Chipotle Mexican Grill Inc. (NYSE:CMG)

An examination of short-term operating activity ratios reveals several noteworthy trends between 2021 and 2025. Generally, the company demonstrates efficient management of its short-term assets and liabilities, with some fluctuations observed over the period.

Inventory Management

Inventory turnover remained consistently high, fluctuating between 169.51 and 185.34. While a slight decrease was noted in 2024, the ratio recovered in 2025, approaching the levels seen in 2022 and 2023. The average inventory processing period remained constant at 2 days throughout the entire period, indicating a consistently rapid inventory cycle.

Receivables Management

Receivables turnover exhibited an increasing trend from 2021 to 2023, peaking at 85.44. A subsequent decline occurred in 2024 and 2025, settling at 76.22. The average receivable collection period remained stable at 5 days for most of the period, with a slight improvement to 4 days in 2023, before returning to 5 days in the following years. This suggests a generally efficient collection of receivables, though a slight lengthening of the collection cycle is apparent in the later years.

Payables Management

Payables turnover demonstrated a consistent upward trend, increasing from 35.79 in 2021 to 41.82 in 2025. This indicates the company is increasingly utilizing its credit period with suppliers. The average payables payment period remained relatively stable at 10 days from 2021 to 2023, decreasing slightly to 9 days in 2024 and 2025, suggesting a potential negotiation of more favorable payment terms.

Working Capital Management

Working capital turnover experienced significant volatility. It increased dramatically from 14.86 in 2021 to 34.00 in 2022, then decreased to 16.73 in 2023, followed by increases to 18.49 in 2024 and a substantial rise to 42.77 in 2025. This suggests a changing relationship between working capital and sales, with a notably more efficient utilization of working capital in 2025.

Cash Conversion Cycle

The cash conversion cycle remained negative throughout the period, ranging from -4 to -2 days. This indicates the company effectively converts its investments in resources into cash before needing to finance those investments through payables. The cycle improved from -3 days in 2021 and 2022 to -4 days in 2023, then slightly improved to -2 days in 2024 and 2025, suggesting increasing efficiency in managing the flow of cash.

Overall Operating Cycle

The operating cycle remained relatively stable, fluctuating between 6 and 7 days. This consistency suggests a predictable and efficient process for converting inventory into cash.

An examination of the provided financial information reveals trends in inventory management over a five-year period. Restaurant operating costs consistently increased throughout the period, while inventory levels also generally rose, though with varying impacts on inventory turnover.

Inventory Turnover

The inventory turnover ratio exhibited a generally stable pattern from 2021 to 2023, increasing from 177.91 to 185.34. This suggests a consistent efficiency in managing inventory relative to restaurant operating costs during these years. A decrease was observed in 2024, with the ratio falling to 169.51, indicating a slower rate of inventory conversion into sales. The ratio partially recovered in 2025, rising to 179.76, but remained below the levels seen in 2022 and 2023.

The decline in 2024 warrants further investigation. While restaurant operating costs continued to increase significantly, the inventory level experienced a more substantial increase than in prior years. This suggests a potential build-up of inventory that did not keep pace with the growth in operating costs, leading to the reduced turnover.

The modest recovery in 2025 suggests some correction in inventory management, but the ratio did not return to its previous highs. The inventory level increased only slightly in 2025, while restaurant operating costs continued to rise, indicating a continued, albeit lessened, pressure on inventory turnover.

Restaurant operating costs increased each year, from US$5,840,052 thousand in 2021 to US$8,899,394 thousand in 2025. Inventory levels also increased over the period, moving from US$32,826 thousand in 2021 to US$49,508 thousand in 2025. However, the rate of increase in inventory was not always proportional to the increase in operating costs, which appears to be a key driver of the fluctuations in the inventory turnover ratio.

Overall, the analysis indicates a generally efficient inventory management system, but with a notable dip in efficiency during 2024. Continued monitoring of the inventory turnover ratio, alongside the growth in restaurant operating costs and inventory levels, is recommended to ensure optimal inventory control.

