McDonald’s Corporation (MCD)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Inventory turnover	92.43	90.10	83.90	76.37	78.21
Receivables turnover	10.88	10.25	10.96	12.40	9.10
Payables turnover	5.03	4.33	4.45	4.22	5.39
Working capital turnover	35.12	22.62	14.29	7.42	309.80

Based on the provided data for McDonald’s Corporation, we can analyze the activity ratios as follows:

1. Inventory Turnover:
- The inventory turnover ratio indicates how efficiently the company manages its inventory. A higher ratio is generally favorable as it suggests that inventory is being sold quickly.
- McDonald’s inventory turnover has shown a slight decrease from 2020 to 2021, followed by a consistent increase through 2024. This improvement indicates better inventory management over the years.

2. Receivables Turnover:
- The receivables turnover ratio measures how efficiently the company collects its receivables. A higher ratio implies that the company is collecting payments quickly.
- McDonald’s receivables turnover increased significantly from 2020 to 2021, indicating improved collection practices. The ratio remained relatively stable from 2022 onwards, suggesting consistent efficiency in receivables management.

3. Payables Turnover:
- The payables turnover ratio evaluates how quickly a company pays its suppliers. A higher ratio implies that the company is paying its bills promptly.
- McDonald’s payables turnover decreased from 2020 to 2021, potentially indicating a change in payment terms. However, the ratio increased from 2022 to 2024, suggesting a more efficient payment cycle.

4. Working Capital Turnover:
- The working capital turnover ratio assesses how effectively the company utilizes its working capital to generate sales. A higher ratio indicates efficient utilization of resources.
- McDonald’s working capital turnover saw a significant decline from 2020 to 2021, possibly due to operational changes. However, from 2022 to 2024, the ratio steadily increased, reflecting improved efficiency in utilizing working capital for generating sales.

Overall, McDonald’s Corporation has shown improvements in its activity ratios over the years, indicating enhanced inventory management, receivables collection, payables payment, and working capital utilization. These trends suggest that the company is effectively managing its operational activities to drive business performance.

Average number of days

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Days of inventory on hand (DOH)	days	3.95	4.05	4.35	4.78	4.67
Days of sales outstanding (DSO)	days	33.56	35.62	33.30	29.43	40.10
Number of days of payables	days	72.56	84.31	82.01	86.55	67.70

Based on the data provided, we can analyze McDonald's Corporation activity ratios as follows:

1. Days of Inventory on Hand (DOH):
- The DOH for McDonald's has seen a slight fluctuation over the years, declining from 4.67 days in 2020 to 3.95 days in 2024.
- A decreasing trend in DOH indicates that McDonald's is managing its inventory more efficiently, turning over its inventory faster.

2. Days of Sales Outstanding (DSO):
- The DSO for McDonald's decreased significantly from 40.10 days in 2020 to 29.43 days in 2021, and has since stabilized around 33-36 days.
- A lower DSO implies that McDonald's is collecting its accounts receivables more quickly, which is a positive sign of effective credit management.

3. Number of Days of Payables:
- McDonald's payables period increased from 67.70 days in 2020 to 86.55 days in 2021, but has gradually decreased to 72.56 days by 2024.
- A decreasing trend in payables period indicates that McDonald's is taking longer to pay its suppliers, potentially improving its cash flow management.

Overall, the analysis of McDonald's activity ratios suggests that the company has been effectively managing its inventory, accounts receivables, and payables over the years, showcasing operational efficiency and financial stability.

Long-term

	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Fixed asset turnover	1.02	1.02	0.98	0.94	0.77
Total asset turnover	0.47	0.45	0.46	0.43	0.36

Based on the provided data, we can analyze McDonald’s Corporation's long-term activity ratios using the Fixed Asset Turnover and Total Asset Turnover ratios.

1. Fixed Asset Turnover:
- The Fixed Asset Turnover ratio measures how effectively a company generates sales revenue from its investments in fixed assets.
- McDonald’s Fixed Asset Turnover has been gradually increasing over the years, from 0.77 in 2020 to 1.02 in both 2023 and 2024.
- This indicates that McDonald’s is becoming more efficient in utilizing its fixed assets to generate sales, which is a positive trend for the company's profitability and operational efficiency.
- The increase in the ratio suggests that McDonald’s is improving its utilization of property, plant, and equipment to drive revenue growth.

2. Total Asset Turnover:
- The Total Asset Turnover ratio evaluates a company's ability to generate sales from its total assets.
- McDonald’s Total Asset Turnover has also shown an increasing trend, rising from 0.36 in 2020 to 0.47 in 2024.
- The gradual increase in this ratio signifies that McDonald’s is utilizing its total assets more effectively to drive sales, reflecting an improvement in the company's overall operational efficiency.
- A higher Total Asset Turnover ratio indicates that McDonald’s is generating more revenue relative to its total asset base, which is a positive indicator of the company's efficiency in utilizing its assets to generate sales.

In conclusion, the improving trends in both the Fixed Asset Turnover and Total Asset Turnover ratios suggest that McDonald’s Corporation is effectively optimizing its fixed and total assets to drive sales and enhance operational efficiency over the years, which could potentially lead to improved financial performance and shareholder value.