.Analysis of Inventory
Difficulty: Advanced
Inventory Accounting Policy
Crude oil, products and merchandise inventories are carried at the lower of current market value or cost (generally determined under the last-in, first-out method – LIFO). Inventory costs include expenditures and other charges (including depreciation) directly and indirectly incurred in bringing the inventory to its existing condition and location. Selling expenses and general and administrative expenses are reported as period costs and excluded from inventory cost. Inventories of materials and supplies are valued at cost or less.
Source: Exxon Mobil Corp., Annual Report
Inventory Disclosure
Exxon Mobil Corp., Statement of Financial Position, Inventory
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | Crude oil, products and merchandise | |||||
| | Materials and supplies | |||||
| | Inventories |
Source: Based on data from Exxon Mobil Corp. Annual Reports
| Item | Description | The company |
|---|---|---|
| Crude oil, products and merchandise | The aggregated amount of merchandise or goods held by the entity that are readily available for future sale and items held by the entity which are partially complete or in the process of being readied for future sale. | Exxon Mobil Corp.'s crude oil, products and merchandise declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
| Materials and supplies | Aggregated amount of unprocessed materials to be used in manufacturing or production process and supplies that will be consumed. | Exxon Mobil Corp.'s materials and supplies 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). | Exxon Mobil Corp.'s inventories declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
Adjustment to Inventory: from LIFO to FIFO
Adjusting LIFO Inventory to FIFO (Current) Cost
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Adjustment to Inventories | ||||||
| | Inventories at LIFO (as reported) | |||||
| | Add: Inventory LIFO reserve | |||||
| | Inventories at FIFO (adjusted) | |||||
| Adjustment to Current Assets | ||||||
| | Current assets (as reported) | |||||
| | Add: Inventory LIFO reserve | |||||
| | Current assets (adjusted) | |||||
| Adjustment to Total Assets | ||||||
| | Total assets (as reported) | |||||
| | Add: Inventory LIFO reserve | |||||
| | Total assets (adjusted) | |||||
| Adjustment to Total ExxonMobil Share Of Equity | ||||||
| | Total ExxonMobil share of equity (as reported) | |||||
| | Add: Inventory LIFO reserve | |||||
| | Total ExxonMobil share of equity (adjusted) | |||||
| Adjustment to Net Income Attributable To ExxonMobil | ||||||
| | Net income attributable to ExxonMobil (as reported) | |||||
| | Add: Increase (decrease) in inventory LIFO reserve | |||||
| | Net income attributable to ExxonMobil (adjusted) | |||||
Exxon Mobil Corp.'s inventory value on Dec 31, 2017 would be $27,792 (in millions) if the FIFO inventory method was used instead of LIFO. Exxon Mobil Corp.'s inventories, valued on a LIFO basis, on Dec 31, 2017 were $16,992 . Exxon Mobil Corp.'s inventories would have been $10,800 higher than reported on Dec 31, 2017 if the FIFO method had been used instead.
Adjusted Ratios: LIFO vs. FIFO (Summary)
Exxon Mobil Corp., adjusted ratios
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Current Ratio | ||||||
| | Reported current ratio (LIFO) | |||||
| | Adjusted current ratio (FIFO) | |||||
| Net Profit Margin | ||||||
| | Reported net profit margin (LIFO) | % | % | % | % | % |
| | Adjusted net profit margin (FIFO) | % | % | % | % | % |
| Total Asset Turnover | ||||||
| | Reported total asset turnover (LIFO) | |||||
| | Adjusted total asset turnover (FIFO) | |||||
| Financial Leverage | ||||||
| | Reported financial leverage (LIFO) | |||||
| | Adjusted financial leverage (FIFO) | |||||
| Return on Equity (ROE) | ||||||
| | Reported ROE (LIFO) | % | % | % | % | % |
| | Adjusted ROE (FIFO) | % | % | % | % | % |
| Return on Assets (ROA) | ||||||
| | Reported ROA (LIFO) | % | % | % | % | % |
| | Adjusted ROA (FIFO) | % | % | % | % | % |
| Ratio | Description | The company |
|---|---|---|
| Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by current liabilities. | Exxon Mobil Corp.'s adjusted current ratio improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017. |
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | Exxon Mobil Corp.'s adjusted net profit margin improved from 2015 to 2016 and from 2016 to 2017. |
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Exxon Mobil Corp.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017. |
| 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. |
