FIN 370 Week 2 Industry Averages and Financial Ratios Paper Final Draft

Topics: Financial ratio, Balance sheet, ExxonMobil Pages: 7 (1510 words) Published: February 20, 2015

Industry Averages and Financial Ratios Paper
Connie Addison, Christine Crocker, Kimberly Guy, Felicia Lombard, and Shavelle Woods FIN 370
January 12, 2015
Shamelda Pete
Industry Averages and Financial Ratios
Industry averages and financial ratio reports determine the financial health of an organization. Solvent, efficiency, and profitability are compared by key financial indicators and ratios that measure several companies within the same industry. The publicly traded company chosen by Team A is ExxonMobil. “The largest publicly traded international oil and gas company in the world. ExxonMobil makes products that drive modern transportation, power cities, lubricate industry, and provide petrochemical building blocks that lead to thousands of consumer goods” (ExxonMobil, 2013-2015). In this paper, Team A will analyze the industry statics and financial ratios of ExxonMobil. Critically adopt lean principles to create a more efficient system. Discuss what a Just-In-Time inventory system would have if adopted. Compare the ratios for ExxonMobil with the appropriate industry ratios shown in the D&B Report. SIC Code of Classification

The Standard Classification Code (SIC) was created in 1937 as four digit codes the government assigns to all U.S. companies to help identify the primary establishment. “These codes were developed to promote the presentation, collection, and analysis of data.” It also helps “simplify comparability and uniformity of the collection of statistical data, which are done by federal government agencies, private organizations, and state agencies”. Each SIC that is assigned has a meaning. “The SIC system arrays the economy into 11 divisions, that are divided into 83 2-digit major groups, that are further subdivided into 416 3-digit industry groups, and finally disaggregated into 1,005 4-digit industries.” The primary SIC code is determined by the highest revenue department within the company that prior year (, 2015). The SIC for ExxonMobil is 2911 Petroleum Refining(U. S. Department of Labor, n. d.). ExxonMobil Inventory Systems

Exxon Mobile operates on the LIFO inventory system method for their business. LIFO, meaning last in, first out, is an inventory system in which goods that are produced last are used first. LIFO is a very common accounting method that many gas and oil industry owners have used over time. Most companies use the LIFO inventory system for tax purposes when cost are raising, hence gas and oil prices. In the event that Exxon Mobile switched to the just in time inventory, it’s possible that Exxon Mobile could come up short on their inventory. Just in time inventory is used to reduce cost by only purchasing inventory when needed. Since gas and oil is such a huge necessity for consumers, the just time inventory method would not be beneficial to Exxon Mobile (Stock Analysis on Net, 2015). Key Financial Ratios for ExxonMobil

According to Farlex (2015), “financial ratios are defined as a financial analysis comparison in which certain financial statement items are divided by one another to reveal their logical interrelationships.” Financial ratios can be classified to reveal movements in profitability, solvency, and efficiency ratios. “Solvency ratios measure a company’s ability to pay its debt and other obligations.” Profitability ratios exhibit the manner in which a business has fulfilled its operational point of view. Efficiency ratios are normally utilized to examine how a business internally uses its assets and liabilities (Investopedia, 2015). The cart below acknowledges some key financial ratio for each of the previous mentioned categories for ExxonMobil. All of these ratios have been computed and derived from annual information for the 2010- 2011 fiscal years.

Solvency Ratios
Quick Ratio
Liquid Assets/ Current Liabilities
Current Ratio
Current Assets/ Current Liabilities

References: Business Dictionary. (2015). Financial Ratios. Retrieved from (2006-2015). Business Financial Analysis Using Ratios. Retrieved from
Dun & Bradstreet. (n.d.). Key Business Ratios. Retrieved from
ExxonMobil. (2013-2015). About Us. Retrieved from us/history/overview
Farlex. (2013-2015). Solvency Ratios. Retrieved from
Google Finance. (2015). ExxonMobil Corporation: Annual Financial Statements. Retrieved from
 Investopedia. (2015). Efficiency Ratios. Retrieved from
Stock Analysis on Net. (2015). Retrieved from
U. S. Department of Labor. (n. d.). 2911 Petroleum Refining. Retrieved from
Worldwide Business Dictionary. (2015). What is a SIC Code?. Retrieved from
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