WD-40 Company (WDFC)

Short-term

Turnover ratios

The activity ratios of WD-40 Company indicate the efficiency with which the company manages its assets and liabilities in relation to its sales and operating cycle.

1. Inventory turnover: WD-40 Company's inventory turnover has shown a positive trend over the past five years, indicating that the company has been more effective in selling its inventory. A higher inventory turnover ratio suggests better inventory management and possibly lower holding costs.

2. Receivables turnover: The receivables turnover ratio has fluctuated slightly but has remained relatively stable over the past five years. This suggests that WD-40 Company has been efficient in collecting outstanding receivables from its customers in a timely manner.

3. Payables turnover: WD-40 Company's payables turnover has shown variability over the years but has generally been on the higher side. A higher payables turnover ratio indicates that the company is paying its suppliers more frequently, which could potentially improve its relationship with suppliers and help manage cash flow.

4. Working capital turnover: The working capital turnover ratio has demonstrated an upward trend over the years, indicating that WD-40 Company has been utilizing its working capital more efficiently to generate sales revenue. A higher working capital turnover ratio suggests that the company is effectively managing its current assets and liabilities to support its operations.

Overall, WD-40 Company's activity ratios reflect a level of efficiency in managing its assets and liabilities to support its sales operations. The company's consistent focus on improving inventory turnover, receivables turnover, payables turnover, and working capital turnover demonstrates its commitment to operational efficiency and effective working capital management.

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Average number of days

To analyze WD-40 Company's activity ratios, we will focus on Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables.

1. Days of Inventory on Hand (DOH):
- The trend for DOH indicates that WD-40 Company has been improving its inventory management efficiency over the past five years.
- A decreasing trend in DOH from 81.20 days in 2020 to 62.71 days in 2024 indicates that the company is managing its inventory more effectively, reducing the number of days inventory is held before being sold.
- This improvement suggests better control over inventory levels, potentially leading to lower carrying costs and better cash flow management.

2. Days of Sales Outstanding (DSO):
- The trend for DSO shows fluctuation over the years but has remained relatively stable.
- DSO measures how quickly the company collects its accounts receivable.
- WD-40 Company's DSO ranged from 63.43 days in 2022 to 72.75 days in 2024.
- While the DSO values are not consistently decreasing, they are within a reasonable range, indicating that the company is managing its accounts receivable effectively without significant deterioration in collection efficiency.

3. Number of Days of Payables:
- The trend for the number of days of payables highlights a fluctuating pattern over the years.
- A decreasing trend in payables days from 42.66 days in 2020 to 28.52 days in 2024 suggests that the company is paying its suppliers more quickly.
- While early payments may strain cash flow, they can improve relationships with suppliers and potentially lead to better terms in the future.

Overall, the analysis of WD-40 Company's activity ratios indicates a positive trend in inventory management efficiency (DOH), a relatively stable collection of receivables (DSO), and a trend towards quicker payment to suppliers (Number of Days of Payables). These trends collectively suggest improved working capital management and efficiency in the company's operations.

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Long-term

The fixed asset turnover ratio measures how efficiently a company is utilizing its fixed assets to generate revenue. WD-40 Company's fixed asset turnover has been consistently increasing over the past five years, indicating that the company is becoming more efficient in generating revenue from its fixed assets. This improvement suggests that the company is making better use of its property, plant, and equipment.

On the other hand, the total asset turnover ratio shows how efficiently a company is using all its assets to generate sales. WD-40 Company's total asset turnover has also shown a positive trend over the same period, reflecting the company's ability to generate more sales with each dollar of assets. This indicates that WD-40 Company is effectively managing its total assets to drive revenue growth.

Overall, both the fixed asset turnover ratio and total asset turnover ratio for WD-40 Company have been increasing over the years, which is a positive sign of improved efficiency in utilizing assets to drive revenue generation and ultimately create value for shareholders.