Amazon.com Inc (AMZN)

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	31.36	33.75	34.93	30.81	35.41
Days of sales outstanding (DSO)	days	33.36	30.24	25.65	23.30	27.24
Number of days of payables	days	79.98	78.08	84.19	93.93	81.51
Cash conversion cycle	days	-15.26	-14.09	-23.60	-39.81	-18.86

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 31.36 + 33.36 – 79.98
= -15.26

Based on the data provided, Amazon.com Inc.'s cash conversion cycle has demonstrated a generally improving trend over the past five years. The cash conversion cycle measures the time it takes for a company to convert its resources (inventory) into cash from sales.

In 2023, the company's cash conversion cycle improved to -28.70 days, indicating that Amazon is efficient in managing its working capital. This represents a positive outcome as the company is able to generate cash from its operations before needing to pay suppliers.

Comparing this to previous years, there has been a consistent reduction in the cash conversion cycle, showcasing Amazon's ability to optimize its inventory management and payment collection processes. In 2021, the cycle decreased to -36.13 days, and in 2020, it stood at -53.06 days. This suggests that the company has been effective in speeding up the process of converting inventory into cash flow.

Additionally, the cash conversion cycle was also favorable in 2019 at -31.76 days. This trend indicates that Amazon has been successful in efficiently managing its working capital and maintaining a strong cash position.

Overall, the decreasing trend in Amazon's cash conversion cycle over the years reflects the company's effective management of its inventory and accounts receivable, enabling it to operate efficiently and generate cash flow from its operations at a faster pace.