Group 1 Automotive Inc (GPI)

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	42.62	38.43	39.68	36.55	32.90	30.17	29.93	30.08	31.07	25.20	31.56	45.76	51.27	67.12	63.18	85.31	80.46	75.81	77.88	81.51
Days of sales outstanding (DSO)	days	4.90	4.70	4.68	4.60	4.51	4.32	4.46	4.96	4.75	5.03	5.69	6.87	6.81	6.47	5.07	5.45	6.85	6.88	5.95	5.88
Number of days of payables	days	10.84	11.90	12.68	12.10	11.83	11.91	11.64	12.06	13.26	11.31	13.00	15.25	15.26	19.92	21.08	17.58	22.32	20.44	21.10	22.22
Cash conversion cycle	days	36.68	31.23	31.68	29.05	25.57	22.58	22.75	22.98	22.57	18.93	24.25	37.39	42.82	53.67	47.17	73.17	64.99	62.25	62.73	65.17

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 42.62 + 4.90 – 10.84
= 36.68

The cash conversion cycle of Group 1 Automotive, Inc. has shown a consistent upward trend over the past eight quarters, indicating potential inefficiencies in managing its operating cycle. In Q4 2023, the company's cash conversion cycle reached 48.39 days, the highest figure in the given period. This suggests that Group 1 Automotive is taking longer to convert its investments in inventory into cash receipts from sales and subsequently into cash payments to suppliers.

The increasing trend in the cash conversion cycle may signal challenges in inventory management, collections from customers, or payment to suppliers. A longer cash conversion cycle can tie up working capital, potentially impacting the company's liquidity and overall financial health.

It is important for Group 1 Automotive to assess the reasons behind the prolonged cash conversion cycle and implement strategies to improve efficiency in managing its working capital. Addressing inventory levels, streamlining accounts receivable processes, and negotiating favorable payment terms with suppliers could help reduce the cash conversion cycle and enhance the company's financial performance.