The Cheesecake Factory (CAKE)

Cash conversion cycle

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	13.11	13.10	8.04	9.39	10.44
Days of sales outstanding (DSO)	days	2.19	2.38	4.51	6.79	4.45
Number of days of payables	days	14.36	15.71	10.15	13.96	13.70
Cash conversion cycle	days	0.94	-0.23	2.40	2.22	1.19

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 13.11 + 2.19 – 14.36
= 0.94

The cash conversion cycle (CCC) of The Cheesecake Factory has fluctuated over the past five years. In 2023, the CCC improved to 0.94 days, indicating that the company is managing its cash flow more effectively. This means that it takes less time for the company to convert its investments in inventory and accounts receivable into cash.

Conversely, in 2022, the CCC was negative at -0.23 days, suggesting that the company was able to collect cash from customers before having to pay its suppliers. This can be seen as a favorable position as it indicates efficient management of working capital.

In 2021 and 2020, the CCC increased to 2.40 days and 2.22 days, respectively, reflecting a longer cash cycle. This could be due to slower collection of receivables or higher inventory holding periods, which may have tied up cash in the business for a longer duration.

Finally, in 2019, the CCC was at 1.19 days, indicating a relatively efficient cash conversion cycle compared to the following years.

Overall, The Cheesecake Factory's cash conversion cycle has shown variability over the years, with improvements in some periods and challenges in others. Monitoring and managing the CCC is crucial for the company to optimize cash flow and working capital efficiency.