Essential Utilities Inc (WTRG)

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	111.99	1,257.36	1,175.64	1,286.70	3,350.64	2,195.01	1,566.06	863.31	2,043.51	814.68	498.33	301.59	1,380.15	89.59	75.73	59.48	33.33	29.84	25.09	21.60
Days of sales outstanding (DSO)	days	43.67	33.44	35.77	52.22	60.11	34.88	39.75	52.56	50.71	34.50	39.08	51.60	68.20	57.02	70.30	101.89	44.15	49.11	47.45	41.65
Number of days of payables	days	219.86	1,893.51	1,938.18	2,089.19	4,006.70	2,079.24	2,363.58	2,360.80	3,598.56	1,172.78	1,036.37	1,053.09	4,194.46	212.76	187.67	202.75	135.85	100.88	88.48	73.43
Cash conversion cycle	days	-64.20	-602.71	-726.78	-750.27	-595.94	150.65	-757.77	-1,444.93	-1,504.34	-323.60	-498.96	-699.90	-2,746.11	-66.15	-41.64	-41.38	-58.37	-21.93	-15.94	-10.18

December 31, 2023 calculation

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

Essential Utilities Inc's cash conversion cycle has shown significant improvement over the quarters, reflecting the company's effectiveness in managing its working capital. The cash conversion cycle measures the amount of time it takes for the company to convert its investments in inventory and other resources into cash flows from sales.

In Q4 2023, the company's cash conversion cycle was negative at -68.76 days, indicating that Essential Utilities Inc was able to convert its resources into cash much faster than in previous quarters. This improvement suggests efficient inventory management, quicker collection of receivables, or extended payment terms from suppliers.

Prior to Q4 2023, the company experienced negative cash conversion cycles in Q3 2023 and Q2 2023, which also reflect efficient working capital management. However, in Q1 2023, the cash conversion cycle turned positive at 17.60 days, indicating a slowdown in the conversion of resources into cash.

Comparing the latest quarter to the same quarter in the previous year, Essential Utilities Inc has made significant progress, as evidenced by the reduction in the cash conversion cycle from 36.40 days in Q4 2022 to -68.76 days in Q4 2023.

Overall, the trend of consistently improving cash conversion cycles suggests that Essential Utilities Inc is effectively managing its working capital and maximizing its cash flows, which can contribute to the company's financial stability and growth potential.