Analysis of Short-term (Operating) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Short-term Activity Ratios (Summary)
Builders FirstSource Inc., short-term (operating) activity ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
- Inventory Turnover
- The inventory turnover ratio displayed a general downward trend from 9.72 in 2018 to a low of 8.08 in 2020, indicating slower inventory movement during this period. However, it subsequently improved, rising to 8.64 in 2021 and reaching 10.5 in 2022, the highest in the observed timeframe, suggesting enhanced efficiency in managing inventory by the end of the period.
- Receivables Turnover
- The receivables turnover ratio remained relatively stable between 2018 and 2019, around 11.8, before declining to 10.4 in 2020. It then recovered to 11.64 in 2021 and increased sharply to 15.69 in 2022, indicating more efficient collection of receivables and improved liquidity position in the most recent year.
- Payables Turnover
- Payables turnover showed a consistent decline from 13.71 in 2018 to 10.55 in 2020, implying slower payment to suppliers during this period. This trend reversed in 2021 and accelerated in 2022, peaking at 18.65, which suggests the company paid its suppliers more quickly in the latest year.
- Working Capital Turnover
- The working capital turnover ratio increased from 12.02 in 2018 to 14.99 in 2019, indicating efficient use of working capital. This was followed by a sharp decline to 7.45 in 2020, signifying reduced efficiency that year. The ratio rebounded to 10.81 in 2021 and further improved to 13.73 in 2022, approaching the earlier efficiency levels.
- Average Inventory Processing Period
- The average inventory processing period increased from 38 days in 2018 to 45 days in 2020, reflecting slower inventory turnover. Thereafter, it decreased to 42 days in 2021 and further down to 35 days in 2022, indicating a marked acceleration in inventory processing by the end of the period.
- Average Receivable Collection Period
- The collection period remained stable at approximately 31 days in 2018, 2019, and 2021, rose to 35 days in 2020, and then shortened significantly to 23 days in 2022. This suggests improvements in collections efficiency and cash flow management in the latest year.
- Operating Cycle
- The operating cycle increased from 69 days in 2018 to 80 days in 2020, indicating a lengthening of the time between inventory acquisition and cash receipt from sales. It decreased to 73 days in 2021 and dropped substantially to 58 days in 2022, reflecting enhanced operational efficiency.
- Average Payables Payment Period
- This period increased from 27 days in 2018 to a peak of 35 days in 2020, suggesting slower payments to suppliers. It then decreased to 28 days in 2021 and further shortened dramatically to 20 days in 2022, indicating faster settlements with creditors in the recent period.
- Cash Conversion Cycle
- The cash conversion cycle increased from 42 days in 2018 to 45 days in both 2020 and 2021, reflecting a longer duration to convert investments in inventory and receivables back into cash. It declined to 38 days in 2022, signaling an improvement in cash flow efficiency.
Turnover Ratios
Average No. Days
Inventory Turnover
Builders FirstSource Inc., inventory turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cost of sales | 14,982,039) | 14,042,900) | 6,336,290) | 5,303,602) | 5,801,831) | |
| Inventories, net | 1,426,196) | 1,626,244) | 784,527) | 561,255) | 596,896) | |
| Short-term Activity Ratio | ||||||
| Inventory turnover1 | 10.50 | 8.64 | 8.08 | 9.45 | 9.72 | |
| Benchmarks | ||||||
| Inventory Turnover, Competitors2 | ||||||
| Boeing Co. | 0.81 | 0.75 | 0.78 | — | — | |
| Caterpillar Inc. | 2.54 | 2.53 | 2.55 | — | — | |
| Eaton Corp. plc | 4.04 | 4.48 | 5.88 | — | — | |
| GE Aerospace | 3.19 | 3.40 | 3.80 | — | — | |
| Honeywell International Inc. | 4.04 | 4.29 | 4.94 | — | — | |
| Lockheed Martin Corp. | 18.68 | 19.45 | 16.01 | — | — | |
| RTX Corp. | 5.03 | 5.65 | 5.11 | — | — | |
| Inventory Turnover, Sector | ||||||
| Capital Goods | 2.28 | 2.28 | 2.28 | — | — | |
| Inventory Turnover, Industry | ||||||
| Industrials | 4.28 | 4.03 | 3.71 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Inventory turnover = Cost of sales ÷ Inventories, net
