Introduction
The company, Exxon Mobil, is a producer of crude oil and natural gas, and the
leading manufacturer of petroleum products. The NAICS code is 211111. Their
headquarters is situated in Irving, Texas with a market location of the United States,
Canada, South America, Europe, Africa, Asia, and Australia. In the most recent year,
2010, Exxon Mobil’s total sales accumulated to $426.25 billion and their total assets
came to $331,052 million, with the fiscal year ending December 30th. The company’s
main competitors are BP and Chevron Corporation. Exxon Mobil’s ticker symbol for the
New York Stock Exchange is XOM and according to the most recent records, the
company’s current stock price is $90.05. To find out more information about this
company, their website is http://www.exxonmobil.com.
Analysis of the Balance Sheet
The balance sheet reports the amount of assets, liabilities, and stockholders’
equity of an accounting entity at a point in time. In 2009, 2010, and 2011, the most
significant use of funds was plant property and equipment at 59.62%, 65.96%, and
64.84%. This data can be seen in Exhibit 1A. This distribution does make sense because
Exxon Mobil continuously produces crude oil and natural gas used around the world, all
made in factories with more technology than actual hands-on workers. In 2009, 2010, and
2011, the two most significant sources of funds were accounts payable at 17.69%,
16.54%, and 17.24% and earnings reinvested at 118.69%, 98.81%, 99.97%. This data can
be found in exhibit 1B. This distribution makes sense because Exxon Mobil is an
extremely large company and has a continuous revenue stream, which they reinvest into
the company. Overall, plant property and equipment is increasing every year and
accounts payable and earnings reinvested are staying at a stable rate.
Analysis of the Income Statement
The income statement summarizes a company’s operating activity, specifically
focusing on revenue and expenses. In 2009, 2010, and 2011, the most significant expense
was the cost of goods sold at 59.83%, 61.00%, and 63.07%. This distribution makes
sense because Exxon’s cost of goods sold includes the cost of equipment, which is
necessary in making their products. The company is profitable because from 2009 to
2011, the net income was positive at 6.21%, 17.37%, and 8.44%, as seen in exhibit 2.
Overall, the cost of goods sold increased overtime.
Trend Analysis
Trend Analysis allows a company to see if they are stable, consolidating, or
growing. As seen in exhibit 1A, from 2009 to 2010, the total assets increased to 29.65%,
and in 2010 to 2011, it increased to 9.44%, therefore they are growing because the
percentages increased in each time period. From 2009 to 2010, the total revenue
increased to 25.79%, and in 2010 to 2011, it increased to 31.25%. This shows that total
revenue is growing each year since the percentages are positive. From 2009 to 2010, net
income increased to 245.32%, and from 2010 to 2011, it decreased by 38.33%. Based on
the percentages for net income, from 2009 to 2010, Exxon is growing. Since net income
decreased from 2010 to 2011, Exxon is consolidating. Total revenue and net income can
be found on exhibit 2.
Analysis of the Cash Flow Statement
The cash flow statement allows a company to see what their most significant
sources and uses of funds are at a given time. As seen in exhibit 3, from 2009 to 2011,
Exxon’s largest source of cash came from its operating activity at $28,438, $48,413, and
$55,354. The company’s largest use of cash was from its financing activity at $27,283,
$26,924, and $28,256. Exxon generates enough cash from operating activities to fund
their investing activities. In 2009, operating activity provided $28,438 and investing
activity only used $22,419. In 2010, operating activity provided $48,413 and investing
activity used $24,204. In 2011, operating activity provided $55,354 and investing activity
used $22,165. Overall, the company is creating enough revenue from their operating
activity to cover their investing activity and ensure that there is no debt.
Efficiency Ratio Analysis
The return on equity ratio (ROE) determines the percentage of income earned
from every dollar invested by shareholders. From 2009 to 2011 respectively, Exxon’s
ROE was 16.56%, 49.67%, and 26.20%. The industry’s ROE from 2009 to 2011
respectively was 11.50%, 25.10%, and 23.70%. Overall, Exxon has a better efficiency
than the industry because their percentages are larger per year. Exxon’s percentages
increased overall from 2009 to 2011, showing that the company is improving efficiency.
The return on assets ratio (ROA) determines the percentage of income earned for a
company’s investment in assets. From 2009 to 2011 respectively, Exxon’s ROA was
8.36%, 24.85%, and 12.96%. The industry’s ROA from 2009 to 2011 respectively was
4.50%, 9.50%, and 9.30%. Overall, Exxon has a better efficiency than the industry
because their percentages are larger per year. Exxon’s ROA percentages increased overall
from 2009 to 2011, indicating that the company is improving efficiency. This information
can be found in exhibit 4 and exhibit 5. In general, Exxon Mobil is improving efficiency
for ROE and ROA and is better than the industry.
