Tesla Inc (TSLA)

Cash conversion cycle

		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	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	62.87	65.10	70.98	79.34	77.32	68.61	60.44	53.87	52.25	52.68	52.94	53.24	60.10	69.28	71.11	77.06	63.22	64.39	60.26	75.94
Days of sales outstanding (DSO)	days	13.23	9.61	13.38	12.72	13.26	10.72	11.35	13.62	13.05	15.37	18.66	19.30	21.93	22.88	21.23	18.00	19.66	16.86	16.79	16.91
Number of days of payables	days	66.58	66.13	75.51	87.78	91.87	92.33	83.58	89.93	90.98	83.69	84.53	85.65	88.68	81.44	64.38	68.08	67.11	62.36	55.83	64.30
Cash conversion cycle	days	9.52	8.59	8.85	4.28	-1.29	-13.00	-11.79	-22.44	-25.69	-15.64	-12.94	-13.12	-6.64	10.72	27.95	26.98	15.76	18.89	21.22	28.55

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 is an important metric for assessing the efficiency of Tesla Inc's working capital management. It measures the time it takes for the company to convert its resources and investments into cash flows from sales. A shorter cash conversion cycle indicates that the company is able to quickly convert its investments into cash, which is generally a positive sign.

Looking at the trend in Tesla's cash conversion cycle, we observe a fluctuating pattern. In the recent quarters, the cash conversion cycle has been positive, with values ranging from 4.50 days to 9.77 days. This means that Tesla has been able to efficiently manage its working capital and convert its resources into cash relatively quickly.

However, in the preceding quarters, the cash conversion cycle was negative, indicating that Tesla was able to collect cash from its sales before paying its suppliers, resulting in a negative cycle period. While negative cycles can be advantageous, as they suggest that the company is effectively using supplier financing and credit terms, it's essential to consider the reasons behind such fluctuations and the overall effects on the company's financial health.

In conclusion, the recent positive cash conversion cycle suggests that Tesla has been effectively managing its working capital and liquidity, but the fluctuating trend indicates the need for further analysis to understand the underlying drivers and potential impact on the company's financial performance.