Exxon Mobil Corp.'s adjusted financial leverage declined from 2015 to 2016 and from 2016 to 2017. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. | Exxon Mobil Corp.'s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Exxon Mobil Corp.'s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017. |
Adjusted Current Ratio
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Current assets (USD $ in millions) | |||||
| | Current liabilities (USD $ in millions) | |||||
| | Current ratio1 | |||||
| Adjusted: from LIFO to FIFO | ||||||
| | Adjusted current assets (USD $ in millions) | |||||
| | Current liabilities (USD $ in millions) | |||||
| | Adjusted current ratio2 | |||||
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. | Exxon Mobil Corp.'s adjusted current ratio improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017. |
Adjusted Net Profit Margin
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Net income attributable to ExxonMobil (USD $ in millions) | |||||
| | Sales and other operating revenue (USD $ in millions) | |||||
| | Net profit margin1 | % | % | % | % | % |
| Adjusted: from LIFO to FIFO | ||||||
| | Adjusted net income attributable to ExxonMobil (USD $ in millions) | |||||
| | Sales and other operating revenue (USD $ in millions) | |||||
| | Adjusted net profit margin2 | % | % | % | % | % |
2017 Calculations
1 Net profit margin = 100 × Net income attributable to ExxonMobil ÷ Sales and other operating revenue
= 100 × ÷ = %
2 Adjusted net profit margin = 100 × Adjusted net income attributable to ExxonMobil ÷ Sales and other operating revenue
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | Exxon Mobil Corp.'s adjusted net profit margin improved from 2015 to 2016 and from 2016 to 2017. |
Adjusted Total Asset Turnover
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Sales and other operating revenue (USD $ in millions) | |||||
| | Total assets (USD $ in millions) | |||||
| | Total asset turnover1 | |||||
| Adjusted: from LIFO to FIFO | ||||||
| | Sales and other operating revenue (USD $ in millions) | |||||
| | Adjusted total assets (USD $ in millions) | |||||
| | Adjusted total asset turnover2 | |||||
2017 Calculations
1 Total asset turnover = Sales and other operating revenue ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Sales and other operating revenue ÷ Adjusted total assets
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Exxon Mobil Corp.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017. |
Adjusted Financial Leverage
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Total assets (USD $ in millions) | |||||
| | Total ExxonMobil share of equity (USD $ in millions) | |||||
| | Financial leverage1 | |||||
| Adjusted: from LIFO to FIFO | ||||||
| | Adjusted total assets (USD $ in millions) | |||||
| | Adjusted total ExxonMobil share of equity (USD $ in millions) | |||||
| | Adjusted financial leverage2 | |||||
2017 Calculations
1 Financial leverage = Total assets ÷ Total ExxonMobil share of equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total ExxonMobil share of 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. |
Exxon Mobil Corp.'s adjusted financial leverage declined from 2015 to 2016 and from 2016 to 2017. |
Adjusted Return on Equity (ROE)
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Net income attributable to ExxonMobil (USD $ in millions) | |||||
| | Total ExxonMobil share of equity (USD $ in millions) | |||||
| | ROE1 | % | % | % | % | % |
| Adjusted: from LIFO to FIFO | ||||||
| | Adjusted net income attributable to ExxonMobil (USD $ in millions) | |||||
| | Adjusted total ExxonMobil share of equity (USD $ in millions) | |||||
| | Adjusted ROE2 | % | % | % | % | % |
2017 Calculations
1 ROE = 100 × Net income attributable to ExxonMobil ÷ Total ExxonMobil share of equity
= 100 × ÷ = %
2 Adjusted ROE = 100 × Adjusted net income attributable to ExxonMobil ÷ Adjusted total ExxonMobil share of equity
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. | Exxon Mobil Corp.'s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017. |
Adjusted Return on Assets (ROA)
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Net income attributable to ExxonMobil (USD $ in millions) | |||||
| | Total assets (USD $ in millions) | |||||
| | ROA1 | % | % | % | % | % |
| Adjusted: from LIFO to FIFO | ||||||
| | Adjusted net income attributable to ExxonMobil (USD $ in millions) | |||||
| | Adjusted total assets (USD $ in millions) | |||||
| | Adjusted ROA2 | % | % | % | % | % |
2017 Calculations
1 ROA = 100 × Net income attributable to ExxonMobil ÷ Total assets
= 100 × ÷ = %
2 Adjusted ROA = 100 × Adjusted net income attributable to ExxonMobil ÷ Adjusted total assets
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Exxon Mobil Corp.'s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017. |
