Sherwin-Williams Co (SHW)
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 | 43.08 | 49.89 | 40.70 | 42.44 | 69.92 |
| Days of sales outstanding (DSO) | days | 39.93 | 43.05 | 44.05 | 42.13 | 42.59 |
| Number of days of payables | days | 42.80 | 46.28 | 50.75 | 49.82 | 69.42 |
| Cash conversion cycle | days | 40.20 | 46.66 | 34.00 | 34.75 | 43.09 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 43.08 + 39.93 – 42.80
= 40.20
The cash conversion cycle for Sherwin-Williams Co. has varied over the past five years, indicating fluctuations in its efficiency in managing working capital. In 2023, the company's cash conversion cycle improved to 39.52 days from 47.65 days in 2022, which suggests a more efficient conversion of inventory into cash during the year. This improvement could be attributed to effective inventory management or more favorable payment terms with customers.
Comparing 2023 to 2021, there was a noticeable increase in the cash conversion cycle, indicating a potential slowdown in the conversion of resources into cash during the year. However, the cycle was more favorable in 2023 than in 2020 and 2019, showcasing the company's efforts in enhancing its working capital efficiency.
Overall, a decreasing trend in the cash conversion cycle is generally favorable as it implies that the company is managing its resources more efficiently and turning them into cash quicker. However, it is essential to delve deeper into the specific components of the cycle, such as days inventory outstanding, days sales outstanding, and days payable outstanding, to pinpoint areas for further improvement or potential risks.
Peer comparison
Dec 31, 2023