Jabil Circuit Inc (JBL)

Cash conversion cycle

		Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020	Aug 31, 2019
Days of inventory on hand (DOH)	days	57.20	69.63	57.08	42.77	47.22
Days of sales outstanding (DSO)	days	38.59	43.76	39.34	—	—
Number of days of payables	days	62.40	90.97	88.47	77.66	80.70
Cash conversion cycle	days	33.39	22.42	7.96	-34.89	-33.48

August 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 57.20 + 38.59 – 62.40
= 33.39

The cash conversion cycle (CCC) measures the efficiency of a company's working capital management by evaluating the time it takes to convert raw materials into cash from sales. Jabil Inc's CCC trend from 2019 to 2023 reflects changes in its operating efficiency and liquidity.

In 2019, Jabil Inc had a CCC of 6.15 days, indicating a relatively short time in converting inventory and accounts receivable into cash. This suggests efficient working capital management.

However, in 2020, the CCC decreased further to 1.31 days, signifying a substantial improvement in its operating cycle. This suggests that the company was able to convert its inventory into sales and collect payment from customers more quickly, leading to an even more efficient use of its working capital.

In 2021, the CCC increased to 6.25 days, which could indicate a change in the company's inventory management or accounts receivable collection process. This increase could potentially signal a slowdown in converting sales into cash, although it still remained relatively low compared to historical averages.

By 2022, the CCC increased to 21.33 days, marking a significant deviation from the previous trend. This suggests a lengthening of the time it takes to convert raw materials into cash, potentially indicating inefficiencies in the working capital management.

Finally, in 2023, Jabil Inc's CCC surged to 32.94 days, representing a significant increase in the time it takes to convert sales into cash. This could be attributed to challenges in inventory turnover or a slowdown in collecting accounts receivable.

Overall, the increasing trend in Jabil Inc's CCC from 2019 to 2023 indicates potential inefficiencies in the management of working capital and the conversion of raw materials and accounts receivable into cash. This trend should be carefully monitored, and the company may need to focus on optimizing its inventory and receivables management to improve its cash conversion cycle.