The receivables turnover ratio exhibits a generally increasing trend from 2021 to 2023, followed by a decline in the subsequent two years. This indicates a shifting pattern in how efficiently the company converts its credit sales into cash.

Receivables Turnover Trend

The receivables turnover ratio increased from 75.77 in 2021 to 85.44 in 2023, suggesting an improvement in the speed at which the company collects its receivables during this period. This could be attributed to more effective credit policies, improved collection efforts, or a change in customer payment behavior.

However, the ratio decreased to 78.59 in 2024 and further to 76.22 in 2025. This decline suggests a lengthening of the collection period, potentially due to extended credit terms offered to customers, a relaxation of credit standards, or difficulties in collecting outstanding balances. It is important to investigate the reasons behind this recent downturn.

Accounts receivable, net, increased consistently from 2021 to 2025. While revenue also increased over the same period, the growth in receivables outpaced revenue growth in 2024 and 2025, contributing to the observed decrease in receivables turnover.

Revenue and Receivables Relationship

Revenue demonstrated consistent growth throughout the analyzed period, increasing from US$7,547,061 thousand in 2021 to US$11,925,601 thousand in 2025. This indicates a strong overall sales performance.

Accounts receivable, net, also increased, rising from US$99,599 thousand in 2021 to US$156,466 thousand in 2025. The rate of increase in receivables accelerated in 2024 and 2025, which, when considered alongside the revenue figures, explains the reduction in receivables turnover.

The combination of increasing receivables and fluctuating revenue growth rates resulted in a dynamic receivables turnover ratio. Further investigation into the company’s credit and collection policies, as well as the aging of receivables, is recommended to understand the underlying causes of the recent decline in efficiency.

The accounts payable activity, as measured by payables turnover, demonstrates a generally increasing trend over the five-year period. This suggests a growing efficiency in how quickly the company pays its suppliers. Restaurant operating costs, exclusive of depreciation and amortization, consistently increased throughout the period, providing context for the changes in accounts payable and turnover.

Payables Turnover

Payables turnover exhibited a slight decrease from 35.79 in 2021 to 35.61 in 2022. However, beginning in 2023, the ratio began a consistent upward trajectory, reaching 36.86, then 39.38 in 2024, and culminating at 41.82 in 2025. This indicates the company is becoming more efficient in managing and paying its suppliers over time, potentially due to improved negotiation terms or streamlined payment processes. The increase could also reflect a deliberate strategy to reduce outstanding payables.

The consistent growth in restaurant operating costs alongside the increasing payables turnover suggests that the company is effectively managing its supplier payments despite a larger volume of operational expenses. The relatively stable accounts payable balance, increasing modestly from US$163,161 thousand in 2021 to US$212,813 thousand in 2025, further supports the conclusion that the increased turnover is not simply a result of higher payable amounts, but rather improved payment efficiency.

Accounts Payable

Accounts payable increased steadily throughout the period, from US$163,161 thousand in 2021 to US$212,813 thousand in 2025. The rate of increase slowed in the final two years, suggesting a potential stabilization of supplier credit terms or a more controlled approach to managing payable balances relative to the continued growth in operating costs.

In summary, the observed trends indicate a positive development in the company’s short-term financial management, specifically regarding its supplier relationships and payment practices. The increasing payables turnover, coupled with the controlled growth in accounts payable, suggests improved operational efficiency and financial health.

The working capital turnover ratio exhibits considerable fluctuation over the five-year period. Initial values demonstrate an increase followed by a decrease, and then a significant rise. This suggests evolving efficiency in utilizing working capital to generate sales.

Working Capital Turnover Trend

The ratio increased substantially from 14.86 in 2021 to 34.00 in 2022, indicating a marked improvement in the efficiency of working capital usage. However, this was followed by a decrease to 16.73 in 2023. A further increase to 18.49 was observed in 2024, before a substantial jump to 42.77 in 2025. This final value represents the highest turnover ratio within the observed period.

