Valvoline Inc (VVV)
Cash conversion cycle
| Sep 30, 2024 | Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 10.72 | 10.40 | 10.30 | 4.13 | 38.70 |
| Days of sales outstanding (DSO) | days | 19.07 | 20.59 | 19.57 | 8.09 | 66.55 |
| Number of days of payables | days | 31.72 | 37.08 | 15.76 | 5.82 | 36.75 |
| Cash conversion cycle | days | -1.92 | -6.08 | 14.11 | 6.41 | 68.49 |
September 30, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 10.72 + 19.07 – 31.72
= -1.92
The cash conversion cycle measures how long it takes a company to convert its resources into cash flows. A negative cash conversion cycle indicates that Valvoline Inc is able to generate cash before paying its suppliers, which can be a favorable sign of efficient operations.
Over the past five years, Valvoline Inc has shown a significant improvement in its cash conversion cycle performance. In 2020, the company had a high cash conversion cycle of 68.49 days, indicating a slower conversion of resources into cash flows. However, since then, the company has steadily improved its efficiency in managing its cash cycle.
In 2021, the cash conversion cycle decreased to 6.41 days, showing a significant improvement. However, the cycle increased slightly to 14.11 days in 2022. Despite this slight setback, Valvoline Inc managed to reduce its cash conversion cycle significantly to -6.08 days in 2023 and further to -1.92 days in 2024, indicating that the company is now able to convert its resources into cash flows even before paying its suppliers.
Overall, the trend in Valvoline Inc's cash conversion cycle over the past five years shows a positive development towards more efficient cash management and improved liquidity. The recent negative cash conversion cycle indicates that the company is effectively managing its working capital, which can positively impact its financial health and operational efficiency.
Peer comparison
Sep 30, 2024