Ichor Holdings Ltd (ICHR)

Cash conversion cycle

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	109.23	86.87	85.23	56.52	76.82
Days of sales outstanding (DSO)	days	30.76	39.21	47.89	40.70	50.75
Number of days of payables	days	26.87	33.74	57.65	48.93	79.56
Cash conversion cycle	days	113.12	92.34	75.47	48.29	48.01

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 109.23 + 30.76 – 26.87
= 113.12

Ichor Holdings Ltd's cash conversion cycle has demonstrated a notable upward trend over the past five years, increasing from 48.01 days at the end of 2019 to 113.12 days at the end of 2023. The cash conversion cycle represents the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

The rising trend of the cash conversion cycle indicates a potential inefficiency in Ichor Holdings Ltd's management of working capital. The company may be taking longer to convert its inventory into sales and ultimately into cash, which could impact its liquidity and cash flow position.

It is essential for Ichor Holdings Ltd to closely monitor and manage its cash conversion cycle to ensure optimal efficiency in its operations. Strategies such as improving inventory management, streamlining the accounts receivable process, and negotiating favorable payment terms with suppliers could help shorten the cash conversion cycle and enhance the company's overall financial performance.