AutoZone Inc (AZO)

Cash conversion cycle

		Aug 31, 2024	Aug 26, 2023	Aug 27, 2022	Aug 28, 2021	Aug 29, 2020
Days of inventory on hand (DOH)	days	259.03	250.86	264.52	245.02	278.57
Days of sales outstanding (DSO)	days	10.77	10.88	11.34	9.44	10.54
Number of days of payables	days	309.55	313.41	342.56	317.58	321.10
Cash conversion cycle	days	-39.75	-51.67	-66.70	-63.12	-32.00

August 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 259.03 + 10.77 – 309.55
= -39.75

The cash conversion cycle of AutoZone Inc has shown fluctuations over the past five years. The trend indicates an improvement in cash conversion efficiency from the negative value of -32.00 days in 2020 to -39.75 days in 2024. This suggests that AutoZone has been able to manage its cash flow more effectively, reducing the time it takes to convert inventory and receivables into cash.

In 2022, there was a significant decrease in the cash conversion cycle to -66.70 days, indicating a very efficient cash conversion process. However, this was followed by a slight improvement in 2023 and a further enhancement in 2024.

Overall, the negative values of the cash conversion cycle signify that AutoZone is able to collect cash from customers and turn over its inventory quickly relative to its payables cycle. This efficient management of working capital is a positive sign for the company's financial health and operational efficiency.