Copart Inc (CPRT)

Short-term

Turnover ratios

The activity ratios of Copart Inc provide insights into how efficiently the company manages its resources related to inventory, receivables, payables, and working capital.

1. Inventory turnover:

- Copart Inc's inventory turnover has been relatively stable over the years, with a slight increase in recent years. The company's inventory turnover ratio indicates that it is able to sell and replace its inventory multiple times a year. This high turnover suggests efficient management of inventory levels and effective sales strategies.

2. Receivables turnover:

- The receivables turnover ratio for Copart Inc has shown some fluctuations but has generally remained within a consistent range. This indicates that the company collects its accounts receivable in a timely manner, with a higher turnover ratio suggesting faster collection of payments from customers.

3. Payables turnover:

- Copart Inc's payables turnover has been increasing steadily over the years. A higher payables turnover ratio implies that the company is paying its suppliers more frequently, which can be beneficial for maintaining good relationships with suppliers and controlling working capital effectively.

4. Working capital turnover:

- The working capital turnover ratio for Copart Inc has decreased significantly over the years. A lower working capital turnover ratio can indicate that the company is not efficiently utilizing its working capital to generate sales, which could be a concern in terms of liquidity management and operational efficiency.

In conclusion, Copart Inc generally demonstrates strong efficiency in managing its inventory and receivables, while also showing improvements in managing payables. However, the decreasing trend in the working capital turnover ratio may warrant further investigation into how effectively the company is utilizing its working capital to support its operations.

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Average number of days

Copart Inc's activity ratios provide insights into how efficiently the company manages its inventory, collects receivables, and pays its payables.

1. Days of Inventory on Hand (DOH): Copart Inc's DOH has been relatively stable over the past five years, ranging from 5.89 days to 10.41 days. A lower number of days indicates that the company is effectively managing its inventory levels and quickly turning over its inventory into sales. However, the slight increase in DOH in 2022 and 2021 may suggest a slower rate of inventory turnover during those years.

2. Days of Sales Outstanding (DSO): Copart Inc's DSO has also shown consistency over the years, ranging from 62.38 days to 67.94 days. The DSO measures how quickly the company is collecting payments from its customers. A lower DSO indicates a faster collection of accounts receivable. Copart Inc's DSO within this range suggests a relatively efficient collection process, but there may be room for improvement to shorten the collection cycle further.

3. Number of Days of Payables: The number of days of payables has decreased over the past five years, from 40.50 days in 2020 to 26.09 days in 2024. A lower number of days of payables means that the company is taking less time to pay its suppliers, which can indicate strong cash management practices. Copart Inc's decreasing trend in days of payables suggests the company is managing its payables more effectively, potentially enhancing supplier relationships and cash flow management.

In summary, Copart Inc's activity ratios reflect a generally efficient management of inventory, receivables, and payables over the years, with stable to improving trends in inventory turnover, collections, and payment cycles. Effective management of these activity ratios is crucial for maintaining a healthy liquidity position and optimizing working capital efficiency.

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Long-term

To analyze Copart Inc's long-term activity ratios, we will focus on the fixed asset turnover and total asset turnover ratios.

1. Fixed Asset Turnover:
The fixed asset turnover ratio measures how efficiently a company utilizes its fixed assets to generate revenue. Copart Inc's fixed asset turnover has ranged from 1.14 to 1.40 over the past five years. This indicates that the company has been able to generate $1.14 to $1.40 in revenue for every $1 of fixed assets invested. The fluctuations in this ratio suggest variations in the effectiveness of utilizing fixed assets over the years. Generally, a higher fixed asset turnover ratio is preferred as it signifies better asset utilization efficiency.

2. Total Asset Turnover:
The total asset turnover ratio reflects how well a company is utilizing all its assets to generate sales. Copart Inc's total asset turnover has fluctuated between 0.51 and 0.66 in the last five years. This implies that the company has generated $0.51 to $0.66 in sales for every $1 of total assets held. The trend in total asset turnover indicates changes in the overall efficiency of asset utilization. A higher total asset turnover ratio is typically considered favorable as it signifies effective use of assets to generate revenue.

In summary, Copart Inc's long-term activity ratios suggest fluctuations in the efficiency of asset utilization over the years. It is important for the company to maintain or improve these ratios to ensure optimal utilization of fixed and total assets in generating revenue.