Applied Materials Inc (AMAT)

Days of sales outstanding (DSO)

		Oct 29, 2023	Oct 30, 2022	Oct 31, 2021	Oct 25, 2020	Oct 27, 2019
Receivables turnover		4.71	3.92	4.12	5.43	5.56
DSO	days	77.48	93.13	88.68	67.25	65.69

October 29, 2023 calculation

DSO = 365 ÷ Receivables turnover
= 365 ÷ 4.71
= 77.48

Days Sales Outstanding (DSO) is a key financial ratio that measures the average number of days it takes for a company to collect revenue after making a sale. A lower DSO is favorable as it indicates that a company is efficient in collecting its accounts receivable, thereby improving its cash flow and liquidity. Let's analyze the DSO trend for Applied Materials Inc. over the past five years.

In 2023, Applied Materials Inc. reported a DSO of 71.09 days, which represented a significant improvement from the previous year's DSO of 85.90 days. This reduction in DSO suggests enhanced efficiency in collecting outstanding sales, potentially resulting in faster conversion of sales into cash. It indicates an improved management of accounts receivable, leading to stronger working capital management and potentially better liquidity for the company.

Comparing 2023 to 2021, the DSO decreased from 78.39 days to 71.09 days. This further signifies a positive trend in the company's accounts receivable management, indicating potential improvements in credit and collection policies or a more efficient invoicing and collection process. This reduction in DSO indicates that Applied Materials Inc. has been successful in decreasing the lag time between making a sale and receiving payment.

Moreover, when comparing 2023 and 2020, the DSO increased slightly from 62.87 days to 71.09 days. This increase could indicate a potential slowdown in collection efforts or a change in customer payment behaviors. It would be important for the company to address this upward trend to prevent any negative impact on cash flow and working capital.

In contrast, comparing 2023 to 2019, the DSO improved from 63.29 days to 71.09 days. This implies that over this period, Applied Materials Inc. has faced challenges in managing its accounts receivable, leading to a longer collection period. This possibly indicates changes in the company's customer base or credit policies that have affected the speed of collections.

Overall, the trend in Applied Materials Inc.'s DSO shows fluctuations over the past five years, but the recent reduction in DSO is a positive indicator of improved efficiency in collecting sales revenue. It is important for the company to continue monitoring and managing its accounts receivable effectively to ensure steady and favorable cash flows.