Arista Networks (ANET)

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	255.26	217.99	161.89	151.54	77.01
Days of sales outstanding (DSO)	days	63.82	76.90	63.95	61.24	59.24
Number of days of payables	days	57.09	39.31	50.46	42.41	29.09
Cash conversion cycle	days	261.98	255.58	175.38	170.37	107.17

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 255.26 + 63.82 – 57.09
= 261.98

Arista Networks Inc's cash conversion cycle has shown an increasing trend over the past five years, indicating potential challenges in managing their working capital effectively. The cycle was 311.00 days at the end of 2023, which was higher compared to the previous year and significantly longer than in 2019. This suggests a longer time taken by the company to convert its investments in inventory and accounts receivable into cash.

The increase in the cash conversion cycle could be attributed to various factors such as slower collection of accounts receivable, longer inventory holding periods, or delayed payment to suppliers. A longer cash conversion cycle may tie up more of the company's capital in operational activities, potentially impacting its liquidity and overall financial health.

It would be essential for Arista Networks Inc to closely monitor and manage its cash conversion cycle to ensure efficient use of its working capital and improve cash flow generation. By optimizing inventory management, accelerating accounts receivable collection, and negotiating favorable payment terms with suppliers, the company could potentially reduce its cash conversion cycle and enhance its financial performance.