Essential Utilities Inc (WTRG)

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	111.99	3,350.64	2,043.51	1,380.15	20.14
Days of sales outstanding (DSO)	days	43.67	60.11	50.71	68.20	44.15
Number of days of payables	days	219.86	4,006.70	3,598.56	4,194.46	82.09
Cash conversion cycle	days	-64.20	-595.94	-1,504.34	-2,746.11	-17.80

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 111.99 + 43.67 – 219.86
= -64.20

The cash conversion cycle of Essential Utilities Inc has shown significant fluctuations over the past five years.

In 2023, the company's cash conversion cycle was negative at -68.76 days, indicating that Essential Utilities was able to convert its inventories into cash more quickly than paying its payables. This may suggest efficient inventory management and effective accounts payable practices.

In 2022, the cash conversion cycle increased to 36.40 days, which implies that Essential Utilities took longer to convert its resources into cash during that period compared to 2023. The increase in the cash conversion cycle could be due to changes in inventory levels or payment terms.

In 2021, the cash conversion cycle was negative at -38.73 days, showing a similar trend as 2023 but less efficient compared to the following year. The negative cash conversion cycle suggests that Essential Utilities managed its cash inflows and outflows effectively during that period.

In 2020, the cash conversion cycle increased significantly to 68.20 days, indicating that Essential Utilities took longer to convert its resources into cash compared to the previous years. This could be a result of changes in the company's operating cycle or liquidity management.

In 2019, the cash conversion cycle was 44.15 days, showing an improvement from 2020 but still higher compared to 2023 and 2021. It indicates that Essential Utilities took a moderate amount of time to convert its resources into cash during that year.

Overall, Essential Utilities Inc's cash conversion cycle has been volatile over the past five years, with fluctuations indicating changes in the company's efficiency in managing working capital and liquidity. It is essential for the company to closely monitor and manage its cash conversion cycle to optimize its working capital and financial performance.