| http-equiv="Content-Type" content="text/html; | | | | equity ratio. |
| charset=utf-8"> | | | | The debt ratio is determined by dividing the total |
| Introduction: | | | | liabilities by total assets, in 2007 total assets for the |
| Exxon corporation was founded in the year 1870, | | | | company amounted to $242,082,000 while the total |
| however in 1999 it changed its name to Exxon Mobil | | | | liabilities amounted to $120,320,000, therefore the debt |
| corporation after merging with Mobil, in 2007 the | | | | ratio is equal to 49.70%, this is the percentage of cash |
| company was ranked as the largest company in | | | | that the company can acquire through borrowing, this |
| terms of it revenue, it is a fortune 500 company | | | | percentage has increased shows an improvement in |
| whose business include exploration and the production | | | | the companies creditworthiness and therefore the |
| of petroleum products. The company operates in | | | | company can finance its operations through borrowing. |
| Canada, US, South America and other regions and has | | | | The following table summarizes the debt ratio of the |
| over 16,000 wells in these regions, according to the | | | | company over the years. |
| 2007report the company employs over 106,000 | | | | 2007 |
| employees and has been ranked one of the best in | | | | 2006 |
| terms of divided earnings. | | | | 2005total liabilities |
| This company has a comparative advantage over its | | | | 120,320,000 |
| competitors due to economies of scale that help in | | | | 105,171,000 |
| reducing production costs and also technological | | | | 97,149,000total assets |
| advantage that helps in reducing these costs through | | | | 242,082,000 |
| optimal drilling and pipelines used in transporting their | | | | 219,015,000 |
| products, this paper discusses financial ratios of Exxon | | | | 208,335,000debt ratio |
| Mobil that will help in determining the companies | | | | 0.49702167 |
| profitability, return on equity, return on assets, liquidity | | | | 0.48019999 |
| and leverage. | | | | 0.46631147 |
| Liquidity: | | | | The table shows the debt ratio for the year 2007, |
| The company has maintained a good liquidity position, | | | | 2006 and 2005, from the table there has been an |
| some of the ratios that show the liquidity position of | | | | increase in the debt ratio. |
| the company include the current ratio, the cash ratio | | | | The debt equity ratio is determined by dividing the total |
| and the cash flow from operation ratio, the current | | | | liabilities by total share holder equity; this ratio shows |
| ratio is determined by dividing the current assets by | | | | the level of borrowing per unit of equity invested. For |
| current liabilities, according to the balance sheet as at | | | | the year 2007 total liabilities amounted to $120,320,000 |
| 31 December 2007 current assets amounted to | | | | while the total share holder equity amounted to |
| $85,963,000 while current liabilities amounted to | | | | $121,762,000, therefore the debt equity ratio is equal to |
| $58,312,000, the current ratio is therefore determined | | | | 0.988, the following table summarizes the debt equity |
| by dividing the current assets by the current liabilities | | | | ratio over the last three years |
| which yield the value of 1.47, the following table | | | | 2007 |
| summarizes the current ratio over the years: | | | | 2006 |
| 2007 | | | | 2005total liabilities |
| 2006 | | | | 120,320,000 |
| 2005current assets | | | | 105,171,000 |
| 85963000 | | | | 97,149,000share holder equity |
| 75777000 | | | | 121,762,000 |
| 73342000current liabilities | | | | 113,844,000 |
| 58312000 | | | | 111,186,000debt equity ratio |
| 47115000 | | | | 0.98815722 |
| 44536000current ratio | | | | 0.9238168 |
| 1.474191 | | | | 0.87375209 |
| 1.608341 | | | | From the above table it is evident that there has been |
| 1.646803 | | | | an increase in the debt equity ratio, this means that the |
| From the table it is evident that there has been an | | | | company has increased its financing through debts and |
| increase in current assets, also an increase in the | | | | a relative decline in its financing through equity. |
| current liabilities but the current ratio has declined over | | | | Profitability: |
| the years. The current ratio for the year 2007 is 1.47 | | | | The company over the years has increased its |
| and this means that for every dollar the company | | | | profitability, gross profit has increased and this is |
| owes its creditors it has 1.47 dollars in form of assets, | | | | attributed to the proper management of its assets, |
| therefore this ratio has decline but its creditworthiness | | | | liquidity and debt management. The factor that has led |
| is still appropriate in the market. | | | | to an increase in profitability is an increase in borrowing |
| The effective management of its assets: | | | | that has enabled the company to increase its assets |
| To determine the effective management of the | | | | and therefore generate more sales levels using these |
| company’s assets we will use the asset | | | | assets, despite the decline in efficiency in the use of |
| turnover ratio, fixed assets turnover and the return on | | | | these assets it is still evident that these assets have |
| assets to determine how well the company effectively | | | | increased the profits of the company, the return on |
