Costco Wholesale Corp (COST)

Cash conversion cycle

		Feb 18, 2024	Nov 26, 2023	Sep 3, 2023	May 7, 2023	Feb 12, 2023	Nov 20, 2022	Aug 28, 2022	May 8, 2022	Feb 13, 2022	Nov 21, 2021	Aug 29, 2021	May 9, 2021	Feb 14, 2021	Nov 22, 2020	Aug 30, 2020	May 10, 2020	Feb 16, 2020	Nov 24, 2019	Sep 1, 2019	May 12, 2019
Days of inventory on hand (DOH)	days	34.35	52.55	49.82	48.64	33.87	30.34	29.79	42.95	42.20	45.50	40.25	28.29	29.30	32.54	27.70	26.40	29.39	35.81	30.53	30.15
Days of sales outstanding (DSO)	days	4.08	3.78	3.44	3.88	4.23	3.65	3.60	3.34	3.88	3.47	3.36	3.12	3.95	3.47	3.39	3.42	4.58	4.04	3.67	4.16
Number of days of payables	days	35.20	59.43	52.31	50.21	34.55	29.98	29.69	43.02	43.75	52.53	46.09	31.46	30.39	37.16	32.06	25.92	27.46	37.42	31.29	30.22
Cash conversion cycle	days	3.23	-3.10	0.95	2.30	3.54	4.02	3.70	3.27	2.33	-3.56	-2.48	-0.05	2.86	-1.14	-0.97	3.89	6.51	2.43	2.91	4.09

February 18, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 34.35 + 4.08 – 35.20
= 3.23

The cash conversion cycle of Costco Wholesale Corp has shown fluctuations over the past several quarters.

- The highest cash conversion cycle of 6.51 days was observed in the Feb 16, 2020 quarter, indicating that Costco took longer to convert its investments in inventory and other resources into cash during that period.
- The lowest cash conversion cycle of -3.56 days was seen in the Nov 21, 2021 quarter, suggesting Costco was able to convert its investments into cash more quickly, potentially through efficient management of inventory and accounts receivable.
- On average, the cash conversion cycle over the quarters appears to be positive, meaning Costco typically took a few days to convert its resources into cash, with a range between negative and positive values indicating periods of efficiency and inefficiency in the utilization of assets.

Overall, fluctuations in the cash conversion cycle can provide insights into Costco's operational efficiency in managing its working capital and liquidity. A shorter cash conversion cycle generally indicates better liquidity and efficient management of resources, while a longer cycle may raise concerns about the effectiveness of working capital management.