Broadcom Inc (AVGO)

Cash conversion cycle

		Feb 4, 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	Nov 1, 2020	Aug 2, 2020	May 3, 2020	Feb 2, 2020	Nov 3, 2019	Aug 4, 2019	May 5, 2019
Days of inventory on hand (DOH)	days	54.73	62.25	59.79	60.83	61.00	63.25	61.70	57.05	52.54	44.64	40.11	34.96	33.15	35.30	38.40	33.93	34.02	31.54	39.83	37.88
Days of sales outstanding (DSO)	days	46.67	32.14	30.00	31.57	34.30	32.52	31.20	—	32.52	27.54	—	—	37.32	35.10	—	—	—	—	—	—
Number of days of payables	days	42.65	39.68	32.20	26.80	29.65	32.79	23.90	36.56	37.26	37.37	33.47	28.90	31.27	29.42	38.79	43.79	35.50	30.86	36.36	27.81
Cash conversion cycle	days	58.75	54.70	57.59	65.60	65.66	62.98	69.00	20.49	47.79	34.80	6.64	6.06	39.20	40.97	-0.39	-9.86	-1.48	0.69	3.47	10.08

February 4, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 54.73 + 46.67 – 42.65
= 58.75

Broadcom Inc's cash conversion cycle, a measure of how quickly the company can convert its inventory into cash, provides insights into its operational efficiency.

The trend in the cash conversion cycle shows fluctuations over the periods analyzed. In the most recent period, ending on Feb 4, 2024, the cash conversion cycle stands at 58.75 days, indicating that, on average, it takes Broadcom Inc approximately 58.75 days to convert its investments in inventory and accounts receivable into cash received from sales.

Analyzing the historical data reveals variations in the efficiency of Broadcom's cash conversion cycle. For instance, the company experienced a relatively short cash conversion cycle of -9.86 days on Aug 2, 2020, indicative that Broadcom has managed to convert its investments into cash faster than the time required to pay off its creditors. Conversely, on Jul 31, 2022, the cash conversion cycle extended to 69.00 days, signifying a longer period between Broadcom's cash outflows for inventory and cash inflows from sales.

Overall, Broadcom Inc should aim to keep its cash conversion cycle as short as possible to optimize its working capital management. Keeping a close eye on inventory management, accounts receivable collection, and accounts payable turnover could facilitate reducing the cash conversion cycle and enhancing the company's financial performance. Tracking this metric over time will help Broadcom identify trends and take proactive measures to improve its operational efficiency.