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Posted by Aex on August 25, 2008, 7:14 pm
I am a new poster trying to understand security analysis.
I decided to start out with ExxonMobil since it is a prime example of
a blue chip. However, I am slightly confused. It has a huge number on
its accounts payable line. Although I understand that you do not need
to immediately pay back vendors, it seems to be inoridnately large,
even for ExxonMobil. At what point is such a huge accounts payable
line unhealthy?
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Posted by catalpa on August 25, 2008, 9:42 pm
>I am a new poster trying to understand security analysis.
>
> I decided to start out with ExxonMobil since it is a prime example of
> a blue chip. However, I am slightly confused. It has a huge number on
> its accounts payable line. Although I understand that you do not need
> to immediately pay back vendors, it seems to be inoridnately large,
> even for ExxonMobil. At what point is such a huge accounts payable
> line unhealthy?
>
It is the accounts receivable line you need to pay attention to, not
accounts payable. Accounts receivable of $41.8 billion and accounts payable
of $60.3 billion is a good way to have things, as it means you have the cash
(a very nice $40 billion). It is when accounts receivable grow quickly and
exceed accounts payable that a problem is developing.
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Posted by dapperdobbs on August 26, 2008, 9:20 am
> I am a new poster trying to understand security analysis.
>
> I decided to start out with ExxonMobil since it is a prime example of
> a blue chip. However, I am slightly confused. It has a huge number on
> its accounts payable line. Although I understand that you do not need
> to immediately pay back vendors, it seems to be inoridnately large,
> even for ExxonMobil. At what point is such a huge accounts payable
> line unhealthy?
>
Interesting question, and I'm not really sure how they schedule those
out of the 'snapshot' in time, but in their 2007 10K there are two
sections that might help you out a bit:
"Additional Working Capital Information" gives some detail on "Notes
and accounts receivable" and on "Accounts payab;e and accrued
liabilities".
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" (the entire section is barely longer than the
title.
Of note is that the Accounts payable and accrued liabilities includes
taxes payable. The 10K probably includes amounts not due until the end
of the first quarter. Total taxes paid in 2006 were $105,683,000,000 -
enough to fund the Federal Government for about 16 days. Interesting,
no?
The ExxonMobil web site investor's section has what amounts to a
pretty neat primer on the business of oil, tucked into their financial
reporting, showing (amongst a wealth of other things and lots of color
glossies), the phases of drilling and production, and their
exploration activities in places I'd never heard of, perhaps giving
some indication of the dedication of the ExxonMobil personnel who
travel to these places, live and work there probably at substantial
personal risks of various types. Somewhat like U.S. Embassy personnel.
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Posted by Aex on August 26, 2008, 3:45 pm
Thanks for your answers. They were very helpful!
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Posted by Tad Borek on August 26, 2008, 4:24 pm
Aex wrote:
> I decided to start out with ExxonMobil since it is a prime example of
> a blue chip. However, I am slightly confused. It has a huge number on
> its accounts payable line.
I don't follow XOM but it seems a $400B (annual revenue) company would
have a lot of oil moving "through the pipe" at any given time, with all
sorts of lags built in for both payments and collections. If you really
want to dissect things you should check the notes to the financial
statements and dig further into how their A/Ps and A/Rs break down. An
increase could be explained by something as simple as "we always have a
payment lag of X days, and now that oil is $120/bbl instead of $80/bbl,
the A/P is that much higher for oil-in-transit."
Of course, it could be something else entirely...
-Tad
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Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
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guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
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