The fluctuations in the working capital turnover ratio do not appear directly correlated with revenue growth. While revenue consistently increased year-over-year, the turnover ratio experienced both increases and decreases. This suggests that changes in working capital management practices, such as inventory control or accounts receivable/payable policies, likely played a significant role in the observed ratio variations.

Relationship to Revenue

Revenue increased consistently throughout the period, moving from 7,547,061 to 11,925,601. Despite this consistent revenue growth, the working capital turnover ratio did not follow a linear pattern. The largest increase in the turnover ratio occurred in 2022, alongside a substantial revenue increase, but the ratio then decreased in 2023 despite continued revenue growth. The most significant turnover ratio increase occurred in 2025, again alongside revenue growth.

The substantial increase in the working capital turnover ratio in 2025 warrants further investigation. It could indicate a highly efficient use of working capital, or potentially aggressive management of accounts payable or inventory levels that may not be sustainable in the long term. The decrease in working capital in 2025, coupled with the increased revenue, supports the idea of improved efficiency, but a deeper analysis of the components of working capital is recommended.

Working Capital Levels

Working capital decreased significantly from 2021 to 2022, then increased in 2023 and 2024, before decreasing again in 2025. This volatility in working capital levels, combined with the fluctuating turnover ratio, suggests dynamic changes in short-term asset and liability management.

The analysis reveals a consistent pattern regarding inventory management over the five-year period. Specifically, the average inventory processing period remained remarkably stable, while inventory turnover exhibited some fluctuation.

Average Inventory Processing Period

The average inventory processing period consistently remained at 2 days from 2021 through 2025. This indicates a highly efficient inventory system where goods are sold very quickly after being acquired. The sustained low number of days suggests effective supply chain management and minimal holding costs associated with inventory.

Inventory Turnover

Inventory turnover increased from 177.91 in 2021 to 184.27 in 2022, and then to 185.34 in 2023, demonstrating increasing efficiency in converting inventory into sales. A slight decrease was observed in 2024, with the ratio falling to 169.51. However, the ratio recovered in 2025, rising to 179.76. While there was a dip in 2024, the overall trend suggests a strong ability to manage inventory levels effectively. The fluctuations, though present, remain within a relatively narrow range, indicating consistent sales velocity.

The combination of a consistently low average inventory processing period and a generally high inventory turnover ratio suggests a well-optimized inventory management strategy. The slight decrease in inventory turnover in 2024 warrants further investigation, but the subsequent recovery in 2025 indicates it may have been a temporary anomaly.

The average receivable collection period remained remarkably stable over the five-year period examined. Receivables turnover, however, exhibited some fluctuation. A detailed examination of these metrics is presented below.

Average Receivable Collection Period

The average number of days to collect receivables consistently remained at five days from 2021 through 2023, and then held steady at five days through 2025. This indicates a highly efficient and consistent process for converting credit sales into cash. The minimal variation suggests effective credit and collection policies are in place and consistently applied.

Receivables Turnover

Receivables turnover increased from 75.77 in 2021 to 85.44 in 2023, indicating an improving efficiency in collecting receivables. This suggests that, during this period, the company was more effectively managing its credit sales and reducing the time it took to convert those sales into cash. However, a decrease to 78.59 in 2024 was observed, followed by a further decline to 76.22 in 2025. While still representing a relatively high turnover rate, these later decreases suggest a potential slowing in the collection process or a change in sales terms.

The consistent collection period, despite fluctuations in receivables turnover, suggests that any changes in turnover are likely driven by shifts in sales volume or credit terms rather than a deterioration in collection efficiency. Further investigation into sales trends and credit policies during 2024 and 2025 would be beneficial to understand the reasons behind the declining turnover ratio.

