Xcel Energy Inc (XEL)

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	282.70	266.21	243.20	200.69	247.89
Days of sales outstanding (DSO)	days	33.79	32.73	27.67	29.01	26.50
Number of days of payables	days	663.20	598.06	543.07	464.03	589.65
Cash conversion cycle	days	-346.72	-299.12	-272.20	-234.33	-315.26

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 282.70 + 33.79 – 663.20
= -346.72

The cash conversion cycle measures how efficiently a company manages its working capital by analyzing the time taken to convert its investments in inventory and accounts receivable into cash flow from sales. A negative cash conversion cycle implies that a company is able to generate cash from its operations before having to pay its suppliers.

Looking at the historical trend of Xcel Energy Inc.'s cash conversion cycle over the past five years, we observe fluctuations in the efficiency of its working capital management:

- In 2023, the company experienced a significantly improved cash conversion cycle, which decreased to -4.70 days. This suggests an efficient utilization of working capital, where Xcel Energy was able to convert its investments into cash flow more rapidly than in the previous year.

- Conversely, in 2022, the cash conversion cycle increased to 6.57 days, indicating a slower conversion of investments into cash compared to 2021. This may have been influenced by factors such as changes in inventory management or accounts receivable collection processes.

- In 2021, there was a positive trend as the cash conversion cycle improved to 2.57 days, reflecting a more efficient management of working capital compared to 2020.

- In 2020, the cash conversion cycle was negative at -8.84 days, indicating that Xcel Energy was quickly converting its investments into cash, highlighting strong working capital efficiency during that period.

- The company achieved its most efficient cash conversion cycle in 2019 with a negative cycle of -12.20 days, indicating a rapid conversion of investments into cash flow from sales.

Overall, Xcel Energy's cash conversion cycle has shown variability over the past five years, with periods of improved efficiency and some fluctuations. Monitoring the cash conversion cycle trend can provide insights into the company's working capital management and operational efficiency.