McDonald’s Corp. (NYSE:MCD)

Inventory Turnover

The inventory turnover ratio shows fluctuations over the period, starting at 136.62 in 2020 and increasing to a peak of 155.76 in 2023 before slightly declining to 148.84 in 2024. This indicates a generally efficient management of inventory with a notable improvement in 2023.

Receivables Turnover

The receivables turnover ratio experienced an increase from 3.86 in 2020 to 5.23 in 2021, followed by a decline to 4.14 in 2022 and relatively stable values around 4.0 in subsequent years. This suggests an initial improvement in collecting receivables efficiently, which later stabilized but did not return to the initial higher level.

Payables Turnover

The payables turnover ratio decreased significantly from 9.42 in 2020 to around 7.5 between 2021 and 2023, before a slight recovery to 8.1 in 2024. This indicates that the company was extending the payment period to suppliers over time but showed some tendency to shorten it again in the latest year.

Working Capital Turnover

The working capital turnover ratio dropped sharply from an exceptionally high 131.28 in 2020 to 3.13 in 2021, then improved steadily to 13.25 in 2024. This sharp initial decline likely reflects a change in the working capital base or accounting method, with a gradual recovery in efficiency thereafter.

Average Inventory Processing Period

The average inventory processing period remained very stable, with 3 days in 2020-2022, then improving slightly to 2 days in 2023 and 2024. This points to maintained or slightly improved efficiency in inventory handling.

Average Receivable Collection Period

The average receivable collection period decreased notably from 95 days in 2020 to 70 days in 2021, but then increased gradually to 93 days by 2023, finishing at 89 days in 2024. This pattern indicates some challenges in maintaining quick collection of receivables after an initial improvement.

Operating Cycle

The operating cycle mirrored the changes in receivables and inventory periods, falling from 98 days in 2020 to 73 in 2021, then rising to 95 days in 2023 and slightly declining to 91 days in 2024. This reflects the overall time tied up in operations before cash is collected.

Average Payables Payment Period

The average payables payment period increased steadily from 39 days in 2020 to a peak of 49 days in 2023, then receded somewhat to 45 days in 2024. The company took longer to pay suppliers for most years, easing slightly in the final year.

Cash Conversion Cycle

The cash conversion cycle followed a downward trend from 59 days in 2020 to a low of 27 days in 2021, then rose again to stabilize near 46 days in 2023 and 2024. This suggests improved cash flow efficiency initially, with a subsequent return to a moderate cash conversion timeline.

Company-operated restaurant expenses

There is an overall upward trend in company-operated restaurant expenses from 2020 through 2024. The expenses increased from $6,981 million in 2020 to $8,335 million in 2024, indicating a steady rise in the costs associated with operating the restaurants. Notably, there was a slight dip in 2022 to $7,381 million after an increase in 2021, but expenses resumed their upward trajectory in subsequent years.

Inventories, at cost, not in excess of market

Inventory levels remained relatively stable over the five-year period, fluctuating narrowly between $51 million and $56 million. This stability suggests consistent inventory management with minimal variation in stock levels relative to sales.

Inventory turnover ratio

The inventory turnover ratio exhibited variability within the given timeframe but overall showed improvement. It increased from 136.62 in 2020 to a peak of 155.76 in 2023, before slightly declining to 148.84 in 2024. The positive trend up to 2023 indicates enhanced efficiency in managing inventory relative to sales, though the slight decrease in 2024 may warrant monitoring.

Sales by Company-operated Restaurants

The sales figures exhibited variability over the observed period. Beginning at 8,139 million US dollars in 2020, sales increased significantly to 9,787 million in 2021. However, in 2022, sales contracted to 8,748 million, marking a notable decline compared to the previous year. The following years saw a recovery trend, with sales rising to 9,742 million in 2023 and slightly increasing again to 9,782 million in 2024. Overall, despite fluctuations, sales levels in the most recent years approached the peak seen in 2021.

Accounts and Notes Receivable

Receivables displayed a fluctuating but generally upward trend over the five-year span. An initial decrease was observed from 2,110 million US dollars in 2020 to 1,872 million in 2021, followed by a rise to 2,115 million in 2022. Subsequent periods saw further increases, reaching 2,488 million in 2023. A slight decline was noted in 2024, with receivables decreasing to 2,383 million. This pattern indicates variability in the company’s credit management or sales terms, with an overall increase in outstanding receivables towards the latter years.

