Simulations Plus Inc (SLP)

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	—	0.99	25.23	—	13.77	33.72	46.92	10.75	15.12	19.51	34.85	17.12	42.70	19.58	33.25	13.94	16.81	3.35	30.95	—
Days of sales outstanding (DSO)	days	74.02	60.80	62.50	66.95	76.47	79.89	93.35	130.43	110.16	89.56	77.38	102.48	90.33	62.39	65.14	98.85	70.11	64.71	54.01	86.52
Number of days of payables	days	8.17	8.50	4.52	11.92	12.14	8.09	7.59	14.23	13.94	0.63	13.33	10.37	13.67	11.61	12.03	23.57	22.99	22.56	8.25	8.62
Cash conversion cycle	days	65.84	53.29	83.21	55.03	78.10	105.52	132.68	126.96	111.34	108.44	98.90	109.23	119.37	70.36	86.35	89.21	63.93	45.50	76.71	77.90

February 29, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 74.02 – 8.17
= 65.84

The cash conversion cycle of Simulations Plus Inc has fluctuated over the past several reporting periods. The cash conversion cycle represents the amount of time it takes for a company to convert its investments in inventory and other resources into cash inflows from sales.

From the data provided, we can observe that the cash conversion cycle ranged from a low of 45.50 days (Feb 29, 2020) to a high of 132.68 days (Aug 31, 2022) over the analyzed period. A lower cash conversion cycle signifies a more efficient management of working capital, while a higher cycle indicates inefficiencies in converting investments into cash.

In general, the cash conversion cycle for Simulations Plus Inc has been in a relatively manageable range, with fluctuations reflecting changes in operational efficiency and working capital management. It is important for the company to focus on optimizing inventory turnover, accounts receivable collection, and accounts payable management to improve the overall cash conversion cycle and enhance liquidity position. Monitoring and analyzing these trends over time can provide valuable insights into the company's financial health and operational effectiveness.