FIN 242 Individual Report (MBA1114E) PDF

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UNIVERSITY TECHNOLOGY MARA MALACCA BRANCH, ALOR GAJAHCAMPUSFACULTY OF BUSINESS MANAGEMENTFUNDAMENTALS OF FINANCE(FIN242)INDIVIDUAL ASSIGNMENTOIL AND GAS COMPANY (PETRONAS COMPANY)PREPARED FOR NORASHIKIN BINTI ADAMCLASS MBA111 4EPREPARED BYNURUL SHAFIFAH BINTI ISMAIL(2019443736)DUE DATE 2 JULY 2021AC...

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UNIVERSITY TECHNOLOGY MARA MALACCA BRANCH, ALOR GAJAH CAMPUS

FACULTY OF BUSINESS MANAGEMENT

FUNDAMENTALS OF FINANCE (FIN242)

INDIVIDUAL ASSIGNMENT

OIL AND GAS COMPANY (PETRONAS COMPANY)

PREPARED FOR

NORASHIKIN BINTI ADAM

CLASS

MBA111 4E

NURUL SHAFIFAH BINTI ISMAIL PREPARED BY

(2019443736)

DUE DATE

2 JULY 2021

ACKNOWLEDGEMENTS In the name of Allah, the Most Gracious, The Most Merciful. Praise be to Allah, Lord of the universe, who give the blessing and strength throughout my work to complete this individual assignment. Peace and prayers be upon His Final Prophet and messenger Muhammad, the ideal role model for human beings. I had finally completed this report with much passion and commitment. I always work hard to accomplish an efficient result in my work with dedication and responsibility. I give special gratitude to my fundamentals of finance (FIN 242) lecturer, Madam Norashikin Binti Adam providing me with a clear guideline for this assignment throughout the development process. May Allah reward her for all her efforts. Furthermore, I am grateful for her helpful advice, suggestions for improvement, and idea. As a result, I manage to complete this report within the time given. Lastly, not to forget to my parents that always giving me a never-ending moral support. I'd want to thank all of my friends for their thoughts, opinions, and willingness to help me finish my task. I hope that this report will be accepted by Madam Norashikin Binti Adam. I’d worked hard in order to complete this and I hope all the information given could be accepted. Thank you.

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TABLE OF CONTENT NO

CONTENT

PAGES

1

Cover pages

0

2

Acknowledgement

1

3

Table of content

2

4

Content of project: -

3

1.0 Introduction of Petronas

2.0 Financial Analysis 3.1 Liquidity Ratio 5

3.2 Activity and Asset Management Ratio

4-11

3.3 Leverage and Debt Management Ratio 3.4 Profitability Ratio

6

3.0 Assessment on company (Character, Capacity, Capital, Collateral, Condition)

12-13

7

4.0 SWOT analysis

14

6

5.0 Conclusion

15

7

6.0 Reference

16

1.0 INTRODUCTION 2

Petroleum Nasional Berhad, or PETRONAS, is well-known around the country as a large organization and corporation that exports Malaysian oil. Petronas is the first commercial oil development in Malaysia dated back as early as 1910 when the Anglo-Saxon Petroleum Company, a forerunner of today Sarawak Shell, developed the Miri oilfield in Sarawak. At the time of April 1, 1975, Malaysian oil corporations functioned under the Concession System for hydrocarbon development. Oil corporations had the legal right to develop and export oil and gas fields under the Concession System.

Petronas started operating at the end of 1976 when it established the first production sharing partnerships with three distinct large oil firms, namely Sabah Shell, Sarawak Shell, and Esso. During its early years, PETRONAS's duties were primarily focused on monitoring and overseeing its contractors' exploratory operations to guarantee that upstream activities were appeal administered and well managed. Petronas is a well-known global corporation operating activity in 32 countries, including Argentina, Russia, and Egypt. Petronas has a strategy that prioritizes environmental management and community involvement. It presently utilizes approximately 30,000 workers of 38 different nationalities. PETRONAS has a workforce of 53,149 workers as of December 2015. Petronas has played a significant role in the Malaysian economy and has become a national emblem of achievement. The organization is Malaysia's largest source of government income and export trade profits. Its massive activities placed it among the Fortune Global 500's largest company in the globe. In 2014, Fortune magazine rated PETRONAS as the world's 68th largest company PETRONAS believes that as the custodian of Malaysia's oil and gas resources, it must contribute to and safeguard the well-being of the people and the nation. The company's mission statement clearly expresses this concept. As a global corporation, Petronas is committed to achieving sustainable growth and expanding its sustainability concept to benefit the people and nation.

