BUSA 302 Exxon Mobile


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BUSA 302 Exxon Mobile

  1. 1. By: Mitch Dietz, Bryan Nuemiller, Aaron Murphy, Kyle Edwards
  2. 2. INDEX Introduction to Company………………………………………………. Ratios (02’, 03’, 04’, 05’, 06’)……………………………………………………………… Sales Forecast……………………………………………………………………… Random Walk…………………………………………………………............... Pro Forma……………………………………………………………………………….. Profits from Economy…………………………………… Analysis w/ Shell…………………………………………..
  3. 3. Who ExxonMobil is… ExxonMobil is the world’s largest publicly traded international oil and gas company. We hold an industry-leading inventory of global oil and gas resources. We are the world’s largest refiner and marketer of petroleum products. And our chemical company ranks among the world’s largest. But we are also a technology company, applying science and innovation to find better, safer and cleaner ways to deliver the energy the world needs. What they do and where…. Meeting the world’s growing energy needs is an enormous challenge. By 2030, as populations and economies grow, global energy demand will reach close to 325 million oil-equivalent barrels a day — more than 60% higher than in the year 2000. Increasingly, developing significant new oil and gas resources requires exploration in more-remote areas and difficult operating environments. The complexity of these environments places greater emphasis on financial strength, technological innovation and execution excellence, areas in which ExxonMobil excels. An industry leader in almost every aspect of the energy and petrochemical business, we operate facilities or market products in most of the world’s countries and explore for oil and natural gas on six continents. Past 125 years….. ExxonMobil has evolved from a regional marketer of kerosene in the U.S. to the largest publicly traded petroleum and petrochemical enterprise in the world. Today we operate in most of the world's countries and are best known by our familiar brand names: Exxon, Esso and Mobil. We make the products that drive modern transportation, power cities, lubricate industry and provide petrochemical building blocks that lead to thousands of consumer goods. Learn more by using the slider or the arrows below to browse our history over time.
  4. 4. Ratios for ExxonMobil 2006 Ratios for Return on Investment and for Risk Return on Assets 18.79% Return on Equity 34.60% Earnings Yield 18.30% Price/Earnings Ratio 5.47 Dividend Yield 3.54% Profit Margin 10.46% Operating Margin 36.70% Gross Margin 40.10% 2005 Ratios for Return on Investment and for Risk Current Ratio 64% Quick Ratio 0.67 Return on Assets Inventory Turnover 17.14% 22.6 Return on Days to Sell Inventory Average Equity 32.89% 16.2 Earnings Yield Receivables Turnover 18.60% 1.39 Price/Earnings Ratio Average Days to Collect 5.38% Dividend Yield Receivables 3.71% 263.5 Profit Margin Debt Ratio 52.73% 9.75% Operating Margin (Total) Debt/Equity Ratio 35.90%1.1 Gross MarginRatio (Long-Term) Debt/Equity 38.90% 0.866 TIE Ratio 212 CurrentComposition Ratio Asset Ratio 15.80% 63% Quick Ratio Dividend Payout Ratio 19.30% 0.72 Inventory Turnover 22.6 Average Days to Sell Inventory Book Value Per Share $9.53 16.1 ReceivablesCycle Operating Turnover 279.7 1.28 Average Days to Collect Average Cash from Operations 135857 285.2 Receivables Per Share Market Price $36.19 Debt Ratio Dividend 54.10% $1.28 Debt/Equity Ratio (Total) EPS $6.62 1.18 Debt/Equity Ratio (Long-Term) 0.91 TIE Ratio 268.2 Asset Composition Ratio 16.70% Dividend Payout Ratio 20% Book Value Per Share $8.11 Operating Cycle 301.3 Average Cash from Operations 135857 Market Price Per Share $30.70 Dividend $1.14 EPS $5.71
  5. 5. 2004 Ratios for Return On Investment and for Risk ROA 12.34% ROE 23.92% Earnings Yield 8.97% Price/Earnings Ratio 11.15 times Dividend Yield 3.24% Profit Margin 9.07% Operating Margin 35.98% Gross Margin .5867 Current Ratio 1.1973 Quick Ratio .96397 Inventory Turnover 12.02 Average Days to Sell inventory 30.37 Receivables Turnover 1.24% Average Days to Collect Inventory 294.35 Debt Ratio .4941 Debt/Equity (total) .93825 Debt/Equity (long term) .88499 TIE Ratio 154.43 Asset Composition Ratio 12.23% Dividend Payout Ratio 18.7% Book Value/Share $13.69 Operation Cycle 273.9 Average Cash from Operations $28,498 Market Price/Share $41.00 Dividend $0.98 EPS $3.24
  6. 6. 2003 Ratios for Return On Investment and for Risk ROA 12.34% ROE 23.92% Earnings Yield 8.97% Price/Earnings Ratio 11.15 times Dividend Yield 3.24% Profit Margin 9.07% Operating Margin 35.98% Gross Margin .5867 Current Ratio 1.1973 Quick Ratio .96397 Inventory Turnover 12.02 Average Days to Sell inventory 30.37 Receivables Turnover 1.24% Average Days to Collect Inventory 294.35 Debt Ratio .4941 Debt/Equity (total) .93825 Debt/Equity (long term) .88499 TIE Ratio 154.43 Asset Composition Ratio 12.23% Dividend Payout Ratio 18.7% Book Value/Share $13.69 Operation Cycle 273.9 Average Cash from Operations $28,498 Market Price/Share $41.00 Dividend $0.98
