Microchip Technology Inc (MCHP)

Cash conversion cycle

		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	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019
Days of inventory on hand (DOH)	days	182.04	169.93	169.33	173.14	176.44	160.44	147.07	135.11	131.51	122.56	118.94	118.29	117.85	119.66	119.07	117.81	123.16	127.51	126.28	113.62
Days of sales outstanding (DSO)	days	54.68	59.75	69.62	61.02	56.46	53.28	54.15	57.92	57.40	52.68	59.58	64.10	66.96	61.58	63.03	62.04	64.64	55.85	57.73	62.63
Number of days of payables	days	29.46	31.39	36.07	36.44	52.86	48.85	54.21	45.15	53.06	48.07	50.44	49.20	51.82	46.67	39.05	37.84	44.33	37.65	40.52	38.08
Cash conversion cycle	days	207.25	198.28	202.88	197.71	180.04	164.87	147.00	147.88	135.85	127.17	128.08	133.19	132.99	134.57	143.06	142.01	143.47	145.70	143.49	138.17

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 some variability over the past few quarters. In the most recent quarter ending March 31, 2024, the cash conversion cycle was 207.25 days, which indicates that, on average, it takes the company approximately 207 days to convert its investments in inventory and other resources into cash inflows from sales.

Comparing this figure to historical data, we observe a general increasing trend in the cash conversion cycle over the past few quarters. This suggests that Microchip Technology Inc may be facing challenges in efficiently managing its working capital and converting its assets into revenue-generating activities.

It is essential for the company to closely monitor and manage its inventory levels, accounts receivable, and accounts payable to optimize its cash conversion cycle. A longer cash conversion cycle can tie up valuable resources and potentially indicate inefficiencies in the company's operations or supply chain management.

Further analysis of the components contributing to the cash conversion cycle, such as inventory turnover, accounts receivable days, and accounts payable days, could provide additional insights into the company's working capital management efficiency and help identify areas for improvement.