McDonald’s Corporation (MCD)

Cash conversion cycle

		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
Cash conversion cycle	days	-35.06	-44.64	-44.36	-52.34	-22.94

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 3.95 + 33.56 – 72.56
= -35.06

The cash conversion cycle of McDonald's Corporation has shown a consistent improvement over the years as evidenced by the decreasing trend. In 2020, the cash conversion cycle was -22.94 days, indicating that McDonald's was able to convert its inventory into cash in less than a month. By the end of 2021, the cash conversion cycle improved further to -52.34 days, reflecting the company's efficiency in managing its working capital.

Although there was a slight increase in the cash conversion cycle by the end of 2022 to -44.36 days, McDonald's continued to demonstrate strong cash conversion capabilities. In 2023 and 2024, the cash conversion cycle remained relatively stable at -44.64 days and -35.06 days respectively, indicating sustained efficiency in converting inventory into cash.

Overall, McDonald's Corporation has effectively managed its operating cycle, highlighting its ability to efficiently turn inventory into cash. The negative values indicate that McDonald's is able to collect cash from customers before the need to pay suppliers, which is a positive sign of liquidity and operational efficiency.