Analysis of Short-term (Operating) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
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- Income Statement
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Net Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Analysis of Revenues
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Short-term Activity Ratios (Summary)
National Oilwell Varco Inc., short-term (operating) activity ratios
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
- Inventory Turnover
- Inventory turnover ratios fluctuated modestly, starting at 2.52 in 2011, declining slightly to 2.5 in 2012, peaking at 3.1 in 2013, then decreasing again to 2.96 in 2014 and further to 2.5 in 2015. This indicates variability in inventory management efficiency, with the best performance observed in 2013.
- Receivables Turnover
- The receivables turnover ratio exhibited a steady upward trend from 4.45 in 2011 to 5.04 in 2015. This suggests improving efficiency in collecting receivables over the period.
- Payables Turnover
- Payables turnover showed a marked increase over the years, rising from 11.28 in 2011 to a sharp jump to 18.77 in 2015, with intermediate increases through 2013 (13.63) and 2014 (13.15). This suggests the company was paying its suppliers faster, particularly in 2015.
- Working Capital Turnover
- Working capital turnover exhibited variability, decreasing from 2.19 in 2011 to 2.0 in 2012, then improving to a peak of 2.44 in 2014, and declining again to 1.95 in 2015. Overall, the pattern reflects fluctuating efficiency in utilizing working capital to generate sales.
- Average Inventory Processing Period
- The average inventory processing period decreased from 145 days in 2011 to a low of 118 days in 2013, before increasing again to 146 days by 2015. This pattern aligns inversely with inventory turnover ratios, demonstrating faster inventory processing mid-period followed by a return to longer holding times.
- Average Receivable Collection Period
- This metric consistently improved, declining from 82 days in 2011 to 72 days in 2015, reflecting faster collection from customers throughout the period.
- Operating Cycle
- The operating cycle shortened from 227 days in 2011 to a low of 196 days in 2013, then lengthened slightly to 218 days in 2015. The trend indicates improved overall efficiency initially, though gains were partially reversed in later years.
- Average Payables Payment Period
- The payment period to suppliers shortened progressively, dropping from 32 days in 2011 to 19 days in 2015. This suggests a strategic shift toward quicker settlements with payables.
- Cash Conversion Cycle
- The cash conversion cycle remained relatively stable around 195 days between 2011 and 2012, improved to 169-170 days during 2013-2014, and then extended to 199 days in 2015. This reflects overall efficiency gains mid-period, with a noticeable lengthening in 2015 due to changes in inventory and payment periods.
Turnover Ratios
Average No. Days
Inventory Turnover
National Oilwell Varco Inc., inventory turnover calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cost of revenue | ||||||
| Inventories, net | ||||||
| Short-term Activity Ratio | ||||||
| Inventory turnover1 | ||||||
| Benchmarks | ||||||
| Inventory Turnover, Competitors2 | ||||||
| Schlumberger Ltd. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Inventory turnover = Cost of revenue ÷ Inventories, net
= ÷ =
2 Click competitor name to see calculations.
- Cost of Revenue
- The cost of revenue experienced a significant increase from 2011 to 2013, rising from $10,161 million to $17,380 million. This upward trend peaked in 2013, followed by a decline in the subsequent years, dropping to $15,631 million in 2014 and further to $11,694 million in 2015. This pattern suggests a period of increasing costs until 2013, after which operational or market conditions likely led to cost reductions.
- Inventories, Net
- Net inventories showed an overall increasing trend from 2011 to 2012, growing from $4,030 million to $5,891 million. However, from 2012 onwards, inventories began to decline gradually, reaching $4,678 million by the end of 2015. This decrease following the peak in 2012 may indicate improved inventory management or a reduction in stock levels in response to changing demand or cost control efforts.
- Inventory Turnover
- The inventory turnover ratio remained relatively stable with minor fluctuations over the five-year period. Starting at 2.52 in 2011, it slightly decreased to 2.50 in 2012, then increased to its highest point of 3.1 in 2013. Thereafter, it declined to 2.96 in 2014 and returned to 2.5 in 2015. The rise in 2013 suggests more efficient inventory utilization during that year, while the following decline indicates a return to prior turnover rates.
- Overall Insights
- The financial data reflects a peak in operational activity around 2013, as evidenced by the high cost of revenue and increased inventory turnover. After this period, reductions in cost of revenue and net inventories suggest a strategic response to changing market conditions or an effort to optimize operational efficiency. Inventory turnover ratios imply moderate improvement in managing inventory during the peak period, followed by stabilization.
