FIN F315 FINANCIAL MANAGEMENT

ASSIGNMENT-1

“ASSESSING THE BOARD STRUCTURE AND

SHAREHOLDING PATTERN”

EXXON MOBIL CORP. VS CHEVRON CORP.

Industry: OIL

AKHIL MAHAJAN 2017A4PS0820H

KASHISH BULANI 2017ABPS1153H

SHARDUL TAMANE 2017ABPS1332H

SANJANA KHOWAL 2017A4PS1682H

LIKHIT KANODIA 2017ABPS0800H

P ARYAN 2017A1PS1106H
 ASSIGNMENT -3

CHEVRON:

Board Members:

NAME PRINCIPAL OCCUPATION

Michael K Wirth "Mike" Chairman of the Board and Chief Executive

Officer

Ronald D. Sugar Lead Director

Retired Chairman and Chief Executive
Officer, Northrop Grumman Corporation

Enrique Hernandez Jr Chairman and Chief Executive Officer,

Inter-Con Security Systems, Inc.

Charles Wick Moorman IV Retired Chairman and Chief Executive

Officer, Norfolk Southern Corporation

Dr Wanda M Austin Retired President and Chief Executive

Officer, The Aerospace Corporation

Dr Dambisa F Moyo Chief Executive Officer,

Mildstorm LLC

Inge G Thulin Retired Chairman, Chief Executive Officer

and President,
3M Company

John Bernkopf Frank Vice Chairman, Oaktree Capital Group,

LLC

Dr Prof Alice P Gast President, Imperial College London

D James Umpleby III "Jim" Chairman of the Board and Chief Executive
Officer,Caterpillar Inc.

Debra L Reed-Klages "Debbie" Retired Chairman, Chief Executive Officer

and President,Sempra Energy
Analysis :
It can be noted from the above table that the board of Chevron is a balanced board with the
member belonging to different firms and not just to the members of the company.

EXXON MOBIL:

Board Members:

NAME PRINCIPAL OCCUPATION

Susan K. Avery President Emerita of the Woods Hole

Oceanographic Institution, a global research
organization

Angela F. Braly Former Chairman of the Board, President

and Chief Executive Officer of WellPoint
(now Anthem), a health insurance company

Ursula M. Burns Chairman of the Board and Chief Executive

Officer, VEON Ltd.

Kenneth C. Frazier Chairman of the Board, President, and Chief

Executive Officer, Merck & Co.

Steven A. Kandarian Chairman, President and Chief Executive

Officer, MetLife

Douglas R. Oberhelman Former Chairman of the Board and Chief

Executive Officer, Caterpillar Inc.

Samuel J. Palmisano Former Chairman of the Board, President

and Chief Executive Officer, IBM

Steven S Reinemund Former Chairman of the Board and Chief

Executive Officer, PepsiCo

William C. Weldon Former Chairman of the Board and Chief

Executive Officer, Johnson & Johnson

Darren W. Woods Chairman of the Board and Chief Executive

Officer, Exxon Mobil Corporation
Analysis :
We can see that the chairman of the board is the CEO of ExxonMobil but the rest of the
board is saturated and have members belonging to different companies. Hence, we can say
that this board will take care of the interest of small shareholders and not just the interest of
the company.

CASH COVERAGE RATIO:

Cash coverage ratio is a liquidity ratio that measures a firm’s ability to pay off its current
liabilities with only cash and cash equivalents. The cash ratio is much more restrictive than
the current ratio or quick ratio because no other current assets can be used to pay off current
debt–only cash.

EXXON MOBIL CORP.

YEAR Cash or cash CURRENT TOTAL CASH CASH

equivalents(in LIABILITIES EQUIVALEN COVERAGE
millions usd) (Million USD) TS(Million RATIO
USD)

2016 3657 47638 3657 0.08

2017 3177 57771 3177 0.05

2018 3042 57138 3042 0.05

CHEVRON CORP.

YEAR Cash or cash CURRENT CASH

equivalents (in LIABILITIES (in COVERAGE
millions USD) millions USD) RATIO

2016 6988 31785 0.22

2017 4813 27737 0.17

2018 9342 11022 0.38

ANALYSIS:

The cash ratio shows how well a company can pay off its current liabilities with only cash
and cash equivalents. This ratio shows cash and equivalents as a percentage of current
liabilities.

A ratio of 1 means that the company has the same amount of cash and equivalents as it has
current debt. In other words, in order to pay off its current debt, the company would have to
use all of its cash and equivalents. A ratio above 1 means that all the current liabilities can be
paid with cash and equivalents. A ratio below 1 means that the company needs more than just
its cash reserves to pay off its current debt.

