Microsoft Excel LibreOffice Calc

Chevron Corp. (CVX)


Analysis of Equity Method Investment

Difficulty: Advanced


Selected Financial Data

Chevron Corp.’s selected financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Income from equity affiliates 6,327  4,438  2,661  4,684  7,098 
Investments in companies accounted for using the equity method 34,893  31,786  29,346  26,004  25,719 
ROA (equity method investments only)1 18.13% 13.96% 9.07% 18.01% 27.60%

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-20).

2018 Calculations

1 ROA (equity method investments only) = 100 × Income from equity affiliates ÷ Investments in companies accounted for using the equity method
= 100 × 6,327 ÷ 34,893 = 18.13%

Item Description The company
Income from equity affiliates This item represents the entity’s proportionate share for the period of the net income (loss) of its investee (such as unconsolidated subsidiaries and joint ventures) to which the equity method of accounting is applied. Such amount typically reflects adjustments similar to those made in preparing consolidated statements, including adjustments to eliminate intercompany gains and losses, and to amortize, if appropriate, any difference between cost and underlying equity in net assets of the investee at the date of investment. Chevron Corp.’s income from equity affiliates increased from 2016 to 2017 and from 2017 to 2018.
Investments in companies accounted for using the equity method This item represents the carrying amount on the entity’s balance sheet of its investment in common stock of an equity method investee. This is not an indicator of the fair value of the investment, rather it is the initial cost adjusted for the entity’s share of earnings and losses of the investee, adjusted for any distributions (dividends) and other than temporary impairment losses recognized. Chevron Corp.’s investments in companies accounted for using the equity method increased from 2016 to 2017 and from 2017 to 2018.
ROA (equity method investments only) A profitability ratio calculated as income from equity affiliates divided by investments in companies accounted for using the equity method. Chevron Corp.’s ROA of equity method investments improved from 2016 to 2017 and from 2017 to 2018.

Summarized Financial Information

Summarized financial information for Chevron Corp.’s affiliates, subsidiaries, associates, and joint ventures

US$ in millions

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Current assets 12,813  13,568  13,743  10,657  13,465 
Noncurrent assets 36,369  32,643  28,854  26,607  26,053 
Total assets 49,182  46,211  42,597  37,264  39,518 
Current liabilities 9,843  10,201  8,996  7,351  9,588 
Noncurrent liabilities 4,446  4,224  4,255  3,909  4,211 
Total liabilities 14,289  14,425  13,251  11,260  13,799 
Affiliates’ net equity 34,893  31,786  29,346  26,004  25,719 
Total liabilities and equity 49,182  46,211  42,597  37,264  39,518 
Revenues 40,679  33,460  27,787  33,492  58,937 
Income before income tax expense 6,755  5,712  3,670  6,279  9,968 
Net income attributable to affiliates 6,384  4,468  2,876  4,691  7,237 

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-20).

Item Description The company
Affiliates’ net equity Amount of equity, excluding noncontrolling interest, attributable to the equity method investment of the entity. Affiliates’ net equity of Chevron Corp.’s affiliates, subsidiaries, associates, and joint ventures increased from 2016 to 2017 and from 2017 to 2018.
Net income attributable to affiliates The amount of net income (loss) reported by an equity method investment of the entity. Net income attributable to affiliates of Chevron Corp.’s affiliates, subsidiaries, associates, and joint ventures increased from 2016 to 2017 and from 2017 to 2018.

Adjustments to Financial Data: Proportionate Consolidation

Recognition of Chevron Corp.’s proportionate share of affiliates, subsidiaries, associates, and joint ventures assets and liabilities instead of net equity.

