Chipotle Mexican Grill Inc (CMG)

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	2.48	2.27	2.30	2.36	2.30
Days of sales outstanding (DSO)	days	6.81	6.23	6.54	9.37	23.62
Number of days of payables	days	10.69	11.44	11.90	11.71	10.59
Cash conversion cycle	days	-1.39	-2.93	-3.06	0.01	15.32

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 2.48 + 6.81 – 10.69
= -1.39

The cash conversion cycle of Chipotle Mexican Grill Inc has shown a significant improvement over the past five years. In December 2020, the company's cash conversion cycle was 15.32 days, indicating that it took Chipotle approximately 15 days to convert its investments in inventory and other resources into cash flow from sales.

However, by December 2021, Chipotle managed to reduce its cash conversion cycle dramatically to just 0.01 days, implying that the company almost instantly converted its investments into cash flow. This trend continued in the following years, with the cash conversion cycle further improving to -3.06 days in December 2022, -2.93 days in December 2023, and -1.39 days in December 2024.

The negative values of the cash conversion cycle in the latter years suggest that Chipotle Mexican Grill Inc was able to operate on a negative cash conversion cycle, meaning it received cash from its customers before paying its suppliers. This improvement indicates the company's efficiency in managing its working capital and optimizing its cash flow processes.