McDonald’s Corp. (NYSE:MCD)

Inventory Turnover

The inventory turnover ratio demonstrates significant fluctuations over the periods. Starting at 136.62 in March 2021, it generally increased reaching peaks around 183.32 in September 2022 and 181.22 in June 2024. However, periods such as March 2022 and December 2024 saw notable declines to 144.74 and 156.14, respectively. Overall, the trend indicates an enhancement in inventory management efficiency with occasional volatility.

Receivables Turnover

Receivables turnover displays a rising trend from 3.86 in March 2021 to a high of 5.93 in June 2022. After this peak, there is a gradual decline, settling around 4.0–4.2 in the most recent quarters. This suggests initial improvement in the speed of receivables collection, followed by a slowdown or stabilization in collection efficiency more recently.

Payables Turnover

The payables turnover ratio demonstrates considerable variation. It rose from 9.42 in March 2021 to a peak of 11.4 in June 2022, indicating faster payment to suppliers. Subsequently, it generally declined to fluctuating levels between 7.46 and 9.5, with the lowest values observed in March and December 2024. This pattern may reflect changes in payment policies or supplier terms over time.

Working Capital Turnover

The working capital turnover ratio shows extreme volatility and missing data in some periods. Notably, it starts from 131.28 in March 2021 but then declines sharply to single digits and lower values such as 3.13 in December 2021 and around 3.33 in December 2023. Certain quarters such as June 2024 and December 2024 have missing data. This inconsistency suggests irregularities or disruptions in working capital efficiency and possible challenges in managing short-term assets and liabilities.

Average Inventory Processing Period

This metric remains stable at 2–3 days across all observed quarters, indicating consistent inventory turnover speed, with minor fluctuations that are unlikely to materially impact analysis.

Average Receivable Collection Period

The average receivable collection period consistently decreased from 95 days in March 2021 to around 62 days in June 2022, reflecting improved collection efficiency. However, it then reverted upward slightly, fluctuating between 83 and 93 days in recent quarters, suggesting some deterioration or variability in collection practices.

Operating Cycle

The operating cycle shows an initial decrease from 98 days in March 2021 to a low of 64 days in June 2022, followed by an upward trend to around 91–95 days in later periods. This pattern mirrors changes in inventory and receivables periods, indicating the company experienced both improvements and reversals in overall operational efficiency.

Average Payables Payment Period

This period exhibits variability from 39 days at the start in March 2021, dropping to 32 days in June 2021, then increasing to peaks of 49 days in December 2023 and 48 days in December 2022. The fluctuations imply shifts in payment timing strategy, possibly balancing liquidity needs with supplier relationships.

Cash Conversion Cycle

The cash conversion cycle improved from 59 days in March 2021 down to 27 days in March 2022, indicating a faster cash recovery period. Following this, it trended upward again, reaching 54 days in March 2025. The overall cycle reflects alternating phases of more efficient and less efficient cash management, with recent increases suggesting potential areas for focus to shorten the cycle and improve liquidity.

Company-owned and operated restaurant expenses

The expenses exhibited notable fluctuations throughout the observed periods. Initially, expenses decreased from $1,753 million in March 2020 to $1,448 million in June 2020, indicating a possible reduction in operational activity or cost-cutting measures. Subsequently, expenses increased steadily, peaking at $2,108 million in September 2021. Following this peak, a general decline with intermittent volatility occurred until March 2023, where expenses again rose to $2,135 million in June 2023 and reached $2,248 million by September 2024. The latest period ended with a decrease to $1,859 million in March 2025. This pattern suggests varying operational intensity, influenced potentially by market conditions, cost management strategies, or expansions in company-operated locations.

Inventories, at cost, not in excess of market

Inventory levels remained relatively stable overall, fluctuating within a range of $39 million to $56 million. Minor increases were observed in late 2020 and into early 2021, reflecting a temporary accumulation of inventory. A notable rise to $56 million occurred in December 2022, followed by recurring oscillations around the mid-40s to mid-50s million marks. The stability of inventory levels, despite variable expenses, may indicate efficient inventory control or consistent supply chain management.

