CarMax Inc (KMX)

Short-term

Turnover ratios

CarMax Inc's activity ratios provide insights into how efficiently the company is managing its inventory, receivables, payables, and working capital.

1. Inventory Turnover:
CarMax's inventory turnover has fluctuated over the past five years, ranging from 5.25 to 7.22 times. A higher inventory turnover ratio indicates that the company is selling its inventory more frequently, which could be positive for cash flow and minimizing carrying costs.

2. Receivables Turnover:
The receivables turnover ratio indicates how quickly CarMax collects its outstanding receivables. The ratio has shown variability over the years, with a significant decrease in 2021. A lower ratio could indicate issues with collecting payments from customers or changes in credit terms.

3. Payables Turnover:
CarMax's payables turnover has consistently remained above 20 times in the past five years, suggesting that the company is efficiently managing its trade payables. A high payables turnover ratio may indicate strong relationships with suppliers or favorable payment terms.

4. Working Capital Turnover:
The working capital turnover ratio shows how effectively CarMax is utilizing its working capital to generate revenue. The company has maintained a relatively stable working capital turnover ratio above 7 times, indicating efficient management of current assets and liabilities to support operations.

In conclusion, CarMax Inc's activity ratios reflect its operational efficiency in managing inventory, receivables, payables, and working capital. Analyzing these ratios can help investors and stakeholders assess the company's financial performance and liquidity position.

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Average number of days

Activity ratios measure how effectively a company manages its assets in generating sales. Let's analyze CarMax Inc's activity ratios based on the provided data.

1. Days of Inventory on Hand (DOH):
- The trend shows fluctuation in the number of days it takes CarMax to sell its inventory.
- In the most recent year (Feb 29, 2024), the days of inventory on hand increased to 56.35 days from 50.59 days in the previous year.
- Compared to Feb 28, 2020, the company is carrying inventory for a longer period in recent years, indicating potential inefficiencies in inventory management.

2. Days of Sales Outstanding (DSO):
- CarMax's days of sales outstanding also exhibit variability over the years, with a significant spike in 2021.
- In 2024, it took the company around 229.24 days to collect its receivables, a marked increase from 3.43 days in 2020.
- The upward trend suggests a longer time to collect payments from customers, potentially impacting cash flow and liquidity.

3. Number of Days of Payables:
- The days of payables for CarMax have remained relatively stable over the years, with slight fluctuations.
- In 2024, the company took 14.31 days to pay off its payables, a slight increase from 11.22 days in 2023.
- The consistency in payables days may indicate a steady approach to managing trade credit relationships with suppliers.

Overall, CarMax Inc's activity ratios reflect mixed performance in managing its assets efficiently to generate sales. The fluctuations in these ratios suggest areas that may require attention to improve operational efficiency and cash flow management.

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Long-term

Over the past five years, CarMax Inc's fixed asset turnover ratio has shown fluctuations but has generally trended downwards. This ratio indicates that CarMax is generating less revenue per dollar of fixed assets invested in the business. Despite the decrease in fixed asset turnover, the ratio remains relatively high, suggesting that CarMax efficiently utilizes its fixed assets to generate sales.

In terms of total asset turnover, CarMax's performance has also fluctuated but has shown a general upward trend over the same period. The total asset turnover ratio measures how efficiently the company is generating revenue from all its assets. The increasing trend in this ratio indicates that CarMax is becoming more efficient in generating sales relative to its total asset base.

Overall, while CarMax's fixed asset turnover has declined, its total asset turnover has improved, indicating a mixed performance in terms of long-term asset utilization. Investors and stakeholders may further investigate the reasons behind these trends to assess the company's operational efficiency and future growth prospects.