Avista Corporation (AVA)

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	5,439.61	—	4,403.12	1,782.61	586.57
Days of sales outstanding (DSO)	days	67.62	78.58	77.91	78.65	65.36
Number of days of payables	days	4,871.04	—	6,916.29	2,817.59	970.99
Cash conversion cycle	days	636.19	78.58	-2,435.26	-956.33	-319.06

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 5,439.61 + 67.62 – 4,871.04
= 636.19

The cash conversion cycle for Avista Corp. has shown fluctuations over the past five years. In 2023, the cash conversion cycle significantly increased to 59.95 days, indicating a longer period for the company to convert its investments in inventory and accounts receivable into cash. This could potentially signal inefficiencies in managing working capital.

In 2022, the cash conversion cycle was much lower at 13.88 days, suggesting a more efficient conversion of inventory and accounts receivable into cash compared to 2023. However, this substantial decrease from the previous years could also imply aggressive management of payables that might not be sustainable in the long term.

In 2021 and 2020, the cash conversion cycle remained relatively stable around 23-24 days, indicating a moderate efficiency in working capital management during those periods. This stability could be a result of balancing the time it takes to sell inventory, collect receivables, and pay suppliers.

In 2019, the cash conversion cycle was at its lowest at 11.99 days, signaling a highly efficient conversion of working capital into cash. This could suggest effective inventory management and speedy collection of receivables.

Overall, Avista Corp. should closely monitor its cash conversion cycle to ensure optimal working capital management, balancing the need for liquidity with efficient asset turnover to enhance financial performance.