  7. 7. EPS $3.24 2002 Ratios for Return on Investment and for Risk Return on Assets 7.51% Return on Equity 15.36% Earnings Yield 4.48% Price/Earnings Ratio 22.57 Dividend Yield Profit Margin 5.70% Operating Margin Gross Margin 5.48% Current Ratio 115% Quick Ratio 0.95 Inventory Turnover 27.39 Average Days to Sell Inventory 13.33 Receivables Turnover Average Days to Collect Receivables Debt Ratio 51.13% Debt/Equity Ratio (Total) 1.05 Debt/Equity Ratio (Long-Term) 0.99 TIE Ratio 43.99 Asset Composition Ratio Dividend Payout Ratio Book Value Per Share $11.13 Average Cash from Operations Market Price Per Share $37.70 Dividend $0.92 EPS $1.69
  8. 8. Sales Forecast Year Sales 2001 208715 2002 200949 2003 237054 2004 291252 2005 258955 2006 365467 - 2007 304239.9 + Sales for 2009 2008 365467 + 426694.1259 Sales for 2010 2009 426694.1 + 487921.2519 2010 487921.3 STD. DEV. 61227.13 Sales forecasting is especially difficult when you don’t have any previous sales history to guide you, as is the case when you’re working on preparing cash flow projections as part of writing a business plan. Here, Terry Elliott provides a detailed explanation of how to do sales forecasting. –Ed.There is all sorts of ways to estimate sales revenues for the purposes of sales forecasting. One point to remember when sales forecasting is that if you
  9. 9. plan to work with a bank for financing, you will want to do multiple estimates so as to have more confidence in the sales forecast. How do you do this? Sales Forecasting Method #1 For your type of business, what is the average sales volume per square foot for similar stores in similar locations and similar size? This isn't the final answer for adequate sales forecasting, since a new business won't hit that target for perhaps a year. Sales Forecasting Method #2 For your specific location, how many households needing your goods live within say, one mile? How much will they spend on these items annually, and what percentage of their spending will you get, compared to competitors? Do the same for within five miles (with lower sales forecast figures). (Use distances that make sense for your location.) Sales Forecasting Method #3 If you offer say, three types of goods plus two types of extra cost services, estimate sales revenues for each of the five product/service lines. Make an estimate of where you think you'll be in six months (such as "we should be selling five of these items a day, plus three of these, plus two of these.") and calculate the gross sales per day. Then multiply by 30 for the month. Now scale proportionately from month one to month six; that is, build up from no sales (or few sales) to your six month sales level. Now carry it out from months six through 12 for a complete annual sales forecast. Don’t Just Do One Sales Forecast Instead of forecasting annual sales as a single figure, use one or two of the sales forecasting methods above and generate three figures: pessimistic, optimistic, and realistic. Then put the figures in by month, as depending on your business, there could be
  10. 10. HUGE variations by month. (Some retail firms do 50 percent of their gross sales around Christmas, from the end of October to the end of December, for example, yet barely get by June through August.) Include Expenses in Your Sales Forecasting Now put in your expenses by month, including big purchases by season (or however you buy materials/goods). Remember, you may buy materials or inventory in say, July, for Christmas, yet not get all of your receipts until 45 days after Christmas. There can be big cash flow implications. Also, will you be buying vehicles? Capital equipment? Make sure to show depreciation expense. In your expenses, put in an allowance for bad debts. Figure how much of your sales are by cash, how much by credit card, how much by your extending credit. Deduct say four percent or more for credit card expense for that portion sold by credit card. For payroll expenses, put in estimated tax withholding payments quarterly that must be paid to the government. If you're going to a bank for financing, be able to answer questions such as, have you made an allowance for a reserve cash account, for your slow months, but also in case you have to quickly replace a vehicle or equipment? You say you'll charge x dollars for your product, but what happens when your competition cuts the price by 33 percent and still makes a profit? How specifically will you grow your business-- selling more to existing customers, selling existing products to new customers, selling new products to existing customers, and selling new products in order to attract new customers? They're going to want to see if you've got a real plan. Remember that it is acceptable (and realistic) to have a negative cash flow projection for the early months of your cash flow projection period.
