American Water Works (AWK)
Cash conversion cycle
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 606.37 | 786.15 | 872.44 | 547.50 | 389.89 |
| Days of sales outstanding (DSO) | days | 59.30 | 62.93 | 69.78 | 40.50 | 50.93 |
| Number of days of payables | days | 2,036.94 | 2,063.65 | 2,261.22 | 2,257.24 | 1,567.84 |
| Cash conversion cycle | days | -1,371.26 | -1,214.57 | -1,319.00 | -1,669.23 | -1,127.03 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 606.37 + 59.30 – 2,036.94
= -1,371.26
The cash conversion cycle of American Water Works has shown fluctuations over the years based on the provided data. As of December 31, 2020, the company had a negative cash conversion cycle of -1,127.03 days, indicating that it was able to convert its investments in inventory and accounts receivable into cash more quickly than paying its liabilities.
By December 31, 2021, the cash conversion cycle increased to -1,669.23 days, suggesting a temporary decrease in the efficiency of the company's cash management. However, by December 31, 2022, the cash conversion cycle improved to -1,319.00 days, showing a positive trend in managing working capital.
This positive trend continued until December 31, 2023 when the cash conversion cycle stood at -1,214.57 days. The company demonstrated efficiency in converting its resources into cash throughout the year. However, by the end of December 31, 2024, there was a slight increase in the cash conversion cycle to -1,371.26 days, indicating a potential need for the optimization of working capital management.
Overall, American Water Works has generally maintained a negative cash conversion cycle over the analyzed period, reflecting its ability to swiftly convert its investments into cash. This performance suggests effective cash management practices within the company.
Peer comparison
Dec 31, 2024