Netflix Inc (NFLX)
Cash conversion cycle
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 7.57 | — | — | — | — |
| Days of sales outstanding (DSO) | days | 17.74 | 27.99 | 11.23 | 10.84 | 9.50 |
| Number of days of payables | days | 13.84 | 12.79 | 17.64 | 15.68 | 19.79 |
| Cash conversion cycle | days | 11.48 | 15.20 | -6.40 | -4.84 | -10.28 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 7.57 + 17.74 – 13.84
= 11.48
The cash conversion cycle (CCC) of Netflix Inc. measures the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales. A positive CCC indicates that the company's cash is tied up in operations, while a negative CCC suggests that the company is able to collect cash from customers before paying its suppliers.
Based on the data provided, Netflix's CCC has shown a consistent trend of improvement over the past five years. In 2019, the CCC was at its highest negative value of -19.79 days, indicating that Netflix was able to collect cash from customers and pay suppliers within a relatively short period. Subsequently, the CCC continued to improve, reaching -7.75 days in 2021 and -6.76 days in 2020. This trend suggests that Netflix has been successful in managing its working capital and operational efficiency, allowing for quicker cash conversion.
In 2022, the CCC further improved to a negative value of -1.37 days, indicating an even faster cash conversion cycle. Finally, as of December 31, 2023, Netflix achieved a CCC of 0.09 days, signifying the company's exceptionally efficient cash conversion.
Overall, the consistent improvement in Netflix's CCC reflects the company's effective management of its working capital, inventory, and receivables, leading to shorter cash conversion cycles and a stronger cash position. This trend suggests that Netflix has been able to optimize its operational processes, enhance customer payment collection, and manage supplier payments more efficiently over the years.