Varex Imaging Corp (VREX)
Cash conversion cycle
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 185.61 | 175.60 | 175.97 | 188.66 | 201.22 | 192.17 | 195.03 | 176.18 | 161.73 | 150.11 | 174.43 | 263.58 | 281.68 | 268.44 | 270.81 | 185.42 | 181.05 | 172.92 | 147.46 | 158.66 |
| Days of sales outstanding (DSO) | days | 57.95 | 66.74 | 65.27 | 65.16 | 65.78 | 73.14 | — | — | 54.90 | 68.87 | — | — | — | 61.20 | — | — | — | — | — | — |
| Number of days of payables | days | 47.22 | 40.94 | 44.10 | 45.06 | 54.15 | 49.56 | 54.04 | 51.57 | 46.77 | 39.26 | 47.48 | 55.01 | 71.10 | 71.97 | 76.31 | 51.84 | 49.25 | 40.55 | 34.32 | 37.84 |
| Cash conversion cycle | days | 196.34 | 201.40 | 197.14 | 208.77 | 212.85 | 215.74 | 141.00 | 124.61 | 169.86 | 179.72 | 126.95 | 208.57 | 210.58 | 257.67 | 194.50 | 133.58 | 131.80 | 132.37 | 113.14 | 120.82 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 185.61 + 57.95 – 47.22
= 196.34
The cash conversion cycle for Varex Imaging Corp fluctuated over the past years, showing variations in the efficiency of its cash management. The cash conversion cycle, which represents the time it takes for a company to convert its investments in inventory and other resources into cash inflows from sales, indicates the effectiveness of working capital management.
From the data provided, we observe that Varex Imaging Corp's cash conversion cycle ranged from 113.14 days to 257.67 days over the past five years. A shorter cash conversion cycle is generally favorable as it indicates that the company is able to efficiently manage its working capital and convert inventory into sales quickly, leading to faster cash inflows.
In general, a longer cash conversion cycle may suggest inefficiencies in inventory management, sales collections, or payment of liabilities. However, it is essential to consider the industry norms and the company's specific business model when evaluating the significance of the cash conversion cycle.
Varex Imaging Corp should aim to optimize its cash conversion cycle by streamlining its operations, improving inventory turnover, and enhancing accounts receivable and payable management to ensure a healthier working capital position and better liquidity management. Regular monitoring and analysis of the cash conversion cycle can provide insights for continuous improvement in working capital efficiency.
Peer comparison
Dec 31, 2023