Marathon Petroleum Corp. (NYSE:MPC)

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Marathon Petroleum Corp., Financial Data: Reported vs. Adjusted

Adjusting LIFO Inventory to FIFO (Current) Cost

US$ in millions

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Adjustment to Inventories
Inventories at LIFO (as reported)	9,317)	8,827)	8,055)	7,999)	10,243)
Add: Inventory LIFO reserve	2,770)	3,720)	2,840)	—)	871)
Inventories at FIFO (adjusted)	12,087)	12,547)	10,895)	7,999)	11,114)
Adjustment to Current Assets
Current assets (as reported)	32,131)	35,242)	30,496)	28,287)	20,170)
Add: Inventory LIFO reserve	2,770)	3,720)	2,840)	—)	871)
Current assets (adjusted)	34,901)	38,962)	33,336)	28,287)	21,041)
Adjustment to Total Assets
Total assets (as reported)	85,987)	89,904)	85,373)	85,158)	98,556)
Add: Inventory LIFO reserve	2,770)	3,720)	2,840)	—)	871)
Total assets (adjusted)	88,757)	93,624)	88,213)	85,158)	99,427)
Adjustment to Total MPC Stockholders’ Equity
Total MPC stockholders’ equity (as reported)	24,404)	27,715)	26,206)	22,199)	33,694)
Add: Inventory LIFO reserve	2,770)	3,720)	2,840)	—)	871)
Total MPC stockholders’ equity (adjusted)	27,174)	31,435)	29,046)	22,199)	34,565)
Adjustment to Net Income (loss) Attributable To MPC
Net income (loss) attributable to MPC (as reported)	9,681)	14,516)	9,738)	(9,826)	2,637)
Add: Increase (decrease) in inventory LIFO reserve	(950)	880)	2,840)	(787)	871)
Net income (loss) attributable to MPC (adjusted)	8,731)	15,396)	12,578)	(10,613)	3,508)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

The conversion from LIFO to FIFO accounting reveals a consistent variance in the valuation of inventories, which directly impacts the company's asset base and equity position. The discrepancy between reported and adjusted figures signifies the existence of a LIFO reserve that fluctuates in response to market pricing and inventory levels.

Inventory Valuation Trends: A significant divergence between reported and adjusted inventories is observed from 2021 onward. While reported inventories grew from $8.06 billion in 2021 to $9.32 billion in 2023, adjusted inventories reached a peak of $12.55 billion in 2022 before receding to $12.09 billion in 2023. Notably, in 2020, reported and adjusted inventories converged at $7.99 billion, indicating the absence of a LIFO reserve during that period.
Balance Sheet Impact: The conversion leads to a systematic increase in current assets, total assets, and stockholders' equity. The impact on equity is exactly proportional to the inventory adjustment; for example, in 2022, adjusted stockholders' equity was $3.72 billion higher than reported equity, matching the difference between adjusted and reported inventories. This indicates that the LIFO reserve functions as a significant contra-asset that suppresses the reported book value of the company.
Earnings and Net Income Variability: Adjusted net income exhibits higher volatility relative to reported figures, driven by changes in the LIFO reserve. In 2021, adjusted net income exceeded reported net income by $2.84 billion, reflecting a period of substantial reserve growth. This trend reversed in 2023, where adjusted net income was $950 million lower than reported net income, coinciding with a decrease in the adjusted inventory valuation. This pattern demonstrates how FIFO reporting captures current replacement costs differently than LIFO, particularly during periods of price volatility.

