O Reilly Auto Parts: Long-Term Solvency Ratio

LONG-TERM SOLVENCY RATIOS
The long-term solvency ratio is the measurement of the company’s ability to meet its longer-term obligations.
DEBT TO EQUITY RATIO
The debt to equity ratio analysis the investments made by creditors, to the investments made by the company's shareholders. A low debt to equity ratio is favorable by investors as it indicates that the shareholder's investments are much higher than that of creditors. This is calculated by taking the total liabilities and dividing it by the stockholder’s equity, as a result it directly marks the risk that the company defaults on the repayment of its liabilities. Advance Auto Parts has a debt to equity ratio was declining at the start of the period, except for 2014 when took a long-term

In 2015 the PE ratios decreased slightly from the year before since it repurchased 42,458 shares of common stock at an average price of $156.98. O’Reilly Auto Parts PE ratio decreased in 2012 due to the downturn in the economy which caused their stock prices to drop, and in 2015 they changed accounting techniques. Another reason for the share price decline common to both 2012 and 2015, was because the company repurchased total millions of shares of its common stock at the average market price at that point in time. Both companies have a positive PE ratio, and when compared side to side, O’Reilly has a higher price-earnings ratio to that of Advanced Auto parts, meaning that investors will be willing to pay more per dollar of its annual

O’Reilly Auto Parts price-to-sales ratio dropped in 2012 due to the downturn in the stock market and again in 2016 when it acquired Bon Auto Parts. Although the price to sales ratio for both companies, when compared to each other, Advance Auto Parts has the lowest price-to-sales ratio. From an investor’s point of view, Advance Auto Parts is a better investment because it means that they are paying less for each unit of sales.
SHORT SUMMARY
When analyzing a company, it is always essential to analyze and compare it with the performance and ratios of other companies within the same industry with like characteristics to identify its position against the industry’s average.
Advance Auto Parts appears to be managing its liquidity very well having the highest liquidity ratios in the industry. It is more liquid meaning it is in a better position than O’ Reilly Auto Parts to pay off its current liabilities if it is required. Although O’Reilly appears to be less liquid, it is not an indication that the company is struggling, since it only indicates that they do not heavily rely on its inventory to pay its short-term creditors. Additionally, their days to receivables is much lower than its competitor, who should look at reducing their ratio since their receivable are not