McDonald’s Corp. (NYSE:MCD)

The analysis of the financial ratios and periods over the examined quarters reveals a number of trends in operational efficiency and working capital management.

Inventory Turnover

The inventory turnover ratio exhibits variability, with notable peaks around mid-2022 and early 2024, reaching above 180 times annually, suggesting periods of faster inventory movement. However, there are intervals, particularly towards late 2022 and early 2023, where the ratio declines below 150, indicating slower inventory processing during those periods.

Receivables Turnover

The receivables turnover ratio shows a general declining trend from a high of 5.93 in early 2022 down to around 3.67 by late 2025. This indicates a lengthening in the time customers take to settle their accounts, which could signal potential challenges in credit management or collection efforts.

Payables Turnover

Payables turnover is relatively stable though with some fluctuations. The ratio peaks in early 2022 at 11.4 but then dips to lower levels near 7.46 to 7.53 during certain quarters in 2022 and 2023, reflecting longer payment periods to suppliers. Toward the latter periods, it recovers somewhat, suggesting improved payment efficiency.

Working Capital Turnover

This ratio is marked by high volatility, with extremely large spikes such as 23.54 and 33.38 in early 2022 and mid-2024, respectively. These spikes indicate periods where working capital is being utilized very efficiently relative to sales, but the inconsistency suggests potential operational irregularities or episodic shifts in working capital structure.

Average Inventory Processing Period

This metric remains very stable, consistently hovering around 2 days, with only occasional increases to 3 days. The steadiness points to a consistent pace in inventory handling and turnover throughout the period.

Average Receivable Collection Period

The average collection period shows an increasing trend, moving from approximately 62 days at the start of 2022 to nearly 99 days by late 2025. This indicates a gradual deterioration in the speed of collecting receivables, which might impact liquidity and cash flow if not managed carefully.

Operating Cycle

The operating cycle lengthens correspondingly with the increase in the receivable collection period, moving up from around 64 days in early 2022 to just over 100 days by 2025. This lengthening suggests an overall slower cash-to-cash cycle in the business.

Average Payables Payment Period

Payables payment period fluctuates moderately but tends to increase over time, rising from about 32 days in early 2022 to values between 37 and 49 days in the subsequent periods. This implies a slight extension in the time taken by the company to pay its suppliers, which may be a strategic cash management decision or a consequence of external factors.

Cash Conversion Cycle

The cash conversion cycle shows an increased duration, especially evident after 2022, where it rises from a low of 27 days to above 50 days consistently by 2024 and further reaching into the 60s by late 2025. This lengthening cash conversion cycle could impact liquidity, signaling a need for improved efficiency in converting resources back into cash.

Overall, the data reflects a company experiencing fluctuating efficiency in inventory and working capital utilization, with a noticeable increase in collection periods and a lengthening operating and cash conversion cycle. These trends suggest potential areas for focus include tightening credit controls, improving collections, and better management of payables and inventory processes to optimize cash flow and operational efficiency.

The financial data presents notable variations in company-owned and operated restaurant expenses, inventories, and inventory turnover over the examined periods.

Company-owned and Operated Restaurant Expenses

The expenses demonstrate some fluctuations with a general pattern of increase and decrease throughout the periods. Starting at 1,818 million US dollars in the first quarter of 2021, expenses peaked around the third quarter of 2024 at 2,248 million US dollars. Thereafter, a slight decline is seen towards the end of the data series, although values remain relatively elevated above the initial levels. Notably, the expenses exhibited a decrease in the second quarter of 2022, followed by a resurgence towards the last quarters of 2023 and 2024.

Inventories, at Cost, Not in Excess of Market

Inventories remained relatively stable across the quarters, fluctuating within a narrow range between 43 and 56 million US dollars. There is no extraordinary upward or downward trend, indicating consistent inventory levels despite changes in restaurant expenses. Minor increases are observed toward the last quarters, particularly during the fourth quarter of 2024, where inventories reached 56 million.

Inventory Turnover Ratio

The inventory turnover ratio shows considerable variability but maintains a generally high turnover rate, consistently above 140 throughout the periods. The ratio peaks at 183.32 during the second quarter of 2022, indicating more efficient inventory utilization at that time. A visible decline occurs in subsequent quarters, reaching a low around the fourth quarter of 2022 and the first quarter of 2023, before rising again in mid-2023. The ratio ends with a moderate decrease by the third quarter of 2025, suggesting some reduction in inventory turnover efficiency relative to the observed peak periods.

Overall, the data suggests that restaurant expenses are subject to periodic increases and decreases without a clear linear trend, inventories are maintained at relatively consistent levels, and inventory turnover experiences fluctuations indicative of varying operational efficiency over time.

