Chesapeake Energy Corp (CHK)
Cash conversion cycle
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 1,753.48 | 2,036.43 | 42.58 | 0.78 | 130.08 |
| Days of sales outstanding (DSO) | days | 24.82 | 44.70 | 73.34 | 51.96 | 42.35 |
| Number of days of payables | days | 1,048.14 | 1,342.04 | 936.83 | 14.20 | 483.43 |
| Cash conversion cycle | days | 730.16 | 739.09 | -820.91 | 38.54 | -311.00 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 1,753.48 + 24.82 – 1,048.14
= 730.16
The cash conversion cycle of Chesapeake Energy Corp has displayed significant fluctuations over the past five years. In 2023, the company's cash conversion cycle was 730.16 days, indicating that it takes the company approximately two years to convert its investment in raw materials into cash receipts from sales. This represents a slight improvement compared to the previous year's cycle of 739.09 days.
Interestingly, in 2021, the company's cash conversion cycle was noted as -820.91 days, implying that Chesapeake Energy was able to convert its inventory into cash very quickly, likely due to efficient management of inventory and collection of receivables. This negative cycle suggests that the company was able to generate cash from sales even before paying for its inventory, which can be a favorable position.
In contrast, in 2020 and 2019, the company had positive cash conversion cycles of 38.54 days and -311.00 days, respectively. These numbers indicate that the company took approximately one month to convert its investments in raw materials into cash receipts in 2020, and was able to convert its investments into cash even before paying for its inventory in 2019.
Overall, the fluctuating nature of Chesapeake Energy's cash conversion cycle over the analyzed period may suggest varying operational efficiencies and changes in working capital management practices within the company. Further investigation and comparison with industry peers could provide additional insights into the company's performance in this area.
Peer comparison
Dec 31, 2023