F5 Networks Inc (FFIV)

Cash conversion cycle

		Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Days of inventory on hand (DOH)	days	7.14	13.93	4.51	6.52	9.46
Days of sales outstanding (DSO)	days	58.71	63.13	47.51	45.79	52.42
Number of days of payables	days	12.61	23.06	12.69	15.07	17.22
Cash conversion cycle	days	53.24	54.00	39.32	37.24	44.66

September 30, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 7.14 + 58.71 – 12.61
= 53.24

The cash conversion cycle (CCC) is a crucial financial metric for assessing a company's efficiency in managing its working capital. It represents the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A lower CCC generally indicates better efficiency in managing working capital and cash flow.

Analyzing the trend of F5 Inc's cash conversion cycle over the past five years reveals the following:

1. Sep 30, 2019: 23.52 days
2. Sep 30, 2020: 13.26 days
3. Sep 30, 2021: 18.11 days
4. Sep 30, 2022: 33.32 days
5. Sep 30, 2023: 42.13 days

The trend shows a fluctuating pattern with the CCC initially decreasing from 2019 to 2020, indicating improved efficiency in managing working capital. However, there was a significant increase in the CCC from 2020 to 2021, followed by a further increase in 2022 and 2023.

The substantial increase in the cash conversion cycle since 2020 might suggest potential issues in managing working capital and cash flow. A rising CCC can indicate inefficiencies in inventory management, collection of receivables, or management of payables. It could also reflect challenges in converting investments into sales and subsequently into cash.

In conclusion, the increasing trend in F5 Inc's cash conversion cycle in recent years raises concerns about the company's working capital management and overall operational efficiency. Further analysis of the components contributing to the CCC, such as days inventory outstanding, days sales outstanding, and days payable outstanding, would provide deeper insights into the specific areas requiring attention to improve the company's cash conversion cycle.