The analysis of the quarterly financial data reveals several notable trends in sales, receivables, and turnover ratios over the observed periods.

Sales by Company-owned and operated restaurants

Sales figures exhibit a fluctuating pattern across quarters. Initially, sales climbed from 2,162 million US dollars in Q1 2021 to a peak of 2,598 million in Q3 2021. Following this peak, there was a dip reaching 2,113 million in Q2 2022, after which sales experienced moderate recovery with intermittent increases and decreases.
More recently, sales showed strength again in Q3 2024 with 2,656 million US dollars, although subsequent quarters reflected a decline, reaching 2,132 million in Q2 2025, before a slight recovery by Q3 2025. Overall, sales demonstrate cyclical variation without a clear sustained upward or downward trajectory.

Accounts and notes receivable

Receivables in US dollars generally trended upwards over the analyzed timeframe. Starting at 1,734 million in Q1 2021, receivables increased to 2,488 million by Q4 2022, indicative of rising outstanding balances.
Despite some fluctuations, the upward trend continued, with balances peaking near 2,579 million in Q3 2025. This growth could suggest either increased credit sales or longer collection periods.

Receivables turnover ratio

The receivables turnover ratio, an indicator of how efficiently a company collects its receivables, showed a declining trend over the periods. Initially, the ratio was stable and relatively high, peaking at 5.93 in Q1 2022, which implies swift collections.
Thereafter, the ratio decreased steadily to a low of 3.67 by Q3 2025. This decline indicates a slowdown in collections efficiency, potentially reflecting longer receivable aging or challenges in cash collection processes.

In summary, while sales volumes fluctuate with some quarter-to-quarter recovery, there is an overall pattern of increasing receivables paired with decreasing receivables turnover. This combination suggests the company is experiencing greater amounts of credit extended to customers and a corresponding reduction in collection speed over the analyzed periods. Monitoring these trends is important for managing working capital and ensuring ongoing operational liquidity.

The analysis of the quarterly financial data reveals several notable trends and fluctuations over the observed periods.

Company-owned and operated restaurant expenses

These expenses show variability across quarters, initially rising from 1,818 million USD in the first quarter of 2021 to a peak of 2,108 million USD in the third quarter of the same year. Subsequently, there is a decline through the first half of 2022, followed by another upward trend reaching 2,135 million USD in the third quarter of 2023. The expense pattern shows alternating increases and decreases with no consistent trend, but the amounts generally remain within the range of approximately 1,770 to 2,248 million USD.

Accounts payable

Accounts payable also fluctuates notably. Starting at 670 million USD in early 2021, it generally rises with some fluctuations, peaking at 1,103 million USD in the fourth quarter of 2023. The trend indicates increasing liabilities on average, although there are periods of decline, such as the reduction following the peak in late 2023, then a decrease before rising again in mid-2025.

Payables turnover ratio

The payables turnover ratio shows considerable variability. It begins at 10.52 in early 2021 and experiences a gradual decline with occasional spikes; the lowest points are recorded in the fourth quarters of 2021 and 2023, at approximately 7.99 and 7.46 respectively. This ratio reflects the frequency with which the company settles its accounts payable, and the observed decrease over time may suggest a slower payment cycle or increasing days payable outstanding during certain periods. Some recovery in turnover is noted in several quarters, such as mid-2022 and mid-2025, but the ratio does not return to the initial high values seen in early 2021.

Overall, the patterns suggest a dynamic operating environment with varying expense levels, increasing accounts payable balances, and fluctuating payment turnover. These trends could reflect changes in operational activities, supplier payment terms, or cash management strategies over the period analyzed. The variability in payables turnover alongside increasing accounts payable balances may warrant further investigation to assess working capital efficiency and liquidity management.

The analysis of the provided financial data reveals several notable trends across the observed periods.

Working Capital

Working capital shows considerable volatility over the reported quarters, with values ranging from a high of 3129 million US dollars on December 31, 2021, to a low of -1396 million US dollars on September 30, 2024. In general, there are periods of significant increase followed by sharp declines, indicating fluctuating short-term financial health. Notably, working capital experiences negative values in the later periods of 2024 but recovers to positive territory in the subsequent quarters of 2025.

Sales by Company-owned and Operated Restaurants

Sales exhibit a relatively stable yet fluctuating pattern over the quarters. The highest recorded sales within the dataset reach approximately 2656 million US dollars on September 30, 2024, while the lowest level observed is around 2113 million US dollars on June 30, 2022. Overall, sales demonstrate seasonal variability but maintain a range predominantly between 2100 and 2650 million US dollars, with periodic increases and decreases that suggest cyclical performance patterns typical of the restaurant industry.

