Pinnacle West Capital Corp (PNW)

Cash conversion cycle

Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 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
Days of inventory on hand (DOH) days 58.64 63.91 67.40 61.29 61.50 60.59 61.93 59.84 60.85 65.29 63.53 62.84 63.59 67.35 67.52 63.90 63.53 52.40 55.69 60.64
Days of sales outstanding (DSO) days 35.66 59.66 40.95 31.55 38.22 49.89 36.85 35.69 37.44 51.39 36.68 28.80 35.90 39.45 33.05 24.46 30.59 41.90 30.13 29.17
Number of days of payables days 56.77 51.98 67.37 59.72 55.13 49.69 54.90 46.50 58.12 70.58 69.04 56.90 68.08 62.50 69.62 58.26 60.54 44.55 52.47 53.67
Cash conversion cycle days 37.54 71.59 40.97 33.12 44.59 60.79 43.89 49.03 40.16 46.11 31.17 34.73 31.41 44.30 30.95 30.11 33.57 49.75 33.35 36.14

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 58.64 + 35.66 – 56.77
= 37.54

The cash conversion cycle of Pinnacle West Capital Corp, a measure of how long it takes for the company to convert its investments in inventory and other resources into cash flows from sales, has fluctuated over the given periods. The trend shows some variability in the company's ability to manage its working capital efficiently.

- The company's cash conversion cycle ranged from a low of 30.11 days on March 31, 2021, to a high of 71.59 days on September 30, 2024. This indicates that the company has experienced both efficient and less efficient working capital management during the period.

- Generally, a shorter cash conversion cycle is favorable as it signifies that the company is able to quickly convert its investments into cash, indicating effective management of inventory and accounts receivable.

- Pinnacle West's cash conversion cycle showed improvement in the most recent quarters, with December 31, 2023, and March 31, 2024, showing lower days compared to the peak on September 30, 2024. This improvement could be attributed to better inventory management, faster collections from customers, or more optimized payment practices.

- However, the increase in the cash conversion cycle from September 30, 2021, to September 30, 2022, and reaching its peak on September 30, 2024, may suggest potential challenges in managing working capital efficiency during those periods.

- It would be beneficial for Pinnacle West Capital Corp to continue monitoring and improving its cash conversion cycle to ensure efficient utilization of resources and maintain strong liquidity position for sustainable growth and profitability.