Assignment 7c...Financial Management Paper
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Comparing Companies’ Financial Performance and Risks
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Institution
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Executive Summary
Companies perform differently in their market and face various financial risks that could
affect their overall financial performance. For a company to be successful, it must maximize its
revenue, net income, and reduce total expenses. It should also ensure payment to shareholders is
sustained for as long as possible. This papers examines and compares financial performance and
risks of five Fortune 500 companies, including Apple, Amazon, Walmart, Chevron, and Exxon
Mobil. The report will assess these companies’ financial performance across the years (2020,
2021, and 2021), using data published in their Form 10K reports. These are among the top 10
companies in the 2023 Fortune 500 listing. Even though they operate in different industries, they
do face almost similar financial risks, with fluctuation of the foreign exchange rate being the
most significant risk.
Based on the analysis, Exxon Mobil is one of the best performing
companies given its high financial performance and fewer risks. Also, Chevron’s financial
performance is also exemplary as it has tried to maintain a high revenue and net income growth
rate and fewer financial risks. Amazon’s financial performance is not at its best, having recorded
a negative net income in the year 2022.
3
Apple
Financial Performance
Apple, whose market cap is currently valued at $2.77 trillion has experienced successful
performance over the years, recording significant financial growth and improvement in nearly all
areas. As captured in Form 10-K 2022, Apple recorded consistent growth in its total revenue,
from $274,515 million in 2020 to $394,328 in 2022 (Apple, Inc., 2022) In 2021, total revenue
was $365,817. Similarly, net income grew significantly, posting $99,803 million in 2022,
$94,680 million in 2021, and $ 57,411 million in 2020. Earnings per Share (EPS) for the last
three years also improved markedly, from $3.28 in 2020 to $6.11 in 2022 (Apple, Inc., 2022)
Total expenses increased from $208,227 million in 2020 to $274,891 million in 2022. In 2021,
total expenses stood at $256,868 million. The stock price has also maintained a positive growth
rate, increasing from $93 in 2020, 139 in 2021, to $153 in 2022. The dividend payout has also
increased from $0.20 in 2020 to $0.22 in 2021, to $0.23 in 2022. Overall, Apple has been
registering successful financial performance in the last three years, with positive growth in all six
areas examined (Apple, Inc., 2022)
Financial Risks
As stated in Form 10-K 2022, Apple's major financial risks include the possibility of its
net sales fluctuating because of the risks associated with the changes in the value of the US
dollar relative to local currencies. The company expects gross sales and operating expenses to be
adversely affected by the fluctuation of foreign currency-dominated sales. The company notes
that the weakening of the foreign currencies relative to the US dollar affects the company’s
foreign earnings, and forces the company to raise international pricing which affects (reduces)
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demand for the company’s products in foreign markets. Other risks include exposure to credit
risks and fluctuation in the company’s value of its investment portfolio (Apple, Inc., 2022)
Walmart
Financial Performance
Walmart, the largest single employer in the US, is an American multinational retailer
operating across many global markets. The company has had a successful economic tenure over
the years, growing into a dominant global retailer, operating in key markets across the globe.
According to Form 10K for the fiscal year ending 31
st
January 2022, Walmart's total revenue has
increased consistently from $523,964 million in 2020, through $559,151 million in 2021, to
$572,754 million in 2022 (Walmart, 2022).
Net Income decreased from $14,881 million in 2020
to $13,510 million in 2021. In 2022, net income increased slightly to $13,673 million. Similarly,
earnings per share (EPS) decreased from $5.19 in 2020 to $4.75 in 2021. However, it increased
to $4.87 in 2022.
Stock Price increased from $123 in 2020 to $136 in 2021 and then dropped to
$135 in 2022. Total expenses have increased from $ $503,396 million in 2020, through $536,603
million in 2021, to $ 546,812 million in 2022. The dividend amount per share has only improved
modestly, increasing from $0.53 in 2020, through $0.55 in 2021 to $0.56 in 2022 (quarterly
dividend) (Walmart, 2022).
