Microchip Technology Inc (MCHP)

Cash conversion cycle

		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
Cash conversion cycle	days	271.04	207.25	180.04	135.85	132.99

March 31, 2025 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 244.16 + 57.19 – 30.31
= 271.04

The cash conversion cycle of Microchip Technology Inc has shown an increasing trend over the years, rising from 132.99 days as of March 31, 2021, to 271.04 days as of March 31, 2025. This indicates that the company is taking longer to convert its investments in inventory and accounts receivable into cash.

The increase in the cash conversion cycle suggests that Microchip Technology Inc may be experiencing challenges in efficiently managing its working capital. A longer cash conversion cycle can tie up a company's funds in inventory and accounts receivable, which can impact its liquidity and ability to meet short-term obligations.

It is important for Microchip Technology Inc to closely monitor and improve its cash conversion cycle to optimize its working capital management and ensure efficient allocation of resources. Strategies such as improving inventory management, accelerating accounts receivable collection, and optimizing accounts payable processes could potentially help in lowering the cash conversion cycle and enhancing the company's financial performance.