Simply Good Foods Co (SMPL)

Cash conversion cycle

		Aug 26, 2023	Aug 27, 2022	Aug 28, 2021	Aug 29, 2020	Aug 31, 2019
Days of inventory on hand (DOH)	days	53.92	63.34	59.58	43.81	45.42
Days of sales outstanding (DSO)	days	42.61	41.43	40.45	40.11	30.85
Number of days of payables	days	24.38	31.37	36.58	23.90	18.76
Cash conversion cycle	days	72.15	73.40	63.46	60.01	57.51

August 26, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 53.92 + 42.61 – 24.38
= 72.15

The cash conversion cycle (CCC) measures how long it takes for a company to convert its investments in inventory and other resources into cash flows from sales. Simply Good Foods Co's cash conversion cycle has shown a mixed trend over the past five years. In 2023, the CCC was 72.15 days, which indicates a slight improvement compared to the previous year.

Looking back, the CCC was 73.40 days in 2022, reflecting a slight increase from 2021. In 2021, the CCC was 63.46 days, showing an increase from 2020. Similarly, there was also an increase from 2020, where the CCC was 60.01 days, and from 2019, where it was 57.52 days.

The increasing trend in the CCC implies that Simply Good Foods Co has taken longer in recent years to convert its investments in inventory and other resources into cash. This may be attributed to various factors such as changes in the company's sales and inventory management practices. In order to enhance efficiency, the company may look to streamline its inventory management and accounts receivable processes to shorten the cash conversion cycle and improve its overall liquidity position.