= 14,982,039 ÷ 1,426,196 = 10.50
2 Click competitor name to see calculations.
- Cost of Sales
- The cost of sales exhibited a fluctuating yet overall increasing trend over the observed period. After a decline from approximately 5.8 billion US dollars in 2018 to about 5.3 billion in 2019, there was a notable increase in 2020. This upward trajectory accelerated sharply in 2021, with the cost more than doubling compared to 2020, and continued to increase in 2022, reaching its highest recorded value in the series at nearly 15 billion US dollars.
- Inventories, Net
- Net inventories showed initial modest fluctuations, declining slightly from about 597 million US dollars in 2018 to around 561 million in 2019. A significant increase occurred in 2020, climbing to nearly 785 million US dollars. The growth trend intensified in 2021, with inventories more than doubling to approximately 1.6 billion US dollars. However, in 2022, there was a reduction in net inventories, decreasing to approximately 1.4 billion US dollars, indicating some inventory drawdown or improved inventory management.
- Inventory Turnover Ratio
- The inventory turnover ratio displayed mild volatility but generally remained within a moderate range. Beginning at 9.72 in 2018, it decreased gradually to a low of 8.08 in 2020, likely reflecting increasing inventory levels relative to sales. A slight recovery was observed in 2021, increasing to 8.64, followed by a notable improvement in 2022 that saw the ratio rise to 10.5, the highest in the examined timeframe. This rise suggests a more efficient management of inventory relative to cost of sales during that year.
Receivables Turnover
Builders FirstSource Inc., receivables turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 22,726,418) | 19,893,856) | 8,558,874) | 7,280,431) | 7,724,771) | |
| Accounts receivable, less allowances | 1,448,139) | 1,708,796) | 822,753) | 614,946) | 654,170) | |
| Short-term Activity Ratio | ||||||
| Receivables turnover1 | 15.69 | 11.64 | 10.40 | 11.84 | 11.81 | |
| Benchmarks | ||||||
| Receivables Turnover, Competitors2 | ||||||
| Boeing Co. | 26.46 | 23.58 | 29.75 | — | — | |
| Caterpillar Inc. | 6.39 | 5.68 | 5.33 | — | — | |
| Eaton Corp. plc | 5.09 | 5.95 | 6.15 | — | — | |
| GE Aerospace | 4.09 | 4.55 | 4.37 | — | — | |
| Honeywell International Inc. | 4.77 | 5.04 | 4.78 | — | — | |
| Lockheed Martin Corp. | 26.34 | 34.15 | 33.06 | — | — | |
| RTX Corp. | 7.36 | 6.66 | 6.11 | — | — | |
| Receivables Turnover, Sector | ||||||
| Capital Goods | 7.36 | 7.57 | 7.30 | — | — | |
| Receivables Turnover, Industry | ||||||
| Industrials | 8.17 | 7.76 | 7.57 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Receivables turnover = Net sales ÷ Accounts receivable, less allowances
= 22,726,418 ÷ 1,448,139 = 15.69
2 Click competitor name to see calculations.
- Net Sales
- Net sales exhibited fluctuations over the analyzed periods. Initially, there was a decline from approximately $7.72 billion in 2018 to $7.28 billion in 2019. This was followed by a recovery and growth to about $8.56 billion in 2020. Substantially higher growth occurred in 2021, where net sales more than doubled to nearly $19.89 billion, and further increased to approximately $22.73 billion in 2022. This indicates a strong upward sales trend in the latter years with especially significant expansion starting from 2020.
