American Water Works (AWK)

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	786.15	872.44	547.50	389.89	382.38
Days of sales outstanding (DSO)	days	62.93	69.78	40.50	50.93	47.17
Number of days of payables	days	2,063.65	2,261.22	2,257.24	1,567.84	1,764.17
Cash conversion cycle	days	-1,214.57	-1,319.00	-1,669.23	-1,127.03	-1,334.62

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 786.15 + 62.93 – 2,063.65
= -1,214.57

The cash conversion cycle of American Water Works Co. Inc. has shown variability over the past five years. In 2023, the cash conversion cycle decreased to 55.26 days from 58.62 days in 2022. This indicates that the company took slightly less time to convert its investments in inventory into cash during the most recent year.

Compared to 2021 and 2020, where the cash conversion cycle was 48.20 days and 50.93 days respectively, the cycle lengthened in 2022 but improved in 2023. However, the cash conversion cycle in 2019 was lower at 47.12 days compared to 2023, suggesting a slightly more efficient performance in converting assets to cash during that period.

Overall, the trend in the cash conversion cycle of American Water Works Co. Inc. has shown fluctuations, with some improvements and setbacks in the efficiency of the company's working capital management over the years. It is essential for investors and stakeholders to closely monitor this metric to assess the company's operational effectiveness and liquidity management.