  11. 11. Random Walk Closing Prices Coin Flip Plus/Minus 81.44 + 83.994 81.89 + 86.549 81.71 - 83.994 83.22 + 86.549 84.38 + 89.103 85.49 - 86.549 85.55 - 83.994 85.37 + 86.549 87.01 - 83.994 88.1 + 86.549 86.92 + 89.103 87.17 + 91.658 89.13 + 94.212 89.89 - 91.658 89.39 + 94.212 89.38 + 96.767 87.01 - 94.212 87.75 + 96.767 86.69 + 99.321 87.19 - 96.767 84.51 + 99.321 Std. Dev 2.55444048
  12. 12. The random walk hypothesis is a financial theory stating that stock market prices evolve according to a random walk and thus the prices of the stock market cannot be predicted. It has been described as 'jibing' with the efficient market hypothesis. Investors, economists, and other financial behaviorists have historically accepted the random walk hypothesis. They have run several tests and continue to believe that stock prices are completely random because of the efficiency of the market. The term was popularized by the 1973 book, A Random Walk Down Wall Street, by Burton Malkiel, currently a Professor of Economics and Finance at Princeton University. Burton G. Malkiel, an economist professor at Princeton University and writer of A Random Walk down Wall Street, performed a test where his students were given a hypothetical stock that was initially worth fifty dollars. The closing stock price for each day was determined by a coin flip. If the result was heads, the price would close a half point higher, but if the result was tails, it would close a half point lower. Thus, each time, the price had a fifty-fifty chance of closing higher or lower than the previous day. Cycles or trends were determined from the tests. Malkiel then took the results in a chart and graph form to a chartist, a person who “seeks to predict future movements by seeking to interpret past patterns on the assumption that ‘history tends to repeat itself’”.[2] The chartist told Malkiel that they needed to immediately buy the stock. When Malkiel told him it was based purely on flipping a coin, the chartist was very unhappy. This indicates that the market and stocks could be just as random as flipping a coin. The random walk hypothesis was also applied to NBA basketball. Psychologists made a detailed study of every shot the Philadelphia 76ers made over one and one-half
  13. 13. seasons of basketball. The psychologists found no positive correlation between the previous shots and the outcomes of the shots afterwards. Economists and believers in the random walk hypothesis apply this to the stock market. The actual lack of correlation of past and present can be easily seen. If a stock goes up one day, no stock market participant can accurately predict that it will raise again the next. Just as a basketball player with the “hot hand” can miss his or her next shot, the stock that seems to be on the rise can fall at any time, making it completely random. There are other economists, professors, and investors who believe that the market is predictable to some degree. The people believe that there are trends and incremental changes in the prices and when looking at them, one can determine whether the stock is on the rise or fall. There have been key studies done by economists and a book has been written by two professors of economics that try to prove the random walk hypothesis wrong. Martin Weber, a leading researcher in behavioral finance, has done many tests and studies on finding trends in the stock market. In one of his key studies, he observed the stock market for ten years. Over those ten years, he looked at the market prices and looked for any kind of trends. He found that stocks with high price increases in the first five years tended to become under-performers in the following five years. Weber and other believers in the non-random walk hypothesis cite this as a key contributor and contradictor to the random walk hypothesis.[3]Another test that Weber ran that contradicts the random walk hypothesis was finding stocks that have had an upward revision for earnings outperform other stocks in the forthcoming six months. With this knowledge,
  14. 14. investors can have an edge in predicting what stocks to pull out of the market and which stocks — the stocks with the upward revision — to leave in. Martin Weber’s studies detract from the random walk hypothesis, because according to Weber there are trends and other tips to predicting the stock market. Professors Andrew W. Lo and Archie Craig MacKinlay, professors of Finance at the MIT Sloan School of Management and the University of Pennsylvania, respectively, have also tried to prove the random walk theory wrong. They wrote the book A Non-Random Walk down Wall Street, which goes through a number of tests and studies that try to prove there are trends in the stock market and that they are somewhat predictable. They prove it with what is called the simple volatility-based specification test, which is an equation that states: Where Xt is the price of the stock at time t μ is an arbitrary drift parameter εt is a random disturbance term. With this equation, they have been able to put in stock prices over the last number of years, and figure out the trends that have unfolded.[4] They have found small incremental changes in the stocks throughout the years. Through these changes, Lo and MacKinlay believe that the stock market is predictable, thus contradicting the random walk hypothesis.
