Netflix Inc (NFLX)
Cash conversion cycle
| 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 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 7.57 | 8.89 | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Days of sales outstanding (DSO) | days | 17.74 | 14.38 | 13.97 | 13.08 | 27.99 | 16.66 | 10.44 | 10.15 | 11.23 | 10.22 | 10.01 | 8.62 | 10.84 | 9.50 | 10.33 | 9.24 | 9.50 | — | — | — |
| Number of days of payables | days | 13.84 | 9.85 | 11.42 | 10.98 | 12.79 | 10.76 | 9.99 | 12.69 | 17.64 | 14.44 | 14.28 | 12.51 | 15.68 | 13.55 | 11.81 | 15.12 | 19.79 | 13.85 | 14.49 | 15.22 |
| Cash conversion cycle | days | 11.48 | 13.42 | 2.55 | 2.11 | 15.20 | 5.90 | 0.45 | -2.54 | -6.40 | -4.22 | -4.27 | -3.89 | -4.84 | -4.05 | -1.48 | -5.88 | -10.28 | -13.85 | -14.49 | -15.22 |
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) provides insights into the efficiency of a company's working capital management. For Netflix Inc., the CCC fluctuated over the past eight quarters. A positive CCC indicates that the company's cash is tied up in inventory and accounts receivable before being collected from customers. Conversely, a negative CCC can indicate that the company is efficiently collecting cash from customers before paying its suppliers.
In the most recent quarter, at December 31, 2023, the CCC was 0.09 days, indicating a very efficient conversion of resources into cash. This represents a significant improvement compared to the two previous quarters, where the CCC was 2.86 days and 2.42 days respectively. The negative CCC at December 31, 2022, and September 30, 2022, suggests that Netflix Inc. was collecting cash from customers more quickly than paying its suppliers, which is a positive indicator of operating efficiency.
However, it's important to note that while a negative CCC can be favorable, sustained negative CCC may imply aggressive policies aimed at delaying payments to suppliers. Therefore, it's crucial to monitor this closely to ensure it aligns with the company's overall financial health and strategy. Overall, the analysis of Netflix Inc.'s CCC suggests fluctuations in cash conversion efficiency over the past eight quarters, with special attention warranted to the trend in negative CCC.