Super Micro Computer Inc (SMCI)
Cash conversion cycle
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 90.34 | 128.33 | 125.69 | 110.48 | 81.41 |
| Days of sales outstanding (DSO) | days | 58.84 | 59.21 | 48.48 | 45.08 | 42.45 |
| Number of days of payables | days | 48.55 | 54.42 | 73.94 | 54.19 | 43.79 |
| Cash conversion cycle | days | 100.63 | 133.12 | 100.24 | 101.37 | 80.07 |
June 30, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 90.34 + 58.84 – 48.55
= 100.63
To analyze the cash conversion cycle of Super Micro Computer Inc, we will utilize the formula:
Cash Conversion Cycle (CCC) = Days of Inventory on Hand (DOH) + Days of Sales Outstanding (DSO) - Number of Days of Payables
The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and accounts receivable into cash flows from sales. A shorter cash conversion cycle indicates a more efficient use of working capital and better liquidity.
Looking at the data provided:
- The cash conversion cycle for Super Micro Computer Inc has fluctuated over the past five years. In 2023, the cycle decreased to 100.63 days, down from 142.23 days in 2022.
- Days of Inventory on Hand (DOH) have also varied, with a noticeable decrease from 128.33 days in 2022 to 90.34 days in 2023. This suggests that the company has improved its inventory management and is holding less inventory on hand.
- Days of Sales Outstanding (DSO) show a similar trend, decreasing from 68.32 days in 2022 to 58.84 days in 2023. This indicates that the company is collecting its accounts receivable more quickly.
- The number of days of payables has fluctuated over the years, with a notable decrease from 73.94 days in 2021 to 48.55 days in 2023. This suggests that the company is taking longer to pay its suppliers.
Overall, the decreasing cash conversion cycle, along with improvements in inventory management and accounts receivable collection, demonstrates that Super Micro Computer Inc has become more efficient in converting its investments into cash flows. However, the trend in payables indicates a potential strain on supplier relationships, possibly due to a deliberate strategic decision to extend payment terms. It will be important for the company to monitor this and ensure it does not negatively impact relationships with suppliers.
Peer comparison
Jun 30, 2023