Applied Materials Inc (AMAT)

Cash conversion cycle

		Oct 27, 2024	Oct 29, 2023	Oct 30, 2022	Oct 31, 2021	Oct 25, 2020
Days of inventory on hand (DOH)	days	120.15	128.39	138.17	112.91	129.79
Days of sales outstanding (DSO)	days	71.91	77.48	93.13	88.68	67.25
Number of days of payables	days	34.80	33.15	40.88	38.57	37.37
Cash conversion cycle	days	157.26	172.72	190.42	163.02	159.67

October 27, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 120.15 + 71.91 – 34.80
= 157.26

The cash conversion cycle of Applied Materials Inc has shown some fluctuations over the past five years. In particular, the company's cash conversion cycle has decreased from 190.42 days in 2022 to 157.26 days in 2024, indicating an improvement in the efficiency of managing its working capital. The downward trend suggests that the company has been successful in reducing the time it takes to convert its investments in inventory into cash from sales.

However, there was a slight increase in the cash conversion cycle from 163.02 days in 2021 to 172.72 days in 2023, which could be a result of factors such as changes in inventory management practices or payment terms with suppliers and customers. Overall, a shorter cash conversion cycle is generally favorable as it indicates that the company is able to generate cash quickly from its operations.

It is important for Applied Materials Inc to continue monitoring and managing its cash conversion cycle effectively to ensure optimal liquidity and working capital management. This will help the company maintain a healthy financial position and support its growth and profitability objectives.