Forecasting with Indices

Forecasting with Indices
QRB/501
January 26, 2012
Dr. Steven Pratt

Forecasting with Indices

BASE YEAR 2009 | 31-Dec-10 | 31-Dec-09 | 31-Dec-08 | 31-Dec-07 | 31-Dec-06 | AVERAGE | FORECAST 31-DEC-11 |
As Reported |   |   |   |   |   | |   |
Net income attributable to ExxonMobil (USD $ in millions) | 30460 | 19280 | 45220 | 40610 | 39500 | 35014 | 35,014 |
Sales and other operating revenue (USD $ in millions) | 370,125 | 301,500 | 459,579 | 390,328 | 365,467 | 377400 | 377,400 |
Net profit margin1 | 8.23% | 6.39% | 9.84% | 10.40% | 10.81% | 9.13% | 9.28% |
Adjusted: from LIFO to FIFO | |   | | | | |   |
Adjusted net income attributable to ExxonMobil (USD $ in millions) | 34,660 | 26,380 | 29,820 | 50,110 | 40,000 | 36,194 | 36,194 |
Sales and other operating revenue (USD $ in millions) | 370,125 | 301,500 | 459,579 | 390,328 | 365,467 | 377,400 | 377,400 |
Adjusted net profit margin2 | 9.36% | 8.75% | 6.49% | 12.84% | 10.94% | 9.68% | 9.59% |

The method chosen to create the inventory index for ExxonMobil’s net income through sales and other operating revenue was to forecast for the next year to determine not only present income but what the company should expect for the future year. This is calculated by determing a base year as indicated above Dec. 31, 2009. Once a base year is determined calculate the average of net income attributable to ExxonMobil and sales and other operating revenue from Adjusted FIFO to LIFO and the same function is performed to get the average for Adjusted LIFO to FIFO. Find the total for each category then divide by 5 to forecast the next year since working with four years of inventory. Finally use the forecast function to determine the next year forecast for net income for LIFO to FIFO and vice versa.

References
Exxon Mobil Corp. (XOM) | Analysis of Inventory. (n.d.). Retrieved from http://www.stock-analysis-on.net/NYSE/Company/Exxon-Mobil-Corp/Analysis/Inventory
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