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Comparing O Reilly's NWC To Total Assets Ratio

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Each ratio represents a different aspect of the business. Short term solvency ratios help measure a company’s ability to meet its financial obligations. According to the current ratios, O’Reilly Automotive Inc. can pay off more of its current debt than AutoZone can. O’Reilly also has more liquid assets to cover its liabilities than AutoZone which is why O’Reilly’s quick ratio is larger. Both companies have a small cash ratio, but AutoZone has more cash to cover its short term debt. Both companies also have a negative NWC to Total Assets Ratio, which means that they have too many current liabilities, which in turn reduces the amount of working capital available. However, O’Reilly is also in a better position because the company’s NWC to Total …show more content…

AutoZone has turned over its inventory 1.42 times while O’Reilly turned over its inventory 1.44 times. Both companies have a low inventory turnover rate, which means that there is little to no return. Low sales or surplus of inventory may be the reason behind the companies’ low Inventory turnover rates. According to the days’ sales in inventory ratios, AutoZone’s inventory sits for 257.04 days before it is sold while O’Reilly’s inventory sits for 253.47 days. AutoZone collected its outstanding credit 45.40 times during the year. O’Reilly’s Automotive collected its outstanding credit 35.65 times during the year. Even though AutoZone has collected more of its outstanding debt owed to them, both companies have a decent Receivables Turnover, which means that they are able to collect most of the debt owed to them. According to the days’ sales in receivables ratio, it takes AutoZone 8.03 days to collect its debt while it takes O’Reilly’s Automotive 10.23 days. In terms of this ratio, AutoZone is better at collecting the debt that is owed to them. Since both companies have a negative NWC Turnover ratio, it shows they cannot generate more revenue than the amount of money that is funded to them. However, O’Reilly Automotive is in a worse position because its NWC ratio is smaller than AutoZone’s. In terms of the fixed asset turnover ratio, AutoZone gains $2.90 in sales for every $1 in fixed assets, while O’Reilly Automotive gains $2.78 in sales for every $1 in fixed assets. However, according to the total asset turnover ratio, O’Reilly Automotive earns $1.19 in sales for every $1 in total assets while AutoZone earns $1.30 in sales for every $1 in total

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The ratios allow a business organisation to develop, but also displays to potential creditors the profitability of the company. Analyzing the Debtors' turnover shows the length it takes to collect payments; a low ratio may mean payment terms need tightening up. Creditors' turnover shows how long a business takes to pay suppliers. Suppliers may withdraw credit if you regularly pay late. Stock turnover shows how long stock is held before selling; a lower stock turnover may mean lower

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In this case, we can say that Amazon performance is a lot better than CanGo. A high Debt to Equity Ratio generally means that a company has been aggressive in financing its growth with debt. Debt can come in the form of stocks, bonds, and loans that the company borrowed against. Amazon current ratio is 1.31, but CanGo current ratio is 5.33. In general we can see that CanGo is performing better in this area compared with their main competitor Amazon, because this ratio shows that CanGo is capable of repaying its debts and liabilities than

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The first part we will be analyzing is the company’s liquidity ratios. Liquidity ratios show a company’s ability to pay debt obligations. For 2015 and 2016 Targets current ratios were greater than 1 meaning that if the company was to liquidate they would be able to pay 100% of their current liabilities with their current assets. In 2017 the current ratio went down to .94 which means they have more current liabilities than current assets. The Acid Test ratio shows if a company has enough quick assets to cover its current liabilities.

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This ratio is exactly the equal to the similar industry average which shows that the company is doing not so bad. Furthermore, this shows that the company is able to pay off their short term liabilities simply with their current assets. This also means that the business is easy to pay off their short term liabilities in the forthcoming period of time. The ‘debtor’s payment period’ for Kai Enterprise is 34 days.

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More liquidity is what manger and shareholders are looking for to determine whether the company has the ability to cover the short-term liabilities. The current ratio value for the year 2013 calculated in comparison to 2012 shows decrease in liabilities. To measure the debt-equity rate of the company, show if a business is using the fitting amount of debt financing (Parrino, Kidwell, Bates, 2012). Greater potential on return and greater bankruptcy risk are shown by higher ratios (Parrino, Kidwell, Bates, 2012). The debt interest rate in 2012 was 15% information revealed the SG&A expenses ratio to income is blank unlike the net year which, is nearly 40% for 2013, long-term debt from the year 2012 to year 2013 has nearly increased by

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The solvency ratios are the ratios which are used in the process of assessing the company’s financial health and hence measure the ability to measure the ability to meet the long-term debt and its interest by the company. The different solvency ratios in the company are like the total debt to Equity ratio of Constellation Brands was 1.70 at 2017 and 1.54 in 2016 and 1.57 in 2015. The trend fall from 2015 to 2016 which meant that the company used little of their cash flow interests in paying for their debts in 2016 as compared to 2015. The increase in the debt ratio in 2017 means that there has been an increase in the debt level financing the organization as compared to before which imposes a high risk in their operation as the interest on debt

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(TGT) 1.) Liquidity of short-term assets Current ratio 0.94 Cash ratio 0.06

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Looking at the annual report, the value of assets in the year 2014 compared to the year 2013, has decline in the cash and cash equivalent by 30%, in the short-term investment by 1% and in the prepaid expenses and other by 1%. The total current assets for 2014 is $29,632 million and 2013 is $70,994. (See attach balance sheet) As you can see that is an approximate 42% difference between the two years. (2014 Annual Report).

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The liquidity risk is determined using the current ratio and the quick ratio. The current ratio and the quick ratio are fairly constant over the three years showing stability in the liquidity position of the company. In comparison to the industrial averages, both ratios are higher. The current ratio for 2007 is 1.67 in comparison to the industrial average of 1.6 while the quick ratio is 0.96 compared to the industrial average of 0.9. This is an indication

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