Analysis of Liquidity Ratios
Quarterly Data
Liquidity ratios measure the company ability to meet its short-term obligations.
Liquidity Ratios (Summary)
Devon Energy Corp., liquidity ratios (quarterly data)
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
The analysis of liquidity ratios over the presented periods reveals notable trends and fluctuations in short-term financial health indicators. Three key ratios are examined: current ratio, quick ratio, and cash ratio.
- Current Ratio
- The current ratio demonstrated an overall increasing trend from early 2019 through 2020, rising from 1.37 on March 31, 2019, and peaking at 2.61 in the first quarter of 2020. This suggested an improving ability to cover current liabilities with current assets during this period. However, starting in 2021, there was a consistent decline in this ratio, dropping below the initial 2019 levels by 2023 to around 0.96 as of September 30, 2023, indicating a weakening liquidity position and potentially tighter short-term financial conditions.
- Quick Ratio
- The quick ratio, which excludes inventories from current assets, also showed an initial upward trajectory from 1.20 in March 2019 to a peak near 1.97 in December 2020. This suggests that the company maintained a relatively strong liquid asset base excluding inventory through this period. Similar to the current ratio, the quick ratio declined significantly after 2020, falling to values below 1.00 by mid-2023, reaching 0.78 in the latest quarter. This decline points to a reduced cushion of highly liquid assets relative to current liabilities.
- Cash Ratio
- The cash ratio exhibited the most volatility and overall decline among the liquidity indicators. Initially, cash availability improved from 0.67 in early 2019 to a high of 1.55 in December 2020, reflecting strong cash and cash equivalents relative to current liabilities. After this peak, the ratio steadily decreased through 2021 to 2023, hitting a low of 0.18 in September 2023. This substantial reduction in cash reserves relative to current obligations raises concerns about immediate liquidity and the company’s capacity to meet short-term debts purely from cash funds.
In summary, all three liquidity measures reached their highest points near the end of 2020, suggesting a strong liquidity position at that time. Subsequent periods show a marked decline across current, quick, and cash ratios, indicating a deterioration in the company's short-term financial flexibility. The decline below 1.0 in current and quick ratios and the sharp drop in the cash ratio highlight increasing liquidity risks that might require closer monitoring and potential strategic responses to safeguard operational stability.
Current Ratio
Devon Energy Corp., current ratio calculation (quarterly data)
| Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||||
| Current assets | 3,212) | 2,605) | 3,189) | 3,891) | 4,009) | 6,351) | 4,973) | 4,249) | 4,227) | 3,076) | 3,467) | 3,260) | 3,477) | 3,378) | 4,055) | 3,851) | 2,846) | 5,167) | 2,703) | ||||||
| Current liabilities | 3,330) | 2,669) | 2,931) | 3,105) | 3,460) | 4,094) | 3,754) | 3,087) | 3,505) | 3,072) | 2,945) | 1,440) | 1,709) | 1,452) | 1,554) | 1,927) | 1,658) | 3,467) | 1,968) | ||||||
| Liquidity Ratio | |||||||||||||||||||||||||
| Current ratio1 | 0.96 | 0.98 | 1.09 | 1.25 | 1.16 | 1.55 | 1.32 | 1.38 | 1.21 | 1.00 | 1.18 | 2.26 | 2.03 | 2.33 | 2.61 | 2.00 | 1.72 | 1.49 | 1.37 | ||||||
| Benchmarks | |||||||||||||||||||||||||
| Current Ratio, Competitors2 | |||||||||||||||||||||||||
| Chevron Corp. | 1.25 | 1.43 | 1.43 | 1.47 | 1.40 | 1.31 | 1.43 | 1.26 | 1.28 | 1.17 | 1.11 | — | — | — | — | — | — | — | — | ||||||
| ConocoPhillips | 1.66 | 1.41 | 1.39 | 1.46 | 1.46 | 1.54 | 1.51 | 1.34 | 1.93 | 2.11 | 2.03 | — | — | — | — | — | — | — | — | ||||||
| Exxon Mobil Corp. | 1.42 | 1.48 | 1.46 | 1.41 | 1.34 | 1.16 | 1.07 | 1.04 | 0.90 | 0.85 | 0.80 | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q3 2023 Calculation
Current ratio = Current assets ÷ Current liabilities
= 3,212 ÷ 3,330 = 0.96
2 Click competitor name to see calculations.
- Current Assets
- The current assets exhibited significant volatility over the analyzed period. Initially, there was a sharp increase from $2,703 million to $5,167 million between March and June 2019, followed by a decline and moderate fluctuations through the end of 2020. From early 2021, current assets generally trended upward, reaching a peak of $6,351 million in June 2022. However, thereafter, they declined notably to $2,605 million by June 2023 before slightly recovering to $3,212 million in September 2023.
