Trex Company Inc (TREX)
Cash conversion cycle
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 89.41 | 47.72 | 61.11 | 33.16 | 38.46 |
| Days of sales outstanding (DSO) | days | 28.07 | 16.97 | 40.84 | 46.20 | 47.42 |
| Number of days of payables | days | 26.43 | 10.68 | 8.62 | 9.84 | 21.77 |
| Cash conversion cycle | days | 91.05 | 54.01 | 93.33 | 69.51 | 64.11 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 89.41 + 28.07 – 26.43
= 91.05
The cash conversion cycle is a key metric that measures how efficiently a company manages its cash flow related to inventory, accounts receivable, and accounts payable. Analyzing Trex Company Inc's cash conversion cycle over the years reveals trends in the company's liquidity and operational efficiency.
From December 31, 2020, to December 31, 2021, Trex Company Inc's cash conversion cycle increased from 64.11 days to 69.51 days. This suggests a slight deterioration in the company's ability to convert its resources into cash within the same time frame.
However, there was a significant increase in the cash conversion cycle from December 31, 2021, to December 31, 2022, jumping to 93.33 days. This prolonged cycle indicates that Trex Company Inc may be facing challenges in managing its working capital effectively, potentially due to slower inventory turnover or extended accounts receivable collection periods.
The following year saw a notable improvement in the cash conversion cycle, dropping to 54.01 days by December 31, 2023. This suggests that the company made efforts to streamline its operations and enhance cash flow efficiency.
Subsequently, by December 31, 2024, the cash conversion cycle increased again to 91.05 days, indicating a reversal in the positive trend observed in the previous year and a potential sign of operational challenges resurfacing.
In conclusion, fluctuations in Trex Company Inc's cash conversion cycle over the years highlight varying levels of effectiveness in managing cash flow and working capital. It is essential for the company to focus on optimizing its inventory management, accounts receivable collection, and accounts payable processes to maintain a healthy cash conversion cycle and overall financial performance.
Peer comparison
Dec 31, 2024