- Accounts Receivable, Less Allowances
- The accounts receivable balance showed a similar pattern to net sales but with notable differences in magnitude. The balance decreased from roughly $654 million in 2018 to about $615 million in 2019, then increased significantly to $823 million in 2020. In 2021, accounts receivable nearly doubled to approximately $1.71 billion, followed by a slight decline to around $1.45 billion in 2022. While the receivables balance grew substantially in line with increased sales, the decline in 2022 while sales continued to rise suggests improved collection or credit management.
- Receivables Turnover
- The receivables turnover ratio remained relatively stable around 11.8 from 2018 through 2019, then decreased to 10.4 in 2020, indicating slower collection relative to sales during this period. This ratio improved to 11.64 in 2021 and surged to 15.69 in 2022, reflecting significantly faster accounts receivable collection in the most recent year. This improvement aligns with the simultaneous reduction in accounts receivable despite continued sales growth, which implies increased efficiency in managing receivables.
Payables Turnover
Builders FirstSource Inc., payables turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Cost of sales | 14,982,039) | 14,042,900) | 6,336,290) | 5,303,602) | 5,801,831) | |
| Accounts payable | 803,479) | 1,093,370) | 600,357) | 436,823) | 423,168) | |
| Short-term Activity Ratio | ||||||
| Payables turnover1 | 18.65 | 12.84 | 10.55 | 12.14 | 13.71 | |
| Benchmarks | ||||||
| Payables Turnover, Competitors2 | ||||||
| Boeing Co. | 6.18 | 6.40 | 4.94 | — | — | |
| Caterpillar Inc. | 4.76 | 4.36 | 4.75 | — | — | |
| Eaton Corp. plc | 4.51 | 4.75 | 6.24 | — | — | |
| GE Aerospace | 2.98 | 3.32 | 3.67 | — | — | |
| Honeywell International Inc. | 3.53 | 3.40 | 3.86 | — | — | |
| Lockheed Martin Corp. | 27.25 | 74.34 | 64.48 | — | — | |
| RTX Corp. | 5.40 | 5.93 | 5.56 | — | — | |
| Payables Turnover, Sector | ||||||
| Capital Goods | 5.21 | 5.60 | 5.54 | — | — | |
| Payables Turnover, Industry | ||||||
| Industrials | 7.83 | 7.81 | 7.49 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Payables turnover = Cost of sales ÷ Accounts payable
= 14,982,039 ÷ 803,479 = 18.65
2 Click competitor name to see calculations.
The financial data for the analyzed periods reveals several key trends in cost of sales, accounts payable, and payables turnover ratio.
- Cost of Sales
- There is an initial decrease observed from 2018 to 2019, with the cost of sales declining from approximately 5.8 billion US dollars to 5.3 billion. Subsequently, a significant increase occurs in 2020, reaching approximately 6.3 billion. The following years demonstrate a substantial upward trend, with cost of sales more than doubling in 2021 to about 14 billion and further rising in 2022 to nearly 15 billion US dollars. This pattern suggests increased production volume or rising input costs over time, especially notable post-2019.
- Accounts Payable
- Accounts payable shows a moderate increase from 2018 (423 million US dollars) to 2019 (approximately 437 million), followed by a more pronounced increase in 2020 to around 600 million. This upward trajectory continues sharply into 2021, surpassing 1 billion US dollars. However, in 2022, accounts payable decreases significantly to approximately 803 million. The trend indicates growth in short-term obligations peaking in 2021, potentially reflecting expanded procurement or extended credit terms during that period, with a partial reduction in 2022.
- Payables Turnover Ratio
- The payables turnover ratio declines from 13.71 in 2018 to 12.14 in 2019 and further to 10.55 in 2020, indicating slower payment to suppliers or longer credit terms during these years. Interestingly, the ratio rebounds to 12.84 in 2021, suggesting a resumption of faster payments relative to purchases. A marked increase to 18.65 in 2022 represents a significant acceleration in payables turnover, implying the company was paying its suppliers more rapidly relative to its purchases or had reduced reliance on credit from suppliers.
