FedEx Corporation (FDX)
Activity ratios
Short-term
Turnover ratios
| May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 63.61 | 66.31 | 65.95 | 60.15 | 56.97 |
| Receivables turnover | 8.62 | 8.78 | 7.82 | 6.86 | 6.79 |
| Payables turnover | 12.25 | 10.41 | 10.42 | 9.19 | 9.97 |
| Working capital turnover | 17.92 | 17.81 | 15.24 | 11.96 | 11.35 |
Activity ratios provide insights into how efficiently a company is managing its assets and operations. Let's analyze FedEx Corporation's activity ratios based on the given data:
1. Inventory Turnover:
- The inventory turnover ratio measures how effectively a company is managing its inventory. A higher turnover indicates efficient inventory management.
- FedEx's inventory turnover has been consistently high over the past five years, ranging from 56.97 to 66.31, with the highest being in 2023.
- This suggests that FedEx is efficiently managing its inventory levels and quickly converting inventory into sales.
2. Receivables Turnover:
- The receivables turnover ratio indicates how quickly a company collects cash from its credit sales. A higher turnover implies faster collection of receivables.
- FedEx's receivables turnover has generally increased over the years, from 6.79 in 2020 to 8.78 in 2023.
- This trend suggests that FedEx is improving its credit management processes and collecting receivables more efficiently.
3. Payables Turnover:
- The payables turnover ratio measures how quickly a company pays its suppliers. A higher turnover indicates efficient management of payables.
- FedEx's payables turnover has been increasing over the years, reaching 12.25 in 2024.
- This indicates that FedEx is managing its payables effectively and potentially taking advantage of favorable payment terms from suppliers.
4. Working Capital Turnover:
- The working capital turnover ratio shows how effectively a company is using its working capital to generate sales.
- FedEx's working capital turnover has been steadily increasing, from 11.35 in 2020 to 17.92 in 2024.
- This suggests that FedEx is efficiently utilizing its working capital to support its operations and generate revenue.
Overall, based on the activity ratios analyzed, FedEx Corporation appears to be managing its inventory, receivables, payables, and working capital efficiently. The increasing turnover ratios indicate improvements in operational efficiency and effective management of resources.
Average number of days
| May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 5.74 | 5.50 | 5.53 | 6.07 | 6.41 |
| Days of sales outstanding (DSO) | days | 42.34 | 41.57 | 46.65 | 53.22 | 53.79 |
| Number of days of payables | days | 29.80 | 35.07 | 35.02 | 39.70 | 36.62 |
Activity ratios provide insights into how efficiently a company is managing its assets and liabilities. Let's analyze FedEx Corporation's activity ratios based on the provided data:
1. Days of Inventory on Hand (DOH):
- The trend shows a slight increase in DOH from 5.50 days in 2023 to 5.74 days in 2024.
- This indicates that, on average, FedEx holds inventory for about 5 to 6 days before selling it.
- A lower DOH is generally preferred as it signifies faster inventory turnover and efficient inventory management.
2. Days of Sales Outstanding (DSO):
- The DSO decreased from 53.79 days in 2020 to 42.34 days in 2024.
- This suggests that FedEx has been able to collect its outstanding sales faster over the years.
- A lower DSO is positive as it indicates quicker conversion of sales into cash, improving liquidity.
3. Number of Days of Payables:
- The days of payables have fluctuated over the years, with the current value at 29.80 days in 2024.
- A lower number of days of payables means that FedEx is paying its suppliers faster.
- However, excessively low payables may indicate a strained liquidity position.
Overall, FedEx Corporation has shown improvements in managing its inventory, collecting sales receivables efficiently, and paying suppliers within a reasonable time frame, based on the activity ratios analysis. Monitoring these ratios can help assess the company's operational efficiency and working capital management.
See also:
FedEx Corporation Short-term (Operating) Activity Ratios
Long-term
| May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | May 31, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 2.10 | 2.20 | 2.44 | 2.32 | 2.04 |
| Total asset turnover | 1.00 | 1.03 | 1.08 | 1.00 | 0.93 |
Based on the data provided for FedEx Corporation's long-term activity ratios, we can observe a trend in both the fixed asset turnover and total asset turnover ratios over the past five years.
The fixed asset turnover ratio has shown fluctuations, starting at 2.04 in 2020, reaching its peak at 2.44 in 2022, and then decreasing slightly to 2.10 by the end of 2024. This indicates that FedEx has been able to generate revenue efficiently from its fixed assets, with a relatively stable performance over the years, despite a slight decrease in the most recent year.
On the other hand, the total asset turnover ratio reveals a different pattern, starting at 0.93 in 2020, gradually increasing to 1.08 in 2022, and then stabilizing around 1.00 in the last two years. This suggests that FedEx has been effectively utilizing its total assets to generate revenue, with a significant improvement in efficiency from 2020 to 2022, followed by a consistent performance in the subsequent years.
Overall, the trend in the long-term activity ratios for FedEx Corporation shows a decent level of efficiency in utilizing both fixed assets and total assets to generate revenue, with some fluctuations in performance observed over the years. It is essential for the company to continue monitoring and optimizing its asset utilization to maintain and improve its operational efficiency in the long term.