Analysing the ratio of one with the other in the industry provides for better understanding about the performance of the company in market. An investor has to make a comparative analysis before making any investment decision.
In this case, the direct competitor of Exxon is Chevron, ratios is being computed for the recent four quarters which is being used for comparative analysis.
This is an essential ratio which discloses about the liquidity position of a company. It is determined by dividing the current assets and current liabilities of the company. In this case, the Exxon’s current ratio is decreasing which indicates about the decreasing liquidity of the company. Current ratio of Chevron is far ahead than Exxon. This ratio is fluctuating for Chevron, but the fluctuation is minor and not drastic. Exxon ratios are fluctuating within 1.0 to 0.84, whereas Chevron ratio is always greater than 1.50. This clearly indicates that Chevron is in better position in meeting its obligations when compared to Exxon. If this decline continues for Exxon then there are chances where the company cannot meet up its short-term obligations and lead to financial distress.
It is another indicator of liquidity which is determined by subtracting inventory from the current assets and dividing by current liabilities. Inventories are less liquid asset, so it is eliminated in determining this ratio. This ratio is already very less and every quarter it is decreasing which indicates about the poor financial health of the company. But in case of Chevron this ratio is far ahead and fluctuates between 1.35 to 1.46, whereas Exxon values are fluctuating within the range of 0.79 and 0.61. Chevron liquidity position is far ahead and is stronger when compared to Exxon. This clearly indicates about Exxon poor financial health.
Accounts receivables days:
Generally, collection days indicates about the ability of the company to convert the generated sales into cash which is essential for any company. This ratio is determined by dividing the accounts receivables by average daily sales. In this the number of collection days is significantly higher and it has increased from 97.87 days in 4th quarter of 2012 to 110.37 in the 3rd quarter of 2013, this number reached peak during 2nd quarter of 2013 to 123.69 days. On the other hand, for Chevron the accounts receivable days are far higher than Exxon with 121 days as the minimum and 137 as its maximum during 3rd quarter of 2013. This provides for an indication about the industrial trend that is in this industry the collection periods are generally higher. This indicates that the collection efficiency of the company is poor. Generally, this will add more pressure to the working capital requirements of the company and in turn will reduce the liquidity and the creditworthiness.
Inventory turnover ratio:
Inventory turnover ratio indicates about the speed in which the inventory is converted...