Financial Risks
The major risk affecting Walmart is the fluctuation of the foreign exchange rates against
the US dollar. Walmart says such fluctuations are likely to materially affect its financial
performance in foreign markets when the local currencies are losing strength against the US
dollar. A failure to meet the stock market performance is likely to trigger the overall stock price
to decline. Delays or failures to meet financial performance in areas such as consolidated net
5
sales, consolidated operating income, eCommerce growth rates, adjusted earnings per share,
gross margin, and capital expenditure among others are likely to affect the company’s overall
stock performance in the stock market.
Amazon
Financial Performance
Amazon, the American Multinational e-commerce retailer has experienced significant
growth since the day it was founded. It is a company that thrived with the invention of internet
technology. Amazon’s total revenue has increased consistently from $386,064 million in 2020,
through $469,983 million in 2021, to $513,983 million in 2022 (Amazon, Inc., 2022). Over the
same period, the net income has fluctuated markedly. In 2020, Amazon posted a net income of
$21,331 million. It increased to $33,364 million in 2021 and decreased sharply to $-2,722
million in 2022. The total expenses increased consistently from $363,165 million in 2020,
$444,943 million in 2021, to $501,735 million in 2022. The earnings per share (EPS), increased
from $2.09 in 2020 to $3.24 in 2021 and decreased to -$0.27. The negative earnings per share
resulted from the negative net income in 2022. The average price for Amazon stocks had a
fluctuating trend. For example, it increased from $133 in 2020 to $166 in 2021 before decreasing
sharply to $125 in 2022 (Amazon, Inc., 2022).
Financial Risks
The financial risk discussed by Amazon in the Form 10K document relates to the foreign
exchange risk. The company notes that its operations in foreign markets are exposed to problems
of fluctuation in the foreign exchange, which impact operating results and could lead to either
losses or gains. Amazon notes that it has increasingly been exposed to foreign exchange risks
amid expansion to various foreign markets. The company holds cash equivalents and market
6
securities in foreign currencies such as Canadian Dollars, Euros, Japanese Yen, and British
Pounds. When the US dollar strengthens against these currencies, the company may lose a
significant amount of money once converted to the dollar and vice versa (Amazon Inc., 2022).
Exxon Mobil
Financial Performance
The American multinational
oil-drilling giant has had a promising financial performance
in the last three years (2022-2020). In 2022, Exxon Mobil posted total revenue of $413,640
million up from $285,640 million in 2021 and $181,502 million in 2020 (Exxon Mobil, 2022).
The low revenue in 2020 could be attributed to the effects of COVID-19 on the transport
industry, which reduced demand for petroleum products. The net income more than doubled,
increasing from $23,040 million in 2021 to $57,740 million in 2022 (Exxon Mobil, 2022). In
2020, Exxon posted a negative income figure of $-22,440 million. Earnings Per Share (EPS)
increased from $-5.25 in 2020 through $5.39 in 2021 to $13.26 in 2022. The total expenses
increased from $210,385 million in 2020, $254,406 million in 2021, to $335,927 million in 2022.
Dividend payment to common shares increased from $3.55 per share in 2022 to $3.49 per share
in 2021, and $3.48 per share in 2020. The average stock price of Exxon Mobil has consistently
increased from $37 in 2020, $52 in 2021, to 87$ in 2022 (Exxon Mobil, 2022).
Financial risks
Exxon Mobil notes that its financial performance and business results are exposed to
potential negative impacts associated with changes in interest rates, currency exchange rates, and
inflation among other financial factors. Such fluctuation can reduce the overall earnings of the
company. The weakening of foreign currencies against the US dollar is also a threat to foreign
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earnings, and the company may be forced to increase the prices of its products which may trigger
demand for its product to decline relative to competitors.