  15. 15. ExxonMobil Pro Forma Year 2005 Actual 2006 Net Sales 358,955 Growth Rate in Net Sales 14% Cost of Goods Sold/Net Sales 12% Gen…Sell…and Admin/Net Sales 4% Long-term Debt 6645 Current Portion long-term debt 1702 Interest Rate 0.18% Tax rate 7.77% Dividend 19.31% Current Assets/Net Sales 21.11% Net fixed assets 105328 Current Liab./Net Sales 14% Owner's Equity 113844 Income Statement Forecast 2006 Forecast 2007 Net Sales 409208.7 Cost of Goods Sold 49933.14 Gross Profit 359275.56 Gen…sell…admin...exp 16271.22 Interest Exp -532.7598 Earnings before Tax 343537.0998 Tax 26703.54824 Earnings after Tax 316833.5516 Dividends Paid 61083.51 Add. To retained earnings 255750.0416 Balance Sheet Current Assets 86385.78 Net Fixed Assets 105328 Total Assets 191713.78 Current Liab. 55651.38 Long-term Debt 6645 Equity 369594.0416 Total Liab. And Equity 431890.4216 External Funding Req. -300758.00
  16. 16. Pro forma describes a presentation of data, typically financial statements, where the data reflect the world on an 'as if' basis. That is, as if the state of the world was different from that which is in fact the case. For example, a pro forma balance sheet might show the balance sheet as if a debt issue under consideration had already been issued. A pro forma income statement might report the transactions of a group on the basis that a subsidiary acquired partway through the reporting period had been a part of the group for the whole period. This latter approach is often adopted in order to ensure comparability between financial statements of the year of acquisition with those of subsequent years. A pro forma document is provided in advance of an actual transaction. Such a document serves as a model for the actual documents of the transaction. For example, when a new corporation is envisioned, its founders may prepare a business plan containing pro forma financial statements, such as projected cash flows and income statements. In addition, pro forma operating figures or profit and/or loss figures may be preferred or even demanded by investors when the actual figures are known to be inaccurate because of sloppy or suspected falsified business accounting practices. Pro forma figures should be clearly labeled as such and the reason for any deviation from reported past figures clearly explained. In trade transactions, a pro forma (or proforma) invoice is a document that states a commitment from the seller to sell goods to the buyer at specified prices and terms. It is used to declare the value of the trade. It is not a true invoice, because it is not used to record accounts receivable for the seller and accounts payable for the buyer.
  17. 17. Profits from Economy BP Amoco enjoyed a profit increase of 117% between 2002 and 2004. In 2002, BP Amoco netted a hefty 8.4 billion. In 2004, this went to 17 billion. Shell raked in a massive 10 billion dollar profit in 2002 which ballooned to 18 billion by 2004. Not to be outdone is Exxon Mobil. In 2002, Exxon Mobil’s profit was 11.5 billion and by 2004, they were taking the public for 25 billion. By any measure, Exxon Mobil’s performance last year was a blowout. The company reported Friday that it beat its own record for the highest profits ever recorded by any company, with net income rising 3 percent to $40.6 billion, thanks to surging oil prices. The company’s sales, more than $404 billion, exceeded the gross domestic product of 120 countries. Exxon Mobil earned more than $1,287 of profit for every second of 2007. The company also had its most profitable quarter ever. It said net income rose 14 percent, to $11.7 billion, or $2.13 a share, in the last three months of the year. The company handily beat analysts’ expectations of $1.95 a share, after missing targets in the last two quarters.
