Costco Wholesale Corp (COST)

Cash conversion cycle

		Sep 1, 2024	Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020
Days of inventory on hand (DOH)	days	27.75	25.93	29.79	27.41	27.69
Days of sales outstanding (DSO)	days	3.90	3.44	3.60	3.36	3.39
Number of days of payables	days	28.90	27.23	29.69	31.39	32.06
Cash conversion cycle	days	2.75	2.15	3.70	-0.62	-0.97

September 1, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 27.75 + 3.90 – 28.90
= 2.75

The cash conversion cycle for Costco Wholesale Corp has exhibited variability over the past five years. The cycle represents the time it takes for the company to convert its investments in inventory into cash receipts from customers.

In September 2024, the cash conversion cycle was 2.75 days, indicating that Costco was able to efficiently convert its inventory investments into cash receipts within a relatively short period. This was slightly higher compared to the previous year, where the cycle was 2.15 days.

In contrast, in August 2022, the cash conversion cycle increased to 3.70 days, suggesting a longer period for Costco to convert inventory into cash compared to the prior years. The negative cash conversion cycles in August 2021 and August 2020 (-0.62 days and -0.97 days, respectively) suggest that Costco was able to generate cash receipts from customers before paying for its inventory, reflecting strong working capital management practices.

Overall, the trend in the cash conversion cycle indicates fluctuations in the efficiency of Costco's inventory management and collection of cash from customers. Further analysis of the underlying factors driving these changes would be necessary to assess the implications for Costco's financial performance and operational efficiency.