Research and Development Expenses
In the 2021 fiscal year, ConocoPhillips reported exploration expenses totaling $344 million, which represents a substantial reduction from the $1,457 million spent in 2020 (ConocoPhillips). In contrast, ExxonMobil recorded $1,054 million in exploration expenses during the same period, a smaller decrease from the $1,285 million incurred in 2020 (ExxonMobil).
Quick Ratio (QR)
The Quick Ratio gauges a firm’s short-term liquidity, calculated as the ratio of current assets (excluding inventory) to current liabilities. In 2021, ConocoPhillips demonstrated adequate liquidity with a QR of 1.2. Conversely, ExxonMobil’s QR of 0.7 for the same period was below the industry expectation of 1.0 or higher, suggesting a weaker liquidity position.
Current Ratio (CR)
The current ratio is a more relaxed measure of a company’s liquidity. It is calculated by dividing the current liabilities by the current assets for the year. In 2021, ConocoPhillips had a quick ratio of 1.3, which is below the expected range of 1.0 to 1.5. In 2021, ExxonMobil had a current ratio of 1.04, which is below the expected range.
Operating Cash Flow Ratio (OCFR)
This ratio is calculated by dividing the operating cash flow by the current liabilities. In 2021, ConocoPhillips had an OCFR of greater than one, which is considered beneficial by interested parties, including investors and creditors. In 2021, ExxonMobil had an OCFR of 0.8. An OCFR of less than one is considered unfit.
Inventory Ratio (IR)
IR measures the amount of inventory a company is able to sell within an accounting period. The inventory ratio is calculated by dividing the cost of sales (COS) by the average inventory. In 2021, ConocoPhillips had an IR of 16.4, indicating a good return for the company. In 2021, ExxonMobil had an IR of 8.2, which is also considered a good return for the company.
Account Receivable Turnover (ACT)
The ACT ratio is a measure of a company’s effectiveness in managing credit extended to customers. It is calculated by dividing the sales revenue by the average accounts receivable (Tracy, 32). In 2021, ConocoPhillips had an ACT of 371.08, which is considered relatively high and preferable. In 2021, ExxonMobil had an ACT of 6.3, which is considered favorable.
Long Term Debt Ratio (LTDR)
The LTDR evaluates the proportion of a company’s assets that are financed through long-term borrowings. It is computed by dividing the long-term debt by the total assets. In 2021, ConocoPhillips had an LTDR of 0.2, showing that the company does not rely too greatly on long-term debt in asset acquisitions. In 2021, ExxonMobil had an LTDR of 0.1, which indicates the same trend.
Debt-to-Equity Ratio
The D/E ratio measures a company’s debt coverage, or financial leverage, which is computed by dividing total debt by shareholder equity. In 2021, ConocoPhillips had a D/E ratio of 0.4, which is low, indicating that the company has adequate debt coverage. In 2021, ExxonMobil had a D/E ratio of 0.3, signaling adequate debt coverage.
Interest Coverage Ratio (ICR)
The ICR is calculated to assess a company’s ability to pay interest on outstanding debt. It is computed by dividing the earnings before interest and tax (EBIT) by the interest expense. In 2021, ConocoPhillips had an ICR of 15.4, which is quite sufficient. In 2021, ExxonMobil had an ICR of 33.98, which is also adequate.
Works Cited
ConocoPhillips. Annual Report. (2021). Web.
ExxonMobil. Annual Report. (2021). Web.