Power Integrations Inc (POWI)

Cash conversion cycle

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Days of inventory on hand (DOH)	days	311.23	276.25	173.90	105.74	153.44
Days of sales outstanding (DSO)	days	23.67	12.05	11.68	21.48	26.84
Number of days of payables	days	55.98	44.68	38.64	46.57	51.77
Cash conversion cycle	days	278.92	243.62	146.94	80.65	128.51

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 311.23 + 23.67 – 55.98
= 278.92

The cash conversion cycle of Power Integrations Inc has exhibited fluctuations over the past five years. As of December 31, 2020, the company's cash conversion cycle stood at 128.51 days, indicating that it took approximately 128.51 days for the company to convert its investments in inventory and accounts receivable into cash.

Subsequently, by December 31, 2021, the cash conversion cycle decreased to 80.65 days, reflecting an improvement in the efficiency of the company's working capital management. However, by December 31, 2022, the cycle increased significantly to 146.94 days, suggesting a potential slowdown in the company's cash conversion process.

The trend continued with a further increase in the cash conversion cycle to 243.62 days as of December 31, 2023, which may indicate challenges in managing the company's accounts receivable, inventory, and accounts payable effectively.

Lastly, by the end of December 31, 2024, the cash conversion cycle reached its peak at 278.92 days, signifying an extended period for the company to convert its investments into cash. This prolonged cycle may raise concerns about liquidity management and operational efficiency within Power Integrations Inc.

Overall, the fluctuations in the cash conversion cycle of Power Integrations Inc highlight the importance of monitoring working capital performance and implementing strategies to streamline the cash conversion process for sustainable financial health.