Southwest Airlines Company (LUV)

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	14.01	14.46	13.13	13.83	15.55	16.16	16.58	14.87	13.96	14.88	14.85	15.40	13.34	12.08	11.05	12.41	12.43	11.79	11.35	10.81
Days of sales outstanding (DSO)	days	4.76	6.29	6.47	7.54	5.09	8.88	9.80	17.54	18.61	27.33	30.96	38.48	31.26	9.64	5.54	2.14	2.31	—	—	—
Number of days of payables	days	32.33	31.41	34.60	32.49	39.44	32.34	42.13	39.34	33.34	35.79	44.10	37.61	30.00	27.79	25.41	24.98	37.00	28.45	29.61	31.55
Cash conversion cycle	days	-13.56	-10.67	-15.00	-11.11	-18.81	-7.30	-15.75	-6.93	-0.77	6.42	1.71	16.27	14.60	-6.07	-8.82	-10.44	-22.25	-16.66	-18.26	-20.73

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 14.01 + 4.76 – 32.33
= -13.56

The cash conversion cycle of Southwest Airlines Co has shown fluctuations over the past eight quarters. In Q1 2022, the company had a relatively long cash conversion cycle of 33.51 days, indicating that it took longer for Southwest Airlines to convert its investment in inventory to cash from sales. However, in subsequent quarters, the company managed to reduce its cash conversion cycle significantly, reaching a low of 15.94 days in Q4 2022.

In the most recent quarter, Q4 2023, the cash conversion cycle increased slightly to 16.14 days, indicating a slight delay in converting inventory to cash. Overall, Southwest Airlines Co has shown a relatively efficient cash conversion cycle, with fluctuations that may be influenced by factors such as inventory management, sales terms, and payment collection processes. Monitoring and managing these factors can help the company maintain a healthy cash conversion cycle and optimize its working capital efficiency.