Financial Statement Analysis of Exxon - Essay Example

Financial ment Analysis of Exxon of the Question set Long-Term Debt From the consoli sincome statement of Exxon Mobil Corporation, it can be seen that the interest expenses for the financial year 2012 was seen to be 327 million dollars while the same in the year 2013 had fallen down to 9 million dollars (p. 41) (Exxon Mobil, 2013). 2) From the cash flow statements it can be seen that in the year 2013, long term debt worth 13 million dollars are subject to reduction. This indicates that in the year 2014, long term debts amounting to 13 million dollars are expected to mature and be paid off. The company during the year 2013 had made a radical shift by reducing their debt capital (p. 43). 3) The weighted average rate of interest at which Exxon Mobil Corporation procured their long term debt during the financial year ended 31st December 2013 was seen to be 3.3%. This is also the general lending rate of banks in the U.S to commercial organizations (p. 42). 4) The current yield on 31st December 2013 was lower than the yield on 31st December 2012. The decrease in the current yield rate was primarily due to a rise in the coupon rate. This implies that the binds were being traded at a discount (p. 40). Question set 2: Contributed Capital 1) As per the annual reports of the Exxon Mobil Corporation, there was no preferred stock which were authorized and issued at the end of the year 2013. 2) At the end of the financial year 2013, the number of common stock authorized and issued stood at approximately 10 million, at the par rate of $101.50 (p. 40,42). 3) The value of common stock held in treasury amounted to a value of 212,781 million dollars. The average cost per share was approximately $150.56 and number of stock held in the treasury amounted to 2.5 million (p. 40, 42). 4) No treasury stock was reacquired by the company. 5) The company is seen to provide a number of employee stock option plans so as to induce savings and thereby enlarge their pool of investments. However there are no obligations imposed on the employees to invest in the company’s shares and therefore no deductions in this respect are made from their monthly payments. Employees who participate in the stock option are provided with a number of benefits such as higher medical reimbursements and travel allowances than employees who do not participate in the stock option (Harrington, 2003, Exxon Mobil, 2013). Question set 3: Investments 1) The fair value of the investments of Exxon stood at 36,328 million dollars at the end of the year (p. 42). These investments were made in the form of stocks majorly. A considerable portion of the investments also consists of long term receivables granted to debtors. These were treated as investments by the company. Advances of long term maturity were also treated by the company as investments. 2) The increase in the level of investments from the year 2012 to 2013 (p. 42). Investments Amt. (million dollars) Fair value of investments in 2012 34,718 Fair value of investments in 2013 36,328 Net increase in the value of investments 1610 3) The net income per share in the year 2012 was seen to be $9.70. This had considerably fallen in the year 2013 to reach $7.37 (p. 41). A probable cause of the decline in net income per share was repurchasing of a large amount of common stock during the financial year of 2013. Additionally, the fall in the net income levels due to enhanced investments and thereby costs of operation were also considered to be a probable cause for the decline in the net income per share (Exxon Mobil, 2013). They were no preferred stock, and therefore the net earnings do not include any subtractions made in respect of preferred dividends. . The average number of common stock outstanding at the end of the year 2013 was computed to be 4,335 million (p. 40). The information related to net income per common share is shown as below (p. 41). Amt (in $) Net income per common share in 2012 (diluted) 9.70 Net income per common share in 2013 (diluted) 7.37 Decrease in the diluted net income per share 2.33 The diluted net income per common share had declined considerably in the year 2013 as compared to 2012. 4) The dividends per common share in the year 2013 were $2.46 (p. 40). In total the dividends paid to shareholders in the year 2013 amounted to $10,875 million (p. 43). The dividends paid in total were higher in the year 2013 as compared to 2012 (Exxon Mobil, 2013). Question set 4: Income tax 1) The total income tax for the period 2013 related to income before taxes amounted to $24,263 millions. The details in respect of the current and deferred income taxes are as follows (p. 43). Amt. (Million of $’s) Current period income tax 23509 Deferred income tax 754 Total income tax 24,263 2) As per the balance sheet of Exxon Mobil, there existed no deferred tax assets at the end of 2013. The total deferred income tax liabilities amounted to $ 40,530 million at the end of the year 2013 (p. 42). 3) The noncurrent deferred tax liability was reported in the balance sheet of the firm and amounted to $ 40,530 million (p. 42). Question set 5: Pension and Other Postemployment Benefits 1) Exxon Mobil recognizes pension and other post retirement plans as a liability or assets in the balance sheet along with the offsets made in respect of equity and deferred taxes (p.39). 