American Water Works (AWK)

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	606.37	723.11	779.13	807.21	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
Days of sales outstanding (DSO)	days	59.35	62.41	62.75	56.54	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
Number of days of payables	days	2,036.94	1,783.68	1,509.13	1,621.44	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
Cash conversion cycle	days	-1,371.21	-998.15	-667.25	-757.69	-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

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 606.37 + 59.35 – 2,036.94
= -1,371.21

The cash conversion cycle of American Water Works indicates the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales. Looking at the data provided, the cash conversion cycle fluctuated significantly over the period.

Initially, the company had a positive cash conversion cycle, indicating that it took around 15 to 26 days to convert its investments into cash. However, towards the end of the period, the cycle turned negative, implying that the company managed to convert its investments into cash more quickly than it took to pay off its suppliers and other payables.

Notably, in the later period, the cash conversion cycle showed days in negative, suggesting a potential improvement in the company's liquidity management and efficiency in converting its resources into cash. This trend indicates that American Water Works may have become more effective in managing its working capital, resulting in a shorter cash conversion cycle and better cash flow management. Further analysis into the company's operational and financial strategies would provide additional insights into this significant change.