CarMax Inc (KMX)

Cash conversion cycle

		Feb 29, 2024	Nov 30, 2023	Aug 31, 2023	May 31, 2023	Feb 28, 2023	Nov 30, 2022	Aug 31, 2022	May 31, 2022	Feb 28, 2022	Nov 30, 2021	Aug 31, 2021	May 31, 2021	Feb 28, 2021	Nov 30, 2020	Aug 31, 2020	May 31, 2020	Feb 29, 2020	Nov 30, 2019	Aug 31, 2019	May 31, 2019
Days of inventory on hand (DOH)	days	56.35	55.59	57.70	58.84	50.59	43.36	55.89	56.55	65.37	65.01	65.09	57.93	69.54	62.11	64.60	43.75	59.04	57.50	57.35	57.53
Days of sales outstanding (DSO)	days	229.24	228.88	226.72	216.28	199.55	185.30	173.37	174.37	178.30	192.49	211.60	227.17	263.76	260.98	263.15	260.77	3.43	3.25	3.30	3.11
Number of days of payables	days	14.31	11.65	14.01	13.95	11.22	10.19	11.11	12.86	11.96	13.07	14.33	18.87	17.61	12.74	15.64	8.99	15.29	13.75	13.84	14.81
Cash conversion cycle	days	271.29	272.82	270.42	261.17	238.92	218.47	218.15	218.06	231.71	244.43	262.36	266.24	315.69	310.35	312.12	295.53	47.18	47.00	46.81	45.82

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 shown fluctuations over the past few periods, ranging from 45.82 days to 315.69 days. The trend indicates that the company's management of its working capital has varied in effectiveness. A shorter cash conversion cycle typically suggests that CarMax is efficiently managing its inventory, collecting receivables quickly, and optimizing payment of liabilities.

The significant increase in the cash conversion cycle from February 2021 to May 2021 followed by a downward trend until November 2022 may indicate challenges in managing cash flow during that period. However, the cycle started to increase again from November 2022 to February 2024, which could imply potential inefficiencies in managing working capital that should be addressed.

Overall, CarMax Inc should focus on optimizing its inventory turnover, monitoring accounts receivable collection, and effectively managing its accounts payable to reduce the length of the cash conversion cycle and improve its working capital management efficiency. Additional analysis of the company's operational and financial activities may provide insights into enhancing its cash management processes.