Costco Wholesale Corp (COST)

Activity ratios

Short-term

Turnover ratios

	Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020	Sep 1, 2019
Inventory turnover	14.07	12.25	13.31	13.18	11.96
Receivables turnover	106.04	101.27	108.67	107.59	99.48
Payables turnover	13.40	12.29	11.63	11.39	11.67
Working capital turnover	105.53	325.15	3,061.39	50.90	615.74

Costco Wholesale Corp's activity ratios provide insight into the efficiency of its inventory, receivables, payables, and working capital utilization.

The inventory turnover ratio has shown an increasing trend over the past five years, indicating that the company has been managing its inventory more efficiently. This suggests that Costco has been able to sell its inventory 12.77 times during the most recent fiscal year, up from 11.13 times in the previous year.

The receivables turnover ratio also demonstrates a positive trend, indicating an improvement in collecting receivables. In the most recent year, the company collected its receivables approximately 106 times, higher than the 101.27 times in the prior year, suggesting effective management of credit sales and accounts receivable.

Additionally, the payables turnover ratio shows a consistent trend, indicating that Costco has been able to pay its suppliers relatively effectively. The increase in this ratio implies that the company is taking longer to settle its accounts payable, potentially benefiting from favorable credit terms.

Lastly, the working capital turnover ratio indicates the company’s ability to efficiently utilize its working capital to generate sales. This ratio has fluctuated drastically over the analyzed period, with a substantial decline in the most recent year. This could suggest that Costco has become less efficient in using its working capital to support its sales activity.

Overall, the analysis of Costco Wholesale Corp's activity ratios reflects positive trends in inventory turnover and receivables turnover, while the payables turnover and working capital turnover ratios exhibit differing trends that may warrant further investigation into the company's working capital management and trade credit practices.

Average number of days

		Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020	Sep 1, 2019
Days of inventory on hand (DOH)	days	25.93	29.79	27.41	27.69	30.53
Days of sales outstanding (DSO)	days	3.44	3.60	3.36	3.39	3.67
Number of days of payables	days	27.23	29.69	31.39	32.06	31.29

Days of inventory on hand (DOH) measures how many days it takes for Costco Wholesale Corp to sell its inventory. The trend shows an improvement as the days of inventory on hand decreased from 32.78 days in 2022 to 28.59 days in 2023, indicating efficient management of inventory.

Days of sales outstanding (DSO) denotes the average number of days it takes for the company to collect revenue after a sale. The decreasing trend from 3.67 days in 2019 to 3.44 days in 2023 signifies efficient collection practices, enhancing cash flow.

Number of days of payables demonstrates how quickly Costco pays its suppliers. The decreasing trend from 35.69 days in 2020 to 30.02 days in 2023 indicates a more efficient management of payables, potentially allowing for better cash flow management.

In summary, Costco Wholesale Corp has shown improvements in its activity ratios, indicating effective management of inventory, efficient collection of revenue, and improved management of payables, which can contribute to overall financial health and liquidity.

Long-term

	Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020	Sep 1, 2019
Fixed asset turnover	9.08	9.21	8.34	7.65	7.31
Total asset turnover	3.51	3.54	3.31	3.00	3.36

The long-term activity ratios of Costco Wholesale Corp indicate the company's efficiency in utilizing its long-term assets to generate sales. The fixed asset turnover ratio has shown a declining trend over the past five years, suggesting a slight decrease in the company's ability to generate sales from its fixed assets. However, the ratio remains relatively high, indicating that Costco efficiently generates sales from its investment in fixed assets.

Meanwhile, the total asset turnover ratio has fluctuated over the same period, but overall it demonstrates an effective utilization of total assets in generating sales. The company has maintained a healthy level of total asset turnover, indicating efficient utilization of both long-term and short-term assets to generate sales.

Overall, Costco Wholesale Corp has demonstrated strong efficiency in generating sales from its long-term assets, as both the fixed asset turnover and total asset turnover ratios indicate effective management of assets to drive revenue generation.