Inventory turnover ratio

The inventory turnover ratio showed high volatility but generally maintained elevated values throughout the periods. Starting at an exceptionally high 136.62 in December 2020, it peaked above 180 multiple times, specifically in September 2022 (183.32) and September 2024 (180.84), demonstrating rapid inventory movement relative to the cost of goods sold. Periodic decreases occurred, such as the drop to 141.94 in December 2022, but the ratio predominantly remained above 140. This indicates efficient utilization of inventory with strong sales performance, reflecting effective inventory and demand management.

Overall analysis

The data depicts operational expenses that respond dynamically over time, possibly in response to internal adjustments or external economic factors. Inventory levels remained controlled and consistent, suggesting effective stock management. The high and fluctuating inventory turnover indicates robust sales efficiency, with inventory being converted to sales quickly. Elevated turnover rates coupled with varying expenses may imply a focus on optimizing costs while maintaining strong sales volumes. These trends point toward active operational management, balancing cost pressures and demand to sustain performance.

The analysis of the quarterly data reveals several key trends related to sales, receivables, and efficiency ratios over the period considered.

Sales by Company-owned and Operated Restaurants

Sales figures fluctuate notably across quarters, indicating variability in operational performance or market conditions. There is a steep decline from March 31, 2020 (2026 million USD) to June 30, 2020 (1594 million USD), likely reflecting external disruptions in early 2020. Subsequently, sales recovered sharply in the third and fourth quarters of 2020, peaking in September 2021 at 2598 million USD. After this peak, sales demonstrate a slight downward trend toward early 2022 but again show increases and variability through 2023 and into 2024. The highest value within the later periods appears on September 30, 2024 (2656 million USD), suggesting a possible cyclical or seasonal pattern. The most recent data point as of March 31, 2025 (2132 million USD) indicates a decline from the previous peak, signaling potential volatility or seasonal adjustments.

Accounts and Notes Receivable

The receivables show an initial spike from March 31, 2020 (1695 million USD) to June 30, 2020 (2853 million USD), which coincides with the drop in sales during the same period, possibly due to delayed payments or changes in credit terms. Following this, receivables generally decline but remain elevated compared to early 2020 levels, fluctuating irregularly across the quarters. Notably, receivables gradually increase again from December 31, 2022 (2115 million USD) through June 30, 2024 (2461 million USD), aligning with periods of increased sales. The pattern suggests periodic management of credit and collections aligning with operational activity, though the relatively high receivables in certain quarters could indicate extended credit or slower payment collection cycles.

Receivables Turnover Ratio

This efficiency ratio, which measures how effectively receivables are collected, shows meaningful variation within the available periods. Starting at 3.86 on September 30, 2020, this ratio improves steadily through the end of 2021, reaching a peak of 5.93 on March 31, 2022, indicating faster collection rates and improved working capital management during that timeframe. After this peak, the ratio declines gradually to approximately 4 in the most recent quarters by March 31, 2025. The downward trend in turnover ratio after the peak may imply a lengthening of the receivables collection period or more liberal credit policies entered into after early 2022. The fluctuations suggest active but varying management of accounts receivable performance over time.

In summary, the company experiences variability in both sales and receivables figures, with signs of strong recovery and growth in sales following the initial impact in early 2020. Receivables and turnover ratios indicate shifts in credit and collection efficiency, peaking in early 2022 before moderating. The patterns reflect: - Sales volatility with periodic peaks and troughs, potentially due to external factors or seasonality. - Receivables responding to sales trends but with some delay and occasional elevated balances. - Management of receivables efficiency showing improvement through 2021 into early 2022, followed by a moderation suggesting changing credit dynamics.

