O’Reilly Automotive Inc (ORLY)

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	134.61	138.74	129.03	145.03	153.17
Days of sales outstanding (DSO)	days	12.05	12.06	10.70	10.57	10.77
Number of days of payables	days	176.03	187.19	164.35	166.13	159.85
Cash conversion cycle	days	-29.37	-36.39	-24.62	-10.53	4.10

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 134.61 + 12.05 – 176.03
= -29.37

Over the past five years, O`Reilly Automotive, Inc.'s cash conversion cycle has displayed fluctuating trends. The cash conversion cycle measures the time it takes a company to convert its investments in inventory back into cash from sales.

In 2019, the company had a negative cash conversion cycle of -0.97 days, indicating that it was able to convert its inventory into cash very quickly. However, this metric deteriorated significantly by the end of 2022, with a cash conversion cycle of -67.14 days, suggesting that the company took longer to convert its inventory into cash during that period.

By the end of 2023, there was an improvement in the cash conversion cycle, which stood at -55.98 days. Although still negative, this figure indicates that O`Reilly Automotive, Inc. had a shorter cash conversion cycle compared to the previous year.

Overall, the company needs to focus on managing its inventory efficiently to ensure that it can rapidly convert inventory into cash, ultimately enhancing its liquidity and operational efficiency.