Cintas Corporation (CTAS)

Short-term

Turnover ratios

The activity ratios for Cintas Corporation provide insights into how efficiently the company is managing its inventory, receivables, payables, and overall working capital turnover.

1. Inventory Turnover:
The inventory turnover ratio has shown a fluctuating trend over the past five years, with a significant increase from 4.40 in 2021 to 6.77 in 2024. This indicates that Cintas has been managing its inventory more effectively in recent years, with goods being sold and replaced at a faster rate.

2. Receivables Turnover:
Cintas has maintained a relatively steady receivables turnover ratio over the past five years, hovering between 7.55 and 8.14. This suggests that the company is efficient in collecting payments from its customers, with minimal delays in accounts receivable turnover.

3. Payables Turnover:
The payables turnover ratio has shown a declining trend from 16.67 in 2020 to 8.19 in 2024. A lower payables turnover ratio may indicate that the company is taking longer to pay its suppliers, which could potentially strain vendor relationships.

4. Working Capital Turnover:
Cintas has demonstrated varying levels of efficiency in utilizing its working capital over the past five years, with a peak in 2024 at 7.07 and a low of 4.97 in 2020. A higher working capital turnover ratio signifies that the company is generating more revenue for each dollar invested in working capital.

Overall, Cintas Corporation has shown improvements in managing its inventory and working capital turnover ratios, indicating increased operational efficiency. However, the declining trend in payables turnover warrants further examination to ensure optimal management of vendor relationships and cash flow.

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Average number of days

The activity ratios of Cintas Corporation provide insights into the efficiency of its operations in managing inventory, collecting receivables, and paying suppliers:

1. Days of Inventory on Hand (DOH):
- The trend of DOH has been fluctuating over the past five years, ranging from a low of 38.75 days in 2020 to a high of 82.96 days in 2021.
- In 2024, the DOH decreased to 53.91 days, indicating that Cintas is currently holding its inventory for a shorter period compared to the previous year.
- A lower DOH suggests that the company is selling inventory quicker, which can lead to improved liquidity and lower holding costs.

2. Days of Sales Outstanding (DSO):
- The DSO has remained relatively stable over the years, with minor fluctuations observed.
- In 2024, the DSO was 47.32 days, slightly lower than the previous year, indicating that Cintas is collecting receivables at a similar pace to the year before.
- A consistent DSO implies that the company has been effective in managing its accounts receivable and ensuring timely collection from customers.

3. Number of Days of Payables:
- The days of payables have been gradually increasing over the years, from 21.89 days in 2020 to 44.58 days in 2024.
- Cintas has been taking longer to pay its suppliers, which may indicate a deliberate strategy to improve cash flows or negotiate more favorable payment terms.
- A higher number of days of payables can enhance cash flow management, but it may also strain relationships with suppliers if payment terms become too extended.

Overall, Cintas Corporation has shown a mix of inventory efficiency, accounts receivable management, and supplier payment strategies through its activity ratios over the past five years. Continued monitoring and analysis of these ratios will be essential for assessing the company's operational performance and financial health.

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Long-term

The fixed asset turnover ratio for Cintas Corporation has shown a consistent upward trend over the past five years, increasing from 5.05 in 2020 to 6.26 in 2024. This indicates that the company has been generating more sales revenue per dollar invested in fixed assets, reflecting improved efficiency in utilizing its long-term assets to generate sales.

On the other hand, the total asset turnover ratio has also been increasing steadily from 0.92 in 2020 to 1.05 in 2024. This trend indicates that Cintas Corporation has been more effective in generating sales revenue from all its assets (both fixed and current) over the years.

Overall, the increasing trend in both fixed asset turnover and total asset turnover ratios suggests that Cintas Corporation has been effectively managing its long-term assets to generate sales revenue and improve operational efficiency. This could be a positive sign of the company's operational effectiveness and financial performance in the long run.