Receivables Turnover Ratio

The receivables turnover ratio, reflecting the efficiency of receivables collection, demonstrated fluctuations throughout the period. Starting at 3.86 in 2020, the ratio improved considerably to 5.23 in 2021, suggesting faster collection. However, this efficiency declined to 4.14 in 2022 and further to 3.92 in 2023, indicating a slowdown in receivables collection. A marginal recovery to 4.1 was seen in 2024. Overall, after peaking in 2021, the ratio indicates reduced efficiency in collecting receivables in the subsequent years, although there was some improvement by 2024.

Company-operated restaurant expenses

The expenses for company-operated restaurants show a generally increasing trend over the five-year period. Starting at 6,981 million US dollars in 2020, expenses rose significantly to 8,047 million in 2021. There was a slight decrease to 7,381 million in 2022, followed by consecutive increases to 8,224 million in 2023 and 8,335 million in 2024. This pattern suggests fluctuations potentially linked to operational factors, but overall expenses have increased by approximately 19% from 2020 to 2024.

Accounts payable

Accounts payable values exhibit variability but with an overall rising trend. Beginning at 741 million US dollars in 2020, the figure increased considerably to 1,007 million in 2021, then decreased slightly to 980 million in 2022. In 2023, accounts payable rose again to 1,103 million but declined to 1,029 million in 2024. Despite these fluctuations, the balance is markedly higher than the 2020 level, indicating possibly increased purchasing or longer payment terms over time.

Payables turnover ratio

The payables turnover ratio indicates how many times accounts payable are paid within a period. The ratio declined steadily from 9.42 in 2020 to 7.46 in 2023, suggesting a lengthening payment period or slower turnover of payables. However, there is a rebound to 8.1 in 2024, indicating an improvement in payment efficiency compared to the previous year, yet still below the 2020 level. This trend could reflect changes in vendor payment policies or cash flow management strategies.

Working Capital

The working capital exhibited significant volatility over the five-year period. Starting at 62 million USD in 2020, it increased sharply to 3,129 million USD in 2021. Subsequently, it decreased consistently over the following years, reaching 1,622 million USD in 2022, then 1,127 million USD in 2023, and finally 738 million USD in 2024. This pattern indicates an initial accumulation of current assets over liabilities followed by a gradual reduction.

Sales by Company-operated Restaurants

The sales revenue from company-operated restaurants showed an overall growth trend with some fluctuations. Sales rose from 8,139 million USD in 2020 to 9,787 million USD in 2021, representing a notable increase. In 2022, sales declined to 8,748 million USD but rebounded in 2023 to 9,742 million USD. In 2024, sales remained relatively stable at 9,782 million USD, slightly surpassing the previous year.

Working Capital Turnover

The working capital turnover ratio demonstrated a considerable decline in 2021 compared to 2020, dropping from 131.28 to 3.13. This sharp decrease corresponds with the substantial increase in working capital observed in 2021. From 2022 onward, the ratio progressively improved, rising to 5.39 in 2022, then 8.64 in 2023, and reaching 13.25 in 2024. This suggests increasing efficiency in using working capital to generate sales after the initial drop.

Summary of Trends

An initial surge in working capital during 2021 was followed by a steady decrease in subsequent years, which aligns with fluctuating sales that ultimately demonstrated recovery and growth after a dip in 2022. The working capital turnover ratio, an indicator of operational efficiency, decreased sharply in 2021 as working capital increased disproportionately but improved steadily afterward, indicating better utilization of working capital in relation to sales.

Inventory Turnover

The inventory turnover ratio demonstrates an overall upward trend from 136.62 in 2020 to a peak of 155.76 in 2023, followed by a slight decline to 148.84 in 2024. This indicates an improvement in the efficiency of inventory management over the years, with the company increasingly able to sell and replace its inventory rapidly. The peak in 2023 suggests optimal inventory utilization before a minor decrease in the subsequent year.

Average Inventory Processing Period

The average inventory processing period remains stable at 3 days for the years 2020 through 2022, then decreases to 2 days in 2023 and maintains this shorter cycle into 2024. This reduction implies enhanced operational efficiency in processing inventory, contributing to the company’s faster inventory turnover observed during the same period.

The data indicates fluctuating trends in the company's receivables management over the observed periods. The receivables turnover ratio exhibits a notable increase from 3.86 in 2020 to a peak of 5.23 in 2021, suggesting an improvement in the effectiveness of collecting receivables during that year. However, this ratio declines to 4.14 in 2022 and continues to decrease to 3.92 in 2023 before experiencing a slight rebound to 4.1 in 2024. Overall, the turnover ratio in 2024 remains above the initial 2020 level but below the peak achieved in 2021.

