Costco Wholesale Corp (COST)

Activity ratios

Short-term

Turnover ratios

	Sep 1, 2024	Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020
Inventory turnover	13.15	14.07	12.25	13.31	13.18
Receivables turnover	93.51	106.04	101.27	108.67	107.59
Payables turnover	12.63	13.40	12.29	11.63	11.39
Working capital turnover	—	105.53	325.15	3,061.39	50.90

- Inventory turnover: Costco's inventory turnover has been relatively consistent over the past five years, ranging from 12.25 to 14.07 times. This indicates that the company efficiently manages its inventory levels, with a high rate of turnover that suggests effective inventory management.

- Receivables turnover: Costco's receivables turnover has also been stable, with values ranging from 93.51 to 108.67 times over the same period. This suggests that the company efficiently collects payments from its customers, with a high turnover indicating a short accounts receivable collection period.

- Payables turnover: The payables turnover for Costco has shown a similar pattern of stability, with values ranging from 11.39 to 13.40 times. This indicates that the company has a consistent rate of paying its suppliers and managing its accounts payable effectively.

- Working capital turnover: Costco's working capital turnover has exhibited significant fluctuations, with a notable increase from 50.90 in 2020 to 3,061.39 in 2021, before dropping to 325.15 in 2022. The working capital turnover measures how efficiently working capital is being utilized to generate sales, and the fluctuations may indicate changes in the company's operational efficiency or capital management strategies.

Overall, Costco's activity ratios suggest efficient management of inventory, receivables, and payables, with working capital turnover reflecting changes in the company's operational efficiency over the years.

Average number of days

		Sep 1, 2024	Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020
Days of inventory on hand (DOH)	days	27.75	25.93	29.79	27.41	27.69
Days of sales outstanding (DSO)	days	3.90	3.44	3.60	3.36	3.39
Number of days of payables	days	28.90	27.23	29.69	31.39	32.06

Costco Wholesale Corp's activity ratios provide insight into how efficiently the company manages its inventory, collects receivables, and pays its suppliers.

1. Days of Inventory on Hand (DOH):
- The trend in DOH shows a slight increase from 2020 to 2022, indicating that inventory turnover has decreased over the years. However, in 2023 and 2024, there is a slight improvement in managing inventory, suggesting better efficiency in inventory management.

2. Days of Sales Outstanding (DSO):
- DSO measures how quickly the company collects its receivables. The decreasing trend in DSO from 2020 to 2022 indicates an improvement in collecting receivables more quickly. However, in 2023 and 2024, there is a slight increase in DSO, suggesting a slower collection of receivables.

3. Number of Days of Payables:
- The trend in the number of days of payables shows a decrease from 2020 to 2023, indicating that the company is taking longer to pay its suppliers. However, in 2024, there is a slight increase in the number of days of payables, suggesting a more timely payment to suppliers.

In conclusion, Costco Wholesale Corp's activity ratios reflect fluctuations in inventory management, receivables collection, and payment practices. The company may need to focus on improving inventory turnover, maintaining efficient receivables collection, and managing payables effectively to enhance its overall working capital efficiency.

Long-term

	Sep 1, 2024	Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020
Fixed asset turnover	8.76	9.08	9.21	8.34	7.65
Total asset turnover	3.64	3.51	3.54	3.31	3.00

Costco Wholesale Corp's long-term activity ratios provide insights into how efficiently the company is utilizing its assets to generate sales over multiple years.

The fixed asset turnover ratio measures the company's ability to generate sales from its investment in fixed assets. Costco's fixed asset turnover has been consistently high over the past five years, ranging from 7.65 to 9.21. This indicates that the company is effectively using its fixed assets to generate sales, with a slight fluctuation but overall maintaining a strong level of efficiency in this area.

On the other hand, the total asset turnover ratio reflects Costco's ability to generate sales from all its assets, including fixed and current assets. The trend in total asset turnover has been positive, increasing from 3.00 in 2020 to 3.64 in 2024. This demonstrates that Costco has been improving its overall asset utilization efficiency over the years, indicating that the company is generating more sales relative to its total assets.

Overall, Costco's long-term activity ratios suggest that the company has been effectively managing and utilizing its assets to drive sales and revenue growth consistently over the past five years.