Liquidity Ratios

The Days Sales Outstanding (DSO) measure the average number of days it takes a company to collect payment after a credit sale. The Days of Inventory on Hand (DOH) indicate the average number of days a company holds its inventory before selling it. The Days Payable Outstanding (DPO), in turn, describe the average period a company takes to pay its bills and suppliers. 

The sum of DSO and DOH, less DPO, results in the Cash Conversion Cycle (CCC). This metric measures the time (in days) it takes for a company to convert its investments in inventory and other operational resources into cash inflows from sales. A low or negative CCC indicates efficient working capital management and a lower financing requirement for ongoing business operations.

The data used for the liquidity ratios (i.e., revenue, COGS, inventories, trade receivables, and trade payables) is based on the most recent financial information published by the respective companies (in annual or semi-annual reports).

We calculated the liquidity metrics based on the median of the companies within the respective sectors. The waterfall charts illustrate the Cash Conversion Cycle in days, which is composed of DSO, DOH, and DPO.

The financial services sector (including banks, insurance companies, etc.) was excluded.