Advance Auto Parts Inc (AAP)
Cash conversion cycle
| Dec 31, 2023 | Oct 7, 2023 | Jul 15, 2023 | Apr 22, 2023 | Dec 31, 2022 | Oct 8, 2022 | Apr 23, 2022 | Dec 31, 2021 | Oct 9, 2021 | Jul 17, 2021 | Apr 24, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jul 11, 2020 | Apr 18, 2020 | Dec 31, 2019 | Oct 5, 2019 | Jul 13, 2019 | Apr 20, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 158.07 | 163.38 | 172.38 | 161.26 | 173.94 | 173.76 | 169.63 | 166.88 | 160.52 | 161.42 | 165.94 | 176.44 | 173.96 | 176.41 | 184.76 | 178.45 | 175.26 | 174.94 | 177.32 | 175.64 |
| Days of sales outstanding (DSO) | days | 25.88 | 28.07 | 25.84 | 24.00 | 22.96 | 28.00 | 31.69 | 25.98 | 31.03 | 26.97 | 27.37 | 27.11 | 31.23 | 28.15 | 24.22 | 25.92 | 27.14 | 26.93 | 25.86 | 23.81 |
| Number of days of payables | days | 135.95 | 133.32 | 131.79 | 121.08 | 148.46 | 143.93 | 139.94 | 140.48 | 135.29 | 138.79 | 138.55 | 141.54 | 140.50 | 133.97 | 134.89 | 137.77 | 135.80 | 132.67 | 131.05 | 127.74 |
| Cash conversion cycle | days | 48.00 | 58.13 | 66.42 | 64.18 | 48.45 | 57.83 | 61.38 | 52.38 | 56.27 | 49.60 | 54.76 | 62.00 | 64.68 | 70.59 | 74.10 | 66.59 | 66.59 | 69.19 | 72.13 | 71.71 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 158.07 + 25.88 – 135.95
= 48.00
The cash conversion cycle of Advance Auto Parts Inc has exhibited fluctuations over the past few years. The cycle represents the time it takes for a company to convert its investments in inventory into cash inflows from sales. A shorter cash conversion cycle indicates more efficient management of working capital.
In analyzing the data provided, we observe that Advance Auto Parts Inc's cash conversion cycle ranged from 48.00 days to 74.10 days over the period. Generally, a longer cash conversion cycle could indicate inefficiencies in managing inventory, accounts receivable, and accounts payable.
The trend in the cash conversion cycle shows periods of increase and decrease. For example, there was an increase in the cycle duration from 48.45 days to 66.59 days between December 31, 2022, and April 18, 2020. This increase may suggest challenges in converting inventory into sales and collecting payments from customers during this period.
On the other hand, there were instances of improvement in efficiency, such as the decrease in the cash conversion cycle from 70.59 days to 48.00 days between July 11, 2020, and Dec 31, 2023. This improvement could indicate better inventory management and quicker conversion of sales into cash receipts.
Overall, monitoring the cash conversion cycle is crucial for assessing the effectiveness of working capital management at Advance Auto Parts Inc. By identifying trends and fluctuations in the cycle, the company can make informed decisions to optimize its cash flow and overall financial performance.
Peer comparison
Dec 31, 2023