Chevron Corp., adjustments to financial data

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Weighted average percentage interest in affiliates 100.00% 100.00% 100.00% 100.00% 100.00%
Adjustment to Current Assets
Current assets (as reported) 34,021  28,560  29,619  35,347  42,232 
Add: Current assets of affiliates (adjustment) 12,813  13,568  13,743  10,657  13,465 
Current assets (adjusted) 46,834  42,128  43,362  46,004  55,697 
Adjustment to Total Assets
Total assets (as reported) 253,863  253,806  260,078  266,103  266,026 
Less: Investments in companies accounted for using the equity method (adjustment) 34,893  31,786  29,346  26,004  25,719 
Add: Total assets of affiliates (adjustment) 49,182  46,211  42,597  37,264  39,518 
Total assets (adjusted) 268,152  268,231  273,329  277,363  279,825 
Adjustment to Current Liabilities
Current liabilities (as reported) 27,171  27,737  31,785  26,464  31,926 
Add: Current liabilities of affiliates (adjustment) 9,843  10,201  8,996  7,351  9,588 
Current liabilities (adjusted) 37,014  37,938  40,781  33,815  41,514 
Adjustment to Total Liabilities
Total liabilities (as reported) 98,221  104,487  113,356  112,217  109,835 
Add: Total liabilities of affiliates (adjustment) 14,289  14,425  13,251  11,260  13,799 
Total liabilities (adjusted) 112,510  118,912  126,607  123,477  123,634 
Adjustment to Sales And Other Operating Revenues
Sales and other operating revenues (as reported) 158,902  134,674  110,215  129,925  200,494 
Add: Revenues of affiliates (adjustment) 40,679  33,460  27,787  33,492  58,937 
Sales and other operating revenues (adjusted) 199,581  168,134  138,002  163,417  259,431 

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-20).


Chevron Corp., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Proportionate Consolidation (Summary)

Chevron Corp., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Current Ratio
Reported current ratio 1.25 1.03 0.93 1.34 1.32
Adjusted current ratio 1.27 1.11 1.06 1.36 1.34
Net Profit Margin
Reported net profit margin 9.33% 6.83% -0.45% 3.53% 9.60%
Adjusted net profit margin 7.43% 5.47% -0.36% 2.81% 7.42%
Total Asset Turnover
Reported total asset turnover 0.63 0.53 0.42 0.49 0.75
Adjusted total asset turnover 0.74 0.63 0.50 0.59 0.93
Financial Leverage
Reported financial leverage 1.64 1.71 1.79 1.74 1.72
Adjusted financial leverage 1.74 1.81 1.88 1.82 1.80
Return on Assets (ROA)
Reported ROA 5.84% 3.62% -0.19% 1.72% 7.23%
Adjusted ROA 5.53% 3.43% -0.18% 1.65% 6.88%

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-20).

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Chevron Corp.’s adjusted current ratio improved from 2016 to 2017 and from 2017 to 2018.
Adjusted net profit margin An indicator of profitability, calculated as net income divided by adjusted revenue. Chevron Corp.’s adjusted net profit margin improved from 2016 to 2017 and from 2017 to 2018.
Adjusted total asset turnover An activity ratio calculated as adjusted total revenue divided by adjusted total assets. Chevron Corp.’s adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Chevron Corp.’s adjusted financial leverage declined from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Chevron Corp.’s adjusted ROA improved from 2016 to 2017 and from 2017 to 2018.

Chevron Corp., Ratios: Reported vs. Adjusted


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Current assets 34,021  28,560  29,619  35,347  42,232 
Current liabilities 27,171  27,737  31,785  26,464  31,926 
Ratio
Current ratio1 1.25 1.03 0.93 1.34 1.32
Adjusted: from Equity Method to Proportionate Consolidation
Selected Financial Data (US$ in millions)
Adjusted current assets 46,834  42,128  43,362  46,004  55,697 
Adjusted current liabilities 37,014  37,938  40,781  33,815  41,514 
Ratio
Adjusted current ratio2 1.27 1.11 1.06 1.36 1.34

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-20).

