A Financial Ratio Quarterly Trend Analysis of Exxon

CML's equity ratio increased to 0.4 and correspondingly debt ratio decreased to 0.15 from 2001 to 2005. Generally it is a good trend, even though there has been a decrease in equity ratio in 2005 from 0.45 to 0.40 and an increase in debt ratio from 2004 to 2005, it may be due to the acquisition from US group KKR. However, in 2005, equity is almost three times debt, which means the capital structure is still in good condition.

Debt ratio percentages increased for Company G from 28.34% to 29.94%. Industry quartile is 30, 45 and 66 percent, putting Company G below average. Debt Ratio represents strength for Company G.

ExxonMobil is the largest publicly traded oil and gas producing company. ExxonMobil does business in 200 countries world-wide (1). Some countries are designated for exploring gas and petroleum, and some are designated for manufacturing chemicals, lubricants, and market fuels (1). ExxonMobil's world-class petroleum portfolio gives access to proven reserves of 21.9 billion oil-equivalent barrels of oil and gas, which is the highest in the industry (1). The company's discovered resources consist of 72 billion oil equivalent barrels of oil and gas. On average, each day, they produce 2.5 million barrels of oil and 10.5 billion cubic feet of gas (4). Their asset base, includes more than 60,000 production wells in 1,800 fields in 25 countries.

First of which, is the current ratio. It has been rapidly declining since 2000. To me this indicates that there is a liquidity issue. Each year their trade debt increase exceeds the increase of net income for the company. As a result, the working capital has taken a nosedive from $58,650 in 2002 to only $5,466 in 2003.

A more tell tale sign is the quick ratio, or acid test, which has increased year after year. Debt to total assets has decreased over 5% since 2001, indicating less financing of current and long term debt and more company assets. Their cash debt coverage far surpasses the ideal 20%, indicating a high level of solvency with sufficient funds and assets to satisfy all debtors. Asset turnover has more or less maintained at right around 1.6, signifying a turnover rate of just less than 180 times per year.

Increase in current liabilities Substantial increase in current liabilities weakened the company’s liquidity position. Its current liabilities were US$2,063.94 million at the end of FY2010, a 48.09% increase compared to the previous year. However, its current assets recorded a marginal increase of 25.07% - from US$1,770.02 million at the end of FY2009 to US$2,213.72 million at the end of FY2010. Following this, the company’s current ratio declined from 1.27 at the end of the FY2009 to 1.07 at the end of FY2010. A lower current ratio indicates that the company is in a weak financial position, and it may find it difficult to meet its day-to-day obligations.

Return on Total Assets was 4.43% which is below five percent. That indicates that the company is not accurately converting its assets into profit. The total for Return on Stockholders’ Equity was 8.89%, however financial analysts prefer ROE to range between 15-20 %. The company’s low ROE indicates that the company is not generating profit with new investments. Lastly, Debt-to-Equity ratio for the company was 1.01 which indicates that investors and creditors are equally sharing assets. In the view of creditors, they see a high ratio as a risk factor because it can indicate that investors are not investing due to the company’s overall performance. The totals of these three ratios demonstrate that the company’s financial state is not as healthy as it should be.

The company’s debt ratios are 54.5% in 1988, 58.69% in 1989, 62.7% in 1990, and 67.37% in 1991. What this means is that the company is increasing its financial risk by taking on more leverage. The company has been taking an extensive amount of purchasing over the past couple of years, which could be the reason as to why net income has not grown much beyond several thousands of dollars. One could argue that the company is trying to expand its inventory to help accumulate future sales. But another problem is that the company’s

Also, according to its leverage ratios, the company’s debts are not only very high, but are also increasing. Its decreasing TIE ratio indicates that its capability to pay interests is decreasing. The company’s efficiency ratios indicate that despite the fact that its fixed assets are increasingly being utilized to generate sales during the years 1990-1991 as indicated by its increasing fixed asset turnover ratio, the decreasing total assets turnover indicate that overall the company’s total assets are not efficiently being put to use. Thus, as a whole its asset management is becoming less efficient. Last but not the least, based on its profitability ratios, the company’s ability to make profit is decreasing.

The Earnings Per share in 2012 and 2013 were $2.90. This is an indicator that the company is still profitable since the ratio is a constant. The price per earnings in 2012 was 12.5 and 17.7 in 2013. A decrease in the price per share may indicate a vote of no confidence to investors. However, this can be attributed to the industry sector as well the stock.

Exxon and Chevron are no doubt some of the leading incorporated oil companies on the globe. Exxon Corp. is the second largest oil firm after Royal Dutch Shell, it is respected for getting the biggest revenue return in 2008 which no company in the U.S. have ever reported before. According to Wilson (2009) Chevron has managed to show a lot of profitability in the market despite the decease in its oil production. It graded as one of firms which made a billion dollars profit within a week in the period of July to September 2008. Regardless of profitability trends set by the two oil firms in the U.S. market, they have been facing financial decline like the rest of the companies in other industries. The two firms are like two sailing ships which are taking longer time to sink. In the last few years, the production capacity of Chevron and Exxon has decreased and their listings on the stock market have become weak. The continuation of construction and drilling which requires billions of dollars in expense of oil production might make them experience a bigger financial crisis (Wilson, 2009).

The decrease shows a prudent position particularly in when the world is undergoing economic recession; Rio Tinto Ltd reduced its reliance on debt to finance its assets. This also explained the 22% increase in current portion of long term debt, i.e. the company retired major portion of its debt holdings in the last year.

Lawsons 2010 and 2011 current ratio are above the industry average (1.8:1) however in 2012 the current ratio falls below the industry average at 1.55:1 and than again in 2013 to 1.02:1. This indicates that the company’s ability to pay its debts is

Chevron operates in the hydrocarbon industry, where it is one of the world's largest companies with sales of $241.9 billion and net income of $26.18 billion. It is the conclusion of this analysis that a creditor should lend Chevron an additional $20.9 billion. The company has the liquidity, solvency and the cash flow to pay back this amount of debt. The company currently finances its operations largely from operating cash flows, with a small amount of long-term debt. This low debt level has left the company with a balance sheet strong enough to withstand a further $20.9 billion in debt. As a lender, it has been found that Chevron meets all of the lending

The long-term liquidity risk ratio such as LT debt/Equity, D/E, and Total Liabilities to Total Assets all show a decline from year 2005 due to the repayment of debts. The interest coverage ratio also shows a healthy number of 29.45 in comparison to the industrial average of 15.04 indicating a high ability to pay out its interest expense. Such a low relative risk is not surprising due to the nature of its business depending heavily in R&D development and large intangible assets.