Advance Auto Parts Inc (AAP)

Short-term

Turnover ratios

Inventory turnover: Advance Auto Parts Inc's inventory turnover has been relatively stable over the past five years, ranging between 2.05 and 2.31 times. This ratio indicates how efficiently the company manages its inventory levels and how quickly it sells its products. The increase in inventory turnover from 2020 to 2023 suggests improved inventory management efficiency.

Receivables turnover: The receivables turnover ratio shows how efficiently Advance Auto Parts collects on its credit sales. The ratio has fluctuated over the years but generally remained above 13 times. The decrease in 2022 followed by an increase in 2023 indicates a temporary slowdown in collecting receivables in 2022, which was then addressed in the following year.

Payables turnover: Advance Auto Parts' payables turnover ratio has been consistent, ranging from 2.51 to 2.68 times over the past five years. This ratio reflects how often the company pays its suppliers within a given period. The stability of this ratio suggests a consistent payment schedule and relationship with suppliers.

Working capital turnover: The working capital turnover ratio measures how effectively a company utilizes its working capital to generate sales revenue. Advance Auto Parts Inc's working capital turnover has shown fluctuations over the years, with significant increases in 2022 and 2023 compared to 2020 and 2019. This indicates that the company has been more efficient in generating sales revenue relative to its working capital in recent years.

Overall, Advance Auto Parts Inc's activity ratios reflect relatively stable or improving efficiency in managing its inventory, collecting receivables, paying suppliers, and utilizing working capital to generate sales revenue over the past five years.

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Average number of days

Days of inventory on hand (DOH) measures how many days it takes for a company to sell its inventory. A lower DOH indicates efficient inventory management. Advance Auto Parts Inc's DOH has improved over the past five years, decreasing from 178.44 days in 2019 to 158.27 days in 2023. This indicates a positive trend towards more efficient inventory turnover.

Days of sales outstanding (DSO) represents the average number of days it takes for a company to collect revenue after a sale. A lower DSO indicates more efficient management of accounts receivable. Advance Auto Parts Inc's DSO has fluctuated over the years but generally remained stable, with a slight increase in 2023 compared to 2022. This suggests the company's ability to collect revenue promptly has not significantly improved.

Number of days of payables reveals how long a company takes to pay its suppliers. A higher number of days indicates the company is taking longer to pay its bills. Advance Auto Parts Inc's days of payables have fluctuated but have generally remained within a similar range over the years. This may indicate a consistent approach to managing payables without significant improvements or deteriorations.

Overall, Advance Auto Parts Inc's activity ratios show improvements in inventory management efficiency, stable accounts receivable management, and consistent handling of payables over the last five years.

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Long-term

The fixed asset turnover ratio for Advance Auto Parts Inc has shown a relatively stable trend over the past five years, ranging from 6.59 to 7.20. This indicates that the company is generating between $6.59 and $7.20 in sales for every dollar invested in fixed assets. The consistent high values suggest efficient utilization of fixed assets to generate revenue.

In contrast, the total asset turnover ratio has fluctuated slightly but generally stayed within a narrow range between 0.85 and 0.93. This metric indicates how efficiently the company is using its total assets to generate revenue. A total asset turnover ratio below 1 suggests that Advance Auto Parts Inc may have a higher level of assets relative to its revenue, potentially indicating room for improvement in asset utilization efficiency.

Overall, the company's long-term activity ratios reflect effective management of fixed assets to generate sales revenue, while also indicating a moderate efficiency in utilizing total assets to generate revenue. It could be beneficial for Advance Auto Parts Inc to focus on further optimizing its total asset turnover to improve overall asset efficiency and profitability.