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Marathon Petroleum Corp., Financial Ratios: Reported vs. Adjusted

Marathon Petroleum Corp., adjusted financial ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Current Ratio
Reported current ratio (LIFO)	1.59	1.76	1.70	1.81	1.25
Adjusted current ratio (FIFO)	1.73	1.95	1.86	1.81	1.30
Net Profit Margin
Reported net profit margin (LIFO)	6.52%	8.18%	8.12%	-14.08%	2.13%
Adjusted net profit margin (FIFO)	5.88%	8.68%	10.48%	-15.21%	2.83%
Total Asset Turnover
Reported total asset turnover (LIFO)	1.73	1.97	1.41	0.82	1.26
Adjusted total asset turnover (FIFO)	1.67	1.90	1.36	0.82	1.25
Financial Leverage
Reported financial leverage (LIFO)	3.52	3.24	3.26	3.84	2.93
Adjusted financial leverage (FIFO)	3.27	2.98	3.04	3.84	2.88
Return on Equity (ROE)
Reported ROE (LIFO)	39.67%	52.38%	37.16%	-44.26%	7.83%
Adjusted ROE (FIFO)	32.13%	48.98%	43.30%	-47.81%	10.15%
Return on Assets (ROA)
Reported ROA (LIFO)	11.26%	16.15%	11.41%	-11.54%	2.68%
Adjusted ROA (FIFO)	9.84%	16.44%	14.26%	-12.46%	3.53%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

The transition from reported LIFO to adjusted FIFO accounting reveals a consistent expansion of the balance sheet, specifically within current assets and equity. This suggests a substantial LIFO reserve that modifies several key performance indicators across the five-year period from 2019 to 2023.

Liquidity and Asset Efficiency: The adjusted current ratio consistently exceeds the reported current ratio, indicating that the LIFO reserve adds significant value to current assets. This gap was most pronounced in 2022, where the adjusted ratio reached 1.95 compared to the reported 1.76. Conversely, the adjusted total asset turnover is generally lower than the reported figure. This pattern is attributable to the increased asset base under FIFO, which mathematically reduces the turnover rate, particularly evident in 2021 and 2022.
Profitability and Returns: Profitability metrics show a divergent relationship between reported and adjusted figures. Between 2019 and 2022, adjusted net profit margins and ROA were generally higher than reported values, suggesting that LIFO accounting suppressed earnings during those periods. However, a reversal occurred in 2023, where the reported net profit margin (6.52%) and ROE (39.67%) outperformed the adjusted figures (5.88% and 32.13% respectively). This inversion indicates a shift in the pricing environment or inventory valuation dynamics during the final year of the period.
Financial Leverage and Solvency: Financial leverage is consistently lower on an adjusted basis compared to reported figures. This reduction is a direct result of the LIFO reserve increasing the equity component of the balance sheet. The difference was most significant in 2021 and 2022, reflecting a stronger equity position when viewed through a FIFO lens, which reduces the perceived reliance on debt relative to total assets.
Return on Assets (ROA) and Equity (ROE): Adjusted returns showed significantly higher volatility than reported returns. In 2020, the adjusted ROE fell further (-47.81%) than the reported ROE (-44.26%), while in 2021, the adjusted ROE reached 43.30% compared to the reported 37.16%. Similar to the profit margin trend, the adjusted ROA and ROE were lower than reported figures by the end of 2023, marking a transition in how inventory valuation impacts overall corporate returns.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Current assets	32,131)	35,242)	30,496)	28,287)	20,170)
Current liabilities	20,150)	20,020)	17,898)	15,663)	16,147)
Liquidity Ratio
Current ratio¹	1.59	1.76	1.70	1.81	1.25
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted current assets	34,901)	38,962)	33,336)	28,287)	21,041)
Current liabilities	20,150)	20,020)	17,898)	15,663)	16,147)
Liquidity Ratio
Adjusted current ratio²	1.73	1.95	1.86	1.81	1.30

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= 32,131 ÷ 20,150 = 1.59

² Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= 34,901 ÷ 20,150 = 1.73

An examination of liquidity metrics from 2019 to 2023 reveals a general expansion of current assets and a corresponding improvement in current ratios, peaking in 2022 before a moderate decline in 2023.