Overall, the company experienced substantial growth in cost of sales and accounts payable through 2021, alongside fluctuating payment practices to suppliers. The sharp rise in payables turnover ratio in 2022, coupled with a reduction in accounts payable, may reflect a strategic shift toward improved supplier payment cycles despite continued growth in cost of sales.
Working Capital Turnover
Builders FirstSource Inc., working capital turnover calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current assets | 3,497,647) | 3,968,269) | 2,223,682) | 1,306,867) | 1,373,751) | |
| Less: Current liabilities | 1,842,779) | 2,128,711) | 1,074,853) | 821,301) | 731,259) | |
| Working capital | 1,654,868) | 1,839,558) | 1,148,829) | 485,566) | 642,492) | |
| Net sales | 22,726,418) | 19,893,856) | 8,558,874) | 7,280,431) | 7,724,771) | |
| Short-term Activity Ratio | ||||||
| Working capital turnover1 | 13.73 | 10.81 | 7.45 | 14.99 | 12.02 | |
| Benchmarks | ||||||
| Working Capital Turnover, Competitors2 | ||||||
| Boeing Co. | 3.42 | 2.34 | 1.69 | — | — | |
| Caterpillar Inc. | 4.62 | 3.54 | 2.84 | — | — | |
| Eaton Corp. plc | 8.70 | 65.65 | 5.42 | — | — | |
| GE Aerospace | 7.93 | 4.94 | 2.26 | — | — | |
| Honeywell International Inc. | 7.03 | 5.86 | 3.64 | — | — | |
| Lockheed Martin Corp. | 12.93 | 11.52 | 12.01 | — | — | |
| RTX Corp. | 20.15 | 9.75 | 7.52 | — | — | |
| Working Capital Turnover, Sector | ||||||
| Capital Goods | 6.79 | 5.01 | 3.24 | — | — | |
| Working Capital Turnover, Industry | ||||||
| Industrials | 10.34 | 6.90 | 4.52 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Working capital turnover = Net sales ÷ Working capital
= 22,726,418 ÷ 1,654,868 = 13.73
2 Click competitor name to see calculations.
- Working Capital
- The working capital exhibits a fluctuating yet overall increasing trend over the observed periods. It declined from approximately 642 million USD at the end of 2018 to about 486 million USD in 2019. After this decrease, working capital rose significantly to nearly 1.15 billion USD in 2020 and continued increasing, peaking at approximately 1.84 billion USD in 2021. In 2022, working capital slightly declined but remained robust at about 1.65 billion USD.
- Net Sales
- Net sales present a clear upward trajectory throughout the years. Initially, sales slightly decreased from around 7.72 billion USD in 2018 to 7.28 billion USD in 2019. Starting in 2020, net sales increased substantially, reaching approximately 8.56 billion USD, followed by a remarkable jump to nearly 19.89 billion USD in 2021. This growth continued strongly into 2022, with net sales climbing further to roughly 22.73 billion USD, indicating significant expansion in sales volume or pricing.
- Working Capital Turnover
- The working capital turnover ratio illustrates efficiency variations in using working capital to generate sales. It increased from 12.02 in 2018 to a peak of 14.99 in 2019, indicating enhanced efficiency despite a decrease in working capital. Subsequently, the ratio declined substantially to 7.45 in 2020, likely impacted by a sharp increase in working capital without proportional sales growth. The turnover recovered to 10.81 in 2021 and further improved to 13.73 in 2022, showing a return to more efficient use of working capital in generating sales.