Receivables Turnover
National Oilwell Varco Inc., receivables turnover calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Revenue | ||||||
| Receivables, net | ||||||
| Short-term Activity Ratio | ||||||
| Receivables turnover1 | ||||||
| Benchmarks | ||||||
| Receivables Turnover, Competitors2 | ||||||
| Schlumberger Ltd. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Receivables turnover = Revenue ÷ Receivables, net
= ÷ =
2 Click competitor name to see calculations.
- Revenue
- The revenue exhibited a notable increase from 14,658 million USD in 2011 to a peak of 22,869 million USD in 2013. Afterward, it slightly declined to 21,440 million USD in 2014 and then experienced a significant decrease to 14,757 million USD in 2015, returning close to the 2011 level. This pattern indicates a period of growth followed by a regression to earlier revenue levels within the five-year span.
- Receivables, net
- Net receivables rose steadily from 3,291 million USD in 2011 to a high of 4,896 million USD in 2013, mirroring the revenue trend. Subsequently, they decreased to 4,416 million USD in 2014 and further to 2,926 million USD in 2015, showing a decline that aligns with the reduced revenue observed in the latter years.
- Receivables Turnover Ratio
- The receivables turnover ratio demonstrated a consistent upward trend over the period, starting at 4.45 in 2011 and increasing each year to reach 5.04 in 2015. This suggests an improvement in the efficiency of collecting receivables despite fluctuations in revenue and net receivables values. The rising ratio indicates a faster conversion of receivables into cash over time.
Payables Turnover
National Oilwell Varco Inc., payables turnover calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cost of revenue | ||||||
| Accounts payable | ||||||
| Short-term Activity Ratio | ||||||
| Payables turnover1 | ||||||
| Benchmarks | ||||||
| Payables Turnover, Competitors2 | ||||||
| Schlumberger Ltd. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Payables turnover = Cost of revenue ÷ Accounts payable
= ÷ =
2 Click competitor name to see calculations.
- Cost of revenue
- The cost of revenue demonstrated a rising trend from 2011 to 2013, increasing from 10,161 million USD to a peak of 17,380 million USD. This was followed by a decline over the next two years, dropping to 15,631 million USD in 2014 and further to 11,694 million USD in 2015. Overall, there was significant volatility with an initial increase exceeding 70% before a reduction close to the original 2011 level by 2015.
- Accounts payable
- Accounts payable showed growth from 901 million USD in 2011 to 1,275 million USD in 2013, indicating an expansion in short-term liabilities or operational scale. However, a descending pattern occurred thereafter, with values decreasing to 1,189 million USD in 2014 and sharply dropping to 623 million USD in 2015. The final value in 2015 is substantially lower than the earlier peak, signaling tighter management of payables or reduced procurement on credit.
- Payables turnover ratio
- The payables turnover ratio exhibited a steady increase throughout the period, rising from 11.28 in 2011 to 13.63 in 2013. Despite a slight dip to 13.15 in 2014, the ratio surged notably to 18.77 in 2015. This upward trend suggests an improvement in the efficiency of payment to suppliers, with the company turning over its payables more rapidly, particularly in the most recent year.
- Summary of trends and insights
- The data reveals an initial phase of growth in cost of revenue and accounts payable, likely reflecting expansion activities. The subsequent decline in these figures from 2014 onwards may indicate a contraction or cost control measures being implemented. Meanwhile, the increasing payables turnover ratio points toward enhanced operational efficiency or stronger liquidity management, as obligations to suppliers are being settled more promptly. The pronounced reduction in accounts payable in 2015, alongside a high turnover ratio, could imply a strategic shift in working capital management or changes in supplier payment terms.
Working Capital Turnover
National Oilwell Varco Inc., working capital turnover calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | ||||||
| Less: Current liabilities | ||||||
| Working capital | ||||||
| Revenue | ||||||
| Short-term Activity Ratio | ||||||
| Working capital turnover1 | ||||||
| Benchmarks | ||||||
| Working Capital Turnover, Competitors2 | ||||||
| Schlumberger Ltd. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Working capital turnover = Revenue ÷ Working capital
= ÷ =
2 Click competitor name to see calculations.
- Working Capital
- The working capital showed an increasing trend from 2011 through 2012, rising from 6694 million US dollars to a peak of 10029 million US dollars. After that, it declined gradually over the next three years, ending at 7552 million US dollars in 2015. This suggests a period of growth in liquidity followed by a reduction, which may indicate tighter management of current assets or an increase in current liabilities.
- Revenue
- Revenue experienced significant growth between 2011 and 2013, increasing from 14658 million US dollars to a high of 22869 million US dollars in 2013. However, it then declined in the subsequent years, dropping to 21440 million in 2014 and decreasing sharply to 14757 million by the end of 2015. This decline after 2013 may reflect reduced sales, changes in market conditions, or other operational challenges.
