Varex Imaging Corp (VREX)
Cash conversion cycle
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 167.94 | 192.17 | 150.11 | 181.07 | 172.92 |
| Days of sales outstanding (DSO) | days | 66.84 | 73.60 | 69.29 | 61.20 | 65.93 |
| Number of days of payables | days | 39.16 | 49.56 | 39.26 | 48.55 | 40.55 |
| Cash conversion cycle | days | 195.63 | 216.21 | 180.14 | 193.73 | 198.30 |
September 30, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 167.94 + 66.84 – 39.16
= 195.63
The cash conversion cycle measures the time it takes for a company like Varex Imaging Corp to convert its investments in inventory and other resources into cash flows from sales. Looking at the trend for Varex Imaging Corp over the past five years, the company's cash conversion cycle has fluctuated.
From 2019 to 2021, the cash conversion cycle showed a decreasing trend, indicating an improvement in the company's efficiency in managing its working capital and turning its inventory into cash. However, in 2022, there was a slight increase in the cash conversion cycle, followed by a further increase in 2023.
The increase in the cash conversion cycle in 2023 compared to the previous year suggests that Varex Imaging Corp may be taking longer to convert its investments in inventory and other resources into cash flows from sales. This could be due to factors such as changes in the company's sales cycle, inventory management practices, or payment terms with customers and suppliers.
Overall, Varex Imaging Corp should closely monitor its cash conversion cycle and identify areas for improvement to ensure efficient working capital management and optimize its cash flow generation. A lower cash conversion cycle generally indicates a more efficient use of resources and faster conversion of investments into cash, which can contribute to the company's financial health and sustainability.
Peer comparison
Sep 30, 2023