Company-owned and operated restaurant expenses

The expenses show considerable fluctuations over the observed quarters, with values ranging between approximately 1,448 million and 2,248 million US dollars. There is a notable dip in the second quarter of 2020, likely influenced by external factors affecting operations during that period. Subsequently, expenses generally increased with periodic drops, demonstrating some seasonality or operational adjustments. From mid-2022 to early 2023, expenses maintain an upward tendency, peaking in the third quarter of 2024 at 2,248 million US dollars, before decreasing again toward the first quarter of 2025. The pattern suggests variable cost management or varying activity levels in company-operated restaurants.

Accounts payable

Accounts payable amounts fluctuate across quarters, ranging from 538 million to 1,103 million US dollars. The data reveals an initial decrease around mid-2020, followed by a rising trend that culminates in an all-time high in the fourth quarter of 2021 at 1,103 million. Afterward, the figures demonstrate volatility but tend to hover within a range approximately between 800 and 1,029 million. This variability may indicate changes in vendor payment terms or procurement activity in response to operating demands.

Payables turnover ratio

The payables turnover ratio exhibits significant variability throughout the reported periods. Initially rising from around 9.42 to a peak of 10.52 in the first half of 2021, the ratio subsequently declines to lows near 7.46 by late 2022 and late 2023. This decline suggests a slowdown in turnover velocity, potentially indicating extended payment terms or slower procurement cycles. However, some recovery in turnover occurs intermittently, with the ratio moving back above 9.0 in several quarters. Overall, the payables turnover ratio reflects fluctuating operational cycles and supplier payment practices.

Summary Insights

The data portrays a dynamic financial environment characterized by considerable fluctuations in operating expenses and accounts payable. The pattern in restaurant expenses aligns with potential operational scaling or external operational impacts. Accounts payable movements suggest strategic management of supplier obligations, possibly influenced by cash flow considerations or supply chain factors. The variability in payables turnover ratios supports the view of changing payment behaviors or operational tempos. Collectively, these trends highlight the company's adaptive management of operating costs and liabilities in response to evolving business conditions.

The analysis of the quarterly financial data reveals notable fluctuations and trends across working capital, sales by company-owned restaurants, and working capital turnover ratios over the observed periods. Several key observations emerge from the data, indicating varying operational and financial dynamics throughout the time span.

Working Capital

The working capital displays significant volatility, starting with a positive value of 3,569 million USD in the first quarter of 2020 but dipping to a negative figure (-637 million USD) in the subsequent quarter. It then recovers and generally maintains positive figures through late 2021, peaking at 3,129 million USD in the last quarter of 2021. During 2022 and early 2023, working capital remains mostly positive, although with moderate fluctuations. However, from the first quarter of 2024 onwards, the working capital reveals a trend of higher volatility including several negative values, such as -829 million USD and -1,396 million USD, before stabilizing around positive values again in the most recent quarters. This pattern suggests intermittent liquidity pressures or changing current asset and liability compositions affecting working capital management.

Sales by Company-owned and Operated Restaurants

Sales figures demonstrate a cyclical yet overall stable trend with some quarterly fluctuations. Initial sales were 2,026 million USD in early 2020, followed by a notable dip in the second quarter of the same year, likely reflecting external economic impacts. Subsequently, sales increased steadily across late 2020 and through 2021, peaking intermittently between approximately 2,474 million USD and 2,656 million USD in certain quarters of 2021 and 2024. Sales then show a tendency to slightly decline towards the later quarters of the data series but remain relatively robust above 2,100 million USD in most quarters. These patterns reflect typical operational seasonality along with periods of growth and contraction within company-operated outlets.

