Texas Roadhouse Inc (TXRH)

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	3.37	3.32	3.57	3.57	3.87	2.53	2.77	3.02	3.77	8.01	7.93	7.92	7.72	6.69	7.70	6.52	6.60	5.81	6.17	7.71
Days of sales outstanding (DSO)	days	13.83	4.00	5.09	3.61	13.67	3.54	4.40	4.52	17.01	5.96	5.98	5.41	14.99	4.70	4.42	3.42	13.16	4.70	5.58	5.03
Number of days of payables	days	11.56	11.47	11.31	11.05	10.75	7.58	8.83	10.08	11.35	23.19	27.62	29.19	23.12	22.13	21.12	13.80	20.07	20.09	22.66	28.79
Cash conversion cycle	days	5.64	-4.15	-2.65	-3.87	6.80	-1.52	-1.67	-2.53	9.42	-9.22	-13.71	-15.86	-0.41	-10.74	-9.00	-3.86	-0.32	-9.58	-10.91	-16.06

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 3.37 + 13.83 – 11.56
= 5.64

The cash conversion cycle measures how long it takes for a company to convert its investment in inventory and other resources into cash flow from sales. A negative cash conversion cycle indicates that the company is able to generate cash from sales before having to pay its suppliers, which is generally a positive sign.

Looking at the data for Texas Roadhouse Inc over the past few quarters, we observe fluctuations in the cash conversion cycle. In the most recent quarter of December 31, 2023, the company's cash conversion cycle stands at 5.64 days, indicating that it takes approximately 5.64 days to convert its investments in inventory to cash from sales. This represents an improvement compared to the previous quarter where the cycle was negative (-4.15 days) which suggests the company is efficiently managing its working capital.

However, the company's performance has been inconsistent as there are quarters with negative cash conversion cycles such as September 30, 2023, June 30, 2023, and so on. This variability could be due to factors such as seasonal fluctuations in sales, changes in inventory management, or shifts in payment terms with suppliers and customers.

It is crucial for Texas Roadhouse Inc to closely monitor and manage its cash conversion cycle to ensure efficient use of resources and maximize cash flow. By optimizing inventory levels, streamlining operations, and negotiating favorable payment terms, the company can potentially improve its working capital efficiency and overall financial health.