Applied Materials Inc (AMAT)

Cash conversion cycle

		Oct 27, 2024	Jul 28, 2024	Apr 28, 2024	Jan 28, 2024	Oct 29, 2023	Jul 30, 2023	Apr 30, 2023	Jan 29, 2023	Oct 30, 2022	Jul 31, 2022	May 1, 2022	Jan 30, 2022	Oct 31, 2021	Aug 1, 2021	May 2, 2021	Jan 31, 2021	Oct 25, 2020	Jul 26, 2020	Apr 26, 2020	Jan 26, 2020
Days of inventory on hand (DOH)	days	121.39	125.90	129.85	128.86	130.32	131.75	134.43	139.45	139.95	134.78	125.54	116.88	119.11	119.70	129.31	137.71	144.02	159.00	157.42	150.19
Days of sales outstanding (DSO)	days	72.22	68.53	69.30	69.52	77.48	78.33	81.98	82.00	93.13	81.08	—	73.06	88.47	—	—	64.41	66.31	66.52	65.01	67.96
Number of days of payables	days	35.16	33.24	33.24	32.32	33.65	32.50	33.22	37.11	41.40	41.27	39.05	38.79	40.69	39.31	41.70	37.75	41.47	44.98	44.88	45.12
Cash conversion cycle	days	158.46	161.19	165.91	166.05	174.16	177.58	183.19	184.34	191.67	174.58	86.49	151.16	166.90	80.39	87.61	164.37	168.86	180.55	177.55	173.03

October 27, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 121.39 + 72.22 – 35.16
= 158.46

The cash conversion cycle for Applied Materials Inc has shown varying trends over the past several quarters. The cycle measures the time it takes for a company to convert its investments in inventory into cash flows from sales.

From January 2020 to April 2020, the cash conversion cycle increased significantly from 168.86 days to 180.55 days, indicating that the company took longer to convert its inventory investments into sales and ultimately cash.

However, a notable improvement was observed from April 2020 to January 2021, with the cycle decreasing from 180.55 days to 164.37 days, demonstrating more efficient management of inventory, sales, and collection processes during that period.

This positive trend continued as the cash conversion cycle decreased further to 87.61 days by May 2021, suggesting Applied Materials Inc was managing its working capital more effectively, resulting in quicker conversion of inventory into cash.

The cycle then decreased significantly to 80.39 days by August 2021, indicating even more efficiency in managing working capital and improving cash flow generation.

By October 2021, the cycle slightly increased to 166.90 days, which could be attributed to seasonal factors or changes in operational activities impacting the company's working capital management.

From October 2021 to May 2022, a significant decrease in the cycle was observed, dropping to 86.49 days, reflecting a sharp improvement in inventory turnover and sales collection efficiency.

However, the cycle increased from May 2022 to October 2022 to 191.67 days, potentially signaling challenges in managing inventory levels and sales conversion during that period.

Throughout the subsequent quarters, the cash conversion cycle fluctuated, ranging from 174.58 days to 191.67 days, indicating some variability in working capital management efficiency.

The most recent data shows a cycle of 158.46 days as of October 27, 2024, suggesting a moderate improvement in the conversion of inventory into cash compared to previous quarters.

Overall, the analysis of the cash conversion cycle for Applied Materials Inc reveals fluctuations in efficiency levels in managing working capital and converting inventory into cash over the analyzed periods. Continued monitoring and potential strategic adjustments may be necessary to optimize the company's cash flow generation processes.