Tesla Inc (TSLA)

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	62.87	77.32	52.25	60.10	63.22
Days of sales outstanding (DSO)	days	13.23	13.26	13.05	21.93	19.66
Number of days of payables	days	66.58	91.87	90.98	88.68	67.11
Cash conversion cycle	days	9.52	-1.29	-25.69	-6.64	15.76

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 62.87 + 13.23 – 66.58
= 9.52

The cash conversion cycle (CCC) for Tesla Inc has varied significantly over the past five years. In 2023, the company's CCC was 9.77 days, indicating that it took Tesla approximately 9.77 days to convert its investments in inventory and other resources into cash receipts from sales. This represents a marked improvement from 2022 when the company had a negative CCC of -1.03 days, suggesting that Tesla was able to generate cash from its sales before having to pay its suppliers for the inventory.

In 2021, the CCC was -25.40 days, reflecting a significantly negative cycle, which implies that Tesla was efficiently managing its working capital and able to collect cash from sales well before paying its suppliers. However, in 2020, the CCC was -6.75 days, indicating an increase in the time it took the company to convert its investments into cash compared to the previous year. In 2019, the CCC was positive at 15.76 days, implying that Tesla took almost 16 days to convert its investments in inventory and other resources into cash receipts from sales.

Overall, the fluctuations in Tesla's CCC over the years suggest varying efficiencies in managing working capital and cash flow. The positive CCC in 2019 and the increasing CCC in 2020 may indicate a need for tighter management of inventory and receivables, while the negative CCC in 2021 and 2022 demonstrates the company's ability to efficiently generate cash from its operations. The positive CCC in 2023 may indicate a return to a more typical cash conversion cycle for the company.