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Devon Energy Corp. (DVN) | Short-term (Operating) Activity Analysis

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Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.


Ratios (Summary)

Devon Energy Corp., short-term (operating) activity ratios

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Turnover Ratios
Inventory turnover 82.83 44.04 78.01 78.36 –
Receivables turnover 8.27 6.63 10.77 6.39 7.59
Payables turnover 7.04 7.05 8.36 8.35 8.89
Working capital turnover – 31.68 – 20.15 52.11
  Average No. of Days
Average inventory processing period 4 8 5 5 –
Add: Average receivable collection period 44 55 34 57 48
Operating cycle 49 63 39 62 –
Less: Average payables payment period -52 -52 -44 -44 -41
Cash conversion cycle -3 12 -5 18 –

Source: Based on data from Devon Energy Corp. Annual Reports

Ratio Description The company
Inventory turnover An activity ratio calculated as revenue divided by inventory. Devon Energy Corp.'s inventory turnover deteriorated from 2008 to 2009 but then improved from 2009 to 2010 exceeding 2008 level.
Receivables turnover An activity ratio equal to revenue divided by receivables. Devon Energy Corp.'s receivables turnover deteriorated from 2008 to 2009 but then slightly improved from 2009 to 2010.
Payables turnover An activity ratio calculated as revenue divided by payables. Devon Energy Corp.'s payables turnover declined from 2008 to 2009 and from 2009 to 2010.
Working capital turnover An activity ratio calculated as revenue divided by working capital.
Average inventory processing period An activity ratio equal to the number of days in the period divided by inventory turnover over the period. Devon Energy Corp.'s average inventory processing period deteriorated from 2008 to 2009 but then improved from 2009 to 2010 exceeding 2008 level.
Average receivable collection period An activity ratio equal to the number of days in the period divided by receivables turnoverd. Devon Energy Corp.'s average receivable collection period deteriorated from 2008 to 2009 but then improved from 2009 to 2010 not reaching 2008 level.
Operating cycle Equal to average inventory processing period plus average receivables collection period. Devon Energy Corp.'s operating cycle deteriorated from 2008 to 2009 but then improved from 2009 to 2010 not reaching 2008 level.
Average payables payment period An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period. Devon Energy Corp.'s average payables payment period increased from 2008 to 2009 and from 2009 to 2010.
Cash conversion cycle A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period. Devon Energy Corp.'s cash conversion cycle deteriorated from 2008 to 2009 but then improved from 2009 to 2010 not reaching 2008 level.

Inventory Turnover

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Selected Financial Data (USD $ in millions)
Revenues 9,940  8,015  15,211  11,362  10,578 
Inventories 120  182  195  145  –
  Inventory Turnover, Comparison to Industry
Devon Energy Corp.1 82.83 44.04 78.01 78.36 –
  Industry, Oil & Gas 15.74 13.89 25.47 16.58 –

Source: Based on data from Devon Energy Corp. Annual Reports

2010 Calculations

1 Inventory turnover = Revenues ÷ Inventories
= 9,940  ÷ 120  = 82.83

Ratio Description The company
Inventory turnover An activity ratio calculated as revenue divided by inventory. Devon Energy Corp.'s inventory turnover deteriorated from 2008 to 2009 but then improved from 2009 to 2010 exceeding 2008 level.

Receivables Turnover

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Selected Financial Data (USD $ in millions)
Revenues 9,940  8,015  15,211  11,362  10,578 
Accounts receivable 1,202  1,208  1,412  1,779  1,393 
  Receivables Turnover, Comparison to Industry
Devon Energy Corp.1 8.27 6.63 10.77 6.39 7.59
  Industry, Oil & Gas 9.86 9.25 14.57 9.00 –

Source: Based on data from Devon Energy Corp. Annual Reports

2010 Calculations

1 Receivables turnover = Revenues ÷ Accounts receivable
= 9,940  ÷ 1,202  = 8.27

Ratio Description The company
Receivables turnover An activity ratio equal to revenue divided by receivables. Devon Energy Corp.'s receivables turnover deteriorated from 2008 to 2009 but then slightly improved from 2009 to 2010.

