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Analysis of Inventory
Difficulty: Advanced
- Inventory Accounting Policy
- Inventory Disclosure
- Adjustment to Inventory: from LIFO to FIFO
- Adjusted Ratios: LIFO vs. FIFO (Summary)
- Adjusted Current Ratio
- Adjusted Net Profit Margin
- Adjusted Total Asset Turnover
- Adjusted Financial Leverage
- Adjusted Return on Equity (ROE)
- Adjusted Return on Assets (ROA)
Inventory Accounting Policy
Crude oil, petroleum products and chemicals inventories are generally stated at cost, using a last-in, first-out method. In the aggregate, these costs are below market. "Materials, supplies and other" inventories are primarily stated at net realizable value.
Source: 10-K (filing date: 2018-02-22).
Inventory Disclosure
Chevron Corp., Statement of Financial Position, Inventory
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
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| Materials, supplies and other | |
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Based on: 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), 10-K (filing date: 2014-02-21).
| Item | Description | The company |
|---|---|---|
| Crude oil and petroleum products | Carrying amount as of the balance sheet date of finished goods inventories for petroleum products, crude oil, petrochemical products, and other oil and gas inventories. | Chevron Corp.'s crude oil and petroleum products declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level. |
| Chemicals | Carrying amount as of the balance sheet date of solvents or substances produced by or used in a process to change the shape, form or composition of some related matter. | Chevron Corp.'s chemicals declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level. |
| Materials, supplies and other | Aggregated amount of unprocessed materials to be used in manufacturing or production process and supplies that will be consumed. | Chevron Corp.'s materials, supplies and other declined from 2015 to 2016 and from 2016 to 2017. |
| Inventories | Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer). | Chevron Corp.'s inventories declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
Adjustment to Inventory: from LIFO to FIFO
Adjusting LIFO Inventory to FIFO (Current) Cost
USD $ in millions
Based on: 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), 10-K (filing date: 2014-02-21).
Chevron Corp.'s inventory value on Dec 31, 2017 would be $9,522 (in millions) if the FIFO inventory method was used instead of LIFO. Chevron Corp.'s inventories, valued on a LIFO basis, on Dec 31, 2017 were $5,585 . Chevron Corp.'s inventories would have been $3,937 higher than reported on Dec 31, 2017 if the FIFO method had been used instead.
Adjusted Ratios: LIFO vs. FIFO (Summary)
Chevron Corp., adjusted ratios
Based on: 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), 10-K (filing date: 2014-02-21).
| Ratio | Description | The company |
|---|---|---|
| Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by current liabilities. | Chevron Corp.'s adjusted current ratio deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017. |
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | Chevron Corp.'s adjusted net profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Chevron Corp.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
| Adjusted financial leverage | A measure of financial leverage calculated as adjusted total assets divided by adjusted 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 increased from 2015 to 2016 but then declined significantly from 2016 to 2017. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. | Chevron Corp.'s adjusted ROE deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Chevron Corp.'s adjusted ROA deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Adjusted Current Ratio
Based on: 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), 10-K (filing date: 2014-02-21).
2017 Calculations
1 Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by current liabilities. | Chevron Corp.'s adjusted current ratio deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017. |
Adjusted Net Profit Margin
Based on: 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), 10-K (filing date: 2014-02-21).
2017 Calculations
1 Net profit margin = 100 × Net income (loss) attributable to Chevron Corporation ÷ Sales and other operating revenues
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to Chevron Corporation ÷ Sales and other operating revenues
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | Chevron Corp.'s adjusted net profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Adjusted Total Asset Turnover
Based on: 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), 10-K (filing date: 2014-02-21).
2017 Calculations
1 Total asset turnover = Sales and other operating revenues ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Sales and other operating revenues ÷ Adjusted total assets
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Chevron Corp.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Adjusted Financial Leverage
Based on: 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), 10-K (filing date: 2014-02-21).
2017 Calculations
1 Financial leverage = Total assets ÷ Total Chevron Corporation stockholders' equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Chevron Corporation stockholders' equity
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted financial leverage | A measure of financial leverage calculated as adjusted total assets divided by adjusted 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 increased from 2015 to 2016 but then declined significantly from 2016 to 2017. |
Adjusted Return on Equity (ROE)
Based on: 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), 10-K (filing date: 2014-02-21).
2017 Calculations
1 ROE = 100 × Net income (loss) attributable to Chevron Corporation ÷ Total Chevron Corporation stockholders' equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net income (loss) attributable to Chevron Corporation ÷ Adjusted total Chevron Corporation stockholders' equity
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. | Chevron Corp.'s adjusted ROE deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Adjusted Return on Assets (ROA)
Based on: 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), 10-K (filing date: 2014-02-21).
2017 Calculations
1 ROA = 100 × Net income (loss) attributable to Chevron Corporation ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net income (loss) attributable to Chevron Corporation ÷ Adjusted total assets
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Chevron Corp.'s adjusted ROA deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
