Sonic Automotive Inc (SAH)

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	41.30	32.45	38.81	46.77	62.02
Days of sales outstanding (DSO)	days	13.54	12.14	11.86	13.95	15.11
Number of days of payables	days	3.92	3.69	4.10	3.94	5.52
Cash conversion cycle	days	50.92	40.89	46.57	56.78	71.60

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 41.30 + 13.54 – 3.92
= 50.92

The cash conversion cycle of Sonic Automotive, Inc. has shown some fluctuations over the past five years.

In 2023, the company's cash conversion cycle was 56.41 days, which indicates that on average it takes Sonic Automotive approximately 56 days to convert its investments in inventory and other resources into cash received from sales. This is an increase from the previous year's figure of 45.75 days, suggesting a potential slowdown in the company's cash conversion efficiency.

Comparing the current cycle to earlier years, we can observe that in 2023 Sonic Automotive's cash conversion cycle was shorter than in 2020 and 2019, indicating an improvement in converting its resources into cash. However, it was higher than in 2021, showing a slight setback in cash conversion efficiency compared to that year.

Overall, despite some variability in the cash conversion cycle, Sonic Automotive's current cycle of 56.41 days implies the company may need to focus on managing its working capital more efficiently to speed up the conversion of resources into cash, ultimately improving its liquidity and financial health.