2.0 FINANCIAL ANALYSIS 3

2.1

Liquidity Ratio

Current Ratio (CR) 2019 CR₁₉ = Current assets

2020 CR₂₀ = Current assets

Current liabilities

Current liabilities

= RM 5, 114, 493

= RM 3, 928, 322

RM 989, 528 = 5. 17 times

RM 999, 116 = 3.93 times

Current Ratio for Petronas company for 2020 is 3.93 times worst compare with their current ratio for 2019 that is 5.17 times that show the company do not have ability to pay short term obligation on time.

Quick Ratio (QR) 2019 QR₁₉ = (Current assets – Trade of other

2020 QR₂₀ = (Current assets – Trade of other

Inventories) / Current liabilities

Inventories) / Current liabilities

= RM 5, 114, 493 – RM 78, 153

= RM 3, 928, 322 – RM 44, 940 RM 999, 116

RM 989, 528 = 5. 09 times

= 3.89 times

Quick Ratio for Petronas company for 2020 is 3.89 times worst compare with their quick ratio for 2019 that is 5.09 times that show the company do not have ability to pay short term obligation without rely on inventories and prepaid expenses.

Net Working Capital (NWC) 2019

2020 4

NWC₁₉=

Current

assets

–

Current NWC₂₀

liabilities

=

Current

assets

–

Current

liabilities

= RM 5, 114, 493 – RM 989, 528

= RM 3, 928, 322 – RM 999,116

= RM 4, 124, 965

= RM 2, 929, 206

Net Working Capital for Petronas company for 2020 is RM 2, 929,206 worst compare with their current ratio for 2019 that is RM 4,124,965 that show the company do not have absolute measure in liquidity.

2.2

Activity and Asset Management Ratio

Inventory Turnover (ITO) 2019 ITO₁₉ = Cost of revenue Trade of other inventories = RM 3, 071, 201 RM 78, 153 = 39.3 times

2020 ITO₂₀ = Cost of revenue Trade of other inventories = RM 2, 935, 689 RM 44, 940 = 65.32 times

Inventory turnover for Petronas company for 2020 is 65.32 times better compare with their inventory turnover for 2019 is 39.3 times that show the company have the effectiveness of inventory to generate sales.

Average Collection Period (ACP) 2019

2020

5

ACP₁₉ = Trade of other receivable (360)

ACP₂₀ = Trade of other receivable (360)

Revenue

Revenue

= RM 954, 875 (360)

= RM 774, 484 (360) RM 5, 592, 117

RM 5, 458, 250 = 63 days

= 50 days

Average collection period for Petronas company for 2020 is 50 days better compare with their average collection period for 2019 is 63 days that show the company don’t have problems in collecting debt.

Fixed Asset Turnover (FATO) 2019 FATO₁₉ = Revenue

2020 FATO₂₀ =

Revenue

Non – current assets

Non – current assets = RM 5, 458, 250

= RM 5, 592, 117

RM 14, 469, 028

RM 14, 416, 293

= 0.38 times

= 0.39 times

Fixed asset turnover for Petronas company for 2020 is 0.39 times better compare with their fixed asset turnover for 2019 is 0.38 times that show the company has the effectiveness of fixed assets to generate sales. 3.0

6

Total Asset Turnover (TATO) 2019 TATO₁₉ = Revenue

2020 TATO₂₀ = Revenue

Total assets

Total assets

= RM 5, 458, 250

= RM 5, 592, 117

RM 19, 583, 521

RM 18, 344, 615

= 0.28 times

= 0.30 times

Total assets turnover for Petronas company for 2020 is 0.30 times better compare with their total assets turnover for 2019 is 0.28 times that show the company has the effectiveness of total assets to generate sales.

2.3

Leverage or Debt Management Ratio

Debt Ratio (DR) 2019 DR₁₉ = (Total debt / total assets) × 100

2020 DR₂₀ = (Total debt / total assets) × 100

= [(RM 3, 792, 264 + RM 106, 652)

= [(RM 3, 134, 260 + RM 145, 161)

/ RM 19, 583, 521] × 100 = RM 3, 898, 916 RM 19, 583, 521 = 19.91 %

× 100

/ RM 18, 344, 615] × 100 = RM 3, 279, 421 RM 18, 344, 615

× 100

= 17.88 %

Debt ratio for Petronas company for 2020 is 17.88% better compare with their debt ratio for 2019 is 19.91% that show the company have lower amount of debt to finance assets. 4.0

7

Debt to Equity Ratio (DER) 2019 DER₁₉ = (Total debt / Equity) × 100 = [(RM 3, 792, 264 + RM 106, 652) / RM 13, 565, 175] × 100 = RM 3, 898, 916

× 100

RM 13, 565, 175 = 28.74 %

2020 DR₂₀ = (Total debt / total assets) × 100 = [(RM 3, 134, 260 + RM 145, 161) / RM 12, 968, 534] × 100 = RM 3, 279, 421 RM 12, 968, 534

× 100

= 25.29 %

Debt to equity for Petronas company for 2020 is 25.29% better compare with their debt to equity for 2019 is 28.74% that show the company have lower amount of debt in capital structure.