Current Asset Analysis: Reported current assets grew from US$ 20,170 million in 2019 to a peak of US$ 35,242 million in 2022. Adjusted current assets followed a similar trajectory, starting at US$ 21,041 million in 2019 and reaching a maximum of US$ 38,962 million in 2022. A divergence between reported and adjusted assets became more pronounced from 2021 onward, with adjusted values consistently exceeding reported values.
Current Ratio Trends: The reported current ratio experienced a sharp increase from 1.25 in 2019 to 1.81 in 2020, thereafter fluctuating slightly and ending at 1.59 in 2023. The adjusted current ratio demonstrated a more consistent upward trend during the first four years, rising from 1.30 in 2019 to a peak of 1.95 in 2022, before contracting to 1.73 in 2023.
Comparative Liquidity Impact: The adjusted current ratio remained higher than the reported current ratio for the majority of the period, with the exception of 2020 when the figures converged at 1.81. The widening gap between the reported and adjusted ratios, which peaked at 0.19 in 2022, indicates that the adjustments made to current assets significantly bolster the perceived short-term solvency position.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to MPC	9,681)	14,516)	9,738)	(9,826)	2,637)
Sales and other operating revenues	148,379)	177,453)	119,983)	69,779)	123,949)
Profitability Ratio
Net profit margin¹	6.52%	8.18%	8.12%	-14.08%	2.13%
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to MPC	8,731)	15,396)	12,578)	(10,613)	3,508)
Sales and other operating revenues	148,379)	177,453)	119,983)	69,779)	123,949)
Profitability Ratio
Adjusted net profit margin²	5.88%	8.68%	10.48%	-15.21%	2.83%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

¹ Net profit margin = 100 × Net income (loss) attributable to MPC ÷ Sales and other operating revenues
= 100 × 9,681 ÷ 148,379 = 6.52%

² Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to MPC ÷ Sales and other operating revenues
= 100 × 8,731 ÷ 148,379 = 5.88%

The financial performance from 2019 to 2023 is characterized by extreme volatility, featuring a significant contraction in 2020 followed by a sharp recovery and a subsequent moderation in profitability.

Net Income Trajectory: A substantial decline occurred between 2019 and 2020, where reported net income fell from 2,637 million USD to a loss of 9,826 million USD. This downward trend was mirrored in the adjusted net income, which reached a deficit of 10,613 million USD. A strong reversal followed in 2021 and 2022, with adjusted net income peaking at 15,396 million USD in 2022, before declining to 8,731 million USD by the end of 2023.
Adjusted Net Profit Margin Analysis: The adjusted net profit margin exhibits high variance over the five-year period. The margin dropped from 2.83% in 2019 to a low of -15.21% in 2020. A rapid recovery was observed in 2021, with the margin surging to 10.48%. This peak was followed by a gradual contraction, decreasing to 8.68% in 2022 and further declining to 5.88% in 2023.
Reported versus Adjusted Performance: Adjusted metrics consistently amplify the volatility seen in reported figures. In 2020, the adjusted net loss and negative margin were more severe than the reported values. Conversely, the recovery in 2021 saw the adjusted net profit margin outperform the reported margin by 2.36 percentage points. By 2023, both reported and adjusted margins converged toward a downward trend, with the adjusted margin ending at 5.88% compared to the reported 6.52%.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Sales and other operating revenues	148,379)	177,453)	119,983)	69,779)	123,949)
Total assets	85,987)	89,904)	85,373)	85,158)	98,556)
Activity Ratio
Total asset turnover¹	1.73	1.97	1.41	0.82	1.26
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Sales and other operating revenues	148,379)	177,453)	119,983)	69,779)	123,949)
Adjusted total assets	88,757)	93,624)	88,213)	85,158)	99,427)
Activity Ratio
Adjusted total asset turnover²	1.67	1.90	1.36	0.82	1.25

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

¹ Total asset turnover = Sales and other operating revenues ÷ Total assets
= 148,379 ÷ 85,987 = 1.73

² Adjusted total asset turnover = Sales and other operating revenues ÷ Adjusted total assets
= 148,379 ÷ 88,757 = 1.67

The asset base experienced a notable contraction between 2019 and 2020, with adjusted total assets decreasing from US$ 99,427 million to US$ 85,158 million. This decline was followed by a period of gradual expansion, peaking in 2022 at US$ 93,624 million, before moderating to US$ 88,757 million by the end of 2023.

