Microchip Technology Inc (MCHP)

Activity ratios

Short-term

Turnover ratios

	Mar 31, 2025	Mar 31, 2024	Mar 31, 2023	Mar 31, 2022	Mar 31, 2021
Inventory turnover	1.49	2.01	2.07	2.78	3.10
Receivables turnover	6.38	6.68	6.46	6.36	5.45
Payables turnover	12.04	12.39	6.91	6.88	7.04
Working capital turnover	2.40	15.47	—	6.47	—

Based on the provided data for Microchip Technology Inc, let's analyze the activity ratios:

1. Inventory Turnover: Microchip's inventory turnover has been declining over the years, from 3.10 in 2021 to 1.49 in 2025. This indicates that the company is selling its inventory less frequently each year, which could be a sign of inefficiency in managing its inventory levels or slower sales.

2. Receivables Turnover: The receivables turnover ratio has been relatively stable over the years, ranging from 5.45 in 2021 to 6.38 in 2025. This suggests that Microchip is efficient in collecting payments from its customers, with a consistent pattern of converting accounts receivable into cash within a reasonable timeframe.

3. Payables Turnover: The payables turnover ratio fluctuated significantly, with a notable increase in 2024 and a slight decrease in 2025. The sharp increase in 2024 could indicate that Microchip is taking longer to pay its suppliers, potentially managing its cash flow more effectively or negotiating better credit terms. However, this trend should be monitored to ensure it does not negatively impact supplier relationships.

4. Working Capital Turnover: The working capital turnover ratio, although missing data for some years, shows a significant increase from 6.47 in 2022 to 15.47 in 2024, indicating that Microchip is generating more revenue per dollar of working capital invested. The decrease to 2.40 in 2025 suggests a potential decline in efficiency in utilizing working capital to generate sales.

In summary, Microchip Technology Inc's activity ratios reveal mixed performance in managing its inventory, collecting receivables, paying suppliers, and utilizing working capital effectively. Monitoring these ratios over time can provide insights into the company's operational efficiency and potential areas for improvement.

Average number of days

		Mar 31, 2025	Mar 31, 2024	Mar 31, 2023	Mar 31, 2022	Mar 31, 2021
Days of inventory on hand (DOH)	days	244.16	182.04	176.44	131.51	117.85
Days of sales outstanding (DSO)	days	57.19	54.68	56.46	57.40	66.96
Number of days of payables	days	30.31	29.46	52.86	53.06	51.82

Microchip Technology Inc's Days of Inventory on Hand (DOH), a measure of how efficiently the company manages its inventory, increased from 117.85 days in March 2021 to 244.16 days in March 2025. This indicates a significant increase in the number of days it takes the company to sell its inventory.

The Days of Sales Outstanding (DSO) for Microchip Technology Inc, a measure of how long it takes for the company to collect its accounts receivable, improved from 66.96 days in March 2021 to 57.19 days in March 2025. This trend suggests that the company has been able to collect its receivables more efficiently over the period.

In terms of the Number of Days of Payables, which reflects how long it takes for the company to pay its suppliers, there was a decrease from 51.82 days in March 2021 to 30.31 days in March 2025. This signifies that Microchip Technology Inc has been paying its suppliers more quickly in recent years.

Overall, while the Days of Inventory on Hand have increased significantly, indicating a potential need for better inventory management, the improved Days of Sales Outstanding and decreased Number of Days of Payables suggest that the company has been efficient in collecting receivables and managing payables.

Long-term

	Mar 31, 2025	Mar 31, 2024	Mar 31, 2023	Mar 31, 2022	Mar 31, 2021
Fixed asset turnover	—	—	7.16	7.05	6.36
Total asset turnover	0.29	0.48	0.52	0.42	0.33

Long-term activity ratios are important in evaluating how efficiently a company is utilizing its assets over an extended period. Let's analyze the data provided for Microchip Technology Inc:

1. Fixed Asset Turnover:
- The fixed asset turnover ratio measures how efficiently a company generates sales revenue from its investment in fixed assets. A higher ratio indicates better utilization of fixed assets.
- Microchip Technology Inc's fixed asset turnover has been improving over the years, from 6.36 in March 2021 to 7.05 in March 2022 and further to 7.16 in March 2023. This trend suggests that the company is becoming more efficient in generating sales from its fixed assets.
- However, there is missing data for March 31, 2024 and 2025, which makes it difficult to assess the continuous trend beyond 2023.

2. Total Asset Turnover:
- The total asset turnover ratio measures how well a company generates revenue in relation to its total assets. A higher total asset turnover indicates more efficient use of assets to generate revenue.
- Microchip Technology Inc's total asset turnover has shown fluctuations over the years, from 0.33 in March 2021, increasing to 0.42 in March 2022, peaking at 0.52 in March 2023, and then declining to 0.48 in March 2024 and further to 0.29 in March 2025.
- The increase in total asset turnover until March 2023 indicates an improvement in utilizing the company's assets to generate sales. However, the decrease in the ratios in 2024 and 2025 suggests a potential decline in efficiency in revenue generation from the total assets.

In summary, Microchip Technology Inc has shown improvements in both fixed asset turnover and total asset turnover ratios over the years, indicating increasing efficiency in utilizing its assets to generate revenue. However, the fluctuating trends in total asset turnover in recent years may require further analysis to understand the underlying reasons for the decline in efficiency.