AutoZone Inc (AZO)

Short-term

Turnover ratios

AutoZone Inc's activity ratios provide insights into the efficiency of the company's operations and management of its working capital.

1. Inventory Turnover:
- AutoZone's inventory turnover has ranged from 1.31 to 1.49 over the past five years, indicating that the company has been able to sell and replace its inventory approximately 1.31 to 1.49 times during each year.
- A lower inventory turnover may suggest overstocking or slow-moving inventory, while a higher turnover indicates efficient inventory management.

2. Receivables Turnover:
- The receivables turnover ratio for AutoZone has fluctuated between 32.19 and 38.66 over the period, indicating the number of times the company collects its accounts receivable during a year.
- A higher turnover ratio suggests that AutoZone is efficient in collecting payment from its customers.

3. Payables Turnover:
- AutoZone's payables turnover has been relatively stable, ranging from 1.07 to 1.18. This ratio reflects how quickly the company pays its suppliers.
- A higher ratio may indicate that AutoZone is able to negotiate favorable credit terms with its suppliers or manage its working capital effectively.

4. Working Capital Turnover:
- The absence of data for the working capital turnover ratio in recent years limits a comprehensive analysis of AutoZone's efficiency in utilizing its working capital.
- However, in the last available year (2020), the company had a working capital turnover of 23.89, representing the number of times working capital was utilized to generate sales.
- A higher working capital turnover ratio suggests effective utilization of resources to generate revenue.

In summary, AutoZone Inc's activity ratios reflect its operational efficiency in managing inventory, receivables, payables, and working capital. Further analysis and comparison with industry benchmarks can provide additional insights into the company's overall operational performance.

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Average number of days

AutoZone Inc's activity ratios indicate the efficiency with which the company manages its inventory, collects its receivables, and pays its payables.

1. Days of Inventory on Hand (DOH): The trend in DOH shows a fluctuating pattern over the past five years, ranging from 245.02 days to 278.57 days. A higher DOH indicates that AutoZone holds inventory for a longer period before selling it, which may tie up capital and increase holding costs. The decrease in DOH from 2020 to 2021 suggests a more efficient inventory management, but the subsequent increase in 2022 and 2024 is a concern.

2. Days of Sales Outstanding (DSO): AutoZone's DSO has also varied over the years, with a range of 9.44 days to 11.34 days. A lower DSO is favorable as it reflects faster collections from customers. The slight increase in DSO from 2021 to 2022 and the subsequent decrease in 2023 and 2024 indicate fluctuations in the company's credit policies or customer payment behaviors.

3. Number of Days of Payables: The trend in the number of days of payables shows an increasing pattern over the past five years, ranging from 309.55 days to 342.56 days. A higher number of days of payables suggests that AutoZone takes a longer time to pay its suppliers, which can improve cash flow but may strain relationships with suppliers. The company's increasing payables days may indicate a deliberate strategy to manage working capital.

Overall, AutoZone should monitor and potentially streamline its inventory management practices to reduce DOH, maintain efficient collections to keep DSO low, and carefully manage payables to optimize working capital efficiency.

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See also:

AutoZone Inc Short-term (Operating) Activity Ratios

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Long-term

The long-term activity ratios of AutoZone Inc, including fixed asset turnover and total asset turnover, provide insight into the company's efficiency in utilizing its assets to generate sales over the years.

Fixed asset turnover has shown a consistent trend, fluctuating within a relatively narrow range over the past five years. The ratio peaked in 2022 at 3.14 and decreased slightly to 2.99 in 2024. This indicates that AutoZone has been able to generate approximately $3 of sales for every $1 invested in fixed assets, with a slight decline in efficiency in the most recent year.

Total asset turnover, on the other hand, has also shown a relatively stable trend. The ratio has gradually improved from 0.88 in 2020 to 1.08 in 2024, indicating that AutoZone's ability to generate sales from all its assets has been increasing over the years. This improvement suggests that AutoZone has been more efficient in utilizing its total assets to generate revenue.

Overall, the analysis of AutoZone Inc's long-term activity ratios suggests that the company has maintained a favorable level of efficiency in utilizing both fixed assets and total assets to generate sales over the years, with a slight decrease in fixed asset turnover but a consistent improvement in total asset turnover.

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See also:

AutoZone Inc Long-term (Investment) Activity Ratios