Chevron
Financial Performance
In the fiscal years 2022, 2021, and 2020 ending 31
st
December, Chevron's total revenue
grew from $94,692 million in 2020, through $162,465 million, to $246,252 million. The net
income increased from -$5,543 million in 2020 to $15,625 million in 2021 and $35,465 million
in 2022 (Chevron, 2022). The year 2020 negative performance was caused by business failure
triggered by the effects of the COVID-19 pandemic. Earnings Per Share (EPS) increased from -
$2.96 in 2020 to $8.14 in 2021 and $18.28 in 2022. There has been a significant bounce back
from the effects of the pandemic. The total expenses stood at $102,145 million in 2020, $140,826
in 2021, and $196,578 million in 2022, year-over-year increment (Chevron, 2022). Stock prices
have increased consistently from 2020 to 2022, increasing from $76 in 2020 to $95 in 2021 and
$152 in 2022. The dividend level has improved in the past three years under consideration,
increasing from $5.16 in 2020 to $5.3 in 2021 and $5.68 in 2022 (Chevron, 2022).
Financial Risks
Chevron as a global company faces financial risks that result from fluctuation in the
foreign exchange rates. The strengthening of the U.S. dollar against local currencies where
Chevron operates could result in significant financial losses when earnings are converted to U.S.
dollars (Chevron, 2022).
Compare and Summarize
Of the five companies, Chevron had the highest revenue growth in 2022 compared to the
2021 figures. It posted a revenue growth of 51.57%, followed by Exxon Mobil at 44.83%,
8
Amazon at 9.4%, Apple at 7.79%, and Walmart at 2.43%. When it comes to the expense growth
rate, Chevron had the highest expense growth rate at 39.59%, followed by Exxon Mobil at
32.04%, Amazon at 12.76%, Apple at 7. 02%, and Walmart at 1.9%. In the year 2022, Exxon
Mobil’s net income grew the highest, at 141.93%, followed by Chevron at 126.98%, Walmart at
14.58%, Apple at 5.41%, and Amazon at -108.16%.
While all the companies had nearly similar
risks, Apple disclosed the highest number of risks, followed by Walmart, and Amazon. Exxon
Mobil and Chevron had fewer risks. The main risk that seemed serious and disclosed by nearly
the five companies has to do with the fluctuation of the exchange rate. Since all companies
operate in diverse global markets, they feared how their financial returns would be affected by
weakening local currencies against the U.S. dollar. As such, this is a significant risk that future
investors should think about when making investment decisions.
From where I sit, Exxon Mobil seems to be performing the best and has the best chances
of winning long-term with the least amount of risk. Currently, Exxon Mobil’s revenue growth
and net income are significantly high while it has tried to keep expenses low. Besides, the
company has the fewest financial risk factors that it has disclosed in its 2022 Form 10-K. On the
contrary, the company that has the greatest challenge given the financial performance and risks is
Amazon. In 2022, Amazon registered a negative net income (loss). Its net income decreased by
over 100% compared to the 2021 figures. It also disclosed a significant number of risks,
including foreign exchange rate fluctuations, which could affect the value of its s cash
equivalents and market securities held in foreign currencies.
9
References
Amazon, Inc. (2022, December 31).
Amazon Form 10-K 2022. U.S. Securities and Exchange
Commission
. https://d18rn0p25nwr6d.cloudfront.net/CIK-0001018724/d2fde7ee-05f7-
419d-9ce8-186de4c96e25.pdf
Apple, Inc. (2022, September 24).
Apple Form 10-K 2022. U.S. Securities and Exchange
Commission
. https://s2.q4cdn.com/470004039/files/doc_financials/2022/q4/_10-K-
2022-(As-Filed).pdf
Chevron. (2022).
Annual Report 2022
. https://www.chevron.com/-/media/chevron/annual-
report/2022/documents/2022-Annual-Report.pdf
Exxon Mobil. (2022, December 31).
Exxon Mobil Form 10-K 2022. U.S. Securities Exchange
Commission
. https://ir.exxonmobil.com/static-files/d74ed1e0-cb0a-4c8f-8a58-
af673056d6bc
Walmart. (2022, January 31).
Walmart Form 10-K 2022. U.S. Securities and Exchange
Commission
. https://s201.q4cdn.com/262069030/files/doc_financials/2023/ar/Walmart-
10K-Reports-Optimized.pdf
Walmart. (2022, January 31).
Walmart Form 10-K 2022. U.S. Securities and Exchange
Commission
. 403 Forbidden.
https://s201.q4cdn.com/262069030/files/doc_financials/2022/ar/WMT-FY2022-Annual-
Report.pdf
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