Exxon Mobil Financial Analysis
Exxon Mobil
By analyzing Exxon Mobil’s financial statements we obtained financial ratios which led me to the conclusion that Exxon Mobil is mildly profitable, however they have some areas that might require attention. We can support this conclusion by analyzing what the implications of certain ratios are, and how they apply to Exxon Mobil. To make things brief will pick out a prominent ratio from four different categories (liquidity/short term debt ratios, turnover ratios, long-term debt ratios, and profitability ratios). The first ratio of importance is the current ratio (current assets/current liabilities) and it is a liquidity /short-term debt ratio that measures a company's ability to pay short-term obligations. Generally speaking a company should be above 1.0, as a number below this indicates that the company would not be able to pay off its current liabilities if it had to sell of its current assets. A strong company however will have a current ratio of about 2.0 or higher (www.answers.com/topic/financial-ratio). For Exxon Mobil the current ratio were 1.47, 1.47, and 1.55 for 2008, 2007, and 2006 respectively. Being that Exxon Mobil is in the middle ground between 1.0 and 2.0, one can come to conclusion that Exxon Mobil is mildly profitable, however there is definitely room to grow by either increasing assets, or decreasing current liabilities. Another short term debt/liquidity ratio to analyze is the cash ratio (cash and cash equivalents/current liabilities). The cash ratio measures the extent to which a corporation or other entity can quickly liquidate assets and cover short-term liabilities (http://www.investopedia.com/terms/c/cash-ratio.asp?&viewed=1). For the most recent year, 2008, Exxon Mobil has a cash ratio of 0.64. A profitable company would more than likely have enough cash to pay off its short turn debt, so a ratio of 1 or greater could be expected. Exxon Mobil however is less than 1 and hence is not terribly profitable and healthy from this
By analyzing Exxon Mobil’s financial statements we obtained financial ratios which led me to the conclusion that Exxon Mobil is mildly profitable, however they have some areas that might require attention. We can support this conclusion by analyzing what the implications of certain ratios are, and how they apply to Exxon Mobil. To make things brief will pick out a prominent ratio from four different categories (liquidity/short term debt ratios, turnover ratios, long-term debt ratios, and profitability ratios). The first ratio of importance is the current ratio (current assets/current liabilities) and it is a liquidity /short-term debt ratio that measures a company's ability to pay short-term obligations. Generally speaking a company should be above 1.0, as a number below this indicates that the company would not be able to pay off its current liabilities if it had to sell of its current assets. A strong company however will have a current ratio of about 2.0 or higher (www.answers.com/topic/financial-ratio). For Exxon Mobil the current ratio were 1.47, 1.47, and 1.55 for 2008, 2007, and 2006 respectively. Being that Exxon Mobil is in the middle ground between 1.0 and 2.0, one can come to conclusion that Exxon Mobil is mildly profitable, however there is definitely room to grow by either increasing assets, or decreasing current liabilities. Another short term debt/liquidity ratio to analyze is the cash ratio (cash and cash equivalents/current liabilities). The cash ratio measures the extent to which a corporation or other entity can quickly liquidate assets and cover short-term liabilities (http://www.investopedia.com/terms/c/cash-ratio.asp?&viewed=1). For the most recent year, 2008, Exxon Mobil has a cash ratio of 0.64. A profitable company would more than likely have enough cash to pay off its short turn debt, so a ratio of 1 or greater could be expected. Exxon Mobil however is less than 1 and hence is not terribly profitable and healthy from this