Simply Good Foods Co (SMPL)

Cash conversion cycle

		Aug 31, 2024	Aug 26, 2023	Aug 27, 2022	Aug 28, 2021	Aug 29, 2020
Days of inventory on hand (DOH)	days	63.27	53.92	63.34	59.58	43.81
Days of sales outstanding (DSO)	days	41.32	42.61	41.43	40.45	40.11
Number of days of payables	days	26.07	24.38	31.37	36.58	23.90
Cash conversion cycle	days	78.52	72.15	73.40	63.46	60.01

August 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 63.27 + 41.32 – 26.07
= 78.52

The cash conversion cycle of Simply Good Foods Co has fluctuated over the past five years, ranging from 60.01 days to 78.52 days. The company's cash conversion cycle measures the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales. A longer cash conversion cycle implies that the company takes more time to recover its investment in inventory and operating expenses, potentially indicating inefficiencies in managing working capital. Conversely, a shorter cash conversion cycle suggests that the company is efficient in converting its resources into cash.

In 2024, Simply Good Foods Co's cash conversion cycle increased to 78.52 days from 72.15 days in 2023. This indicates that the company took longer to convert its investments in inventory and operating expenses into cash flows from sales. The increase in the cash conversion cycle may be due to factors such as inventory management inefficiencies, extended credit terms provided to customers, or delays in receiving payments from customers.

In comparison to previous years, the cash conversion cycle was higher in 2024 than in 2021 and 2020 but was lower than in 2022. This suggests some variability in the company's working capital management over the years. It is important for Simply Good Foods Co to closely monitor its cash conversion cycle and identify areas for improvement to optimize its working capital efficiency and enhance overall financial performance.