Terex Corporation (TEX)
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 | 108.91 | 101.72 | 94.88 | 87.82 | 89.29 |
| Days of sales outstanding (DSO) | days | 38.81 | 45.24 | 47.68 | 45.23 | 33.70 |
| Number of days of payables | days | 64.52 | 64.28 | 62.72 | 53.22 | 53.52 |
| Cash conversion cycle | days | 83.20 | 82.68 | 79.85 | 79.83 | 69.47 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 108.91 + 38.81 – 64.52
= 83.20
The cash conversion cycle of Terex Corp. has shown a relatively stable trend over the past five years. The company's cash conversion cycle increased from 69.47 days in 2019 to 83.20 days in 2023. This indicates that on average, it takes Terex Corp. 83.20 days to convert its investments in inventory into cash flows from sales.
The slight increase in the cash conversion cycle may suggest that Terex Corp. is taking slightly longer to generate cash from its operating cycle. This could be due to factors such as longer inventory holding periods or longer accounts receivable collection periods.
While the cash conversion cycle has increased, it is important to note that the company's management of working capital efficiency has remained relatively stable, with the cycle staying within a narrow range around 80 days over the past five years. This suggests that Terex Corp. has been able to effectively manage its inventory, accounts payable, and accounts receivable to maintain a consistent cash conversion cycle.
Overall, monitoring and managing the cash conversion cycle is crucial for Terex Corp. as it indicates how efficiently the company is managing its working capital and generating cash flows from its operations.