Microchip Technology Inc (MCHP)

Inventory turnover

		Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020
Cost of revenue (ttm)	US$ in thousands	2,000,200	2,181,300	2,412,900	2,638,700	2,816,200	2,868,900	2,817,300	2,740,800	2,651,200	2,557,000	2,463,200	2,371,300	2,287,800	2,189,900	2,110,000	2,059,600	2,031,800	2,027,400	2,036,100	2,032,100
Inventory	US$ in thousands	1,356,300	1,339,600	1,308,000	1,316,000	1,311,100	1,330,900	1,336,400	1,324,900	1,165,400	1,030,300	911,800	854,400	768,200	713,600	683,800	665,000	666,100	661,400	657,200	685,700
Inventory turnover		1.47	1.63	1.84	2.01	2.15	2.16	2.11	2.07	2.27	2.48	2.70	2.78	2.98	3.07	3.09	3.10	3.05	3.07	3.10	2.96

December 31, 2024 calculation

Inventory turnover = Cost of revenue (ttm) ÷ Inventory
= $2,000,200K ÷ $1,356,300K
= 1.47

Inventory turnover ratio measures how efficiently a company manages its inventory by assessing how many times a company sells and replaces its inventory during a specific period.

Analyzing Microchip Technology Inc's inventory turnover ratio over the mentioned period reveals a general downward trend, starting at 2.96 on March 31, 2020, and reaching 1.47 by December 31, 2024. This indicates a decrease in the company's ability to turn over its inventory effectively, potentially signaling issues with inventory management or sales performance.

The ratio fluctuates throughout the period, with occasional increases and decreases. However, the overall trend is a decline, suggesting that the company may be facing challenges in efficiently managing its inventory levels. A low inventory turnover ratio may indicate excess inventory or slow-moving stock, leading to increased storage costs and potential obsolescence risks.

Further investigation into the reasons behind the declining trend in inventory turnover could provide insights into Microchip Technology Inc's operational efficiency, sales strategies, and inventory management practices. The company may benefit from reevaluating its inventory control processes and sales forecasting to improve inventory turnover and optimize its overall business performance.