The AES Corporation (AES)
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 | 25.57 | 38.24 | 26.15 | 24.15 | 22.67 |
| Days of sales outstanding (DSO) | days | 43.25 | 55.14 | 52.48 | 54.33 | 57.67 |
| Number of days of payables | days | 78.97 | 62.71 | 49.92 | 60.56 | 61.04 |
| Cash conversion cycle | days | -10.15 | 30.67 | 28.71 | 17.92 | 19.31 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 25.57 + 43.25 – 78.97
= -10.15
The cash conversion cycle of AES Corp. has exhibited some fluctuations over the past five years. In 2023, the company's cash conversion cycle was negative, indicating that it took less time to convert its resources into cash. This could be a positive sign suggesting efficient management of working capital. However, the negative value may also indicate a potential issue with inventory management or delayed collections.
In 2022, the cash conversion cycle increased significantly to 27.58 days, implying a longer period to convert resources into cash compared to the previous year. This suggests a potential slowdown in the collection of receivables or an increase in the time taken to sell inventory.
The cycle decreased to 22.69 days in 2021, indicating an improvement in the company's efficiency in managing its working capital. This could be attributed to better inventory turnover or quicker collection of receivables.
In 2020, the cash conversion cycle was 12.71 days, which was lower compared to the previous year. This implies a quicker conversion of resources into cash and could indicate effective working capital management.
In 2019, the cycle was 14.62 days, showing a slightly longer time taken to convert resources into cash compared to the following year. This may suggest a slight inefficiency or slower working capital turnover during that period.
Overall, the trend in AES Corp.'s cash conversion cycle shows variability over the years, with periods of improvement and possible challenges in working capital management. It is essential for the company to continue monitoring and optimizing its cash conversion cycle to enhance operational efficiency and financial performance.