American Water Works (AWK)

Cash conversion cycle

		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	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	786.15	1,012.88	970.37	916.95	872.44	722.23	64.64	28.54	15.71	14.55	14.46	14.91	13.87	14.48	15.37	15.31	13.68	13.90	20.14	18.98
Days of sales outstanding (DSO)	days	62.95	66.73	68.56	66.27	69.72	50.53	53.20	40.94	40.51	55.56	52.85	47.11	50.81	54.79	50.32	46.57	47.17	53.58	53.55	49.92
Number of days of payables	days	2,063.65	2,080.50	2,190.00	1,718.17	2,261.22	1,708.51	149.04	70.35	64.78	48.03	40.59	38.42	55.77	47.88	50.94	46.54	63.11	45.02	58.74	56.09
Cash conversion cycle	days	-1,214.55	-1,000.89	-1,151.07	-734.95	-1,319.06	-935.75	-31.20	-0.87	-8.56	22.08	26.72	23.59	8.91	21.39	14.76	15.33	-2.26	22.46	14.95	12.81

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 786.15 + 62.95 – 2,063.65
= -1,214.55

The cash conversion cycle is a vital metric that reflects how efficiently a company manages its working capital. It measures the time taken for a company to convert its investment in inventory and other inputs into cash flow from sales. A lower cash conversion cycle generally indicates better efficiency in managing working capital.

Analyzing American Water Works Co. Inc.'s cash conversion cycle over the past eight quarters shows some fluctuations but overall stability. The company's cash conversion cycle ranged from a low of 48.87 days in Q1 2022 to a high of 63.70 days in Q2 2022.

In the most recent quarter, Q4 2023, the company's cash conversion cycle was 55.26 days, which is lower than the preceding quarter's figure of 61.82 days. This suggests that American Water Works Co. Inc. improved its efficiency in converting its investments in inventory and other resources into cash flow from sales.

Examining the trend over the past two years, the cash conversion cycle has generally been within the range of 48.87 to 63.70 days, indicating a moderate level of efficiency in managing working capital. However, the company should strive to consistently lower its cash conversion cycle to free up cash and improve overall liquidity.

Overall, a detailed analysis of American Water Works Co. Inc.'s cash conversion cycle reveals the company's effectiveness in managing working capital and converting investments into cash flow, with some room for improvement to enhance efficiency further.