Timken Company (TKR)
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 | 108.41 | 110.56 | 104.03 | 98.40 | 92.52 |
| Days of sales outstanding (DSO) | days | 52.78 | 57.57 | 56.27 | 61.40 | 53.31 |
| Number of days of payables | days | 32.39 | 37.49 | 42.90 | 41.10 | 33.15 |
| Cash conversion cycle | days | 128.80 | 130.64 | 117.40 | 118.69 | 112.67 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 108.41 + 52.78 – 32.39
= 128.80
The cash conversion cycle of Timken Co. has shown a fluctuating trend over the past five years, with values ranging from 138.35 days in 2021 to 158.97 days in 2023. The cash conversion cycle represents the number of days it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A longer cash conversion cycle indicates that the company is taking more time to recover its investment in inventory and may face liquidity challenges.
In 2023, the cash conversion cycle increased to 158.97 days compared to the previous year, which suggests that Timken Co. took longer to convert its investments into cash during that period. This increase could be attributed to factors such as slower sales turnover, inefficient inventory management, or extended payment terms to suppliers.
Conversely, in 2021, the cash conversion cycle decreased to 138.35 days, indicating an improvement in the company's efficiency in managing its working capital. This could be the result of more streamlined operations, effective inventory control, or quicker collection of receivables.
Overall, the fluctuating trend in Timken Co.'s cash conversion cycle demonstrates the importance of closely monitoring working capital management to optimize cash flow and maintain operational efficiency.
Peer comparison
Dec 31, 2023