Smart Global Holdings Inc (SGH)

Payables turnover

		Aug 25, 2023	Aug 26, 2022	Aug 27, 2021	Aug 28, 2020	Aug 30, 2019
Cost of revenue	US$ in thousands	1,357,990	1,609,960	1,382,520	1,045,340	1,083,310
Payables	US$ in thousands	134,980	293,165	429,640	224,660	164,866
Payables turnover		10.06	5.49	3.22	4.65	6.57

August 25, 2023 calculation

Payables turnover = Cost of revenue ÷ Payables
= $1,357,990K ÷ $134,980K
= 10.06

The payables turnover ratio measures how efficiently a company manages its accounts payable by comparing the cost of goods sold to the average accounts payable balance. A high payables turnover ratio indicates that the company is paying its suppliers quickly, which can be a positive sign of good financial health and strong supplier relationships.

Looking at the payables turnover data for SMART Global Holdings Inc over the past five years, we observe a fluctuating trend.

In August 2023, SMART Global Holdings Inc achieved a payables turnover ratio of 7.60, which signifies a significant improvement compared to the previous year. This indicates that the company's ability to pay its suppliers has increased substantially, signaling potentially healthy cash flows and efficient management of accounts payable. This could depict improved working capital management and stronger negotiations with suppliers for better payment terms.

In August 2022, the payables turnover ratio was 3.96, showing a decrease from the previous year. This may raise concerns about the company's payment practices and could be a signal of increased reliance on trade credit or weakened ability to negotiate with suppliers.

In August 2021, the payables turnover ratio further decreased to 2.78, indicating a continuation of the downward trend. This might suggest deteriorating relations with suppliers or potential liquidity challenges within the company.

In August 2020, there was a slight improvement in the payables turnover ratio to 4.03, which could indicate a temporary recovery in managing accounts payable. However, the ratio remained below the 2019 level, signaling ongoing challenges in effectively managing payables.

In August 2019, the payables turnover ratio stood at 5.91, representing a strong performance in managing payables. The high ratio suggests efficient working capital management and good negotiation skills in dealing with trade payables.

In conclusion, the fluctuating payables turnover ratio of SMART Global Holdings Inc over the past five years indicates varying levels of efficiency in managing its accounts payable. Investors and stakeholders should closely monitor this ratio to assess the company's financial health and its ability to maintain healthy supplier relationships.