  18. 18. While gas prices continue to rise, people still don’t take action! Profits from these high gas prices are outrageous. ExxonMobil has seen this firsthand. Their profits have nearly tripled since 2002. Fuel prices are impacted by a number of factors, including changes in the price of crude oil, supply and demand, fuel specifications, government regulations, taxes, and transportation costs. Actual or perceived changes in these fundamentals, such as those caused by geopolitical uncertainty or market speculation, can have an impact on commodity markets. Therefore, it's important to recognize that a number of factors may combine to impact transportation fuel prices at any given time. ExxonMobil Position Gasoline prices are influenced by a highly competitive retail marketplace and many other factors, including global commercial trading markets for crude oil and refined petroleum products. Our focus at ExxonMobil is to continually take steps to improve our ability to compete through a selective investment program, ongoing efforts to reduce costs, and a strong commitment to operational excellence. Prices for crude products are set by worldwide markets comprised of buyers and sellers reacting to their individual needs as well as perceptions of supply and demand. Policies and initiatives need to be advanced that support the underlying economic fundamentals that lead to a balanced marketplace. In the U.S., this includes support for increased domestic crude production, and focused efforts to reduce the complexities and limitations that are creeping into the refinery and logistics systems due to the proliferation of specialty fuels. This is from an article by: Beth Boerger
  19. 19. “With gas prices headed towards the stratosphere, whining about the oil industries stuffing their pockets with our money and pointing our fingers toward the ever-present scapegoat that is Washington won’t likely result in gas prices going down anytime soon. If the price of gas is to re-enter Earth’s atmosphere in the near future, we need to stop daydreaming and take action. For one thing, this country’s ridiculous obsession with over-the-top, impractical SUVs need to stop. A vehicle big enough to go charging through the jungle is not anything someone needs for any reason. By driving these vehicles with poor gas mileage, some Americans can put some of the blame of high prices on themselves. They waste gas and keep demand high, thus leaving people with cars, such as myself, to keep contributing to Big Oil’s piggy bank. With all that is going on with the “go green” initiatives, and everybody jumping on the “save the planet” bandwagon these days, why don’t more people put their money where their mouths are?” Royal Dutch Shell
  20. 20. Royal Dutch Shell, commonly known simply as Shell, is a multinational oil company of British and Dutch origins. It is one of the largest private sector energy corporations in the world, and one of the six "super majors" (vertically integrated private sector oil exploration, natural gas, and petroleum product marketing companies). The company's headquarters are in The Hague, Netherlands, with its registered office in London, United Kingdom (Shell Centre).[1] The company's main business is the exploration for and the production, processing, transportation and marketing of hydrocarbons (oil and gas). Shell also has a significant petrochemicals business (Shell Chemicals), and an embryonic renewable energy sector developing wind, hydrogen and solar power opportunities. Shell is incorporated in the UK with its corporate headquarters in The Hague, its tax residence is in Netherlands, and its primary listings on the London Stock Exchange and Euronext Amsterdam (only "A" shares are part of the AEX index).
  21. 21. Shell's revenues of $318.8 billion in 2006 made it the third-largest corporation in the world by revenues behind only ExxonMobil and Wal-Mart. Its 2006 gross profits of $26 billion made it the world's second most profitable company, after ExxonMobil and before BP. Forbes Global 2000 in 2007 ranked Shell the eighth largest company in the world. Also n 2007, Fortune magazine ranked Shell as the third-largest corporation in the world, behind Wal-Mart and ExxonMobil. Shell operates in over 140 countries. In the United States, its Shell Oil Company subsidiary, headquartered in Houston, Texas, is one of Shell's largest businesses. Ratios (Royal Dutch Shell) 2006 Ratios for Return
  22. 22. On Investment and for Risk Current 1.19 Acid 1.76 Working Capital $ 114,945.00 Net Profit Margin $ 55,856.00 ROA 11.1% ROE 22.0% Interest Coverage 37.84% Cash Flow to Long Term Debt 2.00 Long Term Debt to Equity 1.04 EBITDA $ 55,856.00 Dividend Yield 3.6% Dividend Payout 0.32 P/E 13.52% Price to Cash Flow 9.51% Cash Flow Per Share 7.47 Price to Book 3.99% Production to Reserve 8.41% Reserve Life Index 11.89 2005 Ratios for Return On Investment and for Risk Current 1.15 Acid 0.91 Working Capital $ 97,918.00