.
EXXON MOBIL CORP. :

● The data shows that CCR over the years has been decreasing miserably.This is
symbolic to the poor liquidity state of Exxon.The assets equivalent assets for it are
decreasing while the liabilities on the company are taking a toll.
As seen from the point of view of small shareholders this is not a good news.In Fact
its time for them to worry for the monetary future of the company.

● The volume traded for exxon is:

Share Volume
17,889,499
● As of june,2019 the Exxon Mobil Forward Rate of Return% : -4.63% . A negative rate
of return for a company with such a saturated market is not a good sign.
The following shows the past years data for rate of return:
Exxon Mobil Net Issuance of Stock Calculation

● A company may raise cash from issuing new shares. It can also use cash to
buy back shares. If this number is positive, it means that the company has
received more cash from issuing shares than it has paid to buy back shares. If
this number is negative, it means that company has paid more cash to buy
back shares than it has received for issuing shares.

● Net Issuance of Stock for the trailing twelve months (TTM) ended in Jun.
2019 was -1 (Sep. 2018 ) + -196 (Dec. 2018 ) + -421 (Mar. 2019 ) + 0 (Jun.
2019 ) = $-618 Mil.
● * All numbers are in millions except for per share data and ratio. All numbers
are in their local exchange's currency.
● Institutional investors hold a majority ownership of XOM through the 56.64%
of the outstanding shares that they control. This interest is also higher than at
almost any other company in the Integrated Oil industry..
The following shows the percentage of stockholders in the company:

From the provided information it is clear that small shareholder’s percentage of

representation is very minimal in Exxon Hence there are very bleak prospects that the
company would focus on small shareholder’s wealth maximization.
CHEVRON CORP. :

The CCR for Chevron has increased substantially over the year 2018,which shows an
improved liquidity condition for the company. Creditors will be more interested in investing
in the company, owing to the improved CCR.This improved CCR signifies that the company
is more liable to pay its debts in cash than before.
Small shareholders would surely be delighted at the fact of improved CCR as now they will
be eligible for improved returns and benefits.

The traded volume for chevron is:

Share Volume
410,388
Chevron Forward Rate of Return (Yacktman) % : -0.52% (As of Jun.
2019).
Chevron (NYSE:CVX) Forward Rate of Return (Yacktman) %

Explanation
Unlike the Earnings Yield, the Forward Rate of Return uses the normalized Free Cash Flow
of the past seven years, and considers growth. The forward rate of return can be thought of as
the return that investors buying the stock today can expect from it in the future.

For the growth part of the Forward Rate of Return calculation, GuruFocus uses the 5-year
average growth rate of EBITDA per share as the growth rate, and the growth rate is always
capped at 20%. For the Free Cash Flow we use per share data averaged over seven years. The
reason we use seven years is because research shows that seven years is the length of the
typical business cycle.

Chevron Net Issuance of Stock : $-2,452 Mil (TTM As of Jun. 2019)

Chevron Net Issuance of Stock Calculation
A company may raise cash from issuing new shares. It can also use cash to buy back shares.
If this number is positive, it means that the company has received more cash from issuing
shares than it has paid to buy back shares. If this number is negative, it means that company
has paid more cash to buy back shares than it has received for issuing shares.

Net Issuance of Stock for the trailing twelve months (TTM) ended in Jun. 2019 was -671
(Sep. 2018 ) + -941 (Dec. 2018 ) + -15 (Mar. 2019 ) + -825 (Jun. 2019 ) = $-2,452 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their
local exchange's currency.

Chevron's net issuance of stock for the three months ended in Jun. 2019 was $-825 Mil. The
number is negative, which means that Chevron has paid more cash to buy back shares than it
has received for issuing shares quarterly.

Chevron's net issuance of stock for the trailing twelve months (TTM) ended in Jun. 2019 was
$-2,452 Mil.

SHAREHOLDERS:

Institutional investors hold a majority ownership of CVX through the 68.80% of the
outstanding shares that they control. This interest is also higher than at almost any other
company in the Integrated Oil industry. Last, during the quarter ended June 2019, these large
investors purchased a net $14.2 million shares.
Although percentage wise the small shareholders are less in number, the values of CCR and
rate of return are a clear
indication that these shareholders are taken care of.
Hence chevron is a much better platform as compared to exxon, where the wealth
maximization of small shareholders is concerned.