Microchip Technology Inc (MCHP)

Cash conversion cycle

		Mar 31, 2024	Mar 31, 2023	Mar 31, 2022	Mar 31, 2021	Mar 31, 2020
Days of inventory on hand (DOH)	days	182.04	176.44	131.51	117.85	123.16
Days of sales outstanding (DSO)	days	54.68	56.46	57.40	66.96	64.64
Number of days of payables	days	29.46	52.86	53.06	51.82	44.33
Cash conversion cycle	days	207.25	180.04	135.85	132.99	143.47

March 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 182.04 + 54.68 – 29.46
= 207.25

The cash conversion cycle of Microchip Technology Inc has shown an increasing trend over the past five years. The cycle has lengthened from 143.47 days in 2020 to 207.25 days in 2024. This indicates a decreasing efficiency in the company's management of its cash, inventory, and receivables.

The company's cash conversion cycle measures the time it takes for Microchip Technology Inc to convert its investments in inventory and other resources into cash flows from sales. A longer cash conversion cycle suggests that the company is taking more time to generate cash from its operational activities, which could potentially lead to liquidity challenges or inefficiencies in the company's working capital management.

The increasing trend in the cash conversion cycle may indicate issues with inventory management, slow collection of receivables, or a decrease in the company's ability to quickly convert sales into cash. It is essential for Microchip Technology Inc to closely monitor and improve its cash conversion cycle to ensure optimal working capital management and sustainable financial performance.