Exxon Mobil and Chevron Financial Performance

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exxon mobil and chevronExxon Mobil and Chevron Financial Performance
Understanding the key ratios of a company is very important for investors. Each ratio uncovers the inner workings of the company, and may lead an investor to make a decision on whether to invest in the company, or to continue looking elsewhere. Exxon Mobil and Chevron are both in the same industry, and are virtually household names. In this study, key ratios of these two companies will be analyzed, and a comparison of results will be provided. Exxon Mobil and Chevron – Financial Data

Exxon Mobil and Chevron are two of the most prominent companies in the energy sector, ranking 2nd and 4th, respectively, on Fortune 500’s list of America’s largest corporations (Fortune Magazine, 2007). The companies are traded on the New York Stock Exchange (NYSE), and have over $500 billion USD in combined revenue from the year 2006; making them interesting corporations to financially analyze. When analyzing a company’s financials, it is important to conduct ratio and trend analysis. Ratio analysis allows for certain important performance factors to be translated into useful statistics for a given reporting period. Trend analysis, on the other hand, provides insight into a company’s long-term situation since a comparison of certain key ratios spans multiple years; hopefully providing analysts with a clue as to how the company will perform in the future. The follow key ratios were derived from Exxon Mobil’s and Chevron’s SEC filings for the years 2005/6, and will be used to determine possible trends for the companies.

Understanding the key ratios of a company is very important for investors. Each ratio uncovers the inner workings of the company, and may lead an investor to make a decision on whether to invest in the company, or to continue looking elsewhere. Exxon Mobil and Chevron are both in the same industry, and are virtually household names. In this study, key ratios of these two companies will be analyzed, and a comparison of results will be provided.

Current Ratio Analysis:
The current Ratio tells us how well a company is able to pay off its short term debts using its most liquid assets. To illustrate using the current ratio for comparisons of Exxon Mobil current position relative to Chevron as shown. Current Ratio = Current Assets/Current Liabilities.

 | EXXON MOBIL|  | CHEVRON|
| Dec-06| Dec-05| | Dec-06| Dec-05|
Total Current Assets| 75,777.00| 73,342.00| Total Current Assets| 36,304.00| 34,336.00| Total Current Liabilities| 48,817.00| 46,307.00| Total Current Liabilities| 28,409.00| 25,011.00| Current Ratio| 1.550| 1.580| Current Ratio| 1.270| 1.370|

The current ratio measures that Exxon Mobil has better ability of pay in short term its debits than Chevron. The current ratio is computed as shown. A declining ratio of Chevron is a sign of deteriorating financial condition in comparison with Exxon, or it might result from eliminating obsolete inventories or other stagnant current assets. This ratio is definitely not good for any company, but principal for Chevron as it decreasing. Which demonstrate that financial solvency of the company is weakling.

Quick (Acid-Test) Ratio:
This ratio is much like current ratio but as inventory subtracted, this ratio become better test of liquidity. The quick or acid-test ratio is computed as shown. Quick ratio= Quick Assets / Current Liabilities.

In other word
Quick Ratio = Current Assets – Inventory)/Current Liabilities  | EXXON MOBIL|  | CHEVRON|
| Dec-06| Dec-05| | Dec-06| Dec-05|
Current Assets| 75,777.00| 73,342.00| Current Assets| 36,304.00| 34,336.00| Inventory| 10,714.00| 9,321.00| Inventory| 4,656.00| 4,121.00| Quick Assets| 65,063.00| 64,021.00| Quick Assets| 31,648.00| 30,215.00| Total Current Liabilities| 48,817.00| 46,307.00| Total Current Liabilities| 28,409.00| 25,011.00| Quick Ratio| 1.333| 1.383|...
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