Devon Energy Corporation (DVN)

The liquidity ratios of Devon Energy Corp. have shown some fluctuations over the past five years.

The current ratio, which measures the company's ability to cover its short-term liabilities with its short-term assets, has decreased from 2.26 in 2020 to 1.07 in 2023. A current ratio above 1 indicates that Devon Energy Corp. has more current assets than current liabilities, although the downward trend suggests a potential decrease in liquidity over the past three years.

The quick ratio, also known as the acid-test ratio, provides a more stringent measure of liquidity by excluding inventory from current assets. Similarly to the current ratio, the quick ratio has also declined from 2.26 in 2020 to 0.99 in 2023. A quick ratio above 1 is generally considered healthy, but the decreasing trend could indicate potential challenges in meeting short-term obligations without relying on inventory.

The cash ratio, which is the most conservative liquidity ratio as it only considers cash and equivalents in relation to current liabilities, has fluctuated over the years. The ratio has decreased from 1.73 in 2020 to 0.45 in 2023. A cash ratio above 1 indicates that a company can cover its current liabilities with cash on hand, but the decreasing trend suggests potential constraints on Devon Energy Corp.'s ability to meet short-term obligations solely with cash reserves.

Overall, the decreasing trend in all three liquidity ratios over the past few years may indicate a potential weakening in Devon Energy Corp.'s short-term liquidity position. It would be important to closely monitor the company's ability to meet its immediate financial obligations as indicated by these ratios.

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See also:

Devon Energy Corporation Liquidity Ratios

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Additional liquidity measure

The cash conversion cycle of Devon Energy Corp. has shown variability over the past five years. In 2023, the company's cash conversion cycle improved to 37.63 days compared to 33.65 days in 2022. This indicates that the company is taking less time to convert its investments in inventory and other resources into cash from sales, reflecting efficient working capital management.

The trend of the cash conversion cycle from 2020 to 2022 was fluctuating, with an increase in 2020 to 58.59 days followed by a decrease in 2021 to 48.62 days. In 2019, the cycle was at a similar level to 2021 at 48.82 days.

Overall, a decreasing trend in the cash conversion cycle is positive as it signifies that the company is managing its working capital effectively and converting its assets into cash more efficiently. However, it would be important to continue monitoring the cash conversion cycle to ensure sustained efficiency in working capital management.