Copart Inc (CPRT)
Activity ratios
Short-term
Turnover ratios
| Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | Jul 31, 2020 | Jul 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 60.37 | 36.58 | 35.05 | 59.65 | 54.61 |
| Receivables turnover | 5.58 | 5.54 | 5.37 | 5.85 | 5.28 |
| Payables turnover | 13.41 | 11.49 | 9.66 | 9.01 | 10.04 |
| Working capital turnover | 1.43 | 1.98 | 2.10 | 3.63 | 5.04 |
The activity ratios provide insight into how efficiently Copart, Inc. is managing its resources to generate sales and collections, as well as managing its payments to suppliers. Let's analyze each of the activity ratios in detail based on the provided data:
1. Inventory turnover:
- The inventory turnover of Copart, Inc. has shown improvement from 2019 to 2023, indicating that the company is selling its inventory more frequently. This suggests effective inventory management, potentially reducing carrying costs and minimizing obsolete inventory. However, a slight decrease in 2022 may warrant further investigation to understand the reasons behind the change.
2. Receivables turnover:
- Copart, Inc.'s receivables turnover has remained relatively stable over the years. This indicates that the company is efficiently collecting its accounts receivable, with a slight decrease in 2023. A consistent receivables turnover ratio reflects effective credit and collection policies, ensuring timely collection of outstanding dues from customers.
3. Payables turnover:
- The payables turnover for Copart, Inc. has shown a consistent increasing trend since 2019. This suggests that the company is paying its suppliers more frequently, possibly taking advantage of early payment discounts and maintaining good relationships with its creditors. The increase in payables turnover signifies effective management of trade credit and liabilities.
4. Working capital turnover:
- The working capital turnover ratio for Copart, Inc. has declined significantly from 2019 to 2023. This indicates that the company is generating fewer sales relative to its working capital. A declining trend in this ratio may prompt management to review its working capital management strategies and consider measures to improve sales generation relative to the invested capital.
In conclusion, Copart, Inc.'s activity ratios reflect efficient management of inventory, receivables, and payables, with some fluctuations and declining trends in certain ratios in recent years. The company may need to investigate the underlying causes of these changes and consider strategies to maintain or improve its efficiency in utilizing its resources for sales and collections.
Average number of days
| Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | Jul 31, 2020 | Jul 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 6.05 | 9.98 | 10.41 | 6.12 | 6.68 |
| Days of sales outstanding (DSO) | days | 65.38 | 65.88 | 67.94 | 62.38 | 69.14 |
| Number of days of payables | days | 27.23 | 31.77 | 37.80 | 40.50 | 36.37 |
Days of Inventory on Hand (DOH) measures how many days it takes for Copart, Inc. to sell its inventory. A lower DOH indicates efficient inventory management. Over the past five years, the trend shows a decrease in DOH, suggesting that the company has been effectively managing its inventory, thus reducing the number of days it takes to turn inventory into sales.
Days of Sales Outstanding (DSO) reflects the average number of days it takes for Copart, Inc. to collect revenue after a sale. A lower DSO is favorable as it indicates faster collection of receivables. The DSO has fluctuated slightly over the past five years, but overall has remained relatively stable.
Number of Days of Payables measures the average number of days it takes for the company to pay its suppliers. A higher number of days indicates that Copart, Inc. is taking longer to settle its payables, which can improve cash flow. The trend for the last five years displays a decrease in the number of days of payables, suggesting that the company may be paying its suppliers more promptly.
In summary, the trends in Copart, Inc.'s activity ratios indicate improvements in inventory turnover and possibly more efficient management of payables, which can positively impact the company's working capital and overall financial performance.
Long-term
| Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | Jul 31, 2020 | Jul 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 1.39 | 1.40 | 1.17 | 1.14 | 1.43 |
| Total asset turnover | 0.59 | 0.66 | 0.59 | 0.64 | 0.80 |
The long-term activity ratios for Copart, Inc. provide insights into the efficiency of the company's use of fixed assets and total assets to generate sales over the years. Let's analyze these ratios individually.
1. Fixed Asset Turnover:
The fixed asset turnover measures how efficiently the company is using its fixed assets to generate sales. A higher ratio indicates better utilization of fixed assets. Copart's fixed asset turnover has fluctuated over the last five years, ranging from 1.14 to 1.43. In 2023, the fixed asset turnover stands at 1.36, a slight decrease from the previous year.
The slight decline in the fixed asset turnover may indicate a slightly reduced efficiency in utilizing fixed assets to generate sales. However, it's important to assess this trend in the context of the company's industry and business cycle.
2. Total Asset Turnover:
The total asset turnover ratio measures how efficiently the company uses all its assets to generate sales. A higher ratio indicates better asset utilization. Copart's total asset turnover has also fluctuated over the last five years, ranging from 0.57 to 0.80. In 2023, the total asset turnover stands at 0.57, representing a decline from the previous year.
The declining trend in the total asset turnover may suggest that Copart's ability to generate sales from its total assets has decreased. It's worth investigating the factors contributing to this decline, such as changes in the company's asset base or the effectiveness of its operations.
In conclusion, while both the fixed asset turnover and total asset turnover ratios for Copart have fluctuated over time, there are indications of a slight decrease in efficiency in utilizing both fixed and total assets to generate sales in the most recent period. Further analysis of the company's operational and investment activities can provide additional insights into the drivers of these long-term activity ratio fluctuations.