Unifirst Corporation (UNF)

Short-term

Turnover ratios

The activity ratios of Unifirst Corp. provide insights into the efficiency of its operations and management of working capital. The inventory turnover ratio has exhibited a consistent increase over the past five years, indicating that the company is selling its inventory at a faster rate. This may suggest effective inventory management and timely replenishment of stock.

Similarly, the receivables turnover ratio has remained relatively stable, reflecting the company's ability to collect outstanding payments from customers. The consistency in this ratio suggests efficient credit and collection processes.

In terms of payables turnover, Unifirst Corp. has demonstrated a consistent ability to settle its payables, as evidenced by the increasing ratio over the last five years. This signifies an efficient management of trade credit and underscores the company's strong supplier relationships.

The working capital turnover ratio has shown a notable increase, indicating that Unifirst Corp. has been generating more sales revenue from its working capital over the years. This suggests effective utilization of resources to generate sales, which is a positive indication of operational efficiency.

Overall, the activity ratios reflect a trend of improving operational efficiency and effective management of working capital for Unifirst Corp.

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Average number of days

Based on the provided data, we can analyze the activity ratios of Unifirst Corp. as follows:

Days of Inventory on Hand (DOH):
The company's DOH has shown a declining trend over the past five years, indicating that Unifirst Corp. has been more efficient in managing its inventory. This can be a positive sign as it suggests that the company is able to turn over its inventory more quickly, thereby reducing the risk of obsolescence and minimizing holding costs.

Days of Sales Outstanding (DSO):
The DSO for Unifirst Corp. has exhibited some fluctuation over the last five years, with a slight increase in the most recent year. This suggests that the company's accounts receivable turnover may have slowed down. A high DSO could indicate potential issues with collecting revenue, which may impact cash flow and liquidity.

Number of Days of Payables:
Unifirst Corp.’s number of days of payables has fluctuated but remained relatively stable over the past five years. The company has been effective in managing its payables, maintaining consistent payment terms with its suppliers. It’s important to note that extending payment terms too far could potentially strain relationships with suppliers.

In summary, Unifirst Corp. has exhibited improved efficiency in managing its inventory, but may need to focus on optimizing its accounts receivable turnover to ensure timely collection of receivables. Furthermore, while maintaining stable payment terms with suppliers is important, the company should be mindful of potential impacts on supplier relationships and cash flow.

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Long-term

The fixed asset turnover ratio for Unifirst Corp. has been relatively stable over the past five years, with values ranging from 2.95 to 3.15. This indicates that the company generates $2.95 to $3.15 in sales for every dollar invested in fixed assets. The consistency in this ratio suggests that Unifirst Corp. has been effectively utilizing its fixed assets to generate sales.

On the other hand, the total asset turnover ratio has shown more volatility, ranging from 0.77 to 0.88 over the same period. This ratio indicates that Unifirst Corp. generates $0.77 to $0.88 in sales for every dollar of total assets. The fluctuation in this ratio suggests variability in the company's overall efficiency in generating sales from its total asset base.

Overall, the fixed asset turnover ratio indicates consistent efficiency in utilizing fixed assets to drive sales, while the total asset turnover ratio reflects some variability in the company's overall effectiveness in generating sales from its total assets. Both ratios provide insights into Unifirst Corp.'s long-term activity and operational efficiency.