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Phillips 66 (PSX)
Analysis of Inventory
Advanced level
- Accounting Policy on Inventory
- Inventory Disclosure
- Adjustment to Inventory: Conversion from LIFO to FIFO
- Adjusted Financial 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)
Accounting Policy on Inventory
Phillips 66 has several valuation methods for the various types of inventories and consistently uses the following methods for each type of inventory. Crude oil and petroleum products inventories are valued at the lower of cost or market in the aggregate, primarily on the last-in, first-out (LIFO) basis. Any necessary lower-of-cost-or-market write-downs at year end are recorded as permanent adjustments to the LIFO cost basis. LIFO is used to better match current inventory costs with current revenues and to meet tax-conformity requirements. Costs include both direct and indirect expenditures incurred in bringing an item or product to its existing condition and location. Materials and supplies inventories are valued using the weighted-average-cost method.
Source: 10-K (filing date: 2019-02-22).
Inventory Disclosure
Phillips 66, balance sheet: inventory
US$ in millions
Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | |||||||
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Crude oil and petroleum products | ![]() |
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Materials and supplies | ![]() |
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Inventories | ![]() |
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Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
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. | Phillips 66’s inventories increased from 2016 to 2017 and from 2017 to 2018. |
Adjustment to Inventory: Conversion from LIFO to FIFO
Adjusting LIFO Inventory to FIFO (Current) Cost
US$ in millions
Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
Phillips 66’s inventory value on Dec 31, 2018 would be $6,443 (in millions) if the FIFO inventory method was used instead of LIFO. Phillips 66’s inventories, valued on a LIFO basis, on Dec 31, 2018 were $3,543 . Phillips 66’s inventories would have been $2,900 higher than reported on Dec 31, 2018 if the FIFO method had been used instead.
Phillips 66, Financial Data: Reported vs. Adjusted
Adjusted Financial Ratios: LIFO vs. FIFO (Summary)
Phillips 66, adjusted financial ratios
Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
Financial ratio | Description | The company |
---|---|---|
Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by current liabilities. | Phillips 66’s adjusted current ratio improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018. |
Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | Phillips 66’s adjusted net profit margin ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018. |
Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Phillips 66’s adjusted total asset turnover ratio 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. |
Phillips 66’s adjusted financial leverage ratio decreased from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level. |
Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. | Phillips 66’s adjusted ROE improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level. |
Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Phillips 66’s adjusted ROA improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level. |
Phillips 66, Financial Ratios: Reported vs. Adjusted
Adjusted Current Ratio
Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
2018 Calculations
1 Current ratio = Current assets ÷ Current liabilities
= ÷
=
2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= ÷
=
Liquidity ratio | Description | The company |
---|---|---|
Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by current liabilities. | Phillips 66’s adjusted current ratio improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018. |
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
2018 Calculations
1 Net profit margin = 100 × Net income attributable to Phillips 66 ÷ Sales and other operating revenues
= 100 × ÷
=
2 Adjusted net profit margin = 100 × Adjusted net income attributable to Phillips 66 ÷ Sales and other operating revenues
= 100 × ÷
=
Profitability ratio | Description | The company |
---|---|---|
Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | Phillips 66’s adjusted net profit margin ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018. |
Adjusted Total Asset Turnover
Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
2018 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
= ÷
=
Activity ratio | Description | The company |
---|---|---|
Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Phillips 66’s adjusted total asset turnover ratio improved from 2016 to 2017 and from 2017 to 2018. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
2018 Calculations
1 Financial leverage = Total assets ÷ Stockholders’ equity
= ÷
=
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= ÷
=
Solvency 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. |
Phillips 66’s adjusted financial leverage ratio decreased from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
2018 Calculations
1 ROE = 100 × Net income attributable to Phillips 66 ÷ Stockholders’ equity
= 100 × ÷
=
2 Adjusted ROE = 100 × Adjusted net income attributable to Phillips 66 ÷ Adjusted stockholders’ equity
= 100 × ÷
=
Profitability ratio | Description | The company |
---|---|---|
Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. | Phillips 66’s adjusted ROE improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-20).
2018 Calculations
1 ROA = 100 × Net income attributable to Phillips 66 ÷ Total assets
= 100 × ÷
=
2 Adjusted ROA = 100 × Adjusted net income attributable to Phillips 66 ÷ Adjusted total assets
= 100 × ÷
=
Profitability ratio | Description | The company |
---|---|---|
Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | Phillips 66’s adjusted ROA improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level. |