The operating cycle remained remarkably stable over the five-year period examined. Minor fluctuations were observed in the components of the cycle, but the overall duration exhibited a consistent pattern. The analysis below details the trends in each component and the resulting operating cycle.

Average Inventory Processing Period

The average inventory processing period remained constant at 2 days throughout the entire period, from 2021 to 2025. This indicates a consistent efficiency in managing inventory and converting it into finished goods available for sale.

Average Receivable Collection Period

The average receivable collection period demonstrated minimal variability. It held steady at 5 days for 2021, 2022, 2024, and 2025, with a slight improvement to 4 days in 2023. This suggests a consistent ability to collect payments from customers in a timely manner, with a brief period of enhanced efficiency in the collection process during 2023.

Operating Cycle

The operating cycle, calculated as the sum of the average inventory processing period and the average receivable collection period, largely remained at 7 days. A slight decrease to 6 days was noted in 2023, coinciding with the improvement in the receivable collection period. The cycle returned to 7 days in 2024 and remained there through 2025. This overall stability suggests consistent efficiency in converting raw materials into cash from sales.

In summary, the operating cycle metrics demonstrate a high degree of consistency. The minor fluctuations observed do not appear to indicate any significant shifts in the company’s operational efficiency. The stable inventory processing period and consistently quick receivable collection period contribute to a predictably short operating cycle.

The analysis reveals a consistent pattern in the observed short-term activity ratios. Specifically, the payables turnover ratio and the average payables payment period demonstrate notable trends over the five-year period.

Payables Turnover

The payables turnover ratio exhibits an upward trend, increasing from 35.79 in 2021 to 41.82 in 2025. This indicates an increasing efficiency in how quickly the entity pays its suppliers. The increase, while consistent, is not dramatic year-over-year, suggesting a steady improvement rather than a significant shift in payment practices.

Average Payables Payment Period

Correspondingly, the average payables payment period demonstrates a slight downward trend, decreasing from 10 days in 2021 and 2022 to 9 days in 2024 and 2025. This decrease aligns with the increasing payables turnover ratio, confirming that the entity is settling its obligations to suppliers in a shorter timeframe. The period remains consistently low, indicating effective management of supplier relationships and potentially leveraging favorable payment terms.

The observed trends suggest a strengthening of the entity’s short-term financial position with respect to its suppliers. The consistent improvement in both ratios implies a proactive approach to managing accounts payable and maintaining healthy supplier relationships.

The short-term operating activity ratios indicate a consistently efficient cash conversion cycle over the analyzed period. Inventory processing remains remarkably stable, while both receivable collection and payable payment periods exhibit minor fluctuations. These factors contribute to a negative cash conversion cycle, suggesting the company effectively manages its working capital.

Average Inventory Processing Period

The average inventory processing period remains constant at 2 days throughout the entire period from 2021 to 2025. This indicates a highly consistent and efficient inventory management system, with minimal time required to convert raw materials into finished goods.

Average Receivable Collection Period

The average receivable collection period is largely stable, fluctuating between 4 and 5 days. A slight improvement is observed in 2023, decreasing to 4 days, before returning to 5 days in 2024 and 2025. This suggests a generally quick and reliable collection of payments from customers.

Average Payables Payment Period

The average payables payment period remains consistently at 10 days for 2021, 2022, and 2023. A slight decrease to 9 days is noted in 2024 and 2025. This suggests a consistent approach to managing payments to suppliers, with a minor trend towards slightly faster payments in the later years.

Cash Conversion Cycle

The cash conversion cycle is consistently negative, ranging from -3 to -4 days. This indicates that the company receives cash from customers before it needs to pay its suppliers. The cycle improved slightly from -3 days in 2021 and 2022 to -4 days in 2023, then moved to -2 days in 2024 and 2025. This efficient cycle demonstrates strong working capital management and a favorable liquidity position.

Overall, the analyzed ratios demonstrate a strong and stable pattern of efficient working capital management. The consistently negative cash conversion cycle is a positive indicator of the company’s operational effectiveness.