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Financial Analysis of Halliburton Essay

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In 2010, Halliburton produced revenue of $17,973 billion and operating income of $3,009 billion, reflecting an operating margin of approximately 17%. Revenue increased by $3,298 billion, or 22% from 2009, while operating income increased $1,015 billion, or 51% from 2009. According to Halliburton’s 2010 Annual Report, “these increases were due to its customers’ higher capital spending throughout 2010, led by increased drilling activity and pricing improvements in North America” (Hal 2010 annual report). However, Halliburton remains cautious because of the shifts in oil and natural gas prices and supply/demand factors. These “shifts” are important for equipment and services providers in the oil and gas industry because it affects the …show more content…

Several financial ratios can be considered when looking at a company’s economic performance. However, given all the possibilities it is important to focus on a few key areas that are functionally related. Therefore, for the purpose of analyzing Halliburton’s financial position as well as its competitors, some common ratios can be used such as current ratio, debt-to-total assets, inventory turnover, average collection period, net profit margin, and return on total assets (ROA). The first ratio to evaluate is the Current Ratio, which is calculated as current assets divided by current liabilities. Halliburton’s 2010 current ratio is 3.22, which improved from 2.99 in 2009 and from 2.66.in 2008. This ratio shows that Halliburton has a strong increasing liquidity and is in much better shape than its competitors. Baker Hughes has a 2010 current ratio of 2.77

and Schlumberger has a 2010 current ratio of 1.67. Therefore, Halliburton is in a better financial position to meet its short-term obligations. The second ratio to evaluate is Debt-To-Total Assets Ratio, which is calculated as total debt divided by total assets. Halliburton’s debt-to-total assets of .43 has improved from the 2009 ratio of .47 and the 2008 ratio of .46 given it a stronger position in the industry. The low level shows very manageable debt allowing Halliburton to take advantage of the rising demand for oil and

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