LKQ Corporation (LKQ)

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	137.40	137.35	128.47	132.00	132.67	124.74	123.45	119.17	122.70	115.88	116.04	122.56	125.26	116.02	116.59	131.44	132.22	122.70	126.29	130.54
Days of sales outstanding (DSO)	days	30.67	35.53	35.56	35.86	28.47	29.56	32.17	34.09	29.92	33.64	35.49	38.74	33.69	36.69	34.87	34.38	33.01	35.72	37.62	40.31
Number of days of payables	days	72.55	78.94	70.68	66.22	64.55	64.19	67.88	63.45	55.26	60.38	57.74	62.93	48.37	43.79	38.56	43.21	44.96	47.42	49.18	46.20
Cash conversion cycle	days	95.51	93.94	93.35	101.64	96.59	90.11	87.75	89.81	97.36	89.14	93.79	98.37	110.58	108.92	112.90	122.61	120.28	111.00	114.74	124.65

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 been relatively stable over the past eight quarters, ranging from 87.75 days to 101.64 days. This metric represents the average number of days it takes for the company to convert its investments in inventory into cash receipts from customers, taking into account the time it takes to sell inventory, collect receivables, and pay suppliers.

A decreasing cash conversion cycle is generally seen as positive, indicating that the company is able to convert its investments into cash more quickly. Conversely, an increasing cycle may suggest inefficiencies in inventory management, sales, or collection processes.

In the case of LKQ Corp, the cycle has fluctuated within a relatively narrow range, with no clear trend in either direction. This suggests that the company's operations have been relatively stable in terms of inventory turnover, accounts receivable collection, and accounts payable management. Further analysis of the underlying factors contributing to the cycle's fluctuations could provide insights into areas for potential improvement in working capital management.