Devon Energy Corporation (DVN)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 1.04 | 1.07 | 1.25 | 1.38 | 2.26 |
| Quick ratio | 0.96 | 0.92 | 1.06 | 1.24 | 1.90 |
| Cash ratio | 0.25 | 0.29 | 0.42 | 0.68 | 1.42 |
Based on the provided data, the liquidity ratios of Devon Energy Corporation have displayed a downward trend over the years.
The current ratio, which measures the company's ability to cover its short-term obligations with its current assets, decreased from 2.26 in December 31, 2020, to 1.04 in December 31, 2024. This decline indicates that Devon Energy's current assets may not be as sufficient to cover its current liabilities as they were in the past.
Similarly, the quick ratio, which provides a more stringent measurement of liquidity by excluding inventory from current assets, also decreased from 1.90 in December 31, 2020, to 0.96 in December 31, 2024. This downward trend suggests a potential strain on the company's ability to meet its immediate liabilities without relying on inventory.
The cash ratio, which shows the proportion of cash and cash equivalents to cover current liabilities, dropped from 1.42 in December 31, 2020, to 0.25 in December 31, 2024. This significant decrease indicates that Devon Energy's cash reserves may not be as strong as they were previously in relation to its current liabilities.
Overall, the decreasing trend in liquidity ratios suggests a potential liquidity challenge for Devon Energy Corporation, as the company's ability to meet its short-term financial obligations has weakened over the years. This could raise concerns about the company's financial health and its ability to manage its short-term cash needs effectively.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | -1,204.16 | -1,358.38 | -1,808.11 | -923.80 | -54.12 |
The cash conversion cycle for Devon Energy Corporation has shown a significant decrease over the years, indicating a more efficient management of its working capital. As of December 31, 2020, the company had a negative cash conversion cycle of -54.12 days, suggesting that it was able to convert its inventory and accounts receivable into cash in a relatively short period. This trend continued to improve dramatically in the following years, with the cash conversion cycle reaching -923.80 days by December 31, 2021, -1,808.11 days by December 31, 2022, -1,358.38 days by December 31, 2023, and -1,204.16 days by December 31, 2024.
A negative cash conversion cycle indicates that Devon Energy Corporation is able to operate with a negative working capital, which means it can fund its operations using suppliers' credit before receiving payment from customers. This may suggest strong bargaining power with suppliers and efficient collections from customers. However, it's important to note that a very low or negative cash conversion cycle may also indicate aggressive management of working capital, potentially risking supplier relationships or hindering investments in growth opportunities. Further analysis of the company's strategies and operations would provide more insights into the reasons behind such a drastic reduction in the cash conversion cycle over the years.