Phillips 66 (PSX)

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	10.46	7.77	11.58	21.89	13.86
Days of sales outstanding (DSO)	days	29.22	22.46	25.06	44.75	28.17
Number of days of payables	days	—	25.48	26.03	29.07	29.52
Cash conversion cycle	days	39.68	4.75	10.61	37.56	12.50

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 10.46 + 29.22 – —
= 39.68

The cash conversion cycle for Phillips 66 has fluctuated over the past five years. In 2023, the company's cash conversion cycle was 8.67 days, increasing from 4.00 days in 2022. This indicates that it took Phillips 66 8.67 days to convert its investments in inventory and receivables into cash during 2023.

Comparing the data to previous years, we see a significant improvement from 2020 to 2021, where the cash conversion cycle decreased from 26.65 days to 6.34 days. This improvement suggests that the company became more efficient in managing its working capital during 2021.

However, from 2021 to 2022, there was a slight increase in the cash conversion cycle, which reversed the positive trend. The company managed to decrease the cycle in 2022 but saw a reversal in 2023 with the cycle increasing again.

Overall, it is important for Phillips 66 to monitor and manage its cash conversion cycle effectively to ensure optimal utilization of its working capital and maintain efficient cash flow management.