Vicor Corporation (VICR)
Cash conversion cycle
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 142.29 | 136.06 | 121.42 | 98.00 | 91.52 |
| Days of sales outstanding (DSO) | days | 52.11 | 46.41 | 59.62 | 27.97 | 25.19 |
| Number of days of payables | days | 11.72 | 15.45 | 26.59 | 30.84 | 22.57 |
| Cash conversion cycle | days | 182.67 | 167.03 | 154.45 | 95.12 | 94.14 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 142.29 + 52.11 – 11.72
= 182.67
The cash conversion cycle is a critical metric that indicates the efficiency with which a company can convert its investments in raw materials and other inputs into cash inflows from sales. In the case of Vicor Corporation, the trend in the cash conversion cycle over the years shows fluctuations and an increasing trend.
As of December 31, 2020, Vicor had a cash conversion cycle of 94.14 days, indicating that on average, it took the company around 94 days to convert its investments in inventory into cash through sales.
By December 31, 2021, the cash conversion cycle increased slightly to 95.12 days, suggesting a marginal slowdown in the company's ability to turn its assets into cash.
However, there was a significant increase in the cash conversion cycle by December 31, 2022, reaching 154.45 days. This jump indicates that Vicor was taking longer to convert its investments into cash, possibly due to challenges in managing inventory or collection of receivables.
The trend continued to worsen in the following years, with the cash conversion cycle reaching 167.03 days by December 31, 2023, and further increasing to 182.67 days by December 31, 2024. These extended cycles suggest that Vicor may be facing increasing challenges in efficiently managing its working capital and converting its investments into cash inflows promptly.
In conclusion, the progressively lengthening cash conversion cycle of Vicor Corporation raises concerns about its operational efficiency and working capital management. It is essential for the company to analyze the underlying reasons for these extended cycles and implement strategies to improve its cash conversion process to enhance overall financial performance.
Peer comparison
Dec 31, 2024