Average Inventory Processing Period
Builders FirstSource Inc., average inventory processing period calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Inventory turnover | 10.50 | 8.64 | 8.08 | 9.45 | 9.72 | |
| Short-term Activity Ratio (no. days) | ||||||
| Average inventory processing period1 | 35 | 42 | 45 | 39 | 38 | |
| Benchmarks (no. days) | ||||||
| Average Inventory Processing Period, Competitors2 | ||||||
| Boeing Co. | 452 | 486 | 467 | — | — | |
| Caterpillar Inc. | 144 | 144 | 143 | — | — | |
| Eaton Corp. plc | 90 | 82 | 62 | — | — | |
| GE Aerospace | 114 | 107 | 96 | — | — | |
| Honeywell International Inc. | 90 | 85 | 74 | — | — | |
| Lockheed Martin Corp. | 20 | 19 | 23 | — | — | |
| RTX Corp. | 73 | 65 | 71 | — | — | |
| Average Inventory Processing Period, Sector | ||||||
| Capital Goods | 160 | 160 | 160 | — | — | |
| Average Inventory Processing Period, Industry | ||||||
| Industrials | 85 | 91 | 99 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 10.50 = 35
2 Click competitor name to see calculations.
- Inventory Turnover
- The inventory turnover ratio exhibited a fluctuating yet overall positive trend over the five-year period. Starting at 9.72 in 2018, it slightly decreased to 9.45 in 2019, followed by a more pronounced decline to 8.08 in 2020. The ratio then recovered in 2021 to 8.64 and experienced a significant increase in 2022, reaching the highest point of 10.5. This pattern suggests periods of slower inventory movement around 2020, with improving efficiency in inventory management or sales velocity in the most recent year.
- Average Inventory Processing Period
- The average inventory processing period, measured in days, generally moved inversely to the inventory turnover ratio. It began at 38 days in 2018, slightly increasing to 39 days in 2019 and then rising more substantially to 45 days in 2020. Following this peak, it declined to 42 days in 2021 and further to 35 days in 2022. The reduction to 35 days in the most recent year corresponds with the highest inventory turnover ratio, indicating improved efficiency and faster inventory processing.
- Overall Interpretation
- The data indicates that inventory management experienced challenges in 2020, as evidenced by a slower turnover ratio and longer processing period. However, the subsequent years show a recovery and enhancement in inventory efficiency, culminating in 2022 with the strongest performance in terms of turnover and the shortest processing period across the timeframe analyzed. This suggests effective inventory control measures or improved sales dynamics were implemented or occurred after 2020.
Average Receivable Collection Period
Builders FirstSource Inc., average receivable collection period calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Receivables turnover | 15.69 | 11.64 | 10.40 | 11.84 | 11.81 | |
| Short-term Activity Ratio (no. days) | ||||||
| Average receivable collection period1 | 23 | 31 | 35 | 31 | 31 | |
| Benchmarks (no. days) | ||||||
| Average Receivable Collection Period, Competitors2 | ||||||
| Boeing Co. | 14 | 15 | 12 | — | — | |
| Caterpillar Inc. | 57 | 64 | 68 | — | — | |
| Eaton Corp. plc | 72 | 61 | 59 | — | — | |
| GE Aerospace | 89 | 80 | 83 | — | — | |
| Honeywell International Inc. | 77 | 72 | 76 | — | — | |
| Lockheed Martin Corp. | 14 | 11 | 11 | — | — | |
| RTX Corp. | 50 | 55 | 60 | — | — | |
| Average Receivable Collection Period, Sector | ||||||
| Capital Goods | 50 | 48 | 50 | — | — | |
| Average Receivable Collection Period, Industry | ||||||
| Industrials | 45 | 47 | 48 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 15.69 = 23
2 Click competitor name to see calculations.
- Receivables Turnover
- The receivables turnover ratio exhibited a relatively stable pattern from 2018 to 2019, remaining around 11.8. However, there was a decline in 2020 to 10.4, indicating slower collection of receivables during that year. Improvement is observed in the subsequent years, with the ratio increasing to 11.64 in 2021 and significantly rising to 15.69 in 2022. The increase in receivables turnover suggests enhanced efficiency in collecting outstanding receivables by the end of 2022.
- Average Receivable Collection Period
- The average receivable collection period was steady at 31 days for 2018, 2019, and 2021. An increase to 35 days in 2020 aligns with the noted decrease in receivables turnover for that year, implying a longer time to collect receivables. In contrast, 2022 experienced a substantial reduction to 23 days, indicating that the company was able to collect receivables much more quickly compared to prior years. This corresponds with the peak in receivables turnover in 2022, reinforcing the conclusion of improved collection efficiency.
