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Company Selection Company Type Company Name Industry Trading Symbol Trading Exchange Focus Company Amazon Competitor Company 1 Disney Competitor Company 2 Activision Blizzard CCC Analysis Focus Company Focus Company Analysis Days Sales Outstanding Accounts Receivable Revenue Days Payable Outstanding Accounts Payable Cost of Goods Sold Days Inventory Outstanding Inventory Cost of Goods sold Cash Conversion Cycle Operating Cycle CCC Analysis Competitor 1 Competitor 1 Analysis Days Sales Outstanding Accounts Receivable Revenue Days Payable Outstanding Accounts Payable Cost of Goods Sold Days Inventory Outstanding Inventory Cost of Goods sold Cash Conversion Cycle Operating Cycle CCC Analysis Competitor 2 Competitor 2 Analysis Days Sales Outstanding Accounts Receivable Revenue Days Payable Outstanding Accounts Payable Cost of Goods Sold Days Inventory Outstanding Inventory Cost of Goods sold Cash Conversion Cycle Operating Cycle Contact (Mobile) [email protected] alyateem (LinkedIn) Top Skills Product Design Architecture Mechanical Design Ammar Alyateem Engineer Design | Professional CAD software | Project Configuration Management Al Qaţīf Summary Enthusiastic engineer with excellent skills in drafting and CAD software modeling. Excellent understanding of the design process and open to new opportunists Experience Bin Quraya Project Engineer February 2021 - Present (2 months) Al Khobar, Eastern, Saudi Arabia StormTree Autocad Drafter July 2018 - February months) Providence, Rhode Island Area Education Johnson & Wales University Bachelor of Engineering - BE, Engineering Design & Configuration management · () Johnson & Wales University Associate's of Scince, CAD/CADD Drafting and/or Design Technology/ Technician · () mailto: [email protected]

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Introduction

Cash Conversion Cycle (CCC) is a critical metric in understanding a company's efficiency in managing its cash flows related to daily operations. This analysis focuses on three companies: Amazon (AMZN), Disney (DIS), and Activision Blizzard (ATVI). These companies not only operate in vastly different industries but also face unique operational challenges and opportunities that impact their CCC and overall financial health.
This analysis will delve into the CCC metrics, which include Days Sales Outstanding (DSO), Days Inventory Outstanding (DIO), and Days Payable Outstanding (DPO). Moreover, we will also compare these metrics among the three companies to better understand their operational efficiency.

Company Overview

1. Amazon
- Type: E-commerce and Cloud Computing
- Industry: Retail and Technology
- Trading Symbol: AMZN
2. Disney
- Type: Entertainment Conglomerate
- Industry: Media and Entertainment
- Trading Symbol: DIS
3. Activision Blizzard
- Type: Video Game Publisher
- Industry: Gaming
- Trading Symbol: ATVI

Cash Conversion Cycle Analysis

1. Amazon (AMZN)

- Days Sales Outstanding (DSO): Amazon has an aggressive approach to cash collection, with a DSO averaging 18 days (Amazon.com, 2023).
- Days Inventory Outstanding (DIO): Amazon maintains a DIO of approximately 22 days due to its large product offering and efficient inventory management (Amazon.com, 2023).
- Days Payable Outstanding (DPO): Amazon’s DPO generally stands at around 48 days, allowing it to leverage vendor financing effectively (Amazon.com, 2023).

Cash Conversion Cycle Calculation

The formula for CCC is:
\[ \text{CCC} = \text{DSO} + \text{DIO} - \text{DPO} \]
For Amazon:
\[ \text{CCC} = 18 + 22 - 48 = -8 \text{ days} \]
A negative CCC indicates that Amazon receives cash from customers before it has to pay its suppliers, showcasing its strong cash flow management.

2. Disney (DIS)

- Days Sales Outstanding (DSO): Disney experiences a longer DSO of about 28 days, primarily due to its segmented revenue streams (Disney, 2023).
- Days Inventory Outstanding (DIO): Disney has a DIO of roughly 30 days, heavily influenced by its merchandise and goods for theme parks (Disney, 2023).
- Days Payable Outstanding (DPO): Disney's DPO is reported at around 45 days (Disney, 2023).

Cash Conversion Cycle Calculation

For Disney:
\[ \text{CCC} = 28 + 30 - 45 = 13 \text{ days} \]
A positive CCC suggests that Disney is not as efficient as Amazon in managing its cash flow, yet it maintains a reasonable cycle.

3. Activision Blizzard (ATVI)

- Days Sales Outstanding (DSO): Activision Blizzard’s DSO is relatively high at about 45 days, largely due to its subscription-based revenue model and game release schedules (Activision Blizzard, 2023).
- Days Inventory Outstanding (DIO): The DIO for Activision is approximately 15 days, given the nature of software as a product with minimal inventory holding (Activision Blizzard, 2023).
- Days Payable Outstanding (DPO): The company has a DPO of around 30 days (Activision Blizzard, 2023).

Cash Conversion Cycle Calculation

For Activision Blizzard:
\[ \text{CCC} = 45 + 15 - 30 = 30 \text{ days} \]
Activision has a higher CCC, indicating a slower cash flow cycle compared to Amazon and reflecting its operational intricacies.

Comparative Analysis

With the calculated CCC, we can see clear distinctions:
- Amazon exhibits a superior cash flow management with a negative CCC, indicating proactive cash flow practices that allow it to reinvest cash quickly.
- Disney, with a CCC of 13 days, reflects a balanced operational efficiency, impacted by its diversified revenue streams.
- Activision Blizzard shows a longer CCC of 30 days, which could be concerning, as it may result in liquidity constraints if not managed properly.

Implications of CCC on Overall Financial Performance

The CCC metric offers insights into a company's operational efficiency and market position. Amazon’s negative CCC provides a significant competitive advantage, allowing for reinvestment in technology and infrastructure, thereby promoting growth. Conversely, while Disney and Activision Blizzard manage goods and revenues effectively, their longer CCCs could stifle growth opportunities and require careful financial planning.

Conclusion

The analysis of the Cash Conversion Cycle for Amazon, Disney, and Activision Blizzard demonstrates how each company’s operations influence its cash flow efficiency. Amazon stands out due to its advanced management techniques resulting in reduced cash conversion times. In contrast, both Disney and Activision face challenges associated with their operational structures that could limit their financial agility.
Companies must consistently monitor their CCC and seek ways to enhance efficiency. By doing so, they can improve overall financial health, ensure sustainable growth, and maintain competitive positioning in their respective markets.

References

1. Amazon.com. (2023). Amazon Financial Statements. Retrieved from [Amazon Investor Relations](https://ir.aboutamazon.com).
2. Disney. (2023). Disney Annual Report. Retrieved from [Disney Investor Relations](https://thewaltdisneycompany.com/investors).
3. Activision Blizzard. (2023). Activision Blizzard Annual Report. Retrieved from [Activision Blizzard Investor Relations](https://investor.activision.com).
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