SPX Corp (SPXC)
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 | 66.59 | 67.27 | 61.83 | 39.90 | 39.92 |
| Days of sales outstanding (DSO) | days | 59.62 | 66.31 | 70.29 | 70.78 | 70.19 |
| Number of days of payables | days | 28.57 | 34.32 | 38.96 | 26.28 | 36.39 |
| Cash conversion cycle | days | 97.64 | 99.25 | 93.15 | 84.40 | 73.72 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 66.59 + 59.62 – 28.57
= 97.64
The cash conversion cycle of SPX Corp has shown an increasing trend over the past five years, indicating a potential inefficiency in managing its working capital. The cycle measures the time it takes for the company to convert its investments in inventory and accounts receivable into cash, highlighting the liquidity and operational efficiency of the business.
The company's cash conversion cycle increased from 73.72 days in 2019 to 97.64 days in 2023, reflecting a lengthier period to convert its assets into cash. This suggests that SPX Corp may be facing challenges in efficiently managing its inventory and collecting receivables, leading to a prolonged cash conversion cycle.
The rise in the cash conversion cycle could indicate potential issues in inventory management, such as slow-moving inventory or excessive levels of inventory on hand. Additionally, delays in collecting accounts receivable could be impacting the company's ability to convert sales into cash promptly.
SPX Corp should focus on optimizing its working capital management to shorten the cash conversion cycle, improving liquidity and operating efficiency. Strategies to achieve this could include streamlining inventory levels, enhancing accounts receivable collection processes, and negotiating favorable payment terms with suppliers and customers. Addressing these areas could help the company improve its cash flow and overall financial performance in the future.
Peer comparison
Dec 31, 2023