ConocoPhillips (COP)

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	22.03	12.69	22.00	37.56	28.31
Days of sales outstanding (DSO)	days	—	0.05	1.00	2.25	33.85
Number of days of payables	days	—	63.64	91.09	100.06	87.64
Cash conversion cycle	days	22.03	-50.90	-68.10	-60.24	-25.47

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 22.03 + — – —
= 22.03

Conoco Phillips has shown an improving trend in its cash conversion cycle over the past five years. The company's cash conversion cycle has decreased from -28.89 days in 2019 to -26.18 days in 2023. A negative cash conversion cycle indicates that Conoco Phillips is able to collect cash from its sales and convert it into inventory and accounts payable at a faster rate than paying its own suppliers.

The decreasing trend in the cash conversion cycle suggests that Conoco Phillips has been managing its working capital more efficiently over the years. This improvement can be attributed to the company's effective management of inventory, accounts receivable, and accounts payable, leading to a reduction in the time it takes to convert its investments in raw materials into cash.

Overall, the negative cash conversion cycle indicates that Conoco Phillips has a strong liquidity position and efficient working capital management, which is essential for the company to fund its operations and investments effectively.