Sonic Automotive Inc (SAH)

Cash conversion cycle

Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Days of inventory on hand (DOH) days 51.92 41.30 32.45 38.81 46.77
Days of sales outstanding (DSO) days 12.72 13.54 12.14 11.86 13.95
Number of days of payables days 4.56 3.92 3.69 4.10 3.94
Cash conversion cycle days 60.08 50.92 40.89 46.57 56.78

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 51.92 + 12.72 – 4.56
= 60.08

The cash conversion cycle of Sonic Automotive Inc has shown fluctuations over the past five years. As of December 31, 2020, the company's cash conversion cycle was 56.78 days, indicating the time it takes for the company to convert its investment in inventory into cash flows from sales. By the end of December 31, 2021, the cycle had improved to 46.57 days, suggesting more efficient management of inventory and receivables.

In the subsequent years, the cash conversion cycle continued to decrease, reaching 40.89 days by December 31, 2022. This reduction implies that Sonic Automotive Inc was able to optimize its operational processes further, leading to quicker conversion of inventory and receivables into cash.

However, by the end of December 31, 2023, the cash conversion cycle increased to 50.92 days, possibly indicating challenges in managing working capital efficiently or changes in the company's operating environment impacting its cash flows. The cycle further increased to 60.08 days by December 31, 2024, potentially signaling a need for Sonic Automotive Inc to address any operational inefficiencies or strengthen its working capital management practices.

Overall, the trend in Sonic Automotive Inc's cash conversion cycle reflects fluctuations in the company's ability to manage its working capital effectively, impacting its liquidity and cash flow position over the years. It may be essential for the company to monitor and address any factors influencing these fluctuations to maintain a healthy cash conversion cycle in the future.