APA Corporation (APA)

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	281.61	255.56	227.74	36.26	47.99
Days of sales outstanding (DSO)	days	—	277.35	67.06	76.93	59.15
Number of days of payables	days	359.23	388.45	338.48	32.72	66.44
Cash conversion cycle	days	-77.62	144.46	-43.69	80.47	40.70

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 281.61 + — – 359.23
= -77.62

APA Corporation's cash conversion cycle, a key indicator of the efficiency of its working capital management, has shown fluctuations over the past five years. In 2023, the cash conversion cycle increased to 70.83 days from 47.68 days in 2022, indicating a decline in the company's efficiency in converting its investments in inventory and accounts receivable into cash.

The increase in the cash conversion cycle suggests that APA Corporation took longer to sell its inventory and collect payments from customers in 2023 compared to the previous year. This may be attributed to factors such as inventory management issues or slower collection of receivables, affecting the company's cash flow and liquidity position.

Comparing to 2021 and 2020, where the cash conversion cycle was 61.95 days and 73.67 days respectively, the current cycle in 2023 is higher, indicating a deterioration in the efficiency of APA Corporation's working capital management.

However, the cash conversion cycle in 2023 is lower than in 2019 when it was 60.87 days, suggesting that the company has improved in this aspect over the past five years.

Overall, APA Corporation needs to focus on optimizing its inventory turnover and accounts receivable collection processes to shorten its cash conversion cycle, improve cash flow, and enhance its overall financial performance.