The Coca-Cola Company (KO)

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	87.19	84.35	92.63	94.66	85.84	77.01	77.81	85.65	81.14	78.23	83.51	90.29	88.74	88.77	93.16	88.80	84.37	84.22	91.77	86.85
Days of sales outstanding (DSO)	days	27.20	28.33	32.83	38.60	29.60	34.43	—	—	33.16	—	—	—	34.76	41.73	40.93	43.50	38.89	44.13	50.58	40.52
Number of days of payables	days	110.17	—	—	—	126.55	—	—	—	135.95	—	—	—	126.46	—	—	—	94.98	—	—	—
Cash conversion cycle	days	4.22	112.68	125.45	133.26	-11.12	111.44	77.81	85.65	-21.65	78.23	83.51	90.29	-2.95	130.50	134.09	132.30	28.28	128.35	142.35	127.37

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 87.19 + 27.20 – 110.17
= 4.22

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flow from sales. A shorter cash conversion cycle indicates more efficient management of working capital.

Based on the data provided for Coca-Cola Co, we observe fluctuations in the cash conversion cycle over the past eight quarters. In Q4 2022, the company had a relatively low cash conversion cycle of 7.82 days, indicating efficient working capital management. However, this efficiency deteriorated in subsequent quarters, with Q1 2023 showing a cash conversion cycle of 133.26 days, representing a significant increase.

The trend continued in Q2 and Q3 2023, with the cash conversion cycle remaining elevated at 125.45 days and 112.68 days, respectively. Notably, in Q4 2023, the cash conversion cycle improved to 4.22 days, reflecting a sharp decrease compared to the previous quarters.

Overall, Coca-Cola Co's cash conversion cycle has been volatile, showing periods of efficient working capital management followed by longer cycles. It is essential for the company to focus on optimizing inventory levels, accounts receivable, and accounts payable to ensure a more consistent and favorable cash conversion cycle in the future.