Murphy Oil Corporation (MUR)
Activity ratios
Short-term
Turnover ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Inventory turnover | 3.98 | 6.51 | 6.75 | 21.77 | 4.04 |
| Receivables turnover | 10.06 | 10.05 | 8.91 | 7.51 | 6.63 |
| Payables turnover | 0.48 | 0.65 | 0.59 | 3.53 | 0.51 |
| Working capital turnover | — | — | — | 6.93 | 89.70 |
Activity ratios provide insight into how efficiently a company is managing its assets and liabilities to generate sales.
1. Inventory Turnover: This ratio measures how many times a company's inventory is sold and replaced over a period. In 2023, Murphy Oil Corp.'s inventory turnover decreased significantly to 0.95 from 3.16 in 2022. The sharp decline could indicate issues with inventory management or lower sales relative to the inventory levels. A lower ratio suggests slower sales relative to the amount of inventory held.
2. Receivables Turnover: This ratio indicates how many times a company collects its accounts receivable during a period. Murphy Oil Corp.'s receivables turnover increased from 6.60 in 2019 to 10.03 in 2023, showing that the company is collecting its receivables more efficiently. A higher turnover implies that the company is collecting outstanding payments quicker.
3. Payables Turnover: This ratio reflects how many times a company pays its suppliers during a period. The payables turnover in 2023 dropped to 0.12 from 0.32 in 2022, suggesting a slower rate of paying off its suppliers. This could potentially strain supplier relationships or indicate liquidity issues.
4. Working Capital Turnover: This ratio measures how effectively a company is generating sales using its working capital. Murphy Oil Corp. did not have data available in the earlier years, but in 2023, the working capital turnover was not reported. The absence of data may indicate a change in reporting practices or a significantly different approach to utilizing working capital.
In summary, the analysis of Murphy Oil Corp.'s activity ratios shows varied performance in managing inventories, receivables, and payables. The company needs to focus on improving its inventory turnover and payables turnover to enhance efficiency in its operations and cash flow management.
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 | 91.76 | 56.08 | 54.05 | 16.76 | 90.38 |
| Days of sales outstanding (DSO) | days | 36.29 | 36.30 | 40.98 | 48.61 | 55.05 |
| Number of days of payables | days | 753.03 | 559.42 | 621.37 | 103.29 | 714.83 |
Activity ratios provide insight into how efficiently a company manages its assets and liabilities to generate revenue. Let's analyze the activity ratios for Murphy Oil Corp. based on the data given:
1. Days of Inventory on Hand (DOH):
- In 2023, the DOH increased significantly to 384.58 days from 115.69 days in 2022. This indicates that Murphy Oil is holding inventory for a longer period, which may tie up capital and suggest inefficiencies in inventory management.
2. Days of Sales Outstanding (DSO):
- The DSO remained relatively stable over the years, ranging from 36.41 days in 2023 to 55.30 days in 2019. This suggests that Murphy Oil has been consistent in collecting its accounts receivable, maintaining a moderate level of efficiency in converting credit sales into cash.
3. Number of Days of Payables:
- The number of days of payables increased significantly from 1,154.02 days in 2022 to 3,156.13 days in 2023. This substantial increase may indicate that Murphy Oil is taking longer to pay its suppliers, which could strain relationships or suggest potential cash flow issues.
In conclusion, the analysis of Murphy Oil Corp.'s activity ratios shows a concerning trend of increased inventory holding periods and payable days, while maintaining stable receivables turnover. This may signal challenges in managing working capital efficiently, which could impact the company's overall financial performance and liquidity position.
Long-term
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 0.42 | 0.48 | 0.28 | 0.24 | 0.28 |
| Total asset turnover | 0.35 | 0.38 | 0.22 | 0.19 | 0.24 |
The long-term activity ratios of Murphy Oil Corp., as indicated by the fixed asset turnover and total asset turnover ratios, show a fluctuating trend over the past five years.
Starting with the fixed asset turnover ratio, it decreased from 0.47 in 2022 to 0.42 in 2023, after having shown some improvement from 2020 to 2022. This ratio suggests that Murphy Oil Corp. generated $0.42 in revenue for every $1 invested in fixed assets in 2023. A declining trend in the fixed asset turnover ratio could indicate either a decrease in sales relative to fixed assets or an increase in the carrying value of fixed assets.
Moving on to the total asset turnover ratio, it decreased from 0.38 in 2022 to 0.35 in 2023. This ratio signifies that the company generated $0.35 in revenue for every $1 of total assets in 2023. The decreasing trend in this ratio highlights a potential inefficiency in generating sales from its total asset base.
Overall, the long-term activity ratios of Murphy Oil Corp. suggest a mixed performance in utilizing its assets efficiently to generate sales revenue. Management should closely monitor these ratios to assess the effectiveness of the company's asset utilization strategies and identify areas for improvement in its operational efficiency.