Genuine Parts Co (GPC)

Cash conversion cycle

Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Jun 30, 2019 Mar 31, 2019
Days of inventory on hand (DOH) days 80.07 76.44 77.36 79.85 78.92 79.45 82.38 83.26 80.25 79.16 79.80 80.07 77.17 72.69 68.59 73.57 68.03 74.67 76.63 75.75
Days of sales outstanding (DSO) days 35.24 37.89 40.68 38.92 35.94 37.74 39.67 39.71 34.87 37.73 38.94 39.22 33.56 42.01 37.80 52.75 50.98 52.19 54.87 53.36
Number of days of payables days 94.16 93.56 95.49 98.99 96.95 102.18 103.73 103.09 99.12 101.76 102.58 99.62 90.85 85.68 76.64 80.89 81.11 84.26 83.04 83.43
Cash conversion cycle days 21.16 20.78 22.55 19.79 17.91 15.01 18.32 19.88 15.99 15.12 16.16 19.68 19.88 29.02 29.76 45.42 37.90 42.60 48.46 45.68

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 fluctuations over the past eight quarters. In Q4 2023, the company's cash conversion cycle increased to 14.85 days from 13.20 days in Q3 2023, indicating that it took Genuine Parts Co. longer to convert its investments in inventory and accounts receivable into cash during this period. This may be a result of slower inventory turnover or a lengthening of the company's collection period on receivables.

Comparing Q4 2023 to the same quarter in the previous year (Q4 2022), there has been a notable increase in the cash conversion cycle from 10.35 days to 14.85 days. This suggests that Genuine Parts Co. faced challenges in managing its working capital efficiently, potentially leading to cash being tied up in the operating cycle for a longer period.

On a positive note, in Q3 2022, the company had its most favorable cash conversion cycle of 5.55 days in recent quarters, indicating effective management of working capital and swift conversion of inventory and receivables into cash. However, the cycle has since increased, fluctuating between 10.96 days and 14.85 days in subsequent quarters.

Overall, Genuine Parts Co. should focus on optimizing its inventory management, accounts receivable collection, and payment practices to shorten its cash conversion cycle and improve its cash flow efficiency in the future.