Diamondback Energy Inc (FANG)

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	138.52	154.78	146.00	1.97	14.99
Days of sales outstanding (DSO)	days	36.75	38.08	36.03	56.70	56.63
Number of days of payables	days	573.89	293.39	84.77	4.24	72.51
Cash conversion cycle	days	-398.61	-100.53	97.26	54.43	-0.90

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 138.52 + 36.75 – 573.89
= -398.61

The cash conversion cycle for Diamondback Energy Inc has shown variations over the past five years. In 2023, the company's cash conversion cycle was 36.75 days, a slight improvement from the previous year's 38.08 days. This indicates that the company took approximately 36.75 days to convert its investments in raw materials, production, and sales back into cash.

Compared to 2021, where the cash conversion cycle was 36.03 days, the cycle increased in 2022 but decreased again in 2023. This fluctuation suggests that the company may have managed its working capital more efficiently in 2023, leading to a quicker conversion of inventory and receivables into cash.

However, when comparing to 2020 and 2019, where the cash conversion cycle was significantly higher at 56.70 days and 56.63 days respectively, it is evident that Diamondback Energy Inc has made improvements in managing its working capital and liquidity over the past few years.

Overall, a lower cash conversion cycle indicates that the company is able to collect cash from its operations more quickly, which is a positive indicator of efficiency in managing its working capital. This trend suggests that Diamondback Energy Inc has been more effective in converting investments into cash over the years, promoting better financial health and operational efficiency.