PriceSmart Inc (PSMT)

Cash conversion cycle

		Feb 29, 2024	Nov 30, 2023	Aug 31, 2023	May 31, 2023	Feb 28, 2023	Nov 30, 2022	Aug 31, 2022	May 31, 2022	Feb 28, 2022	Nov 30, 2021	Aug 31, 2021	May 31, 2021	Feb 28, 2021	Nov 30, 2020	Aug 31, 2020	May 31, 2020	Feb 29, 2020	Nov 30, 2019	Aug 31, 2019	May 31, 2019
Days of inventory on hand (DOH)	days	309.49	333.28	304.34	294.03	305.68	357.98	330.46	331.43	340.98	367.45	292.06	119.38	122.64	136.27	113.83	99.56	119.67	145.39	124.58	124.54
Days of sales outstanding (DSO)	days	1.56	1.43	1.49	1.28	1.41	1.65	1.20	1.34	1.43	1.53	1.25	1.27	1.27	1.63	1.44	1.20	1.20	1.15	1.12	1.09
Number of days of payables	days	312.44	328.67	292.60	277.17	276.74	313.42	290.61	282.95	276.07	338.30	291.37	120.92	121.41	140.26	137.24	104.85	104.14	123.10	107.64	103.41
Cash conversion cycle	days	-1.39	6.04	13.22	18.13	30.35	46.21	41.05	49.82	66.35	30.67	1.94	-0.28	2.50	-2.35	-21.97	-4.09	16.73	23.44	18.06	22.21

February 29, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 309.49 + 1.56 – 312.44
= -1.39

The cash conversion cycle of PriceSmart Inc has exhibited fluctuations over the past few quarters. From May 2019 to August 2020, the company saw consistently positive cash conversion cycles, indicating efficient management of cash flows. However, from November 2020 to May 2021, the company experienced negative cash conversion cycles, suggesting that it was able to convert its inventory into sales and collect payments from customers at a faster rate than paying off its own suppliers.

In the most recent quarters, the trend shifted again, with positive cash conversion cycles from August 2021 to February 2024. This change implies that PriceSmart Inc might be facing challenges in managing its working capital effectively, potentially resulting in a longer period to convert inventory into sales and collect receivables.

It is essential for PriceSmart Inc to closely monitor and improve its cash conversion cycle to ensure optimal liquidity and efficiency in its operations. Strategies such as inventory management, accounts receivable collection practices, and supplier payment terms could be areas of focus for the company to optimize its cash conversion cycle in the future.