LKQ Corporation (LKQ)
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 | 137.40 | 132.67 | 122.70 | 125.26 | 132.22 |
| Days of sales outstanding (DSO) | days | 30.67 | 28.47 | 29.92 | 33.69 | 33.01 |
| Number of days of payables | days | 72.55 | 64.55 | 55.26 | 48.37 | 44.96 |
| Cash conversion cycle | days | 95.51 | 96.59 | 97.36 | 110.58 | 120.28 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 137.40 + 30.67 – 72.55
= 95.51
The cash conversion cycle of LKQ Corp has shown a decreasing trend over the past five years, indicating an improvement in the company's efficiency in managing its working capital. As of December 31, 2023, the cash conversion cycle stands at 95.51 days, a decrease from 96.59 days in 2022 and 97.34 days in 2021.
A lower cash conversion cycle suggests that the company is taking less time to convert its investments in inventory into cash from sales. This may be due to better inventory management, tighter credit terms with customers, or more efficient collection processes.
The downward trend in the cash conversion cycle is a positive sign as it indicates that LKQ Corp is becoming more effective in managing its cash flow and working capital. However, it is important for the company to continue monitoring and improving its working capital management to ensure ongoing efficiency and financial health.