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Short-term (Operating) Activity Analysis
Quarterly Data
Difficulty: Beginner
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Ratios (Summary)
Costco Wholesale Corp., short-term (operating) activity ratios (quarterly data)
| Ratio | Description | The company |
|---|---|---|
| Inventory turnover | An activity ratio calculated as cost of goods sold divided by inventory. | Costco Wholesale Corp.'s inventory turnover improved from Q1 2018 to Q2 2018 and from Q2 2018 to Q3 2018. |
| Receivables turnover | An activity ratio equal to revenue divided by receivables. | Costco Wholesale Corp.'s receivables turnover deteriorated from Q1 2018 to Q2 2018 but then improved from Q2 2018 to Q3 2018 exceeding Q1 2018 level. |
| Payables turnover | An activity ratio calculated as cost of goods sold divided by payables. | Costco Wholesale Corp.'s payables turnover increased from Q1 2018 to Q2 2018 but then slightly declined from Q2 2018 to Q3 2018. |
| Working capital turnover | An activity ratio calculated as revenue divided by working capital. | |
| Average inventory processing period | An activity ratio equal to the number of days in the period divided by inventory turnover over the period. | Costco Wholesale Corp.'s average inventory processing period improved from Q1 2018 to Q2 2018 and from Q2 2018 to Q3 2018. |
| Average receivable collection period | An activity ratio equal to the number of days in the period divided by receivables turnover. | |
| Operating cycle | Equal to average inventory processing period plus average receivables collection period. | Costco Wholesale Corp.'s operating cycle improved from Q1 2018 to Q2 2018 and from Q2 2018 to Q3 2018. |
| Average payables payment period | An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period. | Costco Wholesale Corp.'s average payables payment period declined from Q1 2018 to Q2 2018 but then slightly increased from Q2 2018 to Q3 2018. |
| Cash conversion cycle | A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period. | Costco Wholesale Corp.'s cash conversion cycle deteriorated from Q1 2018 to Q2 2018 but then improved from Q2 2018 to Q3 2018 not reaching Q1 2018 level. |
Inventory Turnover
Costco Wholesale Corp., inventory turnover calculation (quarterly data)
Q3 2018 Calculations
1 Inventory turnover
= (Merchandise costsQ3 2018
+ Merchandise costsQ2 2018
+ Merchandise costsQ1 2018
+ Merchandise costsQ4 2017)
÷ Merchandise inventories
= ( + + + )
÷ =
| Ratio | Description | The company |
|---|---|---|
| Inventory turnover | An activity ratio calculated as cost of goods sold divided by inventory. | Costco Wholesale Corp.'s inventory turnover improved from Q1 2018 to Q2 2018 and from Q2 2018 to Q3 2018. |
Receivables Turnover
Costco Wholesale Corp., receivables turnover calculation (quarterly data)
Q3 2018 Calculations
1 Receivables turnover
= (Net salesQ3 2018
+ Net salesQ2 2018
+ Net salesQ1 2018
+ Net salesQ4 2017)
÷ Receivables, net
= ( + + + )
÷ =
| Ratio | Description | The company |
|---|---|---|
| Receivables turnover | An activity ratio equal to revenue divided by receivables. | Costco Wholesale Corp.'s receivables turnover deteriorated from Q1 2018 to Q2 2018 but then improved from Q2 2018 to Q3 2018 exceeding Q1 2018 level. |
Payables Turnover
Costco Wholesale Corp., payables turnover calculation (quarterly data)
Q3 2018 Calculations
1 Payables turnover
= (Merchandise costsQ3 2018
+ Merchandise costsQ2 2018
+ Merchandise costsQ1 2018
+ Merchandise costsQ4 2017)
÷ Accounts payable
= ( + + + )
÷ =
| Ratio | Description | The company |
|---|---|---|
| Payables turnover | An activity ratio calculated as cost of goods sold divided by payables. | Costco Wholesale Corp.'s payables turnover increased from Q1 2018 to Q2 2018 but then slightly declined from Q2 2018 to Q3 2018. |
Working Capital Turnover
Costco Wholesale Corp., working capital turnover calculation (quarterly data)
Q3 2018 Calculations
1 Working capital turnover
= (Net salesQ3 2018
+ Net salesQ2 2018
+ Net salesQ1 2018
+ Net salesQ4 2017)
÷ Working capital
= ( + + + )
÷ =
| Ratio | Description | The company |
|---|---|---|
| Working capital turnover | An activity ratio calculated as revenue divided by working capital. |
Average Inventory Processing Period
Costco Wholesale Corp., average inventory processing period calculation (quarterly data)
Q3 2018 Calculations
1 Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ =
| Ratio | Description | The company |
|---|---|---|
| Average inventory processing period | An activity ratio equal to the number of days in the period divided by inventory turnover over the period. | Costco Wholesale Corp.'s average inventory processing period improved from Q1 2018 to Q2 2018 and from Q2 2018 to Q3 2018. |
Average Receivable Collection Period
Costco Wholesale Corp., average receivable collection period calculation (quarterly data)
Q3 2018 Calculations
1 Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ =
| Ratio | Description | The company |
|---|---|---|
| Average receivable collection period | An activity ratio equal to the number of days in the period divided by receivables turnover. |
Operating Cycle
Costco Wholesale Corp., operating cycle calculation (quarterly data)
No. of days
Q3 2018 Calculations
1 Operating cycle = Average inventory processing period + Average receivable collection period
= + =
| Ratio | Description | The company |
|---|---|---|
| Operating cycle | Equal to average inventory processing period plus average receivables collection period. | Costco Wholesale Corp.'s operating cycle improved from Q1 2018 to Q2 2018 and from Q2 2018 to Q3 2018. |
Average Payables Payment Period
Costco Wholesale Corp., average payables payment period calculation (quarterly data)
Q3 2018 Calculations
1 Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ =
| Ratio | Description | The company |
|---|---|---|
| Average payables payment period | An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period. | Costco Wholesale Corp.'s average payables payment period declined from Q1 2018 to Q2 2018 but then slightly increased from Q2 2018 to Q3 2018. |
Cash Conversion Cycle
Costco Wholesale Corp., cash conversion cycle calculation (quarterly data)
No. of days
Q3 2018 Calculations
1 Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= + – =
| Ratio | Description | The company |
|---|---|---|
| Cash conversion cycle | A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period. | Costco Wholesale Corp.'s cash conversion cycle deteriorated from Q1 2018 to Q2 2018 but then improved from Q2 2018 to Q3 2018 not reaching Q1 2018 level. |
