United Rentals Inc (URI)

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	8.78	12.74	10.21	8.53	7.71
Days of sales outstanding (DSO)	days	56.79	62.83	63.00	56.27	59.72
Number of days of payables	days	38.78	62.55	50.80	31.81	29.17
Cash conversion cycle	days	26.80	13.02	22.41	32.99	38.26

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 8.78 + 56.79 – 38.78
= 26.80

The cash conversion cycle (CCC) measures how long it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A shorter CCC indicates a more efficient management of working capital.

Looking at the data for United Rentals, Inc., we can see that the CCC has fluctuated over the past five years. In 2023, the CCC stood at 15.38 days, indicating an increase in the number of days it takes for the company to convert its investments into cash compared to 2022, where the CCC was -6.24 days. The negative CCC in 2022 suggests that the company was effectively receiving cash from its sales before having to pay its suppliers.

The considerable decrease in CCC from 2022 to 2021, where it stood at 7.03 days, suggests an improvement in the efficiency of United Rentals, Inc.'s working capital management. However, the CCC increased again in 2020 to 23.04 days before further increasing to 29.62 days in 2019.

The increase in the CCC in 2023 and its positive value may indicate that United Rentals, Inc. is taking longer to convert its investments into cash, potentially signaling inefficiencies in inventory management or slower collection of receivables. It would be pertinent for the company to closely examine its working capital processes to identify areas for improvement in order to optimize cash flow and overall operational efficiency.