Trane Technologies plc (TT)
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 | 249.89 | 270.10 | 217.42 | 39.33 | 31.63 |
| Days of sales outstanding (DSO) | days | 61.94 | 64.43 | 63.83 | 65.90 | 48.79 |
| Number of days of payables | days | 235.15 | 283.35 | 253.85 | 50.27 | 34.18 |
| Cash conversion cycle | days | 76.68 | 51.18 | 27.40 | 54.96 | 46.25 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 249.89 + 61.94 – 235.15
= 76.68
The cash conversion cycle of Trane Technologies plc has shown some fluctuations over the past five years. In 2023, the company's cash conversion cycle increased to 64.97 days compared to 60.22 days in 2022. This suggests that the company took longer to convert its investments in inventory and accounts receivable into cash during the year.
Looking back at 2021, the cash conversion cycle was 53.04 days, showing an improvement from the previous year. However, in 2020, the cycle increased slightly to 50.57 days. The highest cash conversion cycle in the past five years was recorded in 2019 at 58.44 days.
Overall, the trend indicates that Trane Technologies plc may be facing challenges in managing its working capital effectively, as reflected in the increasing cash conversion cycle over the years. Further analysis of the individual components of the cash conversion cycle, such as inventory turnover and accounts receivable collection period, could provide insights into the specific areas that may require attention to optimize the company's cash flow efficiency.