Microchip Technology Inc (MCHP)

Cash conversion cycle

		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
Days of inventory on hand (DOH)	days	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	123.16
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	64.64
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	44.33
Cash conversion cycle	days	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	143.47

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 247.50 + 65.77 – 35.75
= 277.53

The cash conversion cycle of Microchip Technology Inc has shown fluctuations over the past years, ranging from a low of 127.17 days to a high of 277.53 days. Generally, a lower cash conversion cycle indicates that the company is efficiently managing its working capital as it takes fewer days to convert inventory and accounts receivable into cash, thereby improving liquidity.

In the earlier periods, the company maintained a relatively stable cash conversion cycle around the 130-140 days range. However, in more recent periods, there has been a noticeable increase, with the cycle exceeding 200 days in some quarters. This may indicate potential issues with inventory management, collection of receivables, or payment of payables, leading to a longer cash conversion cycle.

It is essential for Microchip Technology Inc to closely monitor and manage its cash conversion cycle to ensure optimal working capital management and maintain healthy liquidity levels. Strategies to improve the cycle could include streamlining inventory levels, enhancing accounts receivable collection processes, and negotiating favorable payment terms with suppliers to expedite cash inflows and outflows.