| manages its assets. | | | | assets ratio is equal to 0.1677 which is a decline from |
| The asset turnover ratio is determined by dividing the | | | | previous years and also the debt equity ratio which is |
| sales by the total assets, for the year 2007 the | | | | 0.98 is a decline from the previous years showing that |
| companies sales level was$ 404,552,000 while the | | | | the company has relatively increased borrowing rather |
| total assets level was $242,082,000, the asset | | | | than finance the operation through equity. The |
| turnover ratio for this year is equal to 1.67, and the | | | | borrowing has enabled the company to have |
| following chart summarizes the asset turnover over | | | | comparative advantage over fiancé through equity. |
| the years: | | | | From the above discussion therefore this company |
| 2007 | | | | has achieved high profitability through an increase in |
| 2006 | | | | assets financed by borrowing which has proved less |
| 2005sales | | | | expensive than equity financing. The efficiency in the |
| 404552000 | | | | use of assets has also aided the company to improve |
| 377635000 | | | | on profits, finally the current ratio shows that the |
| 370680000assets | | | | company’s creditworthiness has allowed it to |
| 242082000 | | | | borrow more to finance operations. |
| 219015000 | | | | Firms stock prices: |
| 208335000asset turnover | | | | The following chart summarizes the stock prices of |
| 1.6711362 | | | | Exxon Mobil; data was retrieved from yahoo finance |
| 1.7242426 | | | | available at From the above chart there has been a |
| 1.7792498 | | | | decline in the stock prices of Exxon Mobil over the last |
| From the above table it is evident that there has been | | | | few months, however this shows that in the near |
| a decline in the asset turnover ratio from 1.779 in 2005 | | | | future the prices may rise to a peak as depicted by |
| to 1.62 in 2007. The higher the asset turnover ratio then | | | | the business cycle curve. |
| the more a company is efficient in using its assets to | | | | Revenue per share according to recent data shows is |
| increase sales level, the ratio for the company over | | | | $80.367 and cash per share is $7.643, the book value |
| the years has therefore reduced its efficiency in the | | | | per share according to the financial times is 23.03, cash |
| use of its assets to generate sales. | | | | flow per share according to the financial times is 10.39, |
| Return on assets: | | | | the cash flow margins according to the financial times |
| The return on asset ratio is determined by dividing the | | | | is 12.85. From previous levels it is evident that the book |
| net income by total assets, for the year 2007 the net | | | | value per share has increased over the last three |
| income amounted to $ 40,610,000 while total assets | | | | years, this has increased the value of shares and |
| amounted to $242,082,000, therefore the return on | | | | therefore created value to investments by the |
| assets derived is 0.168, the table below shows the | | | | investors. |
| trend over the years | | | | Trend: |
| 2007 | | | | The company has improved its performance over the |
| 2006 | | | | years, profits have increased as a result of increase in |
| 2005net income | | | | operations by the company, increasing oil prices has |
| 40,610,000 | | | | also resulted to an increase in the level of revenue |
| 39,500,000 | | | | realized by the company, the company also enjoys |
| 36,130,000total assets | | | | comparative advantage in that it adopts technologies |
| 242,082,000 | | | | that aid in reducing the cost of production, it has also in |
| 219,015,000 | | | | the recent past improved its distribution networks that |
| 208,335,000return on assets | | | | has helped reduce the cost of production. |
| 0.16775308 | | | | The return on equity ratio is currently at 36.19% which |
| 0.18035294 | | | | is very attractive to investors, the company therefore |
| 0.17342261 | | | | enjoys the advantage of acquiring funds for expanding |
| From the table above there has been a decline in the | | | | its operations either through debts or equity, this is |
| return on asset ratio, this means that the company has | | | | because its returns on equity is high and also its debt |
| increased its assets but has not be efficient in using its | | | | ratio allows it to fiancé through debts. |
| assets to increase its sales and income level, despite | | | | The following chart summarizes the profit levels |
| this however the companies profitability has increased. | | | | earned by the company over the last three years: |
| Leverage: | | | | From the above chart it is evident that the gross |
| Leverage is the borrowing which allows the company | | | | profits have increased over the years, however there |
| to purchase assets more than the stake holders | | | | has been slight increase in the net profits, therfore it is |
| provide, for this reason therefore more assets are | | | | evident that despite the increase in the profits of the |
| purchased and therefore more sales and net income | | | | compnay there has also been relative increase in the |
| increases, some of the ratios that are to determine | | | | expenses and therefoer the company should icnrease |
| financial leverage include the debt ratio and the debt | | | | its efficiency to reduce its expensses. |