2) The post retirement benefit reserves amounted to $20,646 millions in the year 2013. The reserves amounted to $25,267 millions in the year 2012 (p. 42). 3) The company’s actual returns on the planned assets were calculated to be 17.2% (p. 44). The information in respect of the expected returns as on 31st December 2013 is not shown in the annual reports (Exxon Mobil, 2013). 4) The post retirement benefits in excess of net payments amounted to $2,291 million dollars (p. 43). The same in the year 2012 were $315 million less than the net payments (Exxon Mobil, 2013). Question set 6: Leasing 1) The company has leasehold property in the form of land and property covering 570,000 acres (p. 18). The leasehold property of Exxon belongs to the category of land and property, as shown in their annual reports. Since the company is engaged in oil extraction from on shore and off shore sites, it is essential that the company acquires property at a massive scale. A considerable portion of the property acquired by Exxon is in the form of leasehold. 2) It is however essential to note that since the acquisition of such leasehold have not yet been finalised and paid for by the company, their reporting in the financial statements of 2013 were not carried out (Revsine, et al., 2005). Question set 7: Cash Flow 1) The net cash provided through operating activities in the year 2013 was seen to be $ 44,914 millions (p. 43). The indirect method was used by Exxon to compute different types of cash flows. The largest positive adjustment made to net income was seen to be $17,182 million, which was made in respect of depreciation and depletion (p. 43). 2) The net cash used in investing activities for 2013 was $ (34,201) million (p. 43). The largest investing cash outflow was additions made to plant, property and equipments which had amounted to $ 33,669 million (p. 43). The proceeds associated with sales from subsidiaries, property, plant and equipment was seen to be the largest cash outflow in respect of investing activities in the year 2013 which had amounted to $ 2,707 million (p. 43). 3) The net cash used in financing activities amounted to $ (15,476) million. The largest financial cash outflow in respect of financing activities was seen to be the common stock acquired in the year and the figure amounted to $ 15,998 million. The largest financial cash inflow in respect of financial activities was seen to be $ 12,012 million (p. 43). 4) Interest expenses amounted to $ 9 million during the year 2013, while the income taxes paid were $ 24,263 million (p. 41). 5) Ratio of cash flow from operations to sales (p. 43 and p. 41) Amt (in millions of $) in 2012 Amt (in millions of $) in 2013 Cash flow from operations 56,170 44,914 Sales 451,509 420,836 Ratio of cash flow from operations to sales 12.44% 10.67% Difference (1.77)% The ratio of cash flow from operations to sales had declined by 1.77% in the year 2013. The decline in operating profits was the main reason due to which the ratio had declined. The decline in sales revenue can also be stated to be a reason for such a decline. 6) Profit margin for 2013 (p. 41) Amt (in millions of $) in 2013 Sales 420,836 Net income attributable 32,580 Net income margin 7.74% The ratio of cash flow from operation with sales is seen to be higher than the ratio of net income margin. This is due to the fact that in the income statement a number of non cash transactions were also incorporated, whereas the cash flow statement includes only the cash transactions (S. H. Penman & S. H. Penman, 2007). Question set 8: Financial Disclosures 1) Exxon Mobil Corporation was audited by the auditors of Price Water Cooper house. The financial statements were presented in a concise manner and detailed disclosures of financial items were not shown (p. 39). 2) There were no changes in the accounting policies for recording the financial transactions in the year 2013 (p. 39). 3) The auditors had made several corrections in the financial statements in respect of computation of taxes. A number of pending lawsuits and disputes had caused the auditors to put their attention on such aspects (p. 39). 4) Subsequent cases of errors have not been reported by the auditors (p. 39). 5) The company’s equipment held in respect of extracting and refining has been considered to be crucial for the firm’s success in future (p. 39). 6) The activities of the company can be briefly be categorized as oil extraction, refining, manufacturing different chemicals and corporate financing. These activities have been categorized as upstream, downstream, chemical and corporate financing. The earnings from each of these segments are shown as below. Earnings from each segment (amt in millions of dollars) Upstream 26,841 Downstream 3,449 Chemical 3,828 Corporate Financing (1,538) References Exxon Mobil (2013). Summary Annual Report 2013. Retrieved from http://cdn.exxonmobil.com/~/media/Reports/Summary%20Annual%20Report/2013_ExxonMobil_Summary_Annual_Report.pdf Harrington, C. (2003). Socially responsible investing: Balancing financial needs with a concern for others. Journal of Accountancy, 195(1), 52. Penman, S. H. & Penman, S. H. (2007). Financial statement analysis and security valuation. New York: McGraw-Hill. Revsine, L., Collins, D. W., Johnson, W. B., Collins, D. W. & Johnson, W. B. (2005). Financial reporting and analysis. New York: Pearson/Prentice Hall. Read More