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Exxon Mobil Corp. (XOM)

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: 10-K (filing date: 2019-02-27).

Inventory Disclosure

Exxon Mobil Corp., Statement of Financial Position, Inventory

USD $ in millions

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Crude oil 4,783  4,635  3,900  4,200  4,600 
Petroleum products 5,666  4,333  3,700  4,100  4,100 
Chemical products 3,821  3,283  2,800  2,700  2,900 
Gas/other 533  620  477  1,037  784 
Crude oil, products and merchandise 14,803  12,871  10,877  12,037  12,384 
Materials and supplies 4,155  4,121  4,203  4,208  4,294 
Inventories 18,958  16,992  15,080  16,245  16,678 

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

Item Description The company
Inventories Amount after valuation and LIFO reserves of inventory expected to be sold, or consumed within one year or operating cycle, if longer. Exxon Mobil Corp.’s inventories increased from 2016 to 2017 and from 2017 to 2018.

Adjustment to Inventory: from LIFO to FIFO

Adjusting LIFO Inventory to FIFO (Current) Cost

USD $ in millions

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Adjustment to Inventories
Inventories at LIFO (as reported) 18,958  16,992  15,080  16,245  16,678 
Add: Inventory LIFO reserve 8,200  10,800  8,100  4,500  10,600 
Inventories at FIFO (adjusted) 27,158  27,792  23,180  20,745  27,278 
Adjustment to Current Assets
Current assets (as reported) 47,973  47,134  41,416  42,623  52,910 
Add: Inventory LIFO reserve 8,200  10,800  8,100  4,500  10,600 
Current assets (adjusted) 56,173  57,934  49,516  47,123  63,510 
Adjustment to Total Assets
Total assets (as reported) 346,196  348,691  330,314  336,758  349,493 
Add: Inventory LIFO reserve 8,200  10,800  8,100  4,500  10,600 
Total assets (adjusted) 354,396  359,491  338,414  341,258  360,093 
Adjustment to Total ExxonMobil Share Of Equity
Total ExxonMobil share of equity (as reported) 191,794  187,688  167,325  170,811  174,399 
Add: Inventory LIFO reserve 8,200  10,800  8,100  4,500  10,600 
Total ExxonMobil share of equity (adjusted) 199,994  198,488  175,425  175,311  184,999 
Adjustment to Net Income Attributable To ExxonMobil
Net income attributable to ExxonMobil (as reported) 20,840  19,710  7,840  16,150  32,520 
Add: Increase (decrease) in inventory LIFO reserve (2,600) 2,700  3,600  (6,100) (10,600)
Net income attributable to ExxonMobil (adjusted) 18,240  22,410  11,440  10,050  21,920 

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

Exxon Mobil Corp.’s inventory value on Dec 31, 2018 would be $27,158  (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, 2018 were $18,958 . Exxon Mobil Corp.’s inventories would have been $8,200  higher than reported on Dec 31, 2018 if the FIFO method had been used instead.

Exxon Mobil Corp., Financial Data: Reported vs. Adjusted

Adjusted Ratios: LIFO vs. FIFO (Summary)

Exxon Mobil Corp., adjusted ratios

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Current Ratio
Reported current ratio (LIFO) 0.84 0.82 0.87 0.79 0.82
Adjusted current ratio (FIFO) 0.98 1.00 1.04 0.87 0.98
Net Profit Margin
Reported net profit margin (LIFO) 7.46% 8.31% 3.59% 6.22% 8.25%
Adjusted net profit margin (FIFO) 6.53% 9.45% 5.23% 3.87% 5.56%
Total Asset Turnover
Reported total asset turnover (LIFO) 0.81 0.68 0.66 0.77 1.13
Adjusted total asset turnover (FIFO) 0.79 0.66 0.65 0.76 1.09
Financial Leverage
Reported financial leverage (LIFO) 1.81 1.86 1.97 1.97 2.00
Adjusted financial leverage (FIFO) 1.77 1.81 1.93 1.95 1.95
Return on Equity (ROE)
Reported ROE (LIFO) 10.87% 10.50% 4.69% 9.45% 18.65%
Adjusted ROE (FIFO) 9.12% 11.29% 6.52% 5.73% 11.85%
Return on Assets (ROA)
Reported ROA (LIFO) 6.02% 5.65% 2.37% 4.80% 9.30%
Adjusted ROA (FIFO) 5.15% 6.23% 3.38% 2.94% 6.09%

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

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 deteriorated from 2016 to 2017 and from 2017 to 2018.
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 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Exxon Mobil 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 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 2016 to 2017 and from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Exxon Mobil Corp.’s adjusted ROE improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Exxon Mobil Corp.’s adjusted ROA improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.