Correspondingly, the average receivable collection period, measured in days, mirrors these trends inversely. It decreases significantly from 95 days in 2020 to 70 days in 2021, indicating faster collection of receivables. Subsequently, the collection period lengthens to 88 days in 2022 and further increases to 93 days in 2023, implying a slower collection process. In 2024, the collection period shortens slightly to 89 days but remains longer compared to 2021. This inverse relationship between the receivables turnover ratio and the collection period is consistent with expected financial behavior.

Receivables turnover ratio

Improved markedly in 2021, followed by a decline in subsequent years, with a moderate recovery in 2024.

Average receivable collection period

Decreased sharply in 2021, then lengthened over the next two years, with a slight reduction in 2024.

These trends suggest that the company enhanced its credit and collection efficiency significantly in 2021 but faced challenges in maintaining this performance in the following years. The partial recovery in 2024 may indicate renewed efforts to optimize collections or changing credit policies. Monitoring these metrics is advisable to ensure continued improvement in working capital management.

Average Inventory Processing Period

The average inventory processing period remained stable at 3 days during 2020 to 2022, indicating consistency in how inventory is managed. In 2023 and 2024, there was an improvement, with the period reducing to 2 days. This suggests enhanced efficiency in processing inventory over the most recent two years.

Average Receivable Collection Period

The average receivable collection period exhibited notable volatility. It decreased markedly from 95 days in 2020 to 70 days in 2021, implying a faster collection process. However, it increased again to 88 days in 2022 and further to 93 days in 2023. In 2024, there was a slight improvement to 89 days but still above the levels observed in 2021. This pattern indicates some instability in receivables management and collection efficiency over the period.

Operating Cycle

The operating cycle followed a trajectory similar to the receivable collection period due to its dependency on it. It declined from 98 days in 2020 to 73 days in 2021, reflecting a shorter cash conversion period. Subsequently, it lengthened to 91 days in 2022, then rose slightly to 95 days in 2023, before decreasing to 91 days in 2024. The fluctuations denote variability in overall operational efficiency, while recent years show some improvement compared to the peak values.

Payables Turnover

The payables turnover ratio shows a declining trend from 9.42 in 2020 to 7.46 in 2023, indicating a decrease in the frequency of payments to suppliers over these years. However, in 2024, this ratio experiences a slight increase to 8.1, suggesting a modest improvement in payment frequency during that year.

Average Payables Payment Period

The average payables payment period, measured in number of days, demonstrates an increasing trend from 39 days in 2020 to 49 days in 2023. This suggests that the company has been extending the time taken to settle payables over this period. In 2024, there is a reduction to 45 days, indicating a somewhat quicker payment cycle compared to the previous year, but still longer than earlier years.

Overall Analysis

The inverse relationship between payables turnover and average payment period is evident, as the decreasing turnover corresponds with a lengthening payment period. The changes imply a strategic decision or operational shift to manage cash outflows more conservatively by delaying payments. The slight reversal in 2024 for both metrics may represent efforts to improve supplier relations or adapt to changing operational needs.

Average Inventory Processing Period

The average inventory processing period demonstrates a slight improvement over the five-year span, reducing from 3 days in 2020-2022 to 2 days in 2023 and 2024. This indicates enhanced efficiency in managing inventory turnover, which could contribute to better operational effectiveness.

Average Receivable Collection Period

The average receivable collection period shows considerable fluctuation. It decreased significantly from 95 days in 2020 to 70 days in 2021, indicating faster collection of receivables during this period. However, it then increased to 88 days in 2022, followed by slight increases to 93 days in 2023 before slightly improving to 89 days in 2024. Overall, the period remains relatively high, suggesting ongoing challenges in receivables collection efficiency.

Average Payables Payment Period

The average payables payment period generally trended upward from 39 days in 2020 to 49 days in 2023, before decreasing slightly to 45 days in 2024. This pattern suggests a strategy of extending payment terms to suppliers for several years, possibly to improve cash flow, followed by a moderate reduction in the latest year.

Cash Conversion Cycle

The cash conversion cycle decreased markedly from 59 days in 2020 to 27 days in 2021, implying a substantial improvement in the overall efficiency of working capital management. However, it then increased to 43 days in 2022 and further to 46 days in 2023, remaining stable in 2024. Despite the recent increases, the cycle duration remains below the initial 2020 level, indicating relatively improved liquidity management compared to earlier periods.