Chesapeake Energy Corp (CHK)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 0.21 | 0.18 | 8.57 | 468.11 | 2.81 |
| Receivables turnover | 14.71 | 8.17 | 4.98 | 7.02 | 8.62 |
| Payables turnover | 0.35 | 0.27 | 0.39 | 25.71 | 0.76 |
| Working capital turnover | 6.73 | — | — | — | — |
Activity ratios provide insights into how efficiently a company manages its assets and liabilities to generate sales and cash flow. Let's analyze Chesapeake Energy Corp's activity ratios based on the provided data:
1. Inventory Turnover:
- The inventory turnover ratio measures how many times a company sells and replaces its inventory during a period.
- Chesapeake Energy Corp's inventory turnover has been fluctuating significantly over the years, from a very low of 0.18 in 2022 to a high of 468.11 in 2020.
- A low inventory turnover indicates inefficiency in managing inventory levels, while a high turnover suggests effective inventory management.
2. Receivables Turnover:
- The receivables turnover ratio shows how many times a company collects its accounts receivable in a given period.
- Chesapeake Energy Corp's receivables turnover has ranged from 4.98 in 2021 to 14.71 in 2023.
- A higher turnover ratio indicates that the company is collecting its receivables more quickly, which is generally seen as a positive sign.
3. Payables Turnover:
- The payables turnover ratio reveals how efficiently a company pays its suppliers.
- Chesapeake Energy Corp's payables turnover has been on a declining trend, with the ratio dropping from 25.71 in 2020 to 0.35 in 2023.
- A lower payables turnover ratio may suggest delayed payments to suppliers, impacting the company's relationships with vendors.
4. Working Capital Turnover:
- The working capital turnover ratio evaluates how effectively a company utilizes its working capital to generate sales.
- The data provided does not include information for 2022 and prior years, making a trend analysis challenging.
- A higher working capital turnover ratio indicates efficient utilization of working capital to drive sales.
In conclusion, Chesapeake Energy Corp's activity ratios reflect fluctuations in inventory management, receivables collection efficiency, and payables payment strategy over the years. Further analysis and comparison with industry benchmarks would provide a more comprehensive understanding of the company's performance in managing its operational activities.
Average number of days
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 1,753.48 | 2,036.43 | 42.58 | 0.78 | 130.08 |
| Days of sales outstanding (DSO) | days | 24.82 | 44.70 | 73.34 | 51.96 | 42.35 |
| Number of days of payables | days | 1,048.14 | 1,342.04 | 936.83 | 14.20 | 483.43 |
The activity ratios of Chesapeake Energy Corp indicate the efficiency with which the company manages its inventory, receivables, and payables.
Days of inventory on hand (DOH) measures how many days, on average, it takes for the company to sell its inventory. The trend shows a significant increase in DOH from 2019 to 2023, suggesting a slower inventory turnover rate, which may lead to higher carrying costs and potential obsolescence risks.
Days of sales outstanding (DSO) assesses how long it takes for the company to collect its accounts receivable. The decreasing DSO from 2019 to 2023 signals an improvement in the company's collection efficiency, indicating a more effective credit policy or better customer payment practices.
Number of days of payables signifies the average number of days it takes for the company to pay its suppliers. The higher DOP in 2023 compared to previous years indicates that Chesapeake Energy is taking longer to pay its suppliers, which could strain supplier relationships or indicate potential cash flow issues.
Overall, Chesapeake Energy Corp's activity ratios show varying trends in managing inventory, receivables, and payables, highlighting the importance of monitoring these metrics to assess the company's operational efficiency and liquidity management.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 0.86 | 1.05 | 0.63 | 1.00 | 0.58 |
| Total asset turnover | 0.61 | 0.76 | 0.50 | 0.80 | 0.53 |
Chesapeake Energy Corp's long-term activity ratios, specifically the fixed asset turnover and total asset turnover, provide insights into the company's efficiency in generating revenues from its assets.
The fixed asset turnover ratio has fluctuated over the past five years, ranging from 0.58 to 1.05. A lower ratio indicates that the company is not effectively utilizing its fixed assets to generate sales, while a higher ratio signifies better efficiency. The declining trend from 2022 to 2023 may suggest inefficiencies in utilizing fixed assets during that period.
Similarly, the total asset turnover ratio displays fluctuations, varying from 0.50 to 0.80 over the same period. This ratio measures the company's ability to generate sales from all its assets, including fixed and current assets. The lower ratios in 2021 and 2019 indicate that the company was less efficient in utilizing its total assets to generate revenue during those years.
Overall, the analysis of Chesapeake Energy Corp's long-term activity ratios suggests that the company has experienced fluctuations in asset turnover efficiency over the past five years. Further investigation into the underlying factors driving these variations would be necessary to identify potential areas for improvement in operational efficiency.