1.

0 INTRODUCTION

Background of Petronas Company

Petroliam Nasional Berhad (National Petroleum Limited) or also known as Petronas is an oil and

gas company based in Malaysia. The Malaysian government has entrusted the organization with

all of Malaysia's oil and gas resources, as well as the job of developing and adding value to these

resources, since it was created in 1974. During 2019, Petronas has ranked as the 158th largest

company amongst the Fortune Global 500 in the world (Petronas 2020). It is also mentioned that

Petronas is one of the worldwide company that contributed their usage in many foreign country.

Petronas employs various nationalities employees with the total of 30,000 employees from 38

countries all over the world. Thus, Petronas also practices a best culture in the management

which is people orientated and always environmentally friendly.

Moreover. Petronas is also serving their best management which is well known for their

friendly environment. The Malaysia government also entrusted Petronas to develop and add

value to these resources since the company has vested with the entire oil and gas resources in

Malaysia. However, Petronas is also involved in the full spectrum downstream activities which

include oil refining, shipping, property investment, trading, marketing, and contribution of

petroleum products (Petronas 2020).

 Apart from this, Petronas have set up service stations in Malaysia, Thailand, South

Africa, Indonesia and Sudan. Petronas Sprinta premium grade engine oil and Syntium are among

the company's global contributions of automotive and industrial lubricants.

2.0 METHODOLOGY

2.1 Liquidity Ratio

Liquidity ratios are financial indicators that are used to determine a debtor's ability to meet

current debt obligations without needing to acquire extra funds. Liquidity ratios assess a firm's

capacity to meet its debt obligations. Current liabilities are analyzed with liquid assets such as

marketable securities for 3 months or short-term periods in an emergency (Kenton & Hayes

2019).

2.1.1 Current Ratio

A company's ability to pay short-term obligations, such as those that are due within a year, is

assessed. It shows investors and analysts how current assets on a company's balance sheet might

be utilized to pay down current debt and other obligations.

current assets
Current Ratio =
current Liabilities

Year 2017 2018 2019 2020 2021

87,619 117,074 79,357 380,677 21,426

22,025 68,879 24,563 56,718 4,953

= 3.98 = 1.70 =3.23 =6.71 =4.33

 2.1.2 Quick Ratio

The quick ratio is a measure of a company's ability to satisfy short-term obligations with its most

liquid assets and is an indicative of its short-term liquidity position.

Current Assets−Inventory
Quick Ratio =
Current Liabilities

Year 2017 2018 2019 2020 2021

87,619 117,074 79,357 380,677 21,426

15,379 14,503 14,447 12,491 2,214

= 3.28 = 1.49 =2.64 =6.49 =3.88

2.2 Asset Management Ratio

Assets Management Ratios is a tool to measure the efficiency and effectiveness a company in

increase the revenue and expand their business. It is also the main key in analysing how well the

company manage their assets.

2.2.1 Average Collection Period

The average collection period is an accounting indicator that represents the average number of

days between the date of a credit sale and the date of payment by the purchaser. The average

collection period is used to determine the success of a company's AR management practises.

Each company businesses must be able to manage their regular collection period in order to run

successfully.

Account Receivable
Average Collection Period =
365

Year 2017 2018 2019 2020 2021

395 395 395 395 395

6.55 7.79 5.54 5.86 5.85

= 60.31 = 50.71 = 71.30 = 67.41 = 67.52

2.2.2 Receivable turnover

Accounts receivable turnover is described as a ratio of average accounts receivable for a period

divided by the net credit sales for that same period. This ratio gives the business a solid idea of

how efficiently it collects on debts owed toward credit it extended, with a lower number showing

higher efficiency.

Credit Sales
Receivable Turnover =
Account Receivable
 Year 2017 2018 2019 2020 2021

4810 5498 5458 5592 5649

550 631 687 639 774

= 8.75 = 8.71 =7.94 =8.75 =7.30

2.2.3 The Inventory Turnover

The number of times a company sells or uses goods in a certain time period is known as

inventory turnover. It's a useful approach to compare a company's health to the industry average,

because a low turnover rate indicates a company's incapacity to move items.

COGS
The Inventory Turnover =
Inventory

Year 2017 2018 2019 2020 2021

62 62 77 43 44
67 67 78 45 46

= 0.93 = 0.93 =0.99 =0.96 =0.96

 2.2.4 Total Asset Turnover

Total asset turnover, often known as asset turns, is a financial statistic that indicates how well a

company uses its assets to generate sales revenue or profits.

