Assignment 1: Exxon versus Chevron Due Week 8 and worth 200 points

According to the textbook, the income statement measures the success of a companys operations for a given period. The income statement is important to investors and creditors, because it determines the profitability, investment value, and creditworthiness of a company. Specifically, the income statement helps investors and creditors predict the amounts, timing, and uncertainty of future cash. Income statement preparers can make such informed predictions by analyzing a companys financial statements, calculating the price-earnings ratio, and reviewing notes to the financial statements on the income statement.

In order to complete this assignment, use the Internet to research and review financial statements for Exxon and Chevron for the years 2012 and 2013.

Write a five to six (5-6) page paper in which you:

1. Compare and contrast the limitations and usefulness of the single-step income statement and the multi-step income statement.
2. Analyze the gross profit, operating profits, and net income of both Exxon and Chevron for 2012 and 2013. Of the two (2) companies, speculate on the main reasons why one (1) company may have been more profitable than the other company.
3. Compute each companys price-earnings (P / E) ratio and price-to-sales ratio (PSR). Identify primary estimates or assumptions that could result in overstated earnings, and use the ratio data to compare the quality of each companys earnings.
4. Review notes to both Exxons and Chevrons financial statements. Next, identify at least two (2) notes pertaining to the income statement, and explain the main way in which the notes in question could influence your decision to invest in each of the companies. Provide a rationale to justify your decision.
5. Use at least three (3) quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources.