McDonald’s Corporation (MCD)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	90.44	83.90	76.37	78.21	74.66
Receivables turnover	10.25	10.96	12.40	9.10	9.61
Payables turnover	4.33	4.45	4.22	5.39	3.79
Working capital turnover	22.61	14.29	7.42	309.80	—

The activity ratios of McDonald`s Corp provide insights into the efficiency of the company's operations in managing its assets and liabilities.

1. Inventory turnover: The inventory turnover ratio for all years is reported as 0.00, indicating that the company operates with a very low rate of inventory turnover. This could suggest either effective inventory management strategies or a potential issue with overstocking or slow-moving inventory.

2. Receivables turnover: The receivables turnover ratio shows a consistent trend of fluctuation over the years, ranging from 9.10 to 12.40. A higher receivables turnover ratio indicates that the company is efficient in collecting payments from customers, which is a positive sign for cash flow management.

3. Payables turnover: The payables turnover ratio is consistently reported as 0.00 for all years, which suggests that McDonald`s Corp might not rely heavily on short-term credit from suppliers or manages its payables differently.

4. Working capital turnover: The working capital turnover ratio shows a significant variation over the years, ranging from 7.42 to 309.80. A higher working capital turnover ratio indicates that the company generates more revenue with less investment in working capital. The sharp increase in 2020 could result from a change in the company's operating cycle or business strategy.

In conclusion, McDonald`s Corp exhibits varying degrees of efficiency in managing its assets and liabilities, as demonstrated by the activity ratios. Further analysis and comparison with industry standards would be necessary to assess the company's overall performance in this context.

Average number of days

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	4.04	4.35	4.78	4.67	4.89
Days of sales outstanding (DSO)	days	35.62	33.30	29.43	40.10	38.00
Number of days of payables	days	84.30	82.01	86.55	67.70	96.24

Based on the provided data for McDonald's Corp activity ratios, we can see the following trends:

1. Days of Sales Outstanding (DSO):
- The DSO ratio measures how many days, on average, it takes for the company to collect its accounts receivable.
- McDonald's DSO has been fluctuating over the years, with a slight increase from 29.43 days in 2021 to 35.62 days in 2023.
- A higher DSO may indicate a slower collection process, which could potentially impact the company's cash flow if not managed efficiently.

2. Days of Inventory on Hand (DOH):
- Unfortunately, specific data for Days of Inventory on Hand (DOH) is not provided for analysis in the table.
- DOH ratio measures how many days a company takes to sell its entire inventory.
- Monitoring DOH is crucial for managing inventory levels effectively and avoiding excess or obsolete inventory.

3. Number of Days of Payables:
- The information regarding the Number of Days of Payables is not available for analysis in the table.
- This ratio would typically help assess how long the company takes to pay its suppliers.
- Efficient management of payables is essential for maintaining good relationships with suppliers and managing cash flow effectively.

Overall, based on the available DSO data trend, McDonald's Corp should focus on optimizing its collection process to reduce DSO and ensure timely inflow of cash. Additionally, monitoring inventory levels closely (if DOH data were available) and managing payables efficiently are essential aspects to consider for maintaining a healthy working capital cycle.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	1.02	0.98	0.94	0.77	0.88
Total asset turnover	0.45	0.46	0.43	0.36	0.45

The fixed asset turnover ratio of McDonald's Corp has shown a relatively stable trend over the past five years, with a gradual increase from 0.87 in 2019 to 1.02 in 2023. This indicates that the company is generating more revenue from its fixed assets over time, implying improved efficiency in utilizing its long-term assets to generate sales.

On the other hand, the total asset turnover ratio has fluctuated slightly over the same period, ranging from 0.36 in 2020 to 0.46 in 2022, but then decreasing to 0.45 in 2023. This ratio measures how efficiently the company is using all of its assets to generate revenue. The lower total asset turnover compared to fixed asset turnover suggests that McDonald's is not as effective in generating sales from its total assets, including both short-term and long-term assets.

In conclusion, while the fixed asset turnover ratio has shown a positive trend, the total asset turnover ratio indicates that there may be room for improvement in utilizing all assets effectively to generate revenue. McDonald's should focus on optimizing the use of both fixed and total assets to improve overall operational efficiency and profitability in the long term.