Archrock Inc (AROC)
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 | 51.96 | 56.61 | 55.38 | 38.34 | 42.33 |
| Days of sales outstanding (DSO) | days | 50.94 | 63.97 | 54.44 | 49.12 | 60.56 |
| Number of days of payables | days | 38.78 | 43.03 | 29.58 | 18.56 | 34.23 |
| Cash conversion cycle | days | 64.11 | 77.55 | 80.24 | 68.90 | 68.66 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 51.96 + 50.94 – 38.78
= 64.11
The cash conversion cycle of Archrock Inc has shown fluctuating trends over the past five years. In 2023, the company's cash conversion cycle improved to 62.58 days compared to 77.03 days in 2022 and 83.53 days in 2021. This indicates that Archrock has been more efficient in managing its cash flow and working capital in the most recent year.
In general, a lower cash conversion cycle is favorable as it signifies that the company is able to convert its investments in raw materials and production into cash more quickly. This could be due to a variety of factors such as improved inventory management, efficient accounts receivable collection, and extended accounts payable payment terms.
The downward trend in the cash conversion cycle over the past two years suggests that Archrock Inc has been successful in optimizing its working capital processes and improving its liquidity position. However, it is essential for the company to continue monitoring and managing its cash conversion cycle effectively to sustain this positive trend and enhance its overall financial performance.
Peer comparison
Dec 31, 2023