Sales
Total Asset Turnover =
Total Assets

Year 2017 2018 2019 2020 2021

4,810 5498 5458 5592 5649

18,173 19,129 20,364 18,713 19,517

= 0.26 = 0.29 =0.27 =0.30 =0.29

2.2.5 Fixed Asset Turnover (FAT)

Fixed Asset Turnover (FAT) is a sales efficiency ratio that measures how well a company

utilises fixed assets to generate revenue. Usually, a greater fixed asset ratio indicates that fixed

asset investments are being used more effectively to create revenue. This ratio is frequently

examined in conjunction with leverage and profitability ratios.

Sales
Fixed Asset Turnover =
¿ Assets
 Year 2017 2018 2019 2020 2021

4,810 5498 5458 5592 5649

1846 917 1094 964 1032

= 2.61 = 6.00 =4.99 =5.80 =5.47

2.3 Leverage Ratio

A leverage ratio is any kind of financial ratio that indicates the level of debt incurred by a

business entity against several other accounts in its balance sheet, income statement, or cash flow

statement (Jason Gordon).

2.3.1 Debt Ratio

The debt ratio is defined as the ratio of total debt to total assets, expressed as a decimal or

percentage. It can be interpreted as the proportion of a company’s assets that are financed by

debt. The larger debt ratio will show how great the company financial leverage is, otherwise the

smaller debt ratio will show how bad the company financial leverage is. The suitable debt ratio

depended on the business and element that are distinct from the company.

total debts
Debt ratio =
total assets

Year 2017 2018 2019 2020 2021

 3,695 3,892 4,782 4,133 4,575
18,173 19,129 20,364 18,713 19,517

= 0.20 = 0.20 =0.23 =0.22 =0.23

2.3.2 Debt to Equity Ratio

The debt equity ratio shows how much debt and how much equity the business had used to

finance its activities (Kevin 2019). The debt to equity ratio is used to evaluate a company’s

financial leverage.The company with high debt to equity ratios may not be able to incur more

capital because the investors prefer the company with low debt-to-equity ratios. The investor

benefit will have a better protection when the company is having a business decline, their benefit

could have a better protection because the company is having low debt-to-equity ratios. When a

company is having a too high debt to equity ratio, it may not be able to bear with more debt or

receive more capital from the shareholders (Jeanne 2020).

total debt
Debt to Equity ratio =
total stockholder equity

Year 2017 2018 2019 2020 2021

 3,695 3,892 4,782 4,133 4,575
12,762 13,200 13,565 12,969 13,340

= 0.28 = 0.29 =0.35 =0.32 =0.34

2.3.3 Time Interest Earned

The times interest earned ratio is a solvency indicator that assesses a company's ability to meet

its debt obligations. A high times interest generated ratio usually indicates that a company is

performing well and is less risk to bankruptcy . Meanwhile, a high calculation can indicate that a

company isn't focused on growth and isn't a good in long-term investment.

EBIT
Time interest earned ratio =
Interest

Year 2017 2018 2019 2020 2021

3,032 3,585 3,381 3,546 3,613

113 169 230 220 175

= 26.8 = 21.2 =14.7 =16.1 =20.6

2.4 Profitability Ratio

Profitability ratios are type of financial metrics that use by business to assess a company's ability

to earn profits from its sales. This also indicate a company's efficiency determines how much

profit and value it can generate for its owners. Although a higher ratio shows a good and stable

condition to a company but ratio will provide much more information when comparing the result

to a similar company, industries average and the company own historical result. (Kenton 2020).

2.4.1 Gross Profit Margin

The gross profit margin is a metric used by analysts to evaluate a company's financial health by

determining the amount of money left over after subtracting the cost of goods sold from product

sales (COGS).

Revenue−COGS
Gross Profit Margin=
Revenue

Year 2017 2018 2019 2020 2021

4,810−1677 5,498−1825 5,458−1934 5,592−1919 5,649−1,946

4,810 5498 5,458 5,592 5,649

= 0.651 = 0.668 =0.646 =0.657 =0.656

 2.4.2 Operating Profit Margin

An operating margin is a ratio that assesses a company's efficiency in terms of day-to-day

operations and pricing structures. This margin shows how much money a business keeps after

paying for things like payroll, taxes, and materials.