Times Interest Earning (TIE) 2019 TIE₁₉ = Operating profit

2020 TIE₂₀ = Operating profit

Financial costs

Financial costs

= RM 2, 555, 845

= RM 2, 670, 194

RM 229, 684 = 11.13 times

RM 219, 781 = 12.15 times

Time interest earn for Petronas company for 2020 is 12.15 times better compare with their time interest earn for 2019 is 11.13 times that show a company be able meet loan requirement and lower default waste.

8

2.4

Profitability Ratio

Gross Profit Margin (GPM) 2019 GPM₁₉ = Gross profit × 100 Revenue = RM 2, 387, 049 RM 5, 458, 250

2020 GPM₂₀ = Gross profit Revenue

× 100

= RM 2, 656, 428 × 100

= 43.73%

RM 5, 592, 117

× 100

= 47.5%

Gross profit margin for Petronas company for 2020 is 47.5% better compare with their gross profit margin for 2019 is 43.73% that show a company have higher return on contribution margin/gross profit.

Operation Profit Margin (OPM) 2019 OPM₁₉ = Operating profit × 100 Revenue

Revenue

× 100

= RM 2, 670, 194

= RM 2, 555, 845 RM 5, 458, 250

2020 OPM₂₀ = Operating profit

× 100

= 46.83%

RM 5, 592, 117

× 100

= 47.75%

Operating profit margin for Petronas company for 2020 is 47.75% better compare with their operating profit margin for 2019 is 46.83% that show a company have higher of productivity/operating profit. 5.0

9

Net Profit Margin (NPM) 2019 NPM₁₉ = Profit for the year Revenue

2020 NPM₂₀ = Profit for the year × 100

= RM 1, 984, 052 RM 5, 458, 250

Revenue

× 100

= RM 2, 082, 281 × 100

= 36.35%

RM 5, 592, 117

× 100

= 37.24%

Net profit margin for Petronas company for 2020 is 37.24% better compare with their net profit margin for 2019 is 36.35% that show a company have higher return to shareholders/return to net profit.

Return on Total Asset (ROA) 2019 ROA₁₉ = Profit for the year × 100 Total assets

= 10.13%

× 100

Total assets = RM 2, 082, 281

= RM 1, 984, 052 RM 19, 583, 521

2020 ROA₂₀ = Profit for the year

× 100

× 100

RM 18, 344, 615 = 11.35%

Return on assets for Petronas company for 2020 is 11.35% better compare with their return on assets for 2019 is 10.13% that show a company have higher return on investment.

10

Return on Common Equity (ROE) 2019 ROE₁₉ = Profit for the year × 100 Equity = RM 1, 984, 052 RM 13, 565, 175

2020 ROE₂₀ = Profit for the year Equity

× 100

= RM 2, 082, 281 × 100

= 14.63%

RM 12, 968, 534

× 100

= 16.06%

Return on equity for Petronas company for 2020 is 16.06% better compare with their return on equity for 2019 is 14.63% that show a company have higher return to shareholder.

