Fastenal Company (FAST)

Short-term

Turnover ratios

The activity ratios of Fastenal Company over the years show trends in how effectively the company manages its assets and liabilities to generate sales.

1. Inventory Turnover:
- Fastenal's inventory turnover has fluctuated between 3.15 and 3.83 over the five-year period. This ratio indicates how efficiently the company is managing its inventory to generate sales. A higher turnover ratio is generally preferred as it signifies that inventory is being sold quickly.

2. Receivables Turnover:
- The receivables turnover ratio has ranged from 6.67 to 7.33 during the period. This ratio reflects how well the company is collecting on credit sales. A higher ratio suggests that Fastenal is efficient in collecting outstanding receivables from customers.

3. Payables Turnover:
- Fastenal's payables turnover has shown a relatively stable trend, varying between 20.61 and 22.07. This ratio demonstrates how well the company is managing its payables with suppliers. A higher turnover ratio indicates that Fastenal is paying its suppliers more quickly.

4. Working Capital Turnover:
- The working capital turnover ratio has fluctuated between 2.76 and 3.11 over the period. This ratio shows how efficiently Fastenal is using its working capital to generate sales. A higher turnover ratio suggests that the company is effectively utilizing its working capital to support its operations and growth.

In summary, Fastenal's activity ratios indicate that the company has been managing its assets and liabilities effectively to support its sales generation activities over the years. The fluctuations in these ratios highlight potential areas for further analysis and improvement in working capital management and operational efficiency.

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Average number of days

To analyze Fastenal Company's activity ratios, we will focus on three key metrics: Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables.

1. Days of Inventory on Hand (DOH):
- Fastenal's DOH has shown a positive trend, increasing from 108.10 days in 2020 to 115.75 days in 2021 before declining to 99.30 days in 2024.
- Higher DOH values indicate that inventory is held for a longer period, potentially tying up working capital and increasing holding costs.
- The recent decrease in DOH suggests improved inventory management efficiency, which may lead to enhanced liquidity and profitability.

2. Days of Sales Outstanding (DSO):
- DSO measures how long it takes for the company to collect revenue after a sale is made.
- Fastenal's DSO has been relatively stable, fluctuating between 49.80 days in 2020 and 54.74 days in 2021 before decreasing to 53.60 days in 2024.
- A lower DSO indicates that the company is collecting receivables more quickly, potentially improving cash flow and reducing the risk of bad debts.

3. Number of Days of Payables:
- This metric represents the average number of days it takes for a company to pay its suppliers.
- Fastenal's Number of Days of Payables has remained consistent, ranging from 16.54 days in 2023 to 17.71 days in 2021, suggesting a stable relationship with suppliers.
- A longer payment period can provide a company with additional liquidity, but it may strain relationships with suppliers if extended too far.

Overall, Fastenal Company's activity ratios indicate a positive trend in managing its inventory efficiently, collecting receivables in a timely manner, and maintaining stable relationships with suppliers. These improvements can lead to enhanced financial performance and operational effectiveness over time.

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Long-term

Long-term activity ratios provide insights into how efficiently a company is utilizing its assets to generate sales. Two important long-term activity ratios for Fastenal Company are the Fixed Asset Turnover and Total Asset Turnover ratios.

1. Fixed Asset Turnover:
- The Fixed Asset Turnover ratio measures how efficiently a company is generating sales from its fixed assets. It helps assess the company's ability to utilize its long-term assets effectively.
- Fastenal Company's Fixed Asset Turnover has shown a steady increase over the years, from 5.47 in 2020 to 7.15 in 2024. This indicates that the company is improving its ability to generate sales from its fixed assets, reflecting efficient asset utilization.

2. Total Asset Turnover:
- The Total Asset Turnover ratio measures how efficiently a company is generating sales from all its assets, including both fixed and current assets.
- Fastenal Company's Total Asset Turnover has fluctuated slightly over the years, from 1.42 in 2020 to 1.61 in 2024. Although there is some variability, the overall trend shows an increase in asset turnover, indicating improved efficiency in utilizing all assets to generate sales.

Overall, the increasing trend in both Fixed Asset Turnover and Total Asset Turnover ratios for Fastenal Company suggests improved efficiency in asset utilization and a positive outlook for the company's long-term operational performance.