Chevron Financial Statements and Financial Ratios Analyzed

For this section, I have chosen several different financial ratios to review for Chevron from 2015 to 2019.  In reviewing each of their financial ratios, I first start with defining the financial ratio.  Next, I supply the financial formula for calculating the specific ratio.  Finally, I offer a brief analysis of their important Financial ratios. 

Chevron Corporation Current Ratio.

Chevron Corporation ended 2015 with the current ratio of 1.34.  In the next four years, the current ratio would fluctuate between .93 in 2016 to 1.25 and 2018, only ending 2019 at 1.07.  These fluctuations indicate that the firm has no set current ratio target.  This is a little bit concerning the foreign organization that is continually reducing its property, plant, and equipment and suffers from significant fluctuations in the revenues.  Even though the company does enjoy continued cash flows from sales, their industry, oil, and gas, is often highly volatile due to national competitors.  In my most humble of opinions, Chevron needs to hold a higher current ratio, between 1.25 and 1.35, in order to sustain the impression of short term financial solvency.

Chevron Corporation Total Asset Turnover.

Chevron ended 2015 with a total asset turnover of .52.  In 2016, their efficiency for utilizing total assets fell 2.44.  However, in the next three years, their total asset turnover would climb from .56 in 2017 to .62 and 2019.  A driving reason for the increased total asset turnover may have been there continued reduction in property, plant, and equipment.  If the company does not expect to increase substantially their revenues, then investors should expect this trend to continue.

Chevron Corporation Return on Assets.

Chevron’s return on assets in 2015 at 1.77%.  This means that the company is making a moderate return on assets utilized.  In 2017, the organization’s return on assets would jump to 52.2% only to continually fall in 2018 (5.85%) and 2019 at 1.2%.  From an investor’s perspective, this indicates that the company can still divest significant assets and still be able to generate and sustain the current revenue level.

Chevron Corporation Debt ratio.

The Chevron Corporation ended 2015 with a debt ratio of 12.6%.  As compared to other multi-national organizations, this debt level seems relatively low.  Further, their debt level would climb to 13.53% in 2016 only to continually declined through the next several years, and in 2019 at 9.98%.  Reducing the organization's debt level seems to be running in tandem with the reduction in property, plant, equipment.  In other words, the organization seems to be selling off its property and equipment to pay down its debt.  The strategy may be effective if the organization does not believe that its revenues will enjoy sustaining growth.