Acadia Healthcare Company Inc (ACHC)
Cash conversion cycle
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 18.31 | 0.86 | 1.24 | 1.31 | 1.43 |
| Days of sales outstanding (DSO) | days | — | — | — | — | — |
| Number of days of payables | days | — | — | — | — | — |
| Cash conversion cycle | days | 18.31 | 0.86 | 1.24 | 1.31 | 1.43 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 18.31 + — – —
= 18.31
The cash conversion cycle of Acadia Healthcare Company Inc has shown a decreasing trend from 1.43 days on December 31, 2020, to 0.86 days on December 31, 2023, indicating an improvement in the company's efficiency in managing its working capital. However, there was a significant spike to 18.31 days on December 31, 2024, which could be a cause for concern.
A lower cash conversion cycle suggests that the company is able to efficiently convert its investments in inventory and accounts receivable into cash. This can be beneficial as it allows the company to generate cash quickly and reinvest it in the business or pay off obligations.
On the other hand, a high cash conversion cycle, as seen on December 31, 2024, can indicate inefficiencies in managing working capital, potentially leading to liquidity issues. It may be necessary for the company to review its operations and improve its inventory management and collections processes to bring the cash conversion cycle back to more optimal levels.
In conclusion, Acadia Healthcare Company Inc should closely monitor its cash conversion cycle, address the sudden spike observed in December 31, 2024, and strive to maintain a reasonable level to ensure efficient cash flow management and overall financial health.
Peer comparison
Dec 31, 2024