Trane Technologies plc (TT)
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 | 191.33 | 249.89 | 270.10 | 217.42 | 39.33 |
| Days of sales outstanding (DSO) | days | 56.93 | 61.94 | 64.43 | 63.83 | 65.90 |
| Number of days of payables | days | 208.45 | 235.15 | 283.35 | 253.85 | 50.27 |
| Cash conversion cycle | days | 39.80 | 76.68 | 51.18 | 27.40 | 54.96 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 191.33 + 56.93 – 208.45
= 39.80
The cash conversion cycle of Trane Technologies plc has fluctuated over the years based on the provided data.
As of December 31, 2020, the company's cash conversion cycle stood at 54.96 days, indicating that it took approximately 55 days to convert its investments in inventory and other resources into cash inflows.
By December 31, 2021, there was a significant improvement in the cash conversion cycle to 27.40 days, which suggests that Trane Technologies plc was able to manage its working capital more efficiently and convert assets into cash quicker.
However, by December 31, 2022, the cash conversion cycle increased to 51.18 days, indicating a longer time taken to convert investments back into cash, possibly due to changes in inventory management or payment practices.
The cycle further extended to 76.68 days by December 31, 2023, showing potential challenges in the company's working capital management and liquidity position.
Finally, as of December 31, 2024, the cash conversion cycle reduced to 39.80 days, reflecting a slight improvement compared to the previous year but still indicating the need for the company to focus on optimizing its working capital efficiency.
In conclusion, the fluctuating trend in Trane Technologies plc's cash conversion cycle over the years highlights the importance of closely monitoring working capital management to ensure optimal cash flow and liquidity position.