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Comparing O Reilly's NWC To Total Assets Ratio

664 Words3 Pages

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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