American Electric Power Company Inc (AEP)

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	478.23	305.28	257.77	368.52	351.53
Days of sales outstanding (DSO)	days	53.51	54.97	49.29	55.70	45.21
Number of days of payables	days	517.16	626.18	535.40	480.96	627.11
Cash conversion cycle	days	14.58	-265.93	-228.34	-56.74	-230.37

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 478.23 + 53.51 – 517.16
= 14.58

The cash conversion cycle of American Electric Power Company Inc. has been fluctuating over the past five years. In 2023, the company's cash conversion cycle increased to 38.57 days, indicating that it took approximately 38.57 days for the company to convert its investments in inventory and other resources into cash flows from sales. This increase in the cash conversion cycle suggests a potential lengthening of the operating cycle or a slowdown in the collection of receivables.

In 2022, the company had a negative cash conversion cycle of -19.64 days, indicating that it was able to convert its investments into cash flows more quickly than in 2023. This negative value suggests efficient management of working capital, where the company may have been able to collect receivables or manage inventory effectively, resulting in a faster conversion of investments into cash.

In 2021 and 2019, the company also had negative cash conversion cycles of -28.94 days and -25.53 days, respectively, indicating efficient working capital management during those years. This suggests that the company was able to generate cash from its operations quickly and effectively during those periods.

However, in 2020, the company experienced a positive cash conversion cycle of 11.70 days, signifying a slower conversion of investments into cash compared to the other years. This could be attributed to factors such as increased inventory levels or a delay in the collection of receivables.

Overall, the trend in American Electric Power Company Inc.'s cash conversion cycle shows variability, with the company demonstrating efficient working capital management in some years and potential challenges in others. Analyzing the factors contributing to these fluctuations can provide insights into the company's operational efficiency and financial performance.