Aramark Holdings (ARMK)

Cash conversion cycle

		Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	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
Days of inventory on hand (DOH)	days	8.44	7.86	8.08	7.49	8.14	12.63	13.43	13.10	13.22	12.94	11.82	11.44	13.09	13.64	14.95	13.87	12.80	11.39	9.97	9.86
Days of sales outstanding (DSO)	days	44.45	44.63	42.41	40.94	36.12	46.93	49.55	50.58	49.18	49.70	51.62	53.16	54.00	50.92	53.42	50.47	42.00	36.88	42.37	44.39
Number of days of payables	days	30.34	22.09	22.82	22.33	25.64	22.33	25.06	25.13	31.65	22.82	25.20	22.84	29.15	22.87	24.12	20.92	19.46	16.49	19.59	21.18
Cash conversion cycle	days	22.54	30.39	27.67	26.10	18.62	37.24	37.91	38.56	30.74	39.82	38.24	41.76	37.94	41.69	44.24	43.42	35.34	31.78	32.75	33.06

September 30, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 8.44 + 44.45 – 30.34
= 22.54

The cash conversion cycle for Aramark Holdings has shown variability over the past few quarters. The cycle represents the time taken by the company to convert its investments in inventory into cash receipts from customers.

Looking at the trend, we observe fluctuations in the cash conversion cycle, indicating changes in Aramark's efficiency in managing its working capital. A shorter cycle implies the company is more efficient in managing its inventory, accounts receivable, and accounts payable, thus converting its investments into cash more quickly.

In recent quarters, the cash conversion cycle has ranged between approximately 18.62 days to 44.24 days. A lower cycle in Q3 2023 indicated improved efficiency, possibly due to better inventory management or quicker receipt of payments from customers. However, the cycle increased in subsequent quarters, peaking at 44.24 days in Q1 2021, reflecting potential challenges in working capital management during that period.

Overall, monitoring the cash conversion cycle is crucial for evaluating Aramark's liquidity and operational efficiency, as it directly impacts the company's cash flow and financial health. It is essential for Aramark to focus on optimizing its working capital components to ensure a shorter and more consistent cash conversion cycle in the future.