American Electric Power Company Inc (AEP)

Cash conversion cycle

		Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	901.71	701.77	668.40	529.55	462.59	435.69	437.94	414.23	433.34	428.04	534.72	599.41	625.85	569.73	576.06	548.72	555.53	380.34	391.57	149.01
Days of sales outstanding (DSO)	days	53.51	56.69	51.68	49.65	54.97	54.78	55.13	47.16	49.29	57.10	58.35	53.05	55.70	50.46	47.94	47.47	45.21	48.54	45.04	47.08
Number of days of payables	days	975.11	921.52	967.31	824.67	948.84	860.71	873.35	725.93	900.06	698.64	738.64	803.00	816.81	746.09	732.79	731.10	991.04	639.19	639.37	235.68
Cash conversion cycle	days	-19.89	-163.06	-247.23	-245.47	-431.29	-370.24	-380.27	-264.54	-417.43	-213.50	-145.57	-150.54	-135.25	-125.91	-108.80	-134.91	-390.30	-210.32	-202.76	-39.59

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 901.71 + 53.51 – 975.11
= -19.89

The cash conversion cycle of American Electric Power Company Inc. has exhibited fluctuating trends over the past eight quarters. In Q1 2022, the company had a negative cash conversion cycle of -7.79 days, indicating that it was able to convert its inventory, accounts receivable, and accounts payable into cash more quickly than in subsequent quarters. This trend continued into Q2 2022 and Q3 2022, with further negative values of -20.56 days and -15.38 days, respectively.

However, starting from Q4 2022, the cash conversion cycle turned positive, indicating that the company took longer to convert its resources into cash. The cycle increased to 2.02 days in Q1 2023, further rising to 6.41 days in Q2 2023 and 19.67 days in Q3 2023. In Q4 2023, the cycle peaked at 38.57 days, reflecting a significant increase in the time taken by the company to convert its investments into cash.

This fluctuation in the cash conversion cycle suggests varying efficiency levels in managing the company's liquidity and working capital. A longer cycle may indicate potential inefficiencies in managing cash flow, inventory levels, or collections from customers, while a shorter cycle implies better working capital management. It is essential for American Electric Power Company Inc. to monitor these fluctuations closely and implement strategies to optimize its cash conversion cycle for improved financial performance and sustainability.