Understand The Balance Sheet

- Cash on hand > 3-6 months of operating expenses Cash equivalents of $221M is less than 2 months of operating expenses of $1.83B - Red flag - Not too much long term debt - Can they pay down long term debts within 3 years of Free cash flow Long term debts of $452M compared to free cash flow of ($8.8M) -Net cash flow is always a very low value positive or negative. - Total assets > Total liabilities Current Ratio: Total current assets / total current liabilities >1, ideally >2 Good, at a Ratio of 4.01 - Shareholder equity rising over time, ideally growing at >10% anually Yellow flag - shareholder equity is growing, but more slowly at about ~5%. Some of this can be attributed to the high operating expenses accrued during the supply chain challenges from COVID, where FASTENAL spent heavily to source goods for customers as a means to retain trust.