Archrock Inc (AROC)

Cash conversion cycle

		Dec 31, 2024	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
Days of inventory on hand (DOH)	days	52.89	51.18	49.41	50.76	51.96	56.24	59.88	57.85	56.61	58.23	55.55	55.04	55.38	50.74	51.61	45.79	35.03	42.54	42.64	45.56
Days of sales outstanding (DSO)	days	42.34	52.46	43.27	41.72	51.19	55.52	54.15	51.55	66.66	64.15	66.89	61.46	55.91	57.76	55.55	54.51	49.57	49.30	51.78	56.44
Number of days of payables	days	33.95	42.54	27.42	30.77	38.78	33.25	42.01	50.99	43.03	62.05	55.89	53.01	29.58	34.03	35.32	24.40	16.95	18.90	21.35	38.91
Cash conversion cycle	days	61.28	61.10	65.26	61.70	64.37	78.51	72.02	58.41	80.24	60.34	66.56	63.49	81.71	74.47	71.83	75.90	67.64	72.94	73.07	63.09

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 52.89 + 42.34 – 33.95
= 61.28

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash from sales revenue. A lower cash conversion cycle indicates the company is efficiently managing its working capital.

For Archrock Inc, the cash conversion cycle has fluctuated over the past few years. In March 2020, the cycle was 63.09 days, indicating that on average, it took the company about 63 days to convert its investments in inventory and other resources into cash from sales. The cycle increased in the following quarters, reaching a peak of 81.71 days in December 2021. This increase suggests that there may have been delays in converting investments into cash, potentially affecting the company's liquidity and working capital management.

Subsequently, the cash conversion cycle decreased to 58.41 days by March 2023, indicating an improvement in efficiency in converting investments into cash. However, the cycle increased again in the following quarters, reaching 65.26 days by June 2024.

Overall, Archrock Inc should strive to manage its working capital efficiently to maintain a lower cash conversion cycle, which would indicate effective management of its cash flows and resources. This would help improve the company's liquidity position and overall financial health.