Information to help answer this question will be found here. http://www.nasdaq.c
ID: 2713090 • Letter: I
Question
Information to help answer this question will be found here. http://www.nasdaq.com/symbol/xom/financials?query=balance-sheet (Note that the MAIN company is XOM with the comeditor being BP)
Evaluate Return on Equity for the company for the last three years using the DuPont analysis. (10% of the project grade). Compare the company’s results to a major competitor.
Taking the information from the Income statements and the Balance sheets, calculate the company’s return on equity using the DuPont technique for the company for three years. Show your calculation!
Write about 1 page of analysis of the results that you received. Compare the results to main competitor. If the management of the company would like to improve their return on equity, what should the management of these companies do?
Explanation / Answer
Ans
Workings
Ans XON 2014 2013 2012 2011 Total Assets 3494,93,000.00 3468,08,000.00 3337,95,000.00 3310,52,000.00 Total Debt 1750,94,000.00 1728,05,000.00 1679,32,000.00 Total Revenue 3941,05,000.00 4208,36,000.00 4515,09,000.00 Net Income 325,20,000.00 325,80,000.00 44,88,000.00 Asset Turnover Ratio=Revenue/Average Assets 1.13 1.24 1.36 Return on revenue=Net Income/Revenue 8.25% 9.39% 1.34% Financial Leverage=Assets/Debt 2.00 2.01 1.99 ROE=Asset Turnover ratio*Return on revenue*Financial Leverage 18.6% 23.3% 3.6% BP 2014 2013 2012 2011 Total Assets 2843,05,000.00 3056,90,000.00 3004,66,000.00 2929,07,000.00 Total Debt 1728,64,000.00 1763,88,000.00 1819,20,000.00 Total Revenue 3535,68,000.00 3791,36,000.00 3757,65,000.00 Net Income 40,03,000.00 237,58,000.00 112,51,000.00 Asset Turnover Ratio=Revenue/Average Assets 1.20 1.25 1.27 Return on revenue=Net Income/Revenue 1.41% 7.77% 3.74% Financial Leverage=Assets/Debt 1.64 1.73 1.65 ROE=Asset Turnover ratio*Return on revenue*Financial Leverage 2.78% 16.85% 7.83%Workings
XON is able to maintain a higher ROE due to 1. Higher net profit ratio 2. Company is better of incase of solvency since the debt content is comparatively lesser compared to BP" the competitor". BP 1. Is better at manging its asses to generate higher income per asset used.