Wolfspeed Inc (WOLF)

Cash conversion cycle

		Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019
Days of inventory on hand (DOH)	days	164.64	160.85	143.31	137.87	117.89	124.14	120.87	115.17	116.88	132.43	127.22	124.32	86.46	71.19	64.29	74.54	54.25	75.00	56.82	56.13
Days of sales outstanding (DSO)	days	89.76	78.38	75.20	83.12	71.64	74.74	77.95	76.13	151.29	78.19	77.83	79.13	69.20	54.35	46.64	50.76	49.12	64.77	50.44	43.08
Number of days of payables	days	19.80	20.01	17.85	26.25	18.58	19.47	59.93	26.63	29.76	32.66	29.98	25.95	22.94	36.54	37.92	49.23	47.57	40.04	31.38	25.93
Cash conversion cycle	days	234.60	219.22	200.66	194.75	170.95	179.42	138.88	164.68	238.41	177.97	175.07	177.49	132.72	89.00	73.02	76.07	55.79	99.73	75.88	73.28

June 30, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 164.64 + 89.76 – 19.80
= 234.60

The Cash Conversion Cycle (CCC) is a crucial metric that measures the amount of time it takes for a company to convert its investments in inventory and other resources into cash inflows from sales.

Analyzing the data provided for Wolfspeed Inc over multiple periods, we observe fluctuations in the CCC. It is essential to consider the trend and magnitude of changes in the CCC to assess the company's efficiency in managing its working capital.

From December 2019 to June 2020, the CCC increased from 73.28 days to 99.73 days, indicating a potential inefficiency in managing inventory, accounts receivable, and accounts payable during this period. Subsequently, there was a significant improvement in efficiency as the CCC decreased to 55.79 days by December 2020.

However, from December 2020 to June 2021, the CCC increased to 73.02 days, suggesting a lengthening of the cash conversion cycle. Subsequent periods saw a rapid decrease in the CCC, with the company achieving a low of 55.79 days by September 2021, indicating an improvement in working capital management efficiency.

A notable increase occurred by June 2022, with the CCC rising to 238.41 days, signifying potential challenges in managing working capital effectively. Subsequent periods showed fluctuation in the CCC but indicated a trend towards improvement, with the CCC decreasing to 194.75 days by September 2023.

By June 2024, Wolfspeed Inc's CCC stood at 234.60 days, reflecting a longer cash conversion cycle compared to previous periods. It is essential for the company to analyze the components of the CCC, including inventory turnover, accounts receivable collection period, and accounts payable payment period, to identify areas for optimization and efficiency enhancement in working capital management.

In conclusion, while Wolfspeed Inc has experienced fluctuations in its cash conversion cycle over the analyzed periods, monitoring and managing the CCC effectively can contribute to enhancing the company's liquidity, profitability, and overall financial performance in the long run.