- Overall Trends and Insights
- The data reveals a dip in receivables management efficiency in 2020, possibly reflecting adverse conditions or operational challenges during that period. Recovery and improvement are evident in the following years, culminating in significantly enhanced receivables turnover and reduced collection period by 2022. This trend highlights better working capital management related to accounts receivable in the most recent year analyzed.
Operating Cycle
Builders FirstSource Inc., operating cycle calculation, comparison to benchmarks
No. days
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Average inventory processing period | 35 | 42 | 45 | 39 | 38 | |
| Average receivable collection period | 23 | 31 | 35 | 31 | 31 | |
| Short-term Activity Ratio | ||||||
| Operating cycle1 | 58 | 73 | 80 | 70 | 69 | |
| Benchmarks | ||||||
| Operating Cycle, Competitors2 | ||||||
| Boeing Co. | 466 | 501 | 479 | — | — | |
| Caterpillar Inc. | 201 | 208 | 211 | — | — | |
| Eaton Corp. plc | 162 | 143 | 121 | — | — | |
| GE Aerospace | 203 | 187 | 179 | — | — | |
| Honeywell International Inc. | 167 | 157 | 150 | — | — | |
| Lockheed Martin Corp. | 34 | 30 | 34 | — | — | |
| RTX Corp. | 123 | 120 | 131 | — | — | |
| Operating Cycle, Sector | ||||||
| Capital Goods | 210 | 208 | 210 | — | — | |
| Operating Cycle, Industry | ||||||
| Industrials | 130 | 138 | 147 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= 35 + 23 = 58
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period increased from 38 days in 2018 to a peak of 45 days in 2020, indicating that inventory was held longer in that year. Subsequently, there was a decline to 42 days in 2021 and a further reduction to 35 days in 2022, suggesting improved inventory turnover and efficiency in managing stock during the latest period.
- Average Receivable Collection Period
- The average receivable collection period remained stable at 31 days during 2018 and 2019, then lengthened to 35 days in 2020. It returned to 31 days in 2021 and sharply decreased to 23 days in 2022. This trend reflects an initial slowdown in collections in 2020, followed by significant improvement in the efficiency of collecting receivables in the most recent period.
- Operating Cycle
- The operating cycle rose from 69 days in 2018 to 80 days in 2020, indicating an overall lengthening of the time taken to convert inventory and receivables into cash. However, this cycle shortened to 73 days in 2021 and further to 58 days in 2022. The reduction in the operating cycle in the latest years points towards enhanced operational efficiency, combining both faster inventory turnover and quicker receivable collections.
Average Payables Payment Period
Builders FirstSource Inc., average payables payment period calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Payables turnover | 18.65 | 12.84 | 10.55 | 12.14 | 13.71 | |
| Short-term Activity Ratio (no. days) | ||||||
| Average payables payment period1 | 20 | 28 | 35 | 30 | 27 | |
| Benchmarks (no. days) | ||||||
| Average Payables Payment Period, Competitors2 | ||||||
| Boeing Co. | 59 | 57 | 74 | — | — | |
| Caterpillar Inc. | 77 | 84 | 77 | — | — | |
| Eaton Corp. plc | 81 | 77 | 58 | — | — | |
| GE Aerospace | 123 | 110 | 100 | — | — | |
| Honeywell International Inc. | 103 | 107 | 95 | — | — | |
| Lockheed Martin Corp. | 13 | 5 | 6 | — | — | |
| RTX Corp. | 68 | 62 | 66 | — | — | |
| Average Payables Payment Period, Sector | ||||||
| Capital Goods | 70 | 65 | 66 | — | — | |
| Average Payables Payment Period, Industry | ||||||
| Industrials | 47 | 47 | 49 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ 18.65 = 20
2 Click competitor name to see calculations.
- Payables Turnover
- The payables turnover ratio shows a fluctuating trend over the observed five-year period. Starting at 13.71 in 2018, it declined steadily to 10.55 by 2020, indicating a slower rate of payment to suppliers during this period. However, a recovery is noted in 2021, with the ratio increasing to 12.84, followed by a significant rise to 18.65 in 2022. The marked increase in 2022 suggests that the company accelerated its payment pace considerably compared to earlier years.
