University of Houston Downtown Oil Corporation Companys Inventory Essay

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xojvyfba

Business Finance

University of houston downtown

Description

  1. Inventory .The following provides some guidance for analysis of a company’s inventory.
  • What is inventory for the company? (The three types of inventories and its amount for the most recent fiscal year.) (Just explain that your service companies do not have inventory in your answers so that the grader will be informed.)
  • Does the company manufacture inventory?
  • What proportion of total inventory is raw materials? Work in process? Finished goods?
  • Does the company face any inventory related risk? What has been done to mitigate this risk? Read the MD&A.
  • Compute gross profit margin in percentage terms. ( (netsales-cogs)/netsales )
  1. Tangible Assets. The following provides some guidance to the companies’ long-term (tangible) assets. (There is no magic number such as 10% is considered significant. In accounting and economics, anything which might change one's investment decision is considered significant. Walmart's inventories are significant tangible assets. However, for  UBER, its tangible asset is not "significant". Its intangible asset is "significant".)
  2. • Are tangible assets significant for the companies? What proportion of total assets is held as tangible assets(PPE) (The question refers to PPE only.)? What exactly are the companies’ tangible assets? That is, what are assets type and dollar value in numbers?

e.g. https://www.marketwatch.com/investing/stock/jd/financials/balance-sheet (Links to an external site.)

  1. Accrued liabilities. Accrued liabilities arise from ordinary operations and provide interest-free financing.
  • What are the companies’ main operating liabilities? (Use accrued liability type and dollar values from Balance Sheet.)
  1. Short and Long?Term Debt. Examine the debt footnote and consider the following questions.
  • What types of debt does the company have? Is it publicly traded? Are there bank loans? Other types of debt?
  • Read the footnote and the MD&A to see if there are any debt covenants and whether the company is in compliance.

  (Use Apple Inc. as an example:

https://www.marketwatch.com/investing/stock/aapl/financials/balance-sheet (Links to an external site.)

it shows apple only has finished goods. Apple does not manufacture products itself.

Detailed debt information is in the “footnote” or “note to the financial statement ” in the 10-k.)

  1. Credit Ratings. Find the companies’ credit ratings at two or three ratings agencies’ websites.
  • What are the credit ratings and how do they compare across the agencies? Are the two companies similarly rated?
  • Are the companies on a credit watch or a downgrade list?

(There are three rating agencies: S&P, Moody's, Fitch.

A. Since not every firm issues bonds, some firms may not have a credit rating at all.

B. I would google first, then try market watch, yahoo finance, google finance, and company's own website for their credit ratings.

C. Register a free account with S&P and Moody's by using my UTPB e-mail address. The process was quick. 

D.  MD&A  in 10-K provides the ratings that all three agencies assigned, both short- and long-term.

E. DIY:If you like, you actually can give the debt a rating using the ratio in EXHIBIT 7.4

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Explanation & Answer

Hello,I have attached the Word document with the answers to the questions provided. As the analysis was >500 words I am also required by studypool to attach an outline which basically just shows you a high-level summary of what was talked about in the analysis. I'm not sure if you had a particular word count for this, but I tried to elaborate as much as possible for all the answers. Please let me know if you have any questions at all and I would be more than happy to explain :)

Inventory
Marathon Oil Corporation (MRO) inventory consists of crude oil and natural gas, along
with supplies and equipment. All of MROs inventory is measured using the weighted average
cost method. Their inventory for the 2019 year end is $72 million. The company does
manufacture its crude oil and natural gas by extracting oil and natural gas from the earth with oil
rigs.
Inventory in general is inherently risky as there is a chance the inventory will not be ab...


Anonymous
Awesome! Perfect study aid.

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