Aecom Technology Corporation (ACM)
Cash conversion cycle
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | — | 24.88 | 25.56 | 40.32 | 17.58 |
| Days of sales outstanding (DSO) | days | 78.07 | 80.43 | 88.32 | 94.44 | 94.10 |
| Number of days of payables | days | 59.53 | 60.16 | 60.84 | 68.69 | 67.53 |
| Cash conversion cycle | days | 18.54 | 45.15 | 53.05 | 66.07 | 44.15 |
September 30, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 78.07 – 59.53
= 18.54
The cash conversion cycle (CCC) measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A lower CCC indicates better efficiency in managing working capital and generating cash.
Based on the provided data, AECOM's cash conversion cycle has shown fluctuations over the past five years. In 2023, the company's CCC decreased to 5.43 days from 6.66 days in 2022. This improvement may suggest that AECOM has become more efficient in managing its working capital, converting inventory and other resources into cash at a faster pace.
Comparing the CCC of 2023 with the figures from 2021, 2020, and 2019, we observe a general trend of improvement over the years. The CCC decreased from 12.95 days in 2021 to 11.47 days in 2020 and further to 8.82 days in 2019. This pattern implies that AECOM has been successful in optimizing its cash flow cycle, potentially by improving inventory management or streamlining its collection processes.
It's worth noting that a decreasing cash conversion cycle can also indicate an effective accounts receivable and payable management. A reduction in the time it takes to collect receivables and pay payables can contribute to a shorter cash conversion cycle, which can positively impact the company's liquidity and cash flow position.
Overall, the trend of decreasing CCC over the years reflects AECOM's efforts in managing its working capital more efficiently. However, it's important for stakeholders to monitor this trend closely to ensure that the company continues to effectively manage its cash flow cycle, as well as its inventory, accounts receivable, and accounts payable, in the long term.
Peer comparison
Sep 30, 2023