Civitas Resources Inc (CIVI)

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	55.65	12.01	11.82	20.62	44.38
Days of sales outstanding (DSO)	days	56.03	33.21	143.24	55.47	51.12
Number of days of payables	days	14.92	11.89	18.73	4.34	98.33
Cash conversion cycle	days	96.75	33.33	136.33	71.75	-2.82

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 55.65 + 56.03 – 14.92
= 96.75

Civitas Resources Inc's cash conversion cycle has fluctuated over the past five years. The company's cash conversion cycle was 79.02 days at the end of 2023, indicating the number of days it takes for the company to convert its investments in inventory and other resources into cash inflows from sales. This represents an increase from the previous year (46.14 days), suggesting potential inefficiencies in managing its working capital.

In 2022, the cash conversion cycle was 46.14 days, showing an efficient cash conversion process compared to 2021 when it was 168.12 days. The significant decrease in 2022 indicates that Civitas Resources Inc managed its cash flow more effectively, possibly through improved inventory management or quicker collection of receivables.

However, in 2021, the cash conversion cycle spiked to 168.12 days, signaling a potential issue with managing inventory, collecting receivables, or delaying payments to suppliers. The company seemed to have addressed this issue in 2022.

The cash conversion cycle was 79.36 days in 2020 and 95.38 days in 2019, showing fluctuations in the company's working capital management practices over those years. Overall, Civitas Resources Inc should continue monitoring its cash conversion cycle to ensure efficient utilization of its resources and timely conversion of investments into cash inflows.