Smart Global Holdings Inc (SGH)

Cash conversion cycle

		Mar 1, 2024	Dec 1, 2023	Aug 25, 2023	May 26, 2023	Feb 24, 2023	Nov 25, 2022	Aug 26, 2022	May 27, 2022	Feb 25, 2022	Nov 26, 2021	Aug 27, 2021	May 28, 2021	Feb 26, 2021	Nov 27, 2020	May 29, 2020	Feb 28, 2020	Nov 29, 2019	Aug 30, 2019	May 31, 2019	Mar 1, 2019
Days of inventory on hand (DOH)	days	69.02	72.83	52.40	51.17	64.81	92.66	59.80	109.56	100.62	105.26	135.96	85.45	64.05	51.27	64.22	59.88	58.24	40.01	42.25	51.94
Days of sales outstanding (DSO)	days	50.21	45.76	51.54	55.62	49.25	63.60	84.89	71.82	78.37	73.09	76.65	74.05	63.17	67.75	73.21	73.65	78.21	66.44	64.14	—
Number of days of payables	days	59.13	63.52	40.43	38.68	36.93	72.47	66.47	115.26	114.46	123.67	160.65	104.75	88.45	82.04	87.42	80.60	81.61	55.55	56.48	77.77
Cash conversion cycle	days	60.10	55.07	63.52	68.10	77.12	83.78	78.23	66.12	64.53	54.67	51.96	54.75	38.78	36.97	50.02	52.93	54.84	50.90	49.92	-25.83

March 1, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 69.02 + 50.21 – 59.13
= 60.10

The cash conversion cycle of Smart Global Holdings Inc has varied over time based on the data provided. The cash conversion cycle is a measure of how quickly a company can convert its inventory and accounts receivable into cash.

From Nov 2019 to Aug 2023, the cash conversion cycle has been positive, indicating that on average, it took the company over 50 days to convert its resources to cash. The highest average cash conversion cycle was observed in Feb 2023 at 77.12 days, suggesting a longer period for the company to convert its investments into cash during that time.

However, starting from Feb 2021, there is a significant improvement in the company's cash conversion cycle. The cycle dipped to 38.78 days in Feb 2021 and even turned negative in Mar 2019 at -25.83 days. A negative cash conversion cycle implies that the company is able to convert its resources into cash more quickly than it takes to pay off its obligations.

This improvement in the cash conversion cycle from 2021 onwards suggests that Smart Global Holdings Inc has become more efficient in managing its inventory, accounts receivable, and accounts payable. It may indicate better working capital management, streamlined operations, or improved sales and collection processes.

Overall, the trend in the cash conversion cycle for Smart Global Holdings Inc shows a positive transition towards better liquidity and operational efficiency in recent periods. Continued monitoring of this metric will be important to assess the company's ongoing financial health and management effectiveness.