Chevron is a global energy company with significant business activities in the following countries: Angola, Argentina, Australia, Azerbaijan, Bangladesh, Brazil, Canada, China, Colombia, the Democratic Republic of the Congo, Denmark, Indonesia, Kazakhstan, Myanmar, Nigeria, the zone divided between Saudi Arabia and Kuwait, the Philippines, the Republic of the Congo, Singapore, South Africa, South Korea, Thailand, the United Kingdom, the United States and Venezuela.
It is important to mention that in the energy industry the price of crude oil is the variable that most impacts the indicators of the companies; results of operations, cash flows, financing, capital investment, and exploration and production prospects. Since a large part of the company's activities is refining, crude oil is the highest cost component of refined products and plays a major role.
The main indicators that the company follows are the evolution of the financial and credit markets, the level of world economic activity, as well as movements in the prices of crude oil and natural gas. The executives of the company take these indications into account to carry out daily operations and to plan future decisions.
Crude oil and natural gas prices are explained by external factors over which the company has no control, among these factors are product demand, global economic conditions, industry production, inventory levels, progress technology, actions imposed by the Organization of the Petroleum Exporting Countries (OPEC) or other producers, regulatory actions, climate-related disruptions, competitive fuel prices and interruptions in regional supply, this may be caused by military, civil or political uncertainty.
Average price in USD per barrel.
CHEVRON Income Statement
Chevron Income Statement
The company's net sales in recent years have fluctuated according to oil prices, as of 2012 the price of oil plummets and in 2016 we see a recovery in price with a trend that until today is positive, also The company's sales revenue recovered rapidly in 2017 and 2018. When analyzing the operating profit, we realize that 2015 and 2016 have negative figures and that in the coming years 2017 and 2018 they will be positive again.
Chevron Stock Price
Chevron's share price has also behaved according to oil prices. We see that between 2015 and 2016 the share has a general minimum and as of that date there is a price recovery. It is worth mentioning that the trend in oil prices is on the rise.
Next we are going to carry out the main financial analysis indexes of the company to know its status.
Financial strength
Acid test
CHEVRON CORP's ability to meet its short-term obligations with its most liquid assets is 1.04, which means that for every dollar of current liabilities, the company has $ 1.04 of short-term assets to pay the obligations.
Cost effectiveness
Gross margin
The percentage of total sales revenue that CHEVRON CORP retains after incurring the direct costs associated with the production of the goods and services it sells is expressed as 40.5%, this means that after CHEVRON CORP pays its inventory costs, still has 40.5% of its sales revenue to cover its operating costs.
Efficiency
Account receivable rotation
The measure of how quickly CHEVRON CORP collects its accounts receivable is expressed as the turnover ratio of the account receivable, in the case of CHEVRON CORP it is 10.55, which means that on average the company collected its accounts receivable 10.55 times a year.
Effectiveness
Return of assets
The asset turnover ratio is the ratio of the value of a company's sales or income to the value of its assets. The asset turnover ratio can often be used as an indicator of how efficiently a company is deploying its assets to generate revenue. CHEVRON CORP's ability to generate sales given an investment in assets is 5.84%, which means that CHEVRON CORP generates 5.84% more sales than the net book value of its assets.
conclusion
The CHEVRON CORP company is in an acceptable situation since the financial reasons show a good behavior with respect to its main competitors and in the industry, on the other hand, the price of energy is strengthening, also the CHEVRON CORP company announced plans to extraction in the Permian Basin zone in the southern United States where the company has no political risk of extracting and on the other hand in that area it is known that extraction is not expensive, an average of $ 30 per barrel, well below the price current. On the other hand, there is an atmosphere of optimism among the oil companies since the US sanctions on Iran and a cut in the production of Saudi Arabia will reduce the supply of crude oil and therefore the price will increase.Lastly, the company's executives are committed to the earnings of the holders of shares and announced plans to distribute over 45% of operating cash flows to shareholders since the price of Brent crude has remained above $ 60.
Bibliography
- Chevron. (2017). Annual report. Retrieved from https://www.chevron.com/about/historyCarlos Mota. (2015, August 21). Who is Chevron? The financial. Retrieved from https://www.elfinanciero.com.mx/opinion/carlos-mota/quien-es-chevronAndy Joseph (nd). Chevron history. Take care of your money. https://www.cuidatudinero.com/13125236/historia-de-chevron Chevron. (2019). Statement of income. From Investing Website: https: //www.investing.comChevron. (2019). Share price. From Investing's Website:
