Shake Shack Inc (SHAK)
Cash conversion cycle
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 3.54 | 3.75 | 4.35 | 4.37 | 1.97 |
| Days of sales outstanding (DSO) | days | 5.66 | 5.64 | 6.77 | 6.74 | 6.12 |
| Number of days of payables | days | 14.60 | 18.31 | 22.55 | 35.57 | 12.66 |
| Cash conversion cycle | days | -5.40 | -8.91 | -11.44 | -24.46 | -4.57 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 3.54 + 5.66 – 14.60
= -5.40
The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A negative cash conversion cycle indicates that a company is able to generate cash from its operations before it has to pay its suppliers.
Shake Shack Inc has shown a consistent improvement in its cash conversion cycle over the past five years. In 2023, the company's cash conversion cycle was -5.40 days, indicating that it was able to convert its investments into cash quickly.
The company has significantly reduced its cash conversion cycle from -8.91 days in 2022 to -5.40 days in 2023. This improvement suggests that Shake Shack Inc has been more efficient in managing its inventory, collecting receivables, and paying suppliers, leading to a faster conversion of assets into cash.
Overall, the trend of a decreasing cash conversion cycle for Shake Shack Inc demonstrates its ability to efficiently manage its working capital and generate cash flows from its core operations. This efficiency is crucial for the company's financial health and sustainability in the long run.
Peer comparison
Dec 31, 2023