- Working Capital Turnover
- The working capital turnover ratio showed slight fluctuations throughout the period. It started at 2.19 in 2011, decreased to 2.0 in 2012, then increased to 2.35 in 2013 and further to 2.44 in 2014. In 2015, there was a notable decrease to 1.95. This ratio generally indicates how efficiently the working capital is being used to generate revenue; the rise up to 2014 indicates improved efficiency, whereas the decline in 2015 suggests less effective utilization of working capital to produce sales.
- Summary of Trends and Insights
- Over the five-year span, there was an initial phase of increasing working capital and revenue, alongside improving efficiency as indicated by working capital turnover. However, after 2013, all key metrics indicated a reversal with working capital and revenue both declining, accompanied by a deterioration in efficiency as seen in the decreasing turnover ratio. This pattern may reflect challenges in maintaining growth momentum and operational efficiency starting from 2014, potentially impacting liquidity and profitability.
Average Inventory Processing Period
National Oilwell Varco Inc., average inventory processing period calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Inventory turnover | ||||||
| Short-term Activity Ratio (no. days) | ||||||
| Average inventory processing period1 | ||||||
| Benchmarks (no. days) | ||||||
| Average Inventory Processing Period, Competitors2 | ||||||
| Schlumberger Ltd. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ =
2 Click competitor name to see calculations.
- Inventory Turnover
- The inventory turnover ratio demonstrates some fluctuation over the five-year period. It starts at 2.52 in 2011, slightly decreases to 2.5 in 2012, then increases to a peak of 3.1 in 2013. Following this, it declines to 2.96 in 2014 and drops further to 2.5 in 2015, returning to the level observed in 2012. This indicates variability in how efficiently the company converts its inventory into sales, with the highest efficiency occurring in 2013 and a moderate decline thereafter.
- Average Inventory Processing Period
- The average inventory processing period exhibits a trend inverse to the inventory turnover. The number of days goods remain in inventory starts at 145 days in 2011, slightly increases to 146 days in 2012, then decreases significantly to 118 days in 2013. After this reduction, the period extends again to 123 days in 2014 and rises back to 146 days by 2015, matching the earlier level seen in 2012. This indicates that while inventory processing was more rapid in 2013, it slowed down in subsequent years, implying fluctuations in inventory management efficiency.
- Overall Observations
- The data reveals a clear inverse relationship between inventory turnover and average inventory processing period, consistent with financial theory. The year 2013 stands out as a year of improved inventory management, characterized by higher turnover and shorter processing time. However, this improved efficiency was not sustained, as subsequent years saw a reversion toward previous levels. The fluctuations suggest changing operational dynamics impacting inventory control and sales efficiency over the period analyzed.
Average Receivable Collection Period
National Oilwell Varco Inc., average receivable collection period calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Receivables turnover | ||||||
| Short-term Activity Ratio (no. days) | ||||||
| Average receivable collection period1 | ||||||
| Benchmarks (no. days) | ||||||
| Average Receivable Collection Period, Competitors2 | ||||||
| Schlumberger Ltd. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ =
2 Click competitor name to see calculations.
- Receivables Turnover
- The receivables turnover ratio shows a consistent upward trend over the observed five-year period. Starting at 4.45 in 2011, the ratio gradually increased each year, reaching 5.04 by the end of 2015. This steady rise indicates an improvement in the efficiency of the company's collection process, implying the company is collecting its receivables more frequently throughout the year.
- Average Receivable Collection Period
- The average receivable collection period exhibits a continuous downward trend from 82 days in 2011 to 72 days in 2015. This decrease aligns with the increase in receivables turnover, confirming that the company is reducing the time it takes to collect payments from its customers. The reduction in collection days by approximately 10 days over the period suggests enhanced credit and collection policies or better customer payment behavior.
- Overall Analysis
- Both indicators demonstrate improved working capital management concerning accounts receivable. The increasing receivables turnover ratio coupled with a decreasing collection period implies enhanced liquidity and potentially better cash flow management. This trend reflects positively on the operational aspect of credit control within the company over the five years analyzed.
Operating Cycle
National Oilwell Varco Inc., operating cycle calculation, comparison to benchmarks
No. days
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Average inventory processing period | ||||||
| Average receivable collection period | ||||||
| Short-term Activity Ratio | ||||||
| Operating cycle1 | ||||||
| Benchmarks | ||||||
| Operating Cycle, Competitors2 | ||||||
| Schlumberger Ltd. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Operating cycle = Average inventory processing period + Average receivable collection period
= + =
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period exhibited fluctuations over the five-year span. Initially, the period was 145 days in 2011 and slightly increased to 146 days in 2012. A notable reduction occurred in 2013, bringing the period down to 118 days, suggesting improved inventory turnover efficiency that year. However, this improvement was not sustained, as the period rose again to 123 days in 2014 and further increased to 146 days in 2015, reaching the same level as in 2012.
