Microchip Technology Inc (MCHP)

Cash conversion cycle

		Mar 31, 2025	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
Days of inventory on hand (DOH)	days	244.16	247.50	224.16	197.86	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
Days of sales outstanding (DSO)	days	—	65.77	69.35	60.72	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
Number of days of payables	days	—	35.75	34.17	29.71	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
Cash conversion cycle	days	244.16	277.53	259.33	228.87	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

March 31, 2025 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 244.16 + — – —
= 244.16

The cash conversion cycle of Microchip Technology Inc has fluctuated over the years, indicating varying efficiency in managing its working capital. The company's cash conversion cycle, which signifies the time taken to convert raw materials into cash through sales, increased from around 142 days in mid-2020 to a peak of approximately 277 days by the end of 2024.

This prolonged cash conversion cycle suggests that Microchip Technology Inc may be facing challenges in efficiently converting its investments in inventory and accounts receivable into cash. A lengthening cycle can tie up cash resources and impact liquidity, potentially leading to difficulties in meeting short-term obligations or investing in growth opportunities.

It is essential for Microchip Technology Inc to closely monitor and manage its cash conversion cycle to ensure optimal working capital efficiency. Strategies such as improving inventory management, enhancing sales and collection processes, and negotiating favorable payment terms with suppliers could help the company reduce its cash conversion cycle and enhance its overall financial performance.