  23. 23. Net Profit Margin $ 54,109.00 ROA 11.9% ROE 26.8% Interest Coverage 40.72% Cash Flow to Long Term Debt 2.33 Long Term Debt to Equity 1.24 EBITDA $ 54,109.00 Dividend Yield 5.1% Dividend Payout 0.41 P/E 17.02% Price to Cash Flow 10.39% Cash Flow Per Share 6.2 Price to Book 4.41% Production to Reserve 9.39% Reserve Life Index 10.64 2004 Ratios for Return On Investment and for Risk Current 1.13 Acid 0.85
  24. 24. Working Capital $ 91,383.00 Net Profit Margin $ 43,127.00 ROA 10.2% ROE 19.6% Interest Coverage 28.89% Cash Flow to Long Term Debt 1.82 Long Term Debt to Equity 1.05 EBITDA $ 43,127.00 Dividend Yield 3.9% Dividend Payout 0.39 P/E 21.76% Price to Cash Flow 9.80% Cash Flow Per Share 6.07 Price to Book 4.51% Production to Reserve 9.83% Reserve Life Index 10.17 2003 Ratios for Return On Investment and for Risk Current 0.89 Acid 0.63
  25. 25. Working Capital $ 105,733.00 Net Profit Margin $ 33,215.00 ROA 7.8% ROE 15.8% Interest Coverage 15.42% Cash Flow to Long Term Debt 2.41 Long Term Debt to Equity 0.81 EBITDA $ 33,215.00 Dividend Yield 3.9% Dividend Payout 0.55 P/E 29.02% Price to Cash Flow 10.70% Cash Flow Per Share 4.9 Price to Book Production to Reserve Reserve Life Index 2002 Ratios for Return On Investment and for Risk Current 0.84
  26. 26. Acid 0.61 Working Capital $ 90,858.00 Net Profit Margin $ 25,795.00 ROA 6.6% ROE 14.5% Interest Coverage 12.41% Cash Flow to Long Term Debt 2.31 Long Term Debt to Equity 0.94 EBITDA $ 27,795.00 Dividend Yield 3.8% Dividend Payout 0.59 P/E 32.02% Price to Cash Flow 13.88% Cash Flow Per Share 3.25 Price to Book Production to Reserve Reserve Life Index Comparison between ExxonMobil and Shell Royal Dutch Shell
  27. 27. The ROE for Shell has somewhat of a pattern. From 2002-2005 it steadily increases. But in 2006 it went from 26.8% to 22.0%. ROE measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. ROE is viewed as one of the most important financial ratios. It measures a firm's efficiency at generating profits from every dollar of net assets (assets minus liabilities), and shows how well a company uses investment dollars to generate earnings growth. ROE is equal to a fiscal year's net income (after preferred stock dividends but before common stock dividends) divided by total equity (excluding preferred shares), expressed as a percentage. But not all high-ROE companies make good investments. Some industries have high ROE because they require no assets, such as consulting firms. Other industries require large infrastructure builds before they generate a penny of profit, such as oil refiners. You cannot conclude that consulting firms are better investments than refiners just because of their ROE. Generally, capital-intensive businesses have high barriers to entry, which limit competition. But high-ROE firms with small asset bases have lower barriers to entry. Thus, such firms face more business risk because competitors can replicate their success without having to obtain much outside funding. As with many financial ratios, ROE is best used to compare companies in the same industry. The P/E ratio is decreasing throughout the years. It starts out at 32.02% in 2002 and ends at 13.52% in 2006. The P/E ratio is a measure of the price paid for a share relative to the annual income or profit earned by the firm per share. A higher P/E ratio means that investors are paying more for each unit of income. It is a valuation ratio included in other financial ratios. The reciprocal of the P/E ratio is known as the earnings
  28. 28. yield. By comparing price and earnings per share for a company, one can analyze the market's stock valuation of a company and its shares relative to the income the company is actually generating. Investors can use the P/E ratio to compare the value of stocks: if one stock has a P/E twice that of another stock, all things being equal (especially the earnings growth rate), it is a less attractive investment. Companies are rarely equal, however, and comparisons between industries, companies, and time periods may be misleading. References • Shell International B.V. (2007-03-28). "Royal Dutch Shell plc updates on Chief Executive". Press release. Retrieved on 2007-08-30.
  29. 29. • ExxonMobil's Form 10-K. SEC. Retrieved on 2008-04-21. • ExxonMobil stock information. MarketWatch.com. Retrieved on 2008-02-28. • http://www.exxonmobil.com/corporate/ • http://www.shell.com/ • Exxon Mobil Profit Sets Record Again: Top of Form bottom of Form By JAD MOUAWAD Published: February 1, 2008 http://www.nytimes.com/2008/02/01/business/01cnd-exxon.html? em&ex=1202101200&en=575e77c5fd8688b0&ei=5087%0A