CarMax Inc (KMX)

Cash conversion cycle

		Feb 29, 2024	Feb 28, 2023	Feb 28, 2022	Feb 28, 2021	Feb 29, 2020
Days of inventory on hand (DOH)	days	56.35	50.59	65.37	69.54	59.04
Days of sales outstanding (DSO)	days	229.24	199.55	178.30	263.76	3.43
Number of days of payables	days	14.31	11.22	11.96	17.61	15.29
Cash conversion cycle	days	271.29	238.92	231.71	315.69	47.18

February 29, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 56.35 + 229.24 – 14.31
= 271.29

The cash conversion cycle of CarMax Inc has experienced fluctuations over the past five years. In Feb 2024, it stood at 271.29 days, indicating that it takes the company approximately 271 days to convert its investments in inventory and other resources back into cash. This marks an increase from the previous year's cycle of 238.92 days, suggesting a potential inefficiency in managing its working capital.

Looking further back, in Feb 2023, the cash conversion cycle was 231.71 days, which was an improvement from the prior year but still higher than the current cycle. However, in Feb 2021, there was a significant spike in the cash conversion cycle to 315.69 days, indicating a prolonged period for the company to convert its inputs into cash.

The exceptional performance in Feb 2020, with a cash conversion cycle of only 47.18 days, suggests that CarMax Inc was able to efficiently manage its working capital that year.

Overall, CarMax Inc has experienced fluctuations in its cash conversion cycle over the years, signifying varying efficiencies in managing its inventory, receivables, and payables to generate cash. It is crucial for the company to analyze the reasons behind these fluctuations and strive for more consistency in its working capital management to enhance its overall financial performance.