Cintas Corporation (CTAS)

Short-term

Turnover ratios

The activity ratios for Cintas Corporation over the specified periods demonstrate trends in inventory management, receivables collection, payables utilization, and working capital efficiency.

Inventory Turnover:
From May 31, 2021, to May 31, 2024, the inventory turnover exhibits a consistent upward trend, rising from 2.94 to 3.06. This suggests incremental improvements in inventory management efficiency, indicating a faster turnover rate and potentially reducing holding costs. The substantial increase to 11.97 by May 31, 2024, signifies a notable shift, reflecting a markedly higher rate of inventory liquidation within the period preceding that date. This sharp rise may be attributed to operational changes, inventory reduction initiatives, or shifts in sales volume and product mix.

Receivables Turnover:
Receivables turnover remains relatively stable over the same period, fluctuating slightly from 7.70 in 2021 to 7.65 in 2023, with a marginal increase to 7.71 in 2024. This stability suggests that the company's efficiency in collecting accounts receivable has remained consistent over these years, with no significant deterioration or improvement in collection policies. The ratios imply that on average, receivables are collected approximately every 47 to 48 days.

Payables Turnover:
Payables turnover ratios show a gradual decline from 16.47 in 2021 to 15.36 in 2023, with further reduction to 14.48 in 2024. This trend indicates a lengthening of the payables period, suggesting that the company is taking relatively longer to settle its obligations to suppliers over time. Such a change could signify strategic management of working capital, possibly to optimize cash flow or extend supplier payment terms.

Working Capital Turnover:
Working capital turnover exhibits a decreasing trend from 7.83 in 2021 to 5.16 in 2023, with an increase to 7.07 in 2024. The decline indicates a reduction in the efficiency with which the company utilizes its working capital to generate sales. The subsequent increase in 2024 may reflect operational adjustments or improved asset management that enhanced the utilization of working capital.

Summary:
Overall, the activity ratios suggest that Cintas Corporation has improved its inventory management efficiency significantly by 2024, with inventory turnover rising sharply. Receivables collection remains relatively steady, indicating stable credit policies. The company appears to be extending its payment period to suppliers, which can be a strategic move to enhance liquidity but may also impact supplier relationships. Variations in working capital turnover highlight periods of changing operational efficiency, with recent improvements aligning with better utilization of working capital assets.

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Average number of days

The activity ratios of Cintas Corporation, as reflected in the provided data, reveal key insights into the company's operational efficiency over the specified periods.

Days of Inventory on Hand (DOH):
From May 31, 2021, through May 31, 2023, the DOH demonstrates a decreasing trend, declining from 124.04 days to 119.39 days. This gradual reduction indicates a slight improvement in inventory management, with inventory remaining on hand for fewer days. Notably, in the subsequent period ending May 31, 2024, there is a significant decrease to 30.49 days, representing a substantial reduction in inventory holdings. This sharp decline could suggest enhanced inventory turnover efficiency, possible changes in inventory policies, or alterations in business operations.

Days of Sales Outstanding (DSO):
Throughout the periods from May 31, 2021, to May 31, 2024, the DSO remains relatively stable, oscillating narrowly around 47.4 days. The values show minimal fluctuation, indicating consistent credit and collection practices. The stability in DSO suggests that the company's receivables collection cycle has remained steady over the assessed timeframe.

Number of Days of Payables:
The average number of days the company takes to pay its suppliers has shown a gradual increase, moving from 22.16 days in 2021 to 23.77 days in 2023. The trend implies a slight extension in payment periods, possibly reflecting improved cash flow management or negotiated credit terms with suppliers. By May 31, 2024, the payables period increased further to 25.21 days, indicating continued or deliberate elongation of the company's accounts payable cycle.

Summary:
Overall, Cintas Corporation exhibits a pattern of operational efficiency improvements, particularly in inventory management, evidenced by the substantial decrease in DOH in 2024. The stability in DSO indicates consistent receivables collection efficiency, while the gradual increase in days of payables suggests a strategic approach to managing cash outflows. These activity ratios collectively reflect tailored operational strategies aimed at enhancing liquidity and operational effectiveness.

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See also:

Cintas Corporation Short-term (Operating) Activity Ratios

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Long-term

The analysis of Cintas Corporation’s long-term activity ratios over the period from May 31, 2021, to May 31, 2023, reveals a consistent improvement in asset utilization efficiency. The fixed asset turnover ratio increased from 5.07 in 2021 to 5.26 in 2022, indicating that the company has become more effective in generating sales from its fixed assets. This upward trend continued into 2023, with the ratio reaching 6.31, suggesting an enhanced ability to utilize its property, plant, and equipment in driving sales revenue.

Similarly, the total asset turnover ratio exhibited a steady growth trajectory, rising from 0.86 in 2021 to 0.96 in 2022, and further to 1.03 in 2023. This progression indicates an increasing efficiency in using the company’s total assets to generate sales, reflecting a positive trend in overall asset management and operational effectiveness.

The upward movement in both ratios over these years demonstrates a sustained improvement in the company’s ability to leverage its long-term assets for revenue generation. The trend suggests better utilization efficiency, potentially driven by strategic investments, operational improvements, or process optimizations. Since the data for subsequent periods (May 31, 2024, and May 31, 2025) is not available, it is not possible to assess whether this positive trend has continued beyond 2023. Nonetheless, within the analyzed period, Cintas has shown evidence of enhanced long-term asset efficiency, which is generally favorable from an investment and operational standpoint.

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See also:

Cintas Corporation Long-term (Investment) Activity Ratios