FIN 370 Week 2 Industry Averages and Financial Ratios Paper Final Draft
Connie Addison, Christine Crocker, Kimberly Guy, Felicia Lombard, and Shavelle Woods
January 12, 2015
Industry Averages and Financial Ratios
Industry averages and financial ratio reports determine the financial health of an organization. Solvent, efficiency, and profitability are compared by key financial indicators and ratios that measure several companies within the same industry. The publicly traded company chosen by Team A is ExxonMobil. “The largest publicly traded international oil and gas company in the world. ExxonMobil makes products that drive modern transportation, power cities, lubricate industry, and provide petrochemical building blocks that lead to …show more content…
Efficiency Ratios Analysis “Collection period ratio is used in analyzing how fast a business can increase its cash supplies.” Exxon’s collection period ratio for 2010 is 28.24 days and 2011 is 26.60 days. When comparing this ratio to the industry averages on the D & B chart, Exxon falls between the median and lower ranges. This informs potential investors that Exxon is able to collect on its receivables within 30 days of its initial receipt. The assets to sales ratio for Exxon in 2010 is 0.82 and 0.71 in 2011. This ratio is very low compared to the industry averages, which in term means that Exxon is” selling more than it can safely fulfill by its assets.” The accounts payable to sales ratio for Exxon is 0.91 in 2010 and 0.79 in 2011. These two ratios fall in the upper range of the D & B chart, this is bad for Exxon because it states that Exxon might be using its suppliers to help fund the operations during this time period (Creditmanagementworld.com, 2006-2015).
Profitability Ratio Analysis The return on sales (Profit Margin) ratio in 2010 is