Exxon Mobil Corp., Ratios: Reported vs. Adjusted

Adjusted Current Ratio

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Current assets 47,973  47,134  41,416  42,623  52,910 
Current liabilities 57,138  57,771  47,638  53,976  64,633 
Ratio
Current ratio1 0.84 0.82 0.87 0.79 0.82
Adjusted: from LIFO to FIFO
Selected Financial Data (USD $ in millions)
Adjusted current assets 56,173  57,934  49,516  47,123  63,510 
Current liabilities 57,138  57,771  47,638  53,976  64,633 
Ratio
Adjusted current ratio2 0.98 1.00 1.04 0.87 0.98

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= 47,973 ÷ 57,138 = 0.84

2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= 56,173 ÷ 57,138 = 0.98

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 deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Net Profit Margin

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income attributable to ExxonMobil 20,840  19,710  7,840  16,150  32,520 
Sales and other operating revenue 279,332  237,162  218,608  259,488  394,105 
Ratio
Net profit margin1 7.46% 8.31% 3.59% 6.22% 8.25%
Adjusted: from LIFO to FIFO
Selected Financial Data (USD $ in millions)
Adjusted net income attributable to ExxonMobil 18,240  22,410  11,440  10,050  21,920 
Sales and other operating revenue 279,332  237,162  218,608  259,488  394,105 
Ratio
Adjusted net profit margin2 6.53% 9.45% 5.23% 3.87% 5.56%

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Net profit margin = 100 × Net income attributable to ExxonMobil ÷ Sales and other operating revenue
= 100 × 20,840 ÷ 279,332 = 7.46%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to ExxonMobil ÷ Sales and other operating revenue
= 100 × 18,240 ÷ 279,332 = 6.53%

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 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.

Adjusted Total Asset Turnover

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Sales and other operating revenue 279,332  237,162  218,608  259,488  394,105 
Total assets 346,196  348,691  330,314  336,758  349,493 
Ratio
Total asset turnover1 0.81 0.68 0.66 0.77 1.13
Adjusted: from LIFO to FIFO
Selected Financial Data (USD $ in millions)
Sales and other operating revenue 279,332  237,162  218,608  259,488  394,105 
Adjusted total assets 354,396  359,491  338,414  341,258  360,093 
Ratio
Adjusted total asset turnover2 0.79 0.66 0.65 0.76 1.09

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Total asset turnover = Sales and other operating revenue ÷ Total assets
= 279,332 ÷ 346,196 = 0.81

2 Adjusted total asset turnover = Sales and other operating revenue ÷ Adjusted total assets
= 279,332 ÷ 354,396 = 0.79

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 improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Total assets 346,196  348,691  330,314  336,758  349,493 
Total ExxonMobil share of equity 191,794  187,688  167,325  170,811  174,399 
Ratio
Financial leverage1 1.81 1.86 1.97 1.97 2.00
Adjusted: from LIFO to FIFO
Selected Financial Data (USD $ in millions)
Adjusted total assets 354,396  359,491  338,414  341,258  360,093 
Adjusted total ExxonMobil share of equity 199,994  198,488  175,425  175,311  184,999 
Ratio
Adjusted financial leverage2 1.77 1.81 1.93 1.95 1.95

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Financial leverage = Total assets ÷ Total ExxonMobil share of equity
= 346,196 ÷ 191,794 = 1.81

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total ExxonMobil share of equity
= 354,396 ÷ 199,994 = 1.77

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 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Equity (ROE)

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income attributable to ExxonMobil 20,840  19,710  7,840  16,150  32,520 
Total ExxonMobil share of equity 191,794  187,688  167,325  170,811  174,399 
Ratio
ROE1 10.87% 10.50% 4.69% 9.45% 18.65%
Adjusted: from LIFO to FIFO
Selected Financial Data (USD $ in millions)
Adjusted net income attributable to ExxonMobil 18,240  22,410  11,440  10,050  21,920 
Adjusted total ExxonMobil share of equity 199,994  198,488  175,425  175,311  184,999 
Ratio
Adjusted ROE2 9.12% 11.29% 6.52% 5.73% 11.85%

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 ROE = 100 × Net income attributable to ExxonMobil ÷ Total ExxonMobil share of equity
= 100 × 20,840 ÷ 191,794 = 10.87%

2 Adjusted ROE = 100 × Adjusted net income attributable to ExxonMobil ÷ Adjusted total ExxonMobil share of equity
= 100 × 18,240 ÷ 199,994 = 9.12%

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 2016 to 2017 but then slightly deteriorated 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 (USD $ in millions)
Net income attributable to ExxonMobil 20,840  19,710  7,840  16,150  32,520 
Total assets 346,196  348,691  330,314  336,758  349,493 
Ratio
ROA1 6.02% 5.65% 2.37% 4.80% 9.30%
Adjusted: from LIFO to FIFO
Selected Financial Data (USD $ in millions)
Adjusted net income attributable to ExxonMobil 18,240  22,410  11,440  10,050  21,920 
Adjusted total assets 354,396  359,491  338,414  341,258  360,093 
Ratio
Adjusted ROA2 5.15% 6.23% 3.38% 2.94% 6.09%

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 ROA = 100 × Net income attributable to ExxonMobil ÷ Total assets
= 100 × 20,840 ÷ 346,196 = 6.02%

2 Adjusted ROA = 100 × Adjusted net income attributable to ExxonMobil ÷ Adjusted total assets
= 100 × 18,240 ÷ 354,396 = 5.15%

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 2016 to 2017 but then slightly deteriorated from 2017 to 2018.