EBIT
Operating Profit Margin =
Sales

Year 2017 2018 2019 2020 2021

2,042 2,243 2,529 2,630

4,810 5458 5,592 5,649

= 0.425 =0.411 =0.452 =0.466

2.4.3 Net Profit Margin

After all expenses have been removed from sales, the net profit margin is the proportion of

revenue left. The assessment displays how much profit a company can make from its overall

sales. Usually, a net profit margin of more over 10% is considered good, though this varies by

industry and corporate structure.

Net Income
Net Profit Margin =
Sales
 Year 2017 2018 2019 2020 2021

1,793 1,793 1,935 2,010 1,989

4,810 5,498 5,458 5,592 5,649

= 0.373 =0.326 =0.355 =0.359 =0.352

2.4.4 Return on Asset

Return on assets or also known as Return On Total Assets is a ratio that compares the value of a

company's assets to the profits it generates over a given time period. Managers and financial

analysts use return on assets to measure how efficiently a company is using its resources to

create a profit.

Net Income
Return on Assets=
Total Assets

Year 2017 2018 2019 2020 2021

1,793 1,793 1,935 2,010 1,989

18,173 19,129 20,364 18,713 19,517

= 0.1 =0.094 =0.095 =0.107 =0.0102

 2.4.5 Return on Equity

To be specific, the return on equity (ROE) describing the rate of profit growth a business

generates for shareholders and owners. Investors and managers use ROE to compare the growth

rates of different companies, or of a company and an industry benchmark.

Net Income
Return on Equity=
Total Equity

Year 2017 2018 2019 2020 2021

1,793 1,793 1,935 2,010 1,989

18,173 19,129 20,364 18,713 19,517

= 0.1 =0.094 =0.095 =0.107 =0.0102

2.5 Market Value Ratio

Market Value Ratios are used to calculate the current share price of a publicly traded company's

stock. These ratios are used by current and potential investors to determine if a company's stock

is overvalued or undervalued.
 2.5.1 Earning per Share

One of the most important factors in determining a company's share price is earnings per share.

A higher Earnings Per Share (EPS) shows that the company is profitable and has more profits to

offer to its shareholders.

NetIncome
Earning per Share (EPS) =
No . ofShareOutstanding

Year 2017 2018 2019 2020 2021

1,793 1,793 1,935 2,010 1,989

1,979 1,979 1,937 1,937 1,979

= 0.91 =0.91 =0.98 =1.02 =1.01

3.0 FINDING AND ANALYSIS

3.1 Liquidity Ratio

3.1.1 Current Ratio

Petronas' current ratio fell from 2017 to 2018 in the beginning, but then rose from 2018 to

2020. After that, reduce it to 2021. It is because the corporation may have financial difficulties in

2021 when it comes to paying debts and other responsibilities.

3.1.2 Quick Ratio

Petronas' quick ratio fell from 2017 to 2018, but rose to 2020. After that, from 2020 to 2021, it

will decline once more. Because Petronas' inventory is unstable on inventories, this is the case.

As a result, the quick ratio was reduced in 2021.

3.2 Asset Management Ratio

3.2.1 Average Collection Period

According to the graph above, Petronas' average collection period declined from 60.31 in 2017

to 50.71 in 2018 before rising to 71.3 in 2019. It's possible that it's because the company needs to

improve its communication with clients about their debts and payment expectations. After a

minor increase to 67.52 in 2021, the average collection period reduced to 67.41 in 2020, maybe

because the company collects payments faster than before.

3.2.2 Receivable Turnover

According to the graph above, Petronas' receivable turnover declined slightly from 8.75 in 2017

to 8.71 in 2018, and then to 7.94 in 2019. It indicates that the company is facing an increase in

overdue customers. The receivable turnover increased from 2019 to 8.75 in 2020. It could be

because a corporation processes credit more efficiently. The value has declined again in 2020,

according to the graph, to 7.30 in 2021.

3.2.3 Inventory Turnover

According to the graph above, Petronas' inventory turnover was 0.93 in 2017 and 2018 and

remained unchanged in 2019. In 2019, the inventory turnover increased from 0.93 to 0.99. It's

possible that it's because the company's product is in high demand. It also shows that the

corporation moves inventory efficiently in the course of business. Because the company is not

transforming its inventory into cash as quickly as it used to be, the inventory turnover has

declined from 0.99 in 2019 to 0.96 in 2020. Then, in 2020 and 2021, the inventory turnover stays

the same.

