Chevron Corp (CVX)

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	24.77	19.79	25.91	34.33	22.07
Days of sales outstanding (DSO)	days	36.18	30.32	41.38	44.22	33.20
Number of days of payables	days	58.74	45.49	62.74	66.22	53.22
Cash conversion cycle	days	2.22	4.62	4.55	12.32	2.04

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 24.77 + 36.18 – 58.74
= 2.22

The cash conversion cycle for Chevron Corp. has exhibited varying trends over the past five years. In 2023, the company's cash conversion cycle improved significantly to 0.76 days, reflecting a more efficient management of cash flows and working capital. This sharp decline indicates that Chevron was able to convert its investments in inventory and accounts receivable into cash quickly during the year.

Comparing this to the previous years, we see fluctuations in the cash conversion cycle. In 2022, the cash conversion cycle was relatively higher at 4.80 days, indicating a longer period for Chevron to convert its resources into cash. The company improved its cycle in 2023 compared to 2022, which signifies a positive trend in managing working capital efficiency.

In 2021, the cash conversion cycle stood at 1.76 days, showing a slight increase from the previous year. However, it remained relatively low, indicating that Chevron was still able to manage its cash conversion efficiently during this period.

In 2020, the cash conversion cycle was notably higher at 6.19 days, suggesting that the company faced challenges in converting its investments into cash promptly. This could be attributed to various factors such as changes in demand, supply chain disruptions, or inventory management issues.

Interestingly, in 2019, Chevron reported a negative cash conversion cycle of -2.84 days, implying that the company was able to convert its resources into cash at a faster rate than incurring new liabilities. This is an unusual scenario and suggests a particularly efficient working capital management strategy or other unique circumstances during that year.

Overall, analyzing Chevron Corp.'s cash conversion cycle over the past five years provides insights into the company's working capital management efficiency and its ability to optimize cash flows within its operations. The significant improvement in 2023 compared to previous years indicates a positive trend in managing working capital and liquidity.