Payables Turnover

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Selected Financial Data (USD $ in millions)
Revenues 9,940  8,015  15,211  11,362  10,578 
Accounts payable, trade 1,411  1,137  1,819  1,360  1,190 
  Payables Turnover, Comparison to Industry
Devon Energy Corp.1 7.04 7.05 8.36 8.35 8.89
  Industry, Oil & Gas 10.10 9.72 15.63 9.96 –

Source: Based on data from Devon Energy Corp. Annual Reports

2010 Calculations

1 Payables turnover = Revenues ÷ Accounts payable, trade
= 9,940  ÷ 1,411  = 7.04

Ratio Description The company
Payables turnover An activity ratio calculated as revenue divided by payables. Devon Energy Corp.'s payables turnover declined from 2008 to 2009 and from 2009 to 2010.

Working Capital Turnover

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Selected Financial Data (USD $ in millions)
Revenues 9,940  8,015  15,211  11,362  10,578 
Working capital (89) 253  (212) 564  203 
  Working Capital Turnover, Comparison to Industry
Devon Energy Corp.1 – 31.68 – 20.15 52.11
  Industry, Oil & Gas 15.18 12.97 22.77 14.07 –

Source: Based on data from Devon Energy Corp. Annual Reports

2010 Calculations

1 Working capital turnover = Revenues ÷ Working capital
= 9,940  ÷ (89) = –

Ratio Description The company
Working capital turnover An activity ratio calculated as revenue divided by working capital.

Average Inventory Processing Period

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Selected Financial Data
Inventory turnover 82.83 44.04 78.01 78.36 –
  Average Inventory Processing Period (no. of days), Comparison to Industry
Devon Energy Corp.1 4 8 5 5 –
  Industry, Oil & Gas 23 26 14 22 –

Source: Based on data from Devon Energy Corp. Annual Reports

2010 Calculations

1 Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 82.83 = 4

Ratio Description The company
Average inventory processing period An activity ratio equal to the number of days in the period divided by inventory turnover over the period. Devon Energy Corp.'s average inventory processing period deteriorated from 2008 to 2009 but then improved from 2009 to 2010 exceeding 2008 level.

Average Receivable Collection Period

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Selected Financial Data
Receivables turnover 8.27 6.63 10.77 6.39 7.59
  Average Receivable Collection Period (no. of days), Comparison to Industry
Devon Energy Corp.1 44 55 34 57 48
  Industry, Oil & Gas 37 39 25 41 –

Source: Based on data from Devon Energy Corp. Annual Reports

2010 Calculations

1 Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 8.27 = 44

Ratio Description The company
Average receivable collection period An activity ratio equal to the number of days in the period divided by receivables turnoverd. Devon Energy Corp.'s average receivable collection period deteriorated from 2008 to 2009 but then improved from 2009 to 2010 not reaching 2008 level.

Operating Cycle

No. of days

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Selected Financial Data
Average inventory processing period 4 8 5 5 –
Average receivable collection period 44 55 34 57 48
  Operating Cycle, Comparison to Industry
Devon Energy Corp.1 49 63 39 62 –
  Industry, Oil & Gas 60 66 39 63 –

Source: Based on data from Devon Energy Corp. Annual Reports

2010 Calculations

1 Operating cycle = Average inventory processing period + Average receivable collection period
= 4 + 44 = 49

Ratio Description The company
Operating cycle Equal to average inventory processing period plus average receivables collection period. Devon Energy Corp.'s operating cycle deteriorated from 2008 to 2009 but then improved from 2009 to 2010 not reaching 2008 level.

Average Payables Payment Period

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Selected Financial Data
Payables turnover 7.04 7.05 8.36 8.35 8.89
  Average Payables Payment Period (no. of days), Comparison to Industry
Devon Energy Corp.1 52 52 44 44 41
  Industry, Oil & Gas 36 38 23 37 –

Source: Based on data from Devon Energy Corp. Annual Reports

2010 Calculations

1 Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ 7.04 = 52

Ratio Description The company
Average payables payment period An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period. Devon Energy Corp.'s average payables payment period increased from 2008 to 2009 and from 2009 to 2010.

Cash Conversion Cycle

No. of days

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Selected Financial Data
Average inventory processing period 4 8 5 5 –
Average receivable collection period 44 55 34 57 48
Average payables payment period 52 52 44 44 41
  Cash Conversion Cycle, Comparison to Industry
Devon Energy Corp.1 -3 12 -5 18 –
  Industry, Oil & Gas 24 28 16 26 –

Source: Based on data from Devon Energy Corp. Annual Reports

2010 Calculations

1 Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= 4 + 44 – 52 = -3

Ratio Description The company
Cash conversion cycle A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period. Devon Energy Corp.'s cash conversion cycle deteriorated from 2008 to 2009 but then improved from 2009 to 2010 not reaching 2008 level.

February 8, 2012

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