2018 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= 34,021 ÷ 27,171 = 1.25

2 Adjusted current ratio = Adjusted current assets ÷ Adjusted current liabilities
= 46,834 ÷ 37,014 = 1.27

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. Chevron Corp.’s adjusted current ratio improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to Chevron Corporation 14,824  9,195  (497) 4,587  19,241 
Sales and other operating revenues 158,902  134,674  110,215  129,925  200,494 
Ratio
Net profit margin1 9.33% 6.83% -0.45% 3.53% 9.60%
Adjusted: from Equity Method to Proportionate Consolidation
Selected Financial Data (US$ in millions)
Net income (loss) attributable to Chevron Corporation 14,824  9,195  (497) 4,587  19,241 
Adjusted sales and other operating revenues 199,581  168,134  138,002  163,417  259,431 
Ratio
Adjusted net profit margin2 7.43% 5.47% -0.36% 2.81% 7.42%

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-20).

2018 Calculations

1 Net profit margin = 100 × Net income (loss) attributable to Chevron Corporation ÷ Sales and other operating revenues
= 100 × 14,824 ÷ 158,902 = 9.33%

2 Adjusted net profit margin = 100 × Net income (loss) attributable to Chevron Corporation ÷ Adjusted sales and other operating revenues
= 100 × 14,824 ÷ 199,581 = 7.43%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as net income divided by adjusted revenue. Chevron Corp.’s adjusted net profit margin improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Sales and other operating revenues 158,902  134,674  110,215  129,925  200,494 
Total assets 253,863  253,806  260,078  266,103  266,026 
Ratio
Total asset turnover1 0.63 0.53 0.42 0.49 0.75
Adjusted: from Equity Method to Proportionate Consolidation
Selected Financial Data (US$ in millions)
Adjusted sales and other operating revenues 199,581  168,134  138,002  163,417  259,431 
Adjusted total assets 268,152  268,231  273,329  277,363  279,825 
Ratio
Adjusted total asset turnover2 0.74 0.63 0.50 0.59 0.93

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-20).

2018 Calculations

1 Total asset turnover = Sales and other operating revenues ÷ Total assets
= 158,902 ÷ 253,863 = 0.63

2 Adjusted total asset turnover = Adjusted sales and other operating revenues ÷ Adjusted total assets
= 199,581 ÷ 268,152 = 0.74

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as adjusted total revenue divided by adjusted total assets. Chevron Corp.’s adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets 253,863  253,806  260,078  266,103  266,026 
Total Chevron Corporation stockholders’ equity 154,554  148,124  145,556  152,716  155,028 
Ratio
Financial leverage1 1.64 1.71 1.79 1.74 1.72
Adjusted: from Equity Method to Proportionate Consolidation
Selected Financial Data (US$ in millions)
Adjusted total assets 268,152  268,231  273,329  277,363  279,825 
Total Chevron Corporation stockholders’ equity 154,554  148,124  145,556  152,716  155,028 
Ratio
Adjusted financial leverage2 1.74 1.81 1.88 1.82 1.80

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-20).

2018 Calculations

1 Financial leverage = Total assets ÷ Total Chevron Corporation stockholders’ equity
= 253,863 ÷ 154,554 = 1.64

2 Adjusted financial leverage = Adjusted total assets ÷ Total Chevron Corporation stockholders’ equity
= 268,152 ÷ 154,554 = 1.74

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Chevron Corp.’s adjusted financial leverage declined from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to Chevron Corporation 14,824  9,195  (497) 4,587  19,241 
Total assets 253,863  253,806  260,078  266,103  266,026 
Ratio
ROA1 5.84% 3.62% -0.19% 1.72% 7.23%
Adjusted: from Equity Method to Proportionate Consolidation
Selected Financial Data (US$ in millions)
Net income (loss) attributable to Chevron Corporation 14,824  9,195  (497) 4,587  19,241 
Adjusted total assets 268,152  268,231  273,329  277,363  279,825 
Ratio
Adjusted ROA2 5.53% 3.43% -0.18% 1.65% 6.88%

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-20).

1 ROA = 100 × Net income (loss) attributable to Chevron Corporation ÷ Total assets
= 100 × 14,824 ÷ 253,863 = 5.84%

2 Adjusted ROA = 100 × Net income (loss) attributable to Chevron Corporation ÷ Adjusted total assets
= 100 × 14,824 ÷ 268,152 = 5.53%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Chevron Corp.’s adjusted ROA improved from 2016 to 2017 and from 2017 to 2018.