The Cheesecake Factory (CAKE)

Cash conversion cycle

		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	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	17.01	33.72	27.16	21.25	13.10	10.43	8.95	8.25	8.04	8.28	8.65	9.44	9.39	9.16	9.64	10.32	10.44	11.12	10.79	9.90
Days of sales outstanding (DSO)	days	2.93	3.37	3.26	—	2.38	2.71	4.60	4.35	4.51	5.33	5.12	6.40	6.79	12.36	16.98	10.53	4.45	—	—	—
Number of days of payables	days	18.63	30.68	32.43	20.53	15.71	9.88	10.08	10.91	10.15	10.12	11.44	13.58	13.96	14.94	13.69	12.06	13.70	8.40	8.44	8.57
Cash conversion cycle	days	1.31	6.41	-2.01	0.72	-0.23	3.26	3.46	1.69	2.40	3.49	2.33	2.26	2.22	6.57	12.93	8.78	1.19	2.72	2.36	1.33

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 17.01 + 2.93 – 18.63
= 1.31

The cash conversion cycle for The Cheesecake Factory has varied over the period analyzed. The cycle represents the time it takes for a company to convert its investments in inventory into cash received from sales, indicating the efficiency of its working capital management.

Analyzing the trend, we observe that the cash conversion cycle fluctuated significantly from negative values to positive values, indicating differences in managing inventory, accounts receivable, and accounts payable.

In the recent quarter, the cash conversion cycle was 1.31 days, reflecting a short time for the company to convert its investments into cash. This improvement from the previous quarter is a positive sign for the company's liquidity and efficiency.

On the other hand, there were quarters with longer cash conversion cycles, such as in June and September 2020, where the company took 12.93 days and 6.57 days, respectively, to convert its investments into cash. This indicates potential challenges in managing working capital efficiently during those periods.

Overall, The Cheesecake Factory should focus on maintaining a shorter cash conversion cycle to optimize its working capital, improve liquidity, and potentially enhance its profitability in the long term.