Profitability Ratio Analysis
There are three profitability ratios. The first of which is profit margin, which
indicates the percentage of revenue left after covering all expenses. From 2009 to 2011
respectively, profit margin for Exxon was 6.21%, 17.37%, and 8.44%. The industry’s
profit margin from 2009 to 2011 respectively was 4.50%, 4.20%, and 5.70%. Overall,
Exxon has better profitability than the industry, as Exxon’s percentages are higher per
year. This can be seen in exhibit 4 as well as exhibit 6. From 2009 to 2011, Exxon’s
profit margin percentages increased, showing that the company is improving profitability.
The second profitability ratio is gross margin, which indicates the percentage of
revenue left after covering just the cost of goods sold. From 2009 to 2011 respectively,
gross margin for Exxon was 40.17%, 39.00%, and 36.93%. The industry’s gross margin
for the same years was 30.10%, 31.80%, and 30.80%. Exxon’s percentages are higher
than the industry, showing better profitability, but decrease over time, indicating that
their profitability is worsening.
The third profitability ratio is operating expense to sales, which indicates the
percentage of revenue used to cover operating expenses. From 2009 to 2011 respectively,
operating expense to sales was 9.23%, 8.24%, and 6.71%. The industry’s percentages for
the same years respectively was 24.80%, 27.00%, and 24.70%. Exxon’s percentages are
lower than the industry’s, which indicates that Exxon has better profitability. Exxon’s
values are also decreasing which indicates that their profitability is improving. Overall,
all three profitability ratios show that Exxon is improving profitability and better than the
industry. All of this data can be found in exhibits 4 and 6.
Liquidity Ratio Analysis
There are two liquidity ratios, which relate to paying short-term obligations. The
first liquidity ratio is the current ratio, which indicates the number of times a company
can cover their current obligations with their current assets. From 2009 to 2011
respectively, Exxon’s current ratios were 1.06, 0.94, and 0.94. The industry’s current
ratios for the same year were 1.70, 2.00, and 1.90. Overall, Exxon has lower values,
which are decreasing overtime, indicating that they have a worse liquidity compared to
the industry that is worsening.
The second liquidity ratio is the quick ratio, which indicates the number of times a
company can cover their current obligations with liquid current assets. From 2009 to
2011 respectively, Exxon’s quick ratios were 0.74, 0.65, and 0.67. The industry’s quick
ratios for the same years were 0.90, 1.00, and 1.10. Exxon has lower values, which are
decreasing overtime, indicating that they have a worse liquidity compared to the industry
that is worsening overtime. This data can be found in exhibits 4 and 7. Overall, Exxon
has a worse liquidity than the industry because their percentages are lower for both
current and quick ratios.
Solvency Ratio Analysis
There are three solvency ratios, which indicate if a company has the ability to pay
their long-term obligations. The first solvency ratio is debt to total assets, which indicates
the percentage of assets purchased using debit. From 2009 to 2011 respectively, Exxon’s
percentages were 50.54%, 49.53%, and 51.44%. The industry’s percentages for the same
years were 62.60%, 55.30%, and 51.10%. Overall, Exxon has lower values indicating
that they have better solvency than the industry, however from 2009 to 2011, their
percentages slightly increased, showing that Exxon’s solvency is worsening or staying
very similar to what they were.
The second solvency ratio is long-term liabilities to total assets, which indicates
the percentage of funding from long-term obligations. From 2009 to 2011 respectively,
Exxon’s percentages were 28.23%, 28.82%, and 28.03%. The industry’s percentages
were 22.30%, 14.70%, and 13.50%. Exxon has higher percentages, indicating that their
long term liabilities to total assets is worse than the industry’s, however they are very
close in proximity, therefore not worsening or improving.
The third solvency ratio is times interest earned, which indicates the number of
times a company can cover their interest expense. From 2009 to 2011 respectively,
Exxon’s ratios were 175.33, 455.15, and 595.06. The industry’s ratios were 2.70, 8.60,
and 7.30. Exxon has extremely higher ratio values than the industry, indicating that they
have better solvency, and the values are increasing, which indicate improving solvency.
This data can be found in exhibits 4 and 8.
Overall, Exxon has better solvency than the industry that is improving over time.
Conclusion
Exxon’s total assets and revenue are growing, however their net income is
consolidating. Exxon’s ROE and ROA are improving efficiency from 2009 to 2010, and
are better than the industry. Profitability overall is improving and better than the industry.
Exxon’s liquidity is worsening overtime, from 2009 to 2011, and is worse than the
industry. Exxon’s times interest earned was higher than the industry, therefore better than
the industry and the values are also improving from 2009 to 2011, showing that they have
better solvency compared to the industry. The other two solvency ratios, debt to total
assets and long term liabilities to total assets, indicate that Exxon has better solvency and
it is improving, based on their higher percentages than the industry. Overall, the
company’s financial health is strong compared to the industry.