3.2.4 Total Assets

This graph above shows, Petronas total assets went from 0.26 in 2017 to 0.29 in 2018, which

could indicate that the corporation is expanding, but everyone understands that there's a lot more

going on behind the scenes than just looking at the assets. The objective is to find out how an

asset expansion can be funded by a company. In 2019, total assets fell to 0.27, before rising to

0.30 in 2020. In 2021, the total assets fell to 0.29. Because losses are related to a company's

routine activities, the overall assets have reduced.

3.2.5 Fixed Assets

According to the graph above, Petronas' fixed assets climbed from 2.61 in 2017 to 6.00 in 2018

before decreasing to 4.99 in 2019. Fixed assets climbed to 5.87 in 2020 before declining in 2021.

The higher the fixed asset turnover ratio, the more efficient the company's fixed asset

investments are. A high ratio also means that a corporation spends less money on fixed assets per

dollar of sales income.

3.3 Leverage Ratio

3.3.1 Debt Ratio

 Debt Ratio

2021

2020

2019

2018

2017

0.185 0.19 0.195 0.2 0.205 0.21 0.215 0.22 0.225 0.23 0.235

Based on the bar chart, we can see that the debt ratio for Petronas Company was 0.20 times in

2017, remained stable till 2018, and then increased to 0.23 times in 2019. Meanwhile, the debt

ratio fell to 0.22 times in 2020 before rising to 0.23 in 2021. This is beneficial since debt ratios of

0.4 or less are deemed favourable, whereas debt ratios of 0.6 or above make borrowing money

more difficult. A low debt-to-income ratio indicates greater creditworthiness, whereas a high

debt-to-income ratio indicates a lack of credibility.

3.3.2 Debt to Equity Ratio

 Debt to Equity Ratio

2021

2020

2019

2018

2017

0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4

The debt equity ratio of Petronas Company was 0.28 times in 2017, 0.29 times in 2018,

and 0.35 times in 2019. As shown in the bar chart above, the debt equity ratio was 0.28 times in

2017, 0.29 times in 2018, and 0.35 times in 2019. However, the data decreased to 0.32 times in

2020, before improving to 0.34 times in 2021. A debt-to-equity ratio of 2 to 2.5 is considered

healthy, but anything greater than that would result in a bad debt-to-equity ratio for the company.

3.3.3 Time Interest Earned

 Time Interested Earned

2021

2020

2019

2018

2017

0 5 10 15 20 25 30

The interest rate earned by the Petronas Company in 2017 was 26.8 times, and it gradually

declined to 21.2 times in 2018, 14.7 times in 2019, as seen in the bar chart above. In 2020, it

increased to 16.1 times, and in 2021, it increased to 20.6 times. The greater ratio shows that

Petronas has strong capabilities and is deemed a low-risk corporation. Companies with a times

interest earned ratio of less than 2.5 are regarded to be at a considerably higher danger of going

bankrupt or defaulting.

3.4 Profitability Ratio

3.4.1 Gross Profit Margin

The gross profit margin obtained by the Petronas Company in 2017 was 0.651, and it continued

to rise to 0.668 in 2018, before falling to 0.646 in 2019. In 2020, it increased to 0.657, then

decreased to 0.656 in 2021.

3.4.2 Operating Profit Margin

The operating profit margin produced by the Petronas Company in 2017 was 0.425, dropped to 0

in 2018, and then steadily increased to 0.411 in 2019. In 2020, it grew to 0.452, and in 2021, it

increased to 0.466.

3.4.3 Net Profit Margin

The net profit margin obtained by the Petronas Company in 2017 was 0.373, and it has been

steadily decreasing since then, to 0.326 in 2018, and 0.355 times in 2019. In 2020, it increased to

0.359 before dropping to 0.352 in 2021.

3.4.4 Return on Asset

The return on asset earned by the Petronas Company in 2017 was 0.1, and it has been steadily

decreasing since then, to 0.094 times in 2018, and 0.095 times in 2019. In 2020, it increased to

0.107 before dropping to 0.102 in 2021.

 3.4.5 Return on Equity

The return on equity achieved by the Petronas Company in 2017 was 14.4 percent, and it has

steadily declined to 13.6 percent in 2018, 14.3 percent in 2019, as seen in the graph above. In

2020, it increased to 15.5 percent before falling to 15 percent in 2021.

