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My selected fortune 500 company Chevron was placed in the 5th position in terms of revenue in Fortune 500, 2005. In 2005 Chevron had reported annual revenues of $193 billion and a total profit of $ 14 billion (5 year financials, www.chevron.com). Chevron's revenues show a positive improvement starting from $ 103 billion in 2001 and except for the year 2002 revenues are continually increasing…
Also if we were to analyze the debt/equity ratios the decreasing leverage of the company has correspondingly increased not only its profitability but also increasing return on assets and increase in the net profit margin (money central, ten year summary).
The article I am summarizing was published in Economist "The ones that get away: Accounts are increasingly more art than science". The author introduces the argument that although net profits of Amazon, online retailer, had fallen substantially while that of Sprint, telecom, had increased significantly share prices rose for both companies (Economist, 00130613). Author quotes Enron and WorldCom and stresses that people have become shy of profitability figures as these figures tend to be "malleable" (Economist, 00130613). There is a further argument that these errors start to creep in because companies are increasingly making use of estimates in their financial statements. The accrual method of accounting where expenses and revenues are entered into accounts when "incurred" (Economist, 00130613) have made the issue difficult and to compound it fair value accounting practices have introduced their own difficulties. ...
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