Advance Auto Parts Inc (AAP)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 1.57 | 1.39 | 1.26 | 1.30 | 1.24 |
| Receivables turnover | — | — | — | — | — |
| Payables turnover | — | — | — | — | — |
| Working capital turnover | 6.15 | 10.55 | 18.78 | 10.04 | 6.62 |
Advance Auto Parts Inc's activity ratios provide insights into how efficiently the company manages its resources and operates its business.
1. Inventory Turnover:
- The inventory turnover ratio measures how many times a company sells and replaces its inventory within a specific period.
- Advance Auto Parts Inc's inventory turnover has shown a slight improvement over the years, increasing from 1.24 in 2020 to 1.57 in 2024.
- The increasing trend suggests that the company is selling its inventory more efficiently.
2. Receivables Turnover:
- Receivables turnover ratio indicates how quickly a company collects on its accounts receivable.
- The data provided shows that Advance Auto Parts Inc's receivables turnover was not available for the years provided. This could imply that the company may not rely heavily on credit sales or that the information was not disclosed.
3. Payables Turnover:
- Payables turnover ratio measures how quickly a company pays off its suppliers.
- The data indicates that Advance Auto Parts Inc's payables turnover information was not available for the given years. This lack of information may indicate that the company's payment cycle or supplier relationships are not disclosed or may vary significantly.
4. Working Capital Turnover:
- The working capital turnover ratio shows how efficiently a company utilizes its working capital to generate sales.
- Advance Auto Parts Inc's working capital turnover has fluctuated over the years, with a noticeable increase in 2022 and a decline in 2024.
- A high working capital turnover ratio indicates that the company is effectively using its working capital to drive sales.
In conclusion, while Advance Auto Parts Inc has shown improvements in its inventory turnover and working capital turnover ratios, the lack of information for receivables and payables turnover ratios makes it challenging to assess the overall efficiency of the company's operating cycle and management of its working capital.
Average number of days
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 231.88 | 262.13 | 288.59 | 280.19 | 294.49 |
| Days of sales outstanding (DSO) | days | — | — | — | — | — |
| Number of days of payables | days | — | — | — | — | — |
To analyze Advance Auto Parts Inc's activity ratios, we first look at its Days of Inventory on Hand (DOH). The trend in DOH over the past five years shows some fluctuations, ranging from 231.88 days at the end of December 2024 to 294.49 days at the end of December 2020. A decreasing trend in this ratio indicates that the company has been able to manage its inventory more efficiently over time, which is generally a positive sign as it suggests better inventory turnover.
Next, we examine the Days of Sales Outstanding (DSO) for Advance Auto Parts Inc. However, the data provided shows that DSO is not available for any of the years between 2020 and 2024. This means that we do not have information on the average number of days it takes for the company to collect its accounts receivable. Generally, a lower DSO is favorable as it implies quicker collection of receivables and better cash flow management.
Lastly, we consider the Number of Days of Payables for Advance Auto Parts Inc. Similar to DSO, the data shows that the information on the company's payables turnover is not available for the years 2020 to 2024. The number of days of payables helps in understanding how long the company takes to pay its suppliers. A higher number of days indicates that the company is taking longer to settle its payables, potentially indicating a favorable cash flow position.
In conclusion, while we see a positive trend in Advance Auto Parts Inc's inventory turnover based on the decreasing DOH, the lack of data on DSO and payables turnover limits our comprehensive analysis of the company's activity ratios. It is advised to obtain more detailed information on DSO and payables turnover to better assess the company's operational efficiency and working capital management.
Long-term
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | — | — | 2.60 | 7.20 | 6.91 |
| Total asset turnover | 0.84 | 0.92 | 0.93 | 0.90 | 0.85 |
The fixed asset turnover ratio measures how efficiently a company utilizes its fixed assets to generate revenue. For Advance Auto Parts Inc, the fixed asset turnover has shown an increasing trend from 6.91 in 2020 to 7.20 in 2021, indicating that the company is generating more revenue relative to its investment in fixed assets. However, there was a significant drop in this ratio to 2.60 in 2022, which may suggest a decrease in revenue generated from fixed assets during that period.
On the other hand, the total asset turnover ratio reflects the company's efficiency in utilizing all its assets to generate sales. Advance Auto Parts Inc's total asset turnover has been relatively stable over the years, with values of 0.85 in 2020, 0.90 in 2021, 0.93 in 2022, 0.92 in 2023, and 0.84 in 2024. This indicates that, on average, the company is generating sales in proportion to its total assets, with a slight decrease observed in 2024.
Overall, the fixed asset turnover ratio shows fluctuation, with a notable decline in 2022, while the total asset turnover ratio remains relatively steady, suggesting that Advance Auto Parts Inc has been effectively utilizing its assets to drive revenue, albeit with some variability in the efficiency of its fixed asset utilization.