Working Capital Turnover Ratio

The working capital turnover ratio, available for several quarters within the dataset, exhibits considerable variation with some extreme values, indicating fluctuating efficiency in utilizing working capital to generate sales. Early ratios are exceptionally high (e.g., 131.28 in Q1 2021), suggesting unusually low or near-zero working capital at that time, which can distort the ratio. Subsequently, ratios stabilize within a lower range, generally between approximately 3 and 9, reflecting a more normalized relationship between working capital and sales. Intermittent spikes (e.g., 23.54, 33.38) correspond with quarters where working capital experienced significant changes, reaffirming the sensitivity of this metric to working capital variations.

Overall, the financial data indicates that working capital management faces occasional challenges as reflected in large variations and negative values in some quarters. Sales performance by company-operated restaurants remained relatively stable with periods of growth, suggesting underlying resilience in revenue generation. The working capital turnover ratios highlight the variability in capital efficiency, influenced strongly by working capital availability. The combination of these factors points to an operational environment characterized by fluctuating liquidity management but supported by consistent revenue from core restaurant operations.

Inventory Turnover

The inventory turnover ratio demonstrates a generally strong performance over the observed periods starting from March 31, 2020, with a notable absence of data for the initial quarters of 2020. Beginning in March 31, 2021, the turnover ratio shows high values consistently above 140, peaking at 183.32 in September 30, 2022. This indicates an efficient management of inventory with rapid sales cycles during these periods.

There is some fluctuation observed, with turnover dipping slightly to 141.94 in March 31, 2023, but recovering again to above 180 by June and September 2024. Towards the end of the period ending March 31, 2025, turnover decreases moderately to 159.98, though it remains well above the minimum levels observed earlier. Overall, the data suggests strong inventory management with seasonal or cyclic variations.

Average Inventory Processing Period

The average inventory processing period has been consistently low and stable across all reported quarters, predominantly at 2 days with only intermittent 3-day periods. This short processing duration aligns with the high inventory turnover ratios and suggests an efficient and swift movement of inventory within the business cycle.

The minimal variations, such as brief increases to 3 days in some quarters, are minor and do not indicate meaningful changes in operational efficiency. This stability points to a well-maintained supply chain process supporting rapid inventory turnover and minimal holding times.

Overall Observations

The combined high inventory turnover and consistently low average inventory processing period indicate an effective inventory management strategy. The company maintains brisk inventory cycles, minimizing storage duration and enhancing cash flow through quick sales conversions.

Minor fluctuations in turnover ratios and slight variations in processing days appear normal and suggest responsiveness to market or operational conditions without impacting overall efficiency significantly.

Receivables Turnover Ratio

The receivables turnover ratio exhibits an overall fluctuating trend over the period analyzed. Starting from 3.86 at the beginning of the data, it increased to a peak of 5.93 around mid-2022, indicating an improvement in the efficiency of collecting receivables. However, post this peak, the ratio steadily declined and settled around 4.0 by the first quarter of 2025. This decline suggests a decrease in collection efficiency in recent quarters.

Average Receivable Collection Period

The average collection period, expressed in days, inversely mirrors the receivables turnover ratio trends. Initially, there was a reduction from 95 days to a low of 62 days by mid-2022, signifying quicker collections. Following this improvement phase, the period lengthened again and fluctuated between 83 and 91 days toward the end of the dataset. The increasing trend in days reflects a slowdown in the speed of receivable collections in the later quarters.

Comparative Insights

The inverse relationship between receivables turnover and average collection period is consistent throughout the timeline. The peak efficiency in mid-2022 denotes a period during which receivables were managed effectively. The subsequent decline in turnover and corresponding increase in collection days could indicate emerging challenges in credit management or changes in customer payment behaviors starting from late 2022 onward.

Overall Assessment

While there was a marked improvement in receivables management until mid-2022, recent data points to a regression towards less efficient collection practices. The slight fluctuations observed toward the end could warrant further investigation into operational or market factors affecting the company's receivables performance.

Inventory Processing Period

The average inventory processing period remained consistently low throughout the observed quarters, fluctuating narrowly between 2 and 3 days. Starting from the first available data point, the period stabilized quickly at 2 days with occasional slight increases to 3 days. This denotes efficient inventory turnover with minimal variation over the analyzed time frame.

