023