Genuine Parts Co (GPC)
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 | 80.07 | 78.85 | 80.25 | 79.30 | 68.03 |
| Days of sales outstanding (DSO) | days | 35.24 | 35.94 | 35.01 | 34.58 | 49.95 |
| Number of days of payables | days | 94.16 | 96.87 | 99.12 | 93.36 | 81.12 |
| Cash conversion cycle | days | 21.16 | 17.93 | 16.13 | 20.52 | 36.87 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 80.07 + 35.24 – 94.16
= 21.16
The cash conversion cycle of Genuine Parts Co. has shown varying trends over the past five years. In 2023, the company's cash conversion cycle increased to 14.85 days from 10.35 days in 2022, indicating that it took Genuine Parts Co. longer to convert its resources into cash during the year. This deteriorating trend in 2023 is a significant departure from the favorable trend observed in the previous year.
Comparing the data to 2021, where the cash conversion cycle was 7.48 days, it is clear that Genuine Parts Co. improved its efficiency in 2021 by effectively managing its working capital. The efficiency drop seen in 2020 with a cash conversion cycle of 13.51 days may indicate challenges the company faced during that year, possibly related to managing inventory, receivables, and payables.
Notably, in 2019, Genuine Parts Co. experienced a substantial increase in its cash conversion cycle to 41.92 days, signifying a prolonged period to convert resources into cash. The sharp contrast between 2019 and the following years suggests the company implemented strategies to optimize its cash conversion cycle, leading to enhanced efficiency until 2021.
Overall, Genuine Parts Co. should closely monitor and manage its cash conversion cycle to ensure optimal working capital management and sustain its operational efficiency in the future.