American States Water Company (AWR)

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	37.94	36.81	38.74	37.29	33.16	30.38	29.27	26.40	27.57	22.16	19.01	19.24	19.06	18.10	18.08	16.77	13.18	10.34	9.34	8.20
Days of sales outstanding (DSO)	days	35.43	20.00	17.06	14.30	37.70	24.13	20.50	17.42	45.22	24.05	21.51	16.24	41.19	25.93	23.30	20.51	36.26	38.30	34.68	27.27
Number of days of payables	days	148.31	163.04	162.75	150.49	192.40	158.14	160.11	149.21	149.39	147.02	142.91	126.09	141.08	111.60	114.60	99.40	113.99	101.47	83.95	74.03
Cash conversion cycle	days	-74.95	-106.22	-106.96	-98.90	-121.54	-103.63	-110.34	-105.39	-76.60	-100.81	-102.39	-90.61	-80.83	-67.57	-73.22	-62.12	-64.56	-52.83	-39.93	-38.56

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 37.94 + 35.43 – 148.31
= -74.95

The cash conversion cycle, which measures the efficiency of American States Water Co.'s working capital management, has shown variations over the quarters. The company managed to improve its cash conversion cycle from Q4 2022 to Q1 2023 but saw a slight increase in Q2 and Q3 2023 before decreasing in Q4 2023.

A negative cash conversion cycle indicates efficient management in converting resources into cash, with the company able to collect receivables, pay suppliers, and manage inventory effectively. American States Water Co. maintained a negative cash conversion cycle throughout the periods, suggesting a faster cash cycle, which is generally favorable for liquidity and operational efficiency.

The improvement in Q1 2023 could be attributed to effective management of accounts receivable, payables, and inventory. However, the slight increase in Q2 and Q3 2023 may indicate some challenges in managing these components efficiently during that period. Nonetheless, the reduction in the cash conversion cycle in Q4 2023 signifies a potential improvement in working capital efficiency.

Overall, continuous monitoring and management of the cash conversion cycle will be essential for American States Water Co. to sustain operational efficiency and liquidity management in the future.