Diamondback Energy Inc. (NASDAQ:FANG)

Current Ratio

The current ratio exhibited significant fluctuations over the five-year period. It improved from 0.62 in 2017 to 0.91 in 2018, indicating better short-term liquidity. However, it declined in 2019 to 0.69 and further dropped to 0.49 in 2020, showing a weakening in the company's ability to cover current liabilities with current assets during these years. In 2021, the current ratio recovered sharply to 1.01, surpassing the 1.0 threshold, which suggests a restored and stronger liquidity position.

Quick Ratio

The quick ratio remained relatively stable but low from 2017 through 2019, hovering around 0.59 to 0.6, signifying limited liquid assets relative to current liabilities excluding inventories. In 2020, there was a noticeable decline to 0.36, reflecting a constrained immediate liquidity position. By 2021, the quick ratio rebounded significantly to 0.93, indicating an enhanced capability to meet short-term obligations without relying on inventory liquidation.

Cash Ratio

The cash ratio started at a low level of 0.19 in 2017 and showed a slight increase to 0.21 in 2018. It then deteriorated to 0.10 in 2019 and further to 0.09 in 2020, marking the weakest points in cash liquidity within the period assessed. However, in 2021, the cash ratio experienced a substantial increase to 0.47, signaling an improved cash position that supports higher immediate payment capacity.

Current Assets

The current assets exhibited a fluctuating trend over the analyzed periods. Beginning at $359 million in 2017, there was a notable increase to $925 million in 2018. Following this peak, current assets slightly declined to $869 million in 2019 and experienced a further drop to $602 million in 2020. However, in 2021, current assets sharply increased to $1,446 million, indicating a substantial enhancement in liquid resources or short-term assets.

Current Liabilities

Current liabilities showed a consistent upward trajectory throughout the period. Starting at $577 million in 2017, liabilities steadily increased each year, reaching $1,020 million in 2018, $1,263 million in 2019, $1,236 million in 2020, and eventually $1,438 million in 2021. Despite a slight reduction from 2019 to 2020, the general trend reflects a growing short-term debt or obligations.

Current Ratio

The current ratio, an indicator of liquidity, demonstrated volatility over the five-year span. In 2017, it was relatively low at 0.62, indicating limited coverage of current liabilities by current assets. This improved in 2018 to 0.91 but declined again to 0.69 in 2019 and further to 0.49 in 2020, suggesting decreased liquidity and increased risk of short-term liquidity issues during this period. The ratio, however, recovered to 1.01 in 2021, surpassing the critical threshold of 1.0, which implies that current assets exceeded current liabilities, thus indicating improved short-term financial health and a stronger liquidity position by the end of 2021.

The financial data reveals several key trends concerning liquidity and short-term financial health over the five-year period.

Total Quick Assets

Total quick assets exhibit a generally increasing trend, rising from $344 million in 2017 to $1,342 million in 2021. This demonstrates a substantial accumulation of highly liquid assets over the period, with a notable peak in 2019 at $743 million before a decrease in 2020, then a significant jump in 2021.

Current Liabilities

Current liabilities show a steady increase throughout the timeframe. They grew from $577 million in 2017 to $1,438 million in 2021, reflecting a rising short-term obligation load. The growth is relatively consistent year over year, suggesting an expanding liability profile.

Quick Ratio

The quick ratio remains relatively stable at around 0.6 between 2017 and 2019 but then declines sharply to 0.36 in 2020, indicating a reduction in liquidity in that year. However, it recovers significantly to 0.93 in 2021, improving the company's ability to cover its current liabilities with its most liquid assets.

Overall, while current liabilities have consistently increased, the substantial growth in total quick assets by 2021 corresponds with a restoration of liquidity as reflected in the quick ratio recovery. The dip in liquidity in 2020 may suggest temporary financial pressure or strategic shifts during that year, but the subsequent recovery indicates strengthened short-term financial stability by the end of 2021.

The analysis of the annual financial data reveals the following trends and insights:

Total Cash Assets

Total cash assets showed an initial increase from 112 million US$ in 2017 to 215 million US$ in 2018, followed by a decline to 128 million US$ in 2019 and a further decrease to 108 million US$ in 2020. In 2021, there was a significant recovery, with total cash assets rising sharply to 672 million US$, reaching the highest level in the observed period.

Current Liabilities

Current liabilities exhibited an upward trend over the years. They increased steadily from 577 million US$ in 2017 to 1020 million US$ in 2018, then to 1263 million US$ in 2019. In 2020, current liabilities slightly decreased to 1236 million US$ but rose again in 2021 to 1438 million US$, marking the highest liabilities level over the period.

Cash Ratio

The cash ratio, which measures the company's ability to cover its current liabilities with cash and cash equivalents, fluctuated notably. It started at 0.19 in 2017, increased slightly to 0.21 in 2018, before declining to 0.10 in 2019 and reaching its lowest point of 0.09 in 2020. In 2021, the cash ratio increased substantially to 0.47, indicating an improved liquidity position relative to the previous years.

Overall, the data indicates that while current liabilities have generally trended upwards, the company's liquidity position, as represented by total cash assets and the cash ratio, experienced significant volatility. The marked increase in cash assets and the cash ratio in 2021 suggests a strengthened liquidity position, potentially improving the company's ability to meet short-term obligations despite the rising liabilities.