Advance Auto Parts Inc (AAP)
Cash conversion cycle
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 158.27 | 170.67 | 166.88 | 176.44 | 178.44 |
| Days of sales outstanding (DSO) | days | 25.88 | 22.41 | 25.98 | 27.23 | 25.92 |
| Number of days of payables | days | 136.12 | 145.66 | 140.48 | 141.54 | 137.77 |
| Cash conversion cycle | days | 48.03 | 47.41 | 52.38 | 62.13 | 66.60 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 158.27 + 25.88 – 136.12
= 48.03
The cash conversion cycle of Advance Auto Parts Inc has shown a fluctuating trend over the past five years. In 2023, the company improved its efficiency in managing its working capital compared to the previous year, with a cash conversion cycle of 48.03 days, slightly better than the 47.41 days in 2022. This suggests that the company was able to convert its inventory into cash more quickly and efficiently.
However, in 2021 and 2020, the cash conversion cycle increased to 52.38 days and 62.13 days respectively, indicating a temporary decline in the company's ability to efficiently manage its working capital. This increase in days implies that it took the company longer to convert its investments in inventory back into cash, which could potentially indicate inefficiencies or challenges in the supply chain or sales processes during those years.
Moreover, the cash conversion cycle was highest in 2019 at 66.60 days, indicating a longer period for the company to convert its investments in inventory into cash collected from customers. This suggests that there were potential inefficiencies or delays in the company's working capital management during that year.
Overall, the trend in Advance Auto Parts Inc's cash conversion cycle reflects fluctuations in its operational efficiency in managing working capital over the past five years, with improvements in recent years and challenges in certain periods. It is essential for the company to continue monitoring and optimizing its working capital management processes to ensure efficient operations and sustainable growth.
Peer comparison
Dec 31, 2023