- Current Liabilities
- Current liabilities also showed considerable variation. Starting at $1,968 million in March 2019, values rose sharply to $3,467 million by June 2019, then fluctuated around $1,400 million to $1,900 million through the end of 2020. Substantial increases observed in early 2021 peaked at $3,505 million in September 2021, with further elevated levels sustained until June 2022. Following this, liabilities decreased steadily to $2,669 million by June 2023 but rose again to $3,330 million in September 2023.
- Current Ratio
- The current ratio, indicating short-term liquidity, showed a generally declining trend over the entire period. After starting at 1.37 in the first quarter of 2019, it improved to a high of 2.61 in the first quarter of 2020, reflecting strong liquidity at that time. However, since then, the ratio steadily decreased, falling below 1.0 in mid-2023, ending at 0.96 by September 2023. This indicates that current liabilities began to exceed current assets in recent quarters, suggesting a weakening liquidity position.
- Overall Analysis
- The data reveals that while current assets and liabilities both experienced marked fluctuations, liabilities generally increased relative to assets in the latter part of the period. The peak liquidity observed in early 2020 diminished continually, with the current ratio dropping to below 1.0 in 2023. This trend suggests increased short-term financial pressure, highlighting the need for close monitoring of working capital management and potentially indicating tightened cash flow conditions or increased reliance on short-term financing during recent quarters.
Quick Ratio
Devon Energy Corp., quick ratio calculation (quarterly data)
| Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||||
| Cash, cash equivalents and restricted cash | 761) | 488) | 887) | 1,454) | 1,310) | 3,457) | 2,625) | 2,271) | 2,321) | 1,539) | 1,878) | 2,237) | 1,897) | 1,669) | 1,727) | 1,844) | 1,655) | 3,840) | 1,327) | ||||||
| Accounts receivable | 1,853) | 1,519) | 1,615) | 1,767) | 2,061) | 2,348) | 2,002) | 1,543) | 1,517) | 1,185) | 1,089) | 601) | 493) | 515) | 594) | 832) | 787) | 842) | 1,038) | ||||||
| Total quick assets | 2,614) | 2,007) | 2,502) | 3,221) | 3,371) | 5,805) | 4,627) | 3,814) | 3,838) | 2,724) | 2,967) | 2,838) | 2,390) | 2,184) | 2,321) | 2,676) | 2,442) | 4,682) | 2,365) | ||||||
| Current liabilities | 3,330) | 2,669) | 2,931) | 3,105) | 3,460) | 4,094) | 3,754) | 3,087) | 3,505) | 3,072) | 2,945) | 1,440) | 1,709) | 1,452) | 1,554) | 1,927) | 1,658) | 3,467) | 1,968) | ||||||
| Liquidity Ratio | |||||||||||||||||||||||||
| Quick ratio1 | 0.78 | 0.75 | 0.85 | 1.04 | 0.97 | 1.42 | 1.23 | 1.24 | 1.10 | 0.89 | 1.01 | 1.97 | 1.40 | 1.50 | 1.49 | 1.39 | 1.47 | 1.35 | 1.20 | ||||||
| Benchmarks | |||||||||||||||||||||||||
| Quick Ratio, Competitors2 | |||||||||||||||||||||||||
| Chevron Corp. | 0.84 | 0.97 | 1.03 | 1.12 | 1.03 | 1.00 | 1.12 | 0.90 | 0.90 | 0.83 | 0.77 | — | — | — | — | — | — | — | — | ||||||
| ConocoPhillips | 1.46 | 1.19 | 1.20 | 1.27 | 1.27 | 1.34 | 1.29 | 1.10 | 1.66 | 1.86 | 1.81 | — | — | — | — | — | — | — | — | ||||||
| Exxon Mobil Corp. | 1.05 | 1.06 | 1.07 | 1.03 | 0.98 | 0.84 | 0.74 | 0.69 | 0.55 | 0.51 | 0.47 | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q3 2023 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= 2,614 ÷ 3,330 = 0.78
2 Click competitor name to see calculations.
- Liquidity Trends
- The total quick assets showed fluctuating behavior over the periods analyzed. Initially, quick assets increased sharply from approximately 2.4 billion to 4.7 billion US dollars between the first and second quarters of 2019. Thereafter, they declined in the subsequent quarters of 2019 and early 2020, followed by a recovery trend peaking in the second quarter of 2022 at around 5.8 billion US dollars. However, after this peak, total quick assets generally trended downward into 2023, reaching levels close to 2.6 billion US dollars by the third quarter.
- Current liabilities generally followed an upward trend, with some volatility. From just under 2 billion US dollars in the first quarter of 2019, liabilities rose steeply to over 3.4 billion in the second quarter and then decreased towards the last quarter of 2019. A notable surge occurred in 2021, with liabilities surpassing 3.5 billion in the third quarter. Similarly, in 2022, liabilities increased steadily, reaching over 4 billion US dollars in mid-year before declining again into 2023. By the third quarter of 2023, current liabilities stood at approximately 3.3 billion US dollars.