3.0 ASSESMENT ON COMPANY 11

In terms of character, Petronas Berhad is a well-known company around the country as a large organization and corporation that exports Malaysian oil. This company has a lower liquidity ratio for the years 2020 and 2019. As we can see under the liquidity ratio, it shows the decrease of the current ratio and quick ratio. It shows that the company cannot pay short-term obligations on time. Plus, the networking capital ratio also shows a decrease between 2020 and 2019. As a result, this company does not have an absolute measure of liquidity. Overall, Petronas Berhad has a large amount of capital and a good record of managing its finance. It shows that this company can afford to meet the shortterm obligations on time and because it has a strong cash flow on their company. Next, capacity means evaluates a borrower's ability to repay a loan by comparing income to current debt and calculating a debt-to-income (DTI) ratio. Lenders calculate the DTI by dividing the borrower's total monthly debt by the borrower's total monthly income. The PETRONAS firm has demonstrated that the company's debt ratio of 2020 is 17.88% lower than the company's debt ratio of 2019, which is 19.91%. It shows the company has a lower amount of debt to finance assets. The company's net profit margin in 2020 is 37.24% greater than the company's net profit margin in 2019, which is 36.35%. It shows that the company will be successful in 2020 due to its reduced operating costs and increased revenues. As a result, this proved that Petronas Berhad is qualified for the loan. For the capital, The Petronas Berhad has an increase in return to shareholders, which is the net profit margin in 2020 is 37.24%. Plus, Petronas Berhad also shows the return on equity in 2020 is 16.06% higher than in 2019 is 14.63%. It concludes that Petronas Berhad regularly analyses and maintains a reasonable level of shareholders equity to ensure that it complies with all contractual obligations. Furthermore, for the collateral, Petronas Berhad's total assets grew from RM622.4 billion in 2019 to RM630.0 billion in 2020. It is because an increasing capital spending and the effect of Ringgit's depreciation dollar exchange rate. It demonstrates that the company's ability to generate profits by maximizing overall assets.

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Lastly, for the condition, it refers to the economic conditions that might affect the borrower. Petronas Gas sustains performance amidst challenging times during COVID – 19 pandemics. Petronas Gas Berhad was fortunate because its income and profitability were likely unaffected by COVID – 19 and other market fluctuations. Petronas Berhad is carefully reviewing the operational and capital expenditures, prioritizing and optimizing certain operations over others. Based on 2020, the operating profit margin for 2020 better compares with 2019. Its means that the company has higher productivity. In summary, Petronas Berhad well manages their company within a hard time and still manages to gain profit from the company.

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4.0 SWOT ANALYSIS A SWOT analysis is a methodology for analyzing a company's competitive stance in its business environment. It includes analyzing its internal Strengths (S) and Weaknesses (W), followed by identifying the Opportunities (O) and Threats (T) it confronts in its broad business environment.

STRENGTH (S) The strength of Petronas is it has a variety of intellectual property rights, including trademarks and patents. These provide it with protection for its goods and prevent competitors from copying or replicating them. Next, Petronas has come a long way since they oversee the operations of integrated global companies. They have built their capabilities within upstream and expanded into the full range of the downstream industry to add value to our petroleum resources and have built capacity as an operator with a successful record of oil and gas operations in Malaysia.

WEAKNESS (W) The weakness of Petronas is a lack of autonomy. As we all know, PETRONAS is 100% managed by the Malaysian government. This company has lost its self-rule because the political figures may intervene with the daily operations activities of the company. The effectiveness of PETRONAS is affected because the company is reliant on the government for the importance of decision choices. Due to similar reasons, the company cannot make any decisions without government approval.

OPPORTUNITIES (O) Petronas can use the new technologies to implement a differential strategy in the new market. It will allow the company to retain its current customers by providing excellent service. Furthermore, it may attract new customers through additional significant offerings.

THREATS (T) The threat that PETRONAS needs to face is competition from other large companies in Malaysia, including Shell, Caltex, Petron, and others. It is because the other companies have advantages in terms of technology and the ability to manufacture high-quality products. Furthermore, to compete with other companies, PETRONAS needs to develop more products that provide benefits to consumers. 14

5.0 CONCLUSION Petronas Berhad's unique experience and skills, along with its technological and operational capabilities, have allowed it to be recognized as the chosen strategic partner by multinational corporations and host nations throughout the years. Despite the challenging commercial and economic climate, PETRONAS can integrate, create value, and develop international operations. Despite the challenging commercial and economic climate, PETRONAS can integrate, create value, and develop international operations. These will get the company to further its vision of being a “Leading Oil and Gas Multinational of Choice.” Petronas has cooperated in the oil and gas industry for a long time. Petronas has adapted to the chaos caused by Covid-19 by providing products and services at their best in a changing environment. Petornas must take the required efforts to guarantee that the company operates sustainably and considered the environmental effect. Petronas Berhad has been in operation for 42 years. It has established itself as one of the most stable and leading companies in the world. We shall be pleased to be Malaysians now that we are familiar with Petronas Berhad's company profile, commercial activities, and corporate social responsibility. Although we are still a developing country, we have Petronas that can compete with other major corporations and offer our country a reputation on a level with other worldwide corporations.

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6.0 REFERENCES 1. Petronas SWOT Analysis / SWOT Matrix. (n.d.). Essay48. Retrieved June 26, 2021, from https://www.essay48.com/term-paper/13703-Petronas-Swot-A...