- Average Payables Payment Period
- This metric demonstrates an inverse trend relative to the payables turnover. The average number of days taken to pay suppliers increased from 27 days in 2018 to a peak of 35 days in 2020, aligning with the decrease in payables turnover and confirming slower payment practices in that year. Subsequently, the payment period shortened to 28 days in 2021 and dropped sharply to 20 days in 2022, reflecting faster payment processing consistent with the sharp increase in payables turnover in the same year.
- Overall Insights
- The data reveals a strategic shift in the company's payment behavior. The initial trend toward longer payment periods and lower payables turnover up to 2020 may indicate efforts to conserve cash or manage working capital cautiously during that time. From 2021 onwards, there is a clear reversal, with accelerated payments and higher turnover ratios, suggesting an improved liquidity position or a strategic decision to enhance supplier relations through quicker payments. The sharpest change occurs between 2021 and 2022, highlighting a significant operational or financial adjustment.
Cash Conversion Cycle
Builders FirstSource Inc., cash conversion cycle calculation, comparison to benchmarks
No. days
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Average inventory processing period | 35 | 42 | 45 | 39 | 38 | |
| Average receivable collection period | 23 | 31 | 35 | 31 | 31 | |
| Average payables payment period | 20 | 28 | 35 | 30 | 27 | |
| Short-term Activity Ratio | ||||||
| Cash conversion cycle1 | 38 | 45 | 45 | 40 | 42 | |
| Benchmarks | ||||||
| Cash Conversion Cycle, Competitors2 | ||||||
| Boeing Co. | 407 | 444 | 405 | — | — | |
| Caterpillar Inc. | 124 | 124 | 134 | — | — | |
| Eaton Corp. plc | 81 | 66 | 63 | — | — | |
| GE Aerospace | 80 | 77 | 79 | — | — | |
| Honeywell International Inc. | 64 | 50 | 55 | — | — | |
| Lockheed Martin Corp. | 21 | 25 | 28 | — | — | |
| RTX Corp. | 55 | 58 | 65 | — | — | |
| Cash Conversion Cycle, Sector | ||||||
| Capital Goods | 140 | 143 | 144 | — | — | |
| Cash Conversion Cycle, Industry | ||||||
| Industrials | 83 | 91 | 98 | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= 35 + 23 – 20 = 38
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period showed a fluctuating trend over the analyzed years. It increased from 38 days in 2018 to a peak of 45 days in 2020, before gradually decreasing to 35 days by the end of 2022. This indicates an initial decline in inventory turnover efficiency, followed by an improvement in managing inventory levels in the later years.
- Average Receivable Collection Period
- The average receivable collection period remained stable at 31 days in 2018 and 2019, increased to 35 days in 2020, then returned to 31 days in 2021, and subsequently declined significantly to 23 days in 2022. This pattern suggests that the company faced some challenges in collecting receivables in 2020 but improved its collection processes thereafter, achieving a much quicker turnover by 2022.
- Average Payables Payment Period
- The average payables payment period increased from 27 days in 2018 to a high of 35 days in 2020, then decreased to 28 days in 2021 and further declined sharply to 20 days in 2022. This indicates a shift from extending payment terms to suppliers during 2020, possibly to conserve cash, toward faster payment practices in recent years.
- Cash Conversion Cycle
- The cash conversion cycle exhibited a relatively stable pattern from 2018 to 2022 with values fluctuating between 38 and 45 days. It was 42 days in 2018, decreased slightly to 40 days in 2019, rose to 45 days in both 2020 and 2021, before declining to 38 days in 2022. Overall, the cash conversion cycle peaked during the height of the pandemic years and has since improved, indicating enhanced operational efficiency and working capital management.