- Quick Ratio Analysis
- The quick ratio, reflecting short-term financial health, exhibited considerable variability across the observed quarters. Starting at 1.2 in early 2019, it improved to a peak of 1.97 at the end of 2020, indicating a strong liquidity position at that point. However, following this peak, the quick ratio declined notably below parity in 2021, reaching lows around 0.75 to 0.85 by mid to late 2023. This downward trend suggests a weakening ability to meet current liabilities promptly with liquid assets in recent periods.
- Overall Insights
- The data reveals a tightening liquidity profile over time. Despite fluctuations in quick assets, there was a consistent upward drift in current liabilities, which, combined with the falling quick ratio post-2020, indicates increasing short-term financial pressure. The peak in liquidity at the end of 2020 was not sustained, and the subsequent deterioration in quick ratio points toward potential challenges in covering liabilities with readily available assets in the more recent quarters.
Cash Ratio
Devon Energy Corp., cash ratio calculation (quarterly data)
| Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||||
| Cash, cash equivalents and restricted cash | 761) | 488) | 887) | 1,454) | 1,310) | 3,457) | 2,625) | 2,271) | 2,321) | 1,539) | 1,878) | 2,237) | 1,897) | 1,669) | 1,727) | 1,844) | 1,655) | 3,840) | 1,327) | ||||||
| Total cash assets | 761) | 488) | 887) | 1,454) | 1,310) | 3,457) | 2,625) | 2,271) | 2,321) | 1,539) | 1,878) | 2,237) | 1,897) | 1,669) | 1,727) | 1,844) | 1,655) | 3,840) | 1,327) | ||||||
| Current liabilities | 3,330) | 2,669) | 2,931) | 3,105) | 3,460) | 4,094) | 3,754) | 3,087) | 3,505) | 3,072) | 2,945) | 1,440) | 1,709) | 1,452) | 1,554) | 1,927) | 1,658) | 3,467) | 1,968) | ||||||
| Liquidity Ratio | |||||||||||||||||||||||||
| Cash ratio1 | 0.23 | 0.18 | 0.30 | 0.47 | 0.38 | 0.84 | 0.70 | 0.74 | 0.66 | 0.50 | 0.64 | 1.55 | 1.11 | 1.15 | 1.11 | 0.96 | 1.00 | 1.11 | 0.67 | ||||||
| Benchmarks | |||||||||||||||||||||||||
| Cash Ratio, Competitors2 | |||||||||||||||||||||||||
| Chevron Corp. | 0.18 | 0.32 | 0.47 | 0.52 | 0.42 | 0.32 | 0.38 | 0.21 | 0.24 | 0.27 | 0.26 | — | — | — | — | — | — | — | — | ||||||
| ConocoPhillips | 0.91 | 0.71 | 0.75 | 0.72 | 0.74 | 0.67 | 0.61 | 0.55 | 1.14 | 1.31 | 1.18 | — | — | — | — | — | — | — | — | ||||||
| Exxon Mobil Corp. | 0.46 | 0.48 | 0.49 | 0.43 | 0.41 | 0.24 | 0.15 | 0.12 | 0.08 | 0.06 | 0.06 | — | — | — | — | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
1 Q3 2023 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= 761 ÷ 3,330 = 0.23
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals distinct trends concerning cash assets, current liabilities, and liquidity ratios over the observed periods.
- Total Cash Assets
- The level of total cash assets exhibited noticeable volatility throughout the periods. Initially, cash assets increased sharply from $1,327 million in March 2019 to a peak around June 2019 at $3,840 million, followed by a decline and fluctuations throughout the remainder of 2019 and 2020. After reaching another peak of $3,457 million in June 2022, cash assets declined significantly to a low of $488 million by June 2023, with a slight rebound to $761 million by September 2023. Overall, the cash asset values show cyclical behavior with a general downward trend in the most recent quarters.
- Current Liabilities
- Current liabilities display an increasing trend with some fluctuations. Starting at $1,968 million in March 2019, liabilities rose to $3,467 million by June 2019, then decreased somewhat in late 2019 and 2020, before experiencing a steady increase from 2021 onwards. The liabilities peaked at $4,094 million in June 2022 and, despite some variation, remained elevated above $2,600 million through to September 2023. This suggests growing short-term obligations over the period, particularly in more recent years.
- Cash Ratio
- The cash ratio, which measures liquidity by comparing cash assets to current liabilities, exhibited a declining pattern over the period. Ratios above 1.0 during 2019 and early 2020 indicate strong liquidity positions, reaching a high of 1.55 at the end of 2020. However, from 2021 onwards, the cash ratio dropped below 1.0 consistently, falling as low as 0.18 by June 2023 before a slight increase to 0.23 in September 2023. This decline signals a weakening liquidity position, implying that cash assets have become increasingly insufficient to cover short-term liabilities.
In summary, the company experienced significant fluctuations in cash assets, with notable peaks and troughs but a recent downward trajectory. Current liabilities have trended upwards, particularly since 2021, intensifying liquidity pressures. The falling cash ratio corroborates this trend, highlighting a diminished ability to meet short-term obligations solely with cash resources. This interplay suggests increased financial risk related to liquidity in the most recent quarters.