Cars.com Inc (CARS)

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	11.09	12.32	9.41	10.74	7.97	9.82	10.54	7.97	7.43	9.79	8.41	10.44	1.88	3.06	1.48	1.76	3.39	4.39	28.85	27.53
Days of sales outstanding (DSO)	days	69.46	66.92	63.97	66.23	63.69	64.24	63.65	59.34	61.71	61.49	63.72	64.95	65.57	62.48	51.23	60.07	63.63	62.35	56.61	54.99
Number of days of payables	days	19.66	17.02	18.52	16.46	17.33	17.36	12.29	15.74	14.66	15.46	25.71	24.01	4.78	5.73	3.03	3.82	6.47	3.63	49.08	45.03
Cash conversion cycle	days	60.89	62.22	54.86	60.50	54.32	56.71	61.90	51.57	54.47	55.81	46.42	51.37	62.67	59.81	49.68	58.00	60.56	63.11	36.38	37.50

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 11.09 + 69.46 – 19.66
= 60.89

The cash conversion cycle for Cars.com has shown some fluctuations over the past eight quarters. In Q4 2023 and Q2 2023, the company experienced negative cash conversion cycles of -0.08 days and -0.79 days, respectively, indicating that they were able to collect cash from sales before paying suppliers or covering expenses. This is a favorable situation as it signifies efficient working capital management.

On the other hand, Q3 2023 and Q1 2023 saw positive cash conversion cycles of 6.89 days and 8.45 days, respectively, suggesting that Cars.com took longer to convert its investments in inventory and accounts receivable into cash.

In comparison to previous periods, the cash conversion cycle in Q4 2022 and Q3 2022 was relatively low at 2.37 days and 1.68 days, indicating efficient management of working capital during those quarters. However, in Q2 2022, the company experienced a significantly higher cash conversion cycle of 18.14 days, which could potentially point to challenges in managing cash flows efficiently during that period.

Overall, Cars.com should aim to maintain a lower or, ideally, a negative cash conversion cycle to ensure effective management of working capital and optimized cash flows. Monitoring and analyzing the cash conversion cycle consistently can provide valuable insights into the company's operational efficiency and financial health.