Sonic Automotive Inc (SAH)

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 51.90 51.94 52.35 44.84 41.30 36.85 37.79 38.77 32.45 33.66 35.85 35.09 38.81 26.93 33.64 45.42 46.77 44.21 46.38 62.23
Days of sales outstanding (DSO) days 12.71 11.58 11.56 10.87 13.54 11.04 10.39 9.82 12.13 9.74 9.60 9.87 11.86 8.48 11.38 13.36 13.94 10.81 11.95 7.07
Number of days of payables days 4.56 4.02 5.89 3.79 3.92 3.68 3.42 3.94 3.69 3.91 3.89 3.64 4.10 3.33 4.85 5.02 3.94 3.60 4.17 3.03
Cash conversion cycle days 60.06 59.50 58.02 51.91 50.92 44.22 44.76 44.65 40.89 39.49 41.56 41.31 46.57 32.08 40.17 53.75 56.78 51.42 54.16 66.27

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 51.90 + 12.71 – 4.56
= 60.06

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash inflows. For Sonic Automotive Inc, the cash conversion cycle has shown fluctuations over the years.

In the period from March 31, 2020, to June 30, 2020, the company was able to slightly improve its cash conversion cycle from 66.27 days to 54.16 days. This decrease indicated a more efficient management of inventory and cash flow during that time.

From September 30, 2020, to March 31, 2021, Sonic Automotive Inc continued to enhance its efficiency, with the cash conversion cycle decreasing to 32.08 days. This period reflected a significant improvement in managing working capital, indicating faster turnover of inventory and quicker collection of receivables.

However, from March 31, 2021, to December 31, 2021, the cash conversion cycle increased to 46.57 days, which suggested a slight slowdown in the company's efficiency in converting resources into cash.

In the subsequent periods up to December 31, 2024, Sonic Automotive Inc continued experiencing fluctuations, with the cash conversion cycle ranging between 39.49 days to 60.06 days. These variations may indicate changes in inventory management, sales patterns, or payment terms with suppliers and customers.

Overall, it is essential for Sonic Automotive Inc to focus on maintaining a shorter cash conversion cycle to improve liquidity, reduce working capital requirements, and enhance overall financial performance. Regular monitoring and adjustment of operational processes related to inventory management, accounts receivable, and accounts payable could help in achieving a more consistent and efficient cash conversion cycle.