NRG Energy Inc. (NRG)

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	7.50	9.31	7.95	18.25	19.14
Days of sales outstanding (DSO)	days	44.85	55.29	43.89	36.29	38.09
Number of days of payables	days	28.71	45.18	36.29	36.22	36.09
Cash conversion cycle	days	23.64	19.42	15.54	18.32	21.15

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 7.50 + 44.85 – 28.71
= 23.64

The cash conversion cycle is a key financial metric that helps assess how efficiently a company manages its working capital. It represents the number of days it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

Based on the data provided for NRG Energy Inc., we observe fluctuations in the cash conversion cycle over the past five years. In 2023, the cash conversion cycle increased to 21.44 days from the previous year, indicating a potential delay in converting investments into cash. This is a reversal from the trend observed in the prior year, where the cycle had improved to 16.79 days from 21.15 days in 2019.

Looking further back, in 2021, NRG Energy Inc. managed to significantly reduce its cash conversion cycle to 13.28 days, reflecting a more efficient working capital management compared to the year 2020, where the cycle was 18.32 days. However, in 2019, the cycle had increased to 21.15 days, suggesting a potential slowdown in cash conversion efficiency.

Overall, NRG Energy Inc. should continue monitoring and managing its cash conversion cycle to ensure optimal working capital efficiency. Fluctuations in the cycle may indicate changes in inventory management, accounts receivable collection, or accounts payable practices that could impact the company's cash flow and overall financial performance.