Adjusted Total Asset Turnover Trends: Significant volatility is observed in asset utilization efficiency. The adjusted total asset turnover ratio fell sharply from 1.25 in 2019 to a period low of 0.82 in 2020, indicating a substantial decrease in revenue generation relative to the asset base. A strong recovery trend followed, with the ratio increasing to 1.36 in 2021 and reaching a five-year peak of 1.90 in 2022. A moderate correction occurred in 2023, with the ratio settling at 1.67.
Comparison of Reported and Adjusted Metrics: The adjusted total asset turnover closely tracks the trajectory of the reported turnover ratio throughout the five-year period. However, starting in 2021, the adjusted turnover ratio remained consistently lower than the reported ratio. This divergence aligns with the adjusted total assets being higher than the reported total assets from 2021 through 2023, suggesting that the adjustments to the asset base resulted in a more conservative measurement of asset efficiency.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Total assets	85,987)	89,904)	85,373)	85,158)	98,556)
Total MPC stockholders’ equity	24,404)	27,715)	26,206)	22,199)	33,694)
Solvency Ratio
Financial leverage¹	3.52	3.24	3.26	3.84	2.93
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted total assets	88,757)	93,624)	88,213)	85,158)	99,427)
Adjusted total MPC stockholders’ equity	27,174)	31,435)	29,046)	22,199)	34,565)
Solvency Ratio
Adjusted financial leverage²	3.27	2.98	3.04	3.84	2.88

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

¹ Financial leverage = Total assets ÷ Total MPC stockholders’ equity
= 85,987 ÷ 24,404 = 3.52

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total MPC stockholders’ equity
= 88,757 ÷ 27,174 = 3.27

The financial trajectory between 2019 and 2023 shows a period of volatility in total assets and equity, resulting in fluctuating financial leverage. A consistent discrepancy exists between reported and adjusted figures, where adjustments generally result in a lower calculation of financial leverage, suggesting a more favorable capital structure when adjusted metrics are applied.

Total Asset Trends: Reported total assets decreased from 98,556 million USD in 2019 to a low of 85,158 million USD in 2020, followed by a period of fluctuation that peaked at 89,904 million USD in 2022 before ending at 85,987 million USD in 2023. Adjusted total assets followed a similar trend but remained consistently higher than reported figures from 2021 through 2023, reaching a high of 93,624 million USD in 2022.
Stockholders' Equity Fluctuations: A significant contraction in stockholders' equity was observed in 2020, with reported equity dropping from 33,694 million USD to 22,199 million USD. While a recovery trend occurred between 2021 and 2022, peaking at 27,715 million USD, equity declined again to 24,404 million USD by the end of 2023. Adjusted equity figures remained higher than reported values in every year except 2020, providing a higher equity base for leverage calculations.
Financial Leverage Interpretation: Reported financial leverage peaked at 3.84 in 2020, which correlates with the lowest recorded stockholders' equity. Although the ratio improved in 2021 and 2022, it rose again to 3.52 by 2023. The adjusted financial leverage ratio consistently presents a lower risk profile than the reported ratio in four of the five years analyzed. The most significant divergence occurred in 2022, where the adjusted ratio was 2.98 compared to the reported 3.24, indicating that adjustments to assets and equity significantly mitigate the perceived leverage during that period.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to MPC	9,681)	14,516)	9,738)	(9,826)	2,637)
Total MPC stockholders’ equity	24,404)	27,715)	26,206)	22,199)	33,694)
Profitability Ratio
ROE¹	39.67%	52.38%	37.16%	-44.26%	7.83%
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to MPC	8,731)	15,396)	12,578)	(10,613)	3,508)
Adjusted total MPC stockholders’ equity	27,174)	31,435)	29,046)	22,199)	34,565)
Profitability Ratio
Adjusted ROE²	32.13%	48.98%	43.30%	-47.81%	10.15%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

¹ ROE = 100 × Net income (loss) attributable to MPC ÷ Total MPC stockholders’ equity
= 100 × 9,681 ÷ 24,404 = 39.67%

² Adjusted ROE = 100 × Adjusted net income (loss) attributable to MPC ÷ Adjusted total MPC stockholders’ equity
= 100 × 8,731 ÷ 27,174 = 32.13%

The Adjusted Return on Equity (ROE) exhibited extreme volatility between 2019 and 2023, characterized by a severe contraction in 2020 followed by a sharp recovery and a subsequent moderation in 2023. The trajectory of the Adjusted ROE closely mirrored the fluctuations in adjusted net income, highlighting a high sensitivity to earnings volatility relative to the equity base.

