Diamondback Energy Inc (FANG)
Liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Current ratio | 0.44 | 0.77 | 0.81 | 1.01 | 0.49 |
| Quick ratio | 0.03 | 0.28 | 0.16 | 0.46 | 0.52 |
| Cash ratio | 0.03 | 0.28 | 0.16 | 0.46 | 0.52 |
Based on the provided data, the liquidity ratios of Diamondback Energy Inc show variations over the years. The current ratio, which measures the company's ability to cover its short-term liabilities with its current assets, improved from 0.49 in December 2020 to 1.01 in December 2021, indicating a stronger liquidity position. However, in the following years, the current ratio decreased to 0.81 in December 2022, 0.77 in December 2023, and further to 0.44 in December 2024, suggesting a potential liquidity strain.
The quick ratio, also known as the acid-test ratio, provides a more conservative measure of liquidity as it excludes inventory from current assets. Diamondback Energy Inc's quick ratio decreased from 0.52 in December 2020 to 0.46 in December 2021, and then dropped significantly to 0.16 in December 2022, 0.28 in December 2023, and substantially lower to 0.03 in December 2024. This indicates a decreasing ability to meet short-term obligations with its most liquid assets.
The cash ratio, which is the most stringent liquidity ratio as it compares cash and cash equivalents to current liabilities, shows a similar trend to the quick ratio for Diamondback Energy Inc. The cash ratio decreased from 0.52 in December 2020 to 0.46 in December 2021, and then fell to 0.16 in December 2022, 0.28 in December 2023, and notably lower to 0.03 in December 2024. This indicates a diminishing ability to cover immediate liabilities with cash resources alone.
In summary, while Diamondback Energy Inc's liquidity ratios showed some improvement in the initial period, there was a subsequent decline in liquidity from 2022 onwards, as evidenced by decreasing current, quick, and cash ratios. This trend suggests that the company may face challenges in meeting its short-term obligations and may need to closely monitor and manage its liquidity position in the coming periods.
See also:
Additional liquidity measure
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 42.60 | 6.49 | 8.54 | 8.82 | 5.55 |
The cash conversion cycle of Diamondback Energy Inc has shown fluctuations over the years. As of December 31, 2020, the company's cash conversion cycle was 5.55 days, indicating a relatively efficient management of cash, inventory, and receivables. However, there was an increase in the cash conversion cycle to 8.82 days as of December 31, 2021, possibly suggesting a slight delay in converting inventory and receivables into cash.
Further, as of December 31, 2022, the cash conversion cycle decreased to 8.54 days, which could be a positive sign of improved efficiency in managing working capital. Subsequently, as of December 31, 2023, the cash conversion cycle decreased further to 6.49 days, indicating an even more effective management of cash flow and working capital.
However, there was a significant spike in the cash conversion cycle to 42.60 days as of December 31, 2024, which may raise concerns about the company's ability to efficiently convert inventory and receivables into cash within a reasonable timeframe.
Overall, Diamondback Energy Inc's cash conversion cycle has shown variability, with some periods of efficient cash conversion and others with potential delays in the conversion process. It would be important for the company to closely monitor and manage its working capital components to ensure optimal cash flow management in the future.