Receivable Collection Period

The average receivable collection period shows a noticeable declining trend early in the period, dropping from 95 days to around 70 days within several quarters. Following this initial improvement, the collection period demonstrates increased volatility with values oscillating between 62 and 93 days, exhibiting no clear long-term directional change. Towards the latest quarters, the period hovers near the upper eighties to low nineties, indicating potential challenges in further shortening the collection cycle.

Operating Cycle

The operating cycle mirrors the movements in the receivable collection period due to the stable inventory period component. It decreases significantly from 98 days to the low seventies initially, suggesting improved efficiency in cash conversion. However, similar to receivables, the cycle experiences fluctuations afterward, ranging mostly in the mid-eighties to low nineties. The trend indicates that after initial gains, the overall operating cycle stabilizes but with some inconsistency, implying possible variability in accounts receivable management or other operational factors affecting cycle length.

Payables Turnover

The payables turnover ratio demonstrates variability over the observed quarters, beginning at 9.42 and reaching a peak value of 11.4 in June 2022. Following this peak, the ratio shows a declining trend with some fluctuations, settling around 8.1 in December 2024 before rising again to reach 9.25 by March 2025. This pattern suggests periods of both faster and slower payments to suppliers, with no consistent upward or downward trend but rather cyclical variations.

Average Payables Payment Period

The average payables payment period, which represents the number of days taken to pay suppliers, starts at 39 days and fluctuates throughout the timeline. Notably, there is a decreasing trend from 46 days in March 2022 to 32 days in June 2022, indicating quicker payments during this interval. Afterward, the payment period oscillates, reaching highs such as 49 days in December 2023 and 48 days in March 2023, contrasted with lower periods near 38 to 40 days. The payment period trends generally mirror the inverse of the payables turnover ratio, consistent with the relationship between the two metrics.

Overall Insights

The data indicates variability in the management of payables over the years, with alternating periods of accelerated and decelerated payment activity. Such fluctuations may reflect strategic cash management decisions or responses to changing business conditions. No sustained long-term trend is evident toward either consistently faster nor slower payment cycles, suggesting adaptive payables management aligned with operational or market contexts.

Average inventory processing period

The average inventory processing period has remained relatively stable from March 2021 onward, oscillating mostly between 2 and 3 days. This indicates a consistent efficiency level in managing inventory turnover over the observed quarters, with no significant upward or downward trend.

Average receivable collection period

The average receivable collection period shows some fluctuation but generally remains in the higher range of days. It started at 95 days in March 2021, declined to a low of 62 days in June 2022, and then gradually increased again to levels around 90 days by early 2025. This suggests variability in the speed of collecting receivables, with a tendency towards longer collection periods in recent quarters compared to mid-2022.

Average payables payment period

The average payables payment period varies throughout the observed periods, starting at 39 days in March 2021, reaching lows around 32-34 days mid-2022, then rising again to peaks near 49 days in some quarters of 2023 and 2024, before slightly decreasing towards early 2025. This indicates variability in the company's payment practices, ranging between more prompt payments and more extended payment terms.

Cash conversion cycle

The cash conversion cycle exhibits a downward trend from 59 days in March 2021 to around 27 days in March 2022, showing improved efficiency in managing the operating cycle during this period. However, post-March 2022, the cycle lengthened again, fluctuating between 38 and 54 days through to early 2025. This suggests that after initial gains in cash flow efficiency, the company experienced some deterioration in the cash conversion process over subsequent quarters.

Summary

Overall, the inventory processing period remains stable, while receivables collection and payables payment periods are more volatile, reflecting fluctuations in working capital management practices. The cash conversion cycle improved markedly in early 2022 but showed signs of weakening afterward, indicating that the company may face challenges in maintaining optimal liquidity management over the longer term.