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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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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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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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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