Working Capital Turnover

The working capital turnover ratio shows substantial fluctuation throughout the periods. After an initial value of 9.32 on March 31, 2021, the ratio declines to a low of 3.13 by December 31, 2021, then spikes to an unusually high of 23.54 on March 31, 2022, following which it fluctuates between approximately 3.33 and 13.38 in subsequent quarters. These variations suggest inconsistencies in managing working capital relative to sales, with some quarters demonstrating high efficiency in converting working capital into sales, while others indicate lower efficiency levels.

In summary, the company's working capital presents a turbulent trend with notable volatility and occasional negative values, which may signal liquidity management challenges during certain periods. Sales remain relatively stable, reflecting consistent operational performance with expected seasonal shifts. The working capital turnover ratio’s volatility underscores variable efficiency in working capital utilization, potentially impacted by the sharp fluctuations in working capital levels in certain quarters. These mixed signals highlight areas for focused financial management to improve stability and efficiency over time.

Inventory Turnover

The inventory turnover ratio exhibits variability across the observed periods, reflecting fluctuations in inventory management efficiency. Starting at 155.54 in March 2021, the ratio trends upward, peaking at 183.32 in June 2022. This peak suggests enhanced efficiency in inventory utilization during that quarter. Following this, a decline is evident, with the ratio dropping to 141.94 by December 2022, indicating slower inventory movement.

Subsequent quarters show moderate recovery and oscillation, with turnover ratios generally ranging between 140 and 180. Notably, the ratio increases again to 181.22 in March 2024, demonstrating another phase of improved inventory velocity, before declining to values around 147 by the end of the observed period in September 2025.

Overall, the data suggest a cyclical pattern in inventory turnover, with periods of increased efficiency followed by slowdowns, likely influenced by operational or market dynamics.

Average Inventory Processing Period

The average inventory processing period remains remarkably stable across all periods, consistently fluctuating between 2 and 3 days. The slight increase to 3 days occurs sporadically in a few quarters (notably in December 2021, December 2022, and March 2023), but promptly returns to a consistent 2-day period in subsequent quarters. This stability indicates a steady and efficient inventory management cycle, with minimal variation in the time required to process inventory.

Overall Insights

The relationship between the inventory turnover ratio and average inventory processing period suggests that despite fluctuations in turnover rates, the company maintains a consistently short inventory processing time. This balance reflects effective operational control in maintaining inventory flow, even as turnover ratios experience periodic variances.

Periods of higher turnover ratio correlate with strong inventory management performance, while dips may point to transient challenges in sales or supply chain aspects. The consistently low processing period underscores resilience in inventory handling efficiency over the years.

The analysis of the quarterly financial ratios related to receivables over the observed periods reveals discernible trends in both the receivables turnover ratio and the average collection period. These metrics provide insight into the efficiency of the company's credit policies and its effectiveness in collecting receivables from customers.

Receivables Turnover Ratio

The receivables turnover ratio experienced an initial upward trend from 4.77 at the beginning of the period to peak at 5.93 by the first quarter of 2022, indicating improved efficiency in the collection of receivables during this time. After reaching this peak, there was a notable decline with some fluctuations, decreasing steadily to around 3.67 by the third quarter of 2025. This downward trend suggests a gradual reduction in the pace at which receivables are converted into cash, implying potential challenges in collection efficiency or changes in credit terms.

Average Receivable Collection Period

The average number of days for receivables collection initially improved, decreasing from 76 days to a low of 62 days by the first quarter of 2022, consistent with the peak in turnover ratio. This indicates faster receipt of payments during this interval. Following this period, the collection days gradually increased with some variability, reaching 99 days by the third quarter of 2025. The lengthening collection period complements the decreasing turnover ratio, signaling a slower collection process, potentially raising concerns regarding liquidity and credit risk.

Overall Interpretation

The inverse relationship observed between the receivables turnover ratio and the average collection period adheres to expected financial behavior: as turnover decreases, collection days increase. The initial improvements up to early 2022 suggest a period of enhanced operational efficiency or stricter credit control, while the subsequent deterioration points to weakened collection efforts or more lenient credit policies. This trajectory highlights the need for the company to evaluate its receivables management practices to avoid adverse impacts on cash flow and working capital.

The analysis of the quarterly financial data reveals several notable trends in the company's operating efficiency over the observed periods.

Average Inventory Processing Period

The inventory processing period remains relatively stable throughout the years, fluctuating mostly between 2 and 3 days. This consistency suggests effective inventory management, with minimal changes in the duration required to process inventory.

Average Receivable Collection Period

The receivable collection period shows more variability, ranging from a low of 62 days to a high of 99 days. Initially, there is a downward trend from 76 days at the beginning to 62 days, indicating faster collections. However, this is followed by a general upward trend with increasing days towards the end of the period, reaching as high as 99 days. This increase may indicate a slowing in the collection of receivables, potentially affecting cash flow and indicating possible challenges in credit management or changes in customer payment behaviors.