- Average Receivable Collection Period
- The average receivable collection period demonstrated a consistent downward trend from 82 days in 2011 to 72 days in 2015. This gradual decrease indicates an improvement in the company's collection efficiency over the period under review, with customers paying more quickly each year.
- Operating Cycle
- The operating cycle decreased from 227 days in 2011 to a low of 196 days in 2013, indicating enhanced operational efficiency during that interval. After 2013, the cycle slightly increased to 198 days in 2014 and then more substantially to 218 days in 2015. Despite this increase towards the end of the period, the operating cycle in 2015 remained below the initial figure observed in 2011, suggesting overall operational improvements, albeit with some regression in the latter years.
Average Payables Payment Period
National Oilwell Varco Inc., average payables payment period calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Payables turnover | ||||||
| Short-term Activity Ratio (no. days) | ||||||
| Average payables payment period1 | ||||||
| Benchmarks (no. days) | ||||||
| Average Payables Payment Period, Competitors2 | ||||||
| Schlumberger Ltd. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ =
2 Click competitor name to see calculations.
- Payables Turnover
- The payables turnover ratio demonstrated a consistent upward trend from 2011 to 2015. Starting at 11.28 in 2011, the ratio increased steadily each year, reaching 18.77 by the end of 2015. This increasing ratio indicates that the company has been accelerating its payment of accounts payable over these years, suggesting improved efficiency in settling obligations with suppliers.
- Average Payables Payment Period
- Corresponding to the payables turnover trend, the average payables payment period showed a decreasing pattern over the same period. It decreased from 32 days in 2011 to 19 days in 2015, with a gradual decline each year except a slight increase from 27 days in 2013 to 28 days in 2014. This shortening payment period implies a faster settlement cycle, reflecting the company's shift towards quicker payments to creditors.
- Overall Trend and Insights
- The inverse relationship observed between the payables turnover ratio and the average payment period aligns with typical financial behavior; as one increases, the other decreases. This trend suggests an intentional or operational improvement in the company's management of payables. Faster payment cycles may enhance supplier relationships or take advantage of potential early payment discounts, although they could also affect the company’s cash flow management. The marked jump in payables turnover and corresponding reduction in payment period in 2015 is especially notable, indicating a significant change in payables management strategy during that year.
Cash Conversion Cycle
National Oilwell Varco Inc., cash conversion cycle calculation, comparison to benchmarks
No. days
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data | ||||||
| Average inventory processing period | ||||||
| Average receivable collection period | ||||||
| Average payables payment period | ||||||
| Short-term Activity Ratio | ||||||
| Cash conversion cycle1 | ||||||
| Benchmarks | ||||||
| Cash Conversion Cycle, Competitors2 | ||||||
| Schlumberger Ltd. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= + – =
2 Click competitor name to see calculations.
- Average Inventory Processing Period
- The average inventory processing period showed fluctuations over the five-year period. It started at 145 days in 2011, slightly increased to 146 days in 2012, then decreased significantly to 118 days in 2013. The period then experienced a modest rise to 123 days in 2014, followed by a sharp increase returning to 146 days by 2015. This indicates variability in inventory turnover efficiency, with a notable improvement in 2013 that was not sustained in subsequent years.
- Average Receivable Collection Period
- There was a consistent downward trend in the average receivable collection period, decreasing steadily from 82 days in 2011 to 72 days in 2015. This suggests an improvement in the company's ability to collect receivables over time, which is generally favorable for cash flow management.
- Average Payables Payment Period
- The average payables payment period exhibited a declining pattern as well, moving from 32 days in 2011 to 19 days in 2015. This denotes that the company has been shortening the time it takes to pay its suppliers, which could reflect changes in payment policies or possibly tighter supplier terms.
- Cash Conversion Cycle
- The cash conversion cycle (CCC) remained relatively stable around 195 days during 2011 and 2012, then improved significantly to 169 days in 2013 and held steady at 170 days in 2014. However, in 2015, the CCC experienced an increase to 199 days, exceeding the earlier years. This pattern reflects shifts in the efficiency of managing working capital components. The improvement during 2013 and 2014 aligns with reduced inventory processing and receivable collection periods, but the increase in 2015, despite improved receivables and payables periods, suggests issues mainly related to inventory management.