Kinder Morgan Inc (KMI)

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	32.56	22.62	22.55	24.69	32.63
Days of sales outstanding (DSO)	days	37.80	35.78	36.32	41.80	38.91
Number of days of payables	days	84.71	51.51	50.52	59.38	80.39
Cash conversion cycle	days	-14.35	6.88	8.36	7.11	-8.85

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 32.56 + 37.80 – 84.71
= -14.35

The cash conversion cycle is a critical metric that measures the efficiency of a company's operating cycle, specifically how long it takes for a company to convert its resources into cash inflows.

Analyzing the cash conversion cycle of Kinder Morgan Inc over the past five years, we observe the following trends:

1. Dec 31, 2019: The company had a negative cash conversion cycle of -22.88 days, indicating that it was able to convert its resources into cash before paying its obligations, resulting in a favorable position.

2. Dec 31, 2020: The cash conversion cycle worsened significantly, becoming even more negative at -29.79 days. This suggests an extended time to convert resources into cash, potentially due to operational challenges or changes in the company's working capital management.

3. Dec 31, 2021: The company improved its cash conversion cycle to -3.78 days, moving towards a more efficient position. This turnaround may indicate enhanced operational efficiency or a more effective management of working capital.

4. Dec 31, 2022: The cash conversion cycle further improved to a positive value of 3.03 days, reflecting a slower conversion of resources into cash compared to the previous year. This change could indicate a shift in the company's working capital dynamics.

5. Dec 31, 2023: The cash conversion cycle continued to deteriorate significantly, reaching a negative value of -24.36 days. This suggests a longer time to convert resources into cash, potentially signaling challenges in working capital management or operational efficiency.

Overall, the fluctuation in Kinder Morgan Inc's cash conversion cycle over the past five years indicates varying levels of efficiency in converting resources into cash. It is crucial for the company to closely monitor and manage its operating cycle to optimize cash flow and enhance overall financial performance.