Operating Cycle

Given that the operating cycle combines inventory processing and receivable collection periods, it reveals a similar pattern to the receivable collection period. The operating cycle starts around 78 days, decreases to 64 days mid-period, and then increases again to 101 days by the end. The initial reduction suggests some improvements in operational efficiency, but the subsequent rise highlights longer cash conversion cycles, pointing to potential liquidity risks if the trend continues.

Overall, while inventory processing remains efficient and stable, the growing receivable collection period and operating cycle may warrant attention to mitigate potential impacts on the company's working capital and short-term liquidity.

The analysis of the payables turnover ratio and the average payables payment period over the examined quarters reveals notable fluctuations and trends indicating varying payment efficiency and supplier credit terms.

Payables Turnover Ratio

The payables turnover ratio exhibits a degree of volatility across the quarters. Initially, this ratio starts relatively high around the range of 10.5 to 10.1 in 2021, suggesting a faster rate of paying off suppliers. However, a noticeable decline occurs toward the end of 2021, dropping to approximately 7.5, indicating a slower payment pace or extended credit terms with suppliers during this period.

In 2022, the ratio rebounds somewhat, reaching peaks above 11 early in the year but then declines again towards the fourth quarter, settling near 7.5. In 2023 and 2024, the ratio fluctuates within a narrower range mostly between 7.4 and 9.5, indicating somewhat stabilized but slower payables turnover compared to earlier periods.

By the mid to late 2024 and into 2025, the ratio slightly improves, mostly holding around 8 to 9.7, which suggests a moderate pace of payments though still below the early 2021 highs.

Average Payables Payment Period (Days)

The average payment period complements the turnover analysis by showing the number of days taken on average to settle payables. Initially, in 2021, periods range from 35 to 46 days, with a significant increase observed at the end of the year reaching nearly 48 days, consistent with the observed drop in payables turnover ratio.

During 2022, the payment period fluctuates between 32 and 49 days, indicating some inconsistency but generally longer payment durations compared to the early 2021 levels.

Throughout 2023 and 2024, the payment periods remain variable, mostly oscillating between 38 and 49 days, showing a tendency toward longer payment cycles relative to earlier years.

In 2025, the payment periods decline marginally but remain around 37 to 44 days, suggesting slightly improved payment timing but still longer than the initial periods examined.

Overall Trends and Insights

There is an inverse relationship between the payables turnover ratio and the average payment period, as expected. Periods with lower turnover ratios coincide with higher days outstanding, indicating slower payments to suppliers.

The data suggests the company extended its payment terms or slowed payments significantly toward the end of 2021 and again intermittently through 2022 and later periods. This could reflect strategic decisions to manage cash flow, supplier negotiations, or operational challenges.

While some recovery in turnover and reduction in days payable occur in mid to late 2024 and 2025, the payables turnover does not return to the earlier high levels observed in 2021, indicating a maintained longer payables cycle in recent periods.

The analysis of the reported quarterly financial metrics reveals several patterns and shifts over the examined periods.

Average inventory processing period

The inventory processing period remains relatively stable throughout the periods, fluctuating between 2 and 3 days. This indicates consistent efficiency in inventory turnover with minimal variation, maintaining a short processing time.

Average receivable collection period

The receivable collection period shows notable variability and an overall increasing trend in later periods. Initially, the collection days decrease from 76 days to around 62 days by early 2022, suggesting improved collections speed during that time. However, from mid-2022 onwards, the days increase steadily, reaching up to 99 days in later quarters of 2025. This pattern points to elongating customer payment cycles, potentially indicating challenges in receivables management or credit policy changes.

Average payables payment period

The payables payment period also experiences fluctuations. It starts in the mid-30 days range with a spike to 46 and 48 days in certain quarters, particularly towards the end of 2021 and 2022. While some quarters record shorter payment terms near 32-35 days, others extend to nearly 45-49 days. Overall, the company appears to be managing payment terms variably, possibly balancing supplier relationships and cash outflows.

Cash conversion cycle

The cash conversion cycle exhibits a declining trend from 43 days in early 2021 to a low near 27 days by the end of 2021, indicating improved operational efficiency and faster cash availability. However, from 2022 onwards, the cycle trends upward, peaking around 62 days in late 2025. This rise correlates strongly with the increasing receivable collection period, suggesting slower cash recovery from customers outweighs stable inventory and payable periods. The expansion in the cash conversion cycle implies a growing working capital requirement and potentially tighter liquidity conditions.

In summary, while inventory management remains stable, the lengthening of receivables and fluctuations in payables have influenced the overall cash conversion cycle, leading to a deterioration in working capital efficiency over time.