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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, 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 | ||
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| Crude oil, products and merchandise | |
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| Materials and supplies | |
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| Inventories | |
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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
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
| 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
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
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
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
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)
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)
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. |