Adjusted Net Income Trends: Adjusted net income transitioned from US$ 3,508 million in 2019 to a substantial loss of US$ 10,613 million in 2020. A strong recovery followed, with earnings rising to US$ 12,578 million in 2021 and reaching a peak of US$ 15,396 million in 2022. In 2023, adjusted net income decreased to US$ 8,731 million, representing a normalization following the 2022 peak.
Adjusted Stockholders' Equity Movements: The adjusted equity base experienced a reduction from US$ 34,565 million in 2019 to US$ 22,199 million in 2020. This base gradually expanded over the next two years, reaching US$ 31,435 million by the end of 2022, before declining to US$ 27,174 million in 2023.
Adjusted ROE Analysis: The Adjusted ROE plummeted from 10.15% in 2019 to -47.81% in 2020, driven by the significant net loss. The ratio recovered aggressively to 43.30% in 2021 and peaked at 48.98% in 2022, indicating highly efficient capital utilization during those periods. By 2023, the Adjusted ROE declined to 32.13%, reflecting the decrease in adjusted net income despite a lower equity base.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to MPC	9,681)	14,516)	9,738)	(9,826)	2,637)
Total assets	85,987)	89,904)	85,373)	85,158)	98,556)
Profitability Ratio
ROA¹	11.26%	16.15%	11.41%	-11.54%	2.68%
Adjusted: After Conversion from LIFO to FIFO
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to MPC	8,731)	15,396)	12,578)	(10,613)	3,508)
Adjusted total assets	88,757)	93,624)	88,213)	85,158)	99,427)
Profitability Ratio
Adjusted ROA²	9.84%	16.44%	14.26%	-12.46%	3.53%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

¹ ROA = 100 × Net income (loss) attributable to MPC ÷ Total assets
= 100 × 9,681 ÷ 85,987 = 11.26%

² Adjusted ROA = 100 × Adjusted net income (loss) attributable to MPC ÷ Adjusted total assets
= 100 × 8,731 ÷ 88,757 = 9.84%

The financial performance from 2019 to 2023 is characterized by extreme volatility in profitability and asset efficiency, moving from a period of stability to a severe contraction, followed by a rapid recovery and a subsequent correction.

Adjusted Net Income Trends: Adjusted net income shifted from US$ 3,508 million in 2019 to a substantial loss of US$ 10,613 million in 2020. A significant recovery occurred in 2021 and 2022, with the latter representing a five-year peak of US$ 15,396 million. By 2023, adjusted net income decreased to US$ 8,731 million, indicating a normalization following the 2022 peak.
Asset Base Management: Adjusted total assets demonstrated relative stability compared to earnings volatility. Assets declined from US$ 99,427 million in 2019 to a low of US$ 85,158 million in 2020, before gradually increasing to US$ 93,624 million in 2022 and settling at US$ 88,757 million in 2023. This suggests that the fluctuations in return ratios were driven primarily by income volatility rather than drastic changes in the asset base.
Adjusted Return on Assets (ROA) Analysis: The Adjusted ROA followed a mirrored trajectory to net income. The ratio plummeted from 3.53% in 2019 to -12.46% in 2020. A sharp upward trend followed, reaching 14.26% in 2021 and peaking at 16.44% in 2022. The decline to 9.84% in 2023 reflects a reduction in the efficiency of asset utilization for profit generation relative to the previous two years.

A consistent gap is observed between reported and adjusted metrics, particularly in the ROA figures. Adjusted ROA remained higher than reported ROA in every year except 2020, suggesting that one-time adjustments positively impacted the perceived operational efficiency. Despite the decline in 2023, the Adjusted ROA remains significantly higher than the pre-pandemic levels seen in 2019.

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