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After reading today's Article on the cash conversation cycle I ran the fomulas on Costco last three years of financials and this is what I got:
Days Inventory outstanding	2001            2000                1999 		
net sales	                34797.04	32164.3	                27456.03
net sales per day	        95.33435616	88.12136986	        75.222
Inventories	                2738.5	        2490.09	                2210.48

Days Inventory outstanding	28.72521628	28.25750444	29.38608386

Days sales outstanding			
receivables	                324.77	        174.38             168.65
DSO (receivables/net sales)	3.406641772	1.978861657	2.242030257

Days Payable Outstanding			
Cost of Goods Sold	        30598.14	28322.17	24170.2
COGS per day 	                83.83052055	77.5949863	66.21972603
Accounts Payable	        2727.64	        2197.14	          1912.63
DPO	                        194.8314286	156.9385714	136.6164286

Cash Conversation Cycle			
DIO+DSO-DPO	                -162.6995705	-126.7022053	-104.9883145 

So based on this it looks like Costco converts its cash well before it has to pay out its payables. Does this look right?  If so this is amazing.

Goo
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Your DIO should be calculated using COGS not Revenue and your DPO figure is way off, it should be about 29, 28 and 33 for FY '99 - '01 respectively. COST's CCC is in the positive single digits.

Marv

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So based on this it looks like Costco converts its cash well before it has to pay out its payables. Does this look right? If so this is amazing.

I haven't looked at your math, but it is true that Costo has inventory turns high enough that they are paid by their customers before they have to pay the manufacturers. It's not 100%, of course, but it's fairly high.

This is also true of Wal-Mart. The last time I read the figure, about 65% of WalMart's merchandise leaves the shelves before payment is due to the manufacrurer. The similar metric for K-Mart was somewhere around 25-30%. In effect, K-Mart was financing most of its inventory itself, while the manufacturers were financing most of Wal-Mart's.

I have never seen a comparable figure for Costco, but I do know that their inventory turns are slightly higher even than WalMart.
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I'm trying to calculate the CCC..where do I find the Accounts Payable?

Also, is this most meaningful for retailers or is it a good measure for other industries as well?

Thanks.
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"I'm trying to calculate the CCC..where do I find the Accounts Payable?

look half way down on the balance sheet:
http://quote.fool.com/Snapshot/financials.asp?osymb=&osymbols=cost&symbols=cost&currticker=COST&rtype=5&report=2

Goo
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Okay I must have been smoking crack last night! I recalculated and got a cash conversation cycle of 3.545800245 for 2001 5.754234447 for 2000 and 6.738207015 for 1999. Still these are really impressive numbers. They also have declined each year.

G

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