Pinnacle West Capital Corp (PNW)

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	60.82	60.85	62.74	63.53	65.23
Days of sales outstanding (DSO)	days	38.22	37.44	35.90	30.59	29.44
Number of days of payables	days	54.52	58.12	67.17	60.54	65.33
Cash conversion cycle	days	44.52	40.16	31.47	33.57	29.34

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 60.82 + 38.22 – 54.52
= 44.52

The cash conversion cycle of Pinnacle West Capital Corp. has shown variations over the past five years. In 2023, the cash conversion cycle increased to 61.65 days from 55.87 days in 2022, indicating that the company took longer to convert its investments in inventory into cash receipts from customers. This could be attributed to factors such as increased inventory levels or slower collection of receivables.

Comparing 2023 to 2021, there was a significant increase from 40.54 days to 61.65 days, suggesting a deterioration in the efficiency of the company's cash conversion cycle. This longer cycle may indicate potential issues with managing working capital effectively, leading to tied-up cash in the operating cycle.

In 2023, the cash conversion cycle was also higher compared to 2020 and 2019, signaling a trend of increased time taken to convert inputs into cash flows. Pinnacle West Capital Corp. may need to focus on streamlining its inventory management, improving accounts receivable collection, and optimizing payment processes to enhance its cash conversion efficiency in the future.