Simulations Plus Inc (SLP)

Cash conversion cycle

		Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020	Aug 31, 2019
Days of inventory on hand (DOH)	days	25.23	46.92	34.85	33.25	30.94
Days of sales outstanding (DSO)	days	62.50	93.35	77.38	65.14	54.01
Number of days of payables	days	4.52	7.59	13.33	12.03	8.25
Cash conversion cycle	days	83.21	132.68	98.90	86.35	76.70

August 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 25.23 + 62.50 – 4.52
= 83.21

The cash conversion cycle (CCC) of Simulations Plus Inc. has fluctuated over the past five years. In 2023, the CCC decreased to 57.98 days from 85.76 days in 2022, indicating an improvement in the company's ability to convert its resources into cash. This was a turnaround from the increased CCC in 2022 compared to 2021. However, the CCC in 2023 remained higher than the levels seen in 2021 and 2020. The decreasing trend from 2021 to 2023 suggests that the company may be managing its inventory, accounts receivable, and accounts payable more efficiently, but the recent increase in CCC warrants attention to identify factors leading to the extended cycle. Overall, a lower CCC indicates a more efficient use of working capital and better management of cash flow.