3.5 Market Value Ratio 

3.5.1 Earning per Share (EPS)

Earning per Share

1.04
1.02
1
0.98
0.96
0.94
0.92
0.9
0.88
0.86
0.84
2017 2018 2019 2020 2021

Earnings per share (EPS) is one of the most essential components that investors are searching

for. According to the data, the company has been growing year after year. From 2017 to 2021,

the data shows that it was 0.91 in 2017 and 1.01 in 2021. As a result, the company has made a

good market investment and may now expand to the global market to developed.
4.0 CONCLUSION AND RECOMENDDATION

First and foremost, we may assess the company's present state using the liquidity ratio,

which consists of the current and quick ratios. The company's current ratio increased from 3.98

in 2017 to 4.33 in 2021, while its quick ratio increased from 3.28 in 2017 to 3.88 in 2021. This

indicates that the corporation can repay the loan and debt in the short term because the current

ratio and quick ratio are both greater than 1 in 5 years, indicating that the business is doing well

and can meet its obligations.

Secondly, we can judge the current financial condition of the company based on asset

management ratio that are average collection period, receivable turnover, inventory turnover,

total asset turnover, and fixed asset turnover. Average collection period of the company shows

1.39 days in 2017 to 1.96 days in 2021, this means that the company gets money more quickly

because the lower the numbers of days is the better. Receivable turnover of the company shows

8.75 times in 2017 to 7.30 times in 2021. Inventory turnover of the Petronas Gas Bhd Company

shows 0.93 times in 2017 to 0.96 times in 2021. It is shows that the numbers decrease and that

means the company have to watch out for the obsolete inventory. Total asset turnover of

Petronas Gas Bhd Company shows 0.26 times in 2017 to 0.29 times in 2021. This show that,

Petronas Gas Bhd Company has a low ratio because they not using their assets efficiently and

most likely to have management or production problems because the higher the total asset

turnover ratio, the better and more efficiently the company use their asset. Last ratio for the asset

management ratio is the company fixed asset turnover shows 2.61 times in 2017 to 5.47 times in

2021. This means Petronas Gas Bhd Company are using their assets efficiently.
 Next, the third ratio is leverage ratio that contain debt ratio, debt equity and time interest

earned. Debt ratio of Petronas Gas Bhd Company shows 0.20 in 2017 to 0.23 in 2021. This

means, the company showed a debt ratio less than 1. A low value ratio indicates that the

company is stable with lower debt ratio and indicate the total assets of the company are financed

by liabilities. Debt equity ratio of Petronas Gas Bhd Company shows 0.28 in 2017 to 0.34 in

2021. This means, the company did not able to pay of their long-term debt and need to pay

interest as it comes due because the higher the ratio, the higher of risk carried by the company.

Time interest earned (TIE) of Petronas Gas Bhd Company shows 31.9 times in 2017 to 20.6

times in 2021. It means, the company can meet the company interest expenses on their debt

because (TIE) is more than 1.0 because the higher the number, the better the company pay their

interest expenses or debt service

The profitability ratio is the fourth ratio that contains gross profit margin, operating profit

margin, net profit margin, return on asset and return on equity. Gross profit margin of Petronas

Gas Bhd Company shows 0.651 in 2017 to 0.656 in 2021. This mean the company generates

more money on each product, it is said to be profitable. It has a higher gross profit margin since

it sells. Operating profit margin in was increased from 2017 until 2021 from 0.425 to 0.466. An

increased operating margin over time implies a business that is becoming more profitable. Net

profit margin of Petronas Gas Bhd Company shows 2017 0.373 decreased to 35.2 in 2021.This

indicates that Petronas’s marketing plan failed miserably. A low net profit margin indicates that a

company's cost structure or pricing initiatives are unsuccessful. For the return on asset Petronas

company show increased from 2017 until 2021, from 0.1 to 0.102 show a rising return on assets

indicates the company may have invested well in assets that have successfully generated revenue

growth indicating a sign the company may not be in trouble. Last ratios for profitability ratios are
return on equity it show in 2017 is 14.4% and increased to 15% in 2021. It can be concluded that

the company is becoming more efficient in creating profits and increasing shareholder value than

this statement it can be concluded that I feel Petronas Gas Bhd Company Has performed well in

generating profits. However, I still feel that there is a need to improve the marketing strategy and

so on for the profit of the company in the future.

Lastly, there's the market value ratio, which includes earnings per share (EPS). The profit

of a firm is divided by the number of outstanding shares of its common stock to compute

earnings per share (EPS). The resulting figure is used to determine a company's profitability. It is

typical for a corporation to announce earnings per share (EPS) that has been adjusted for unusual

items and probable share dilution. The higher a company's earnings per share (EPS), the more

profitable it is thought to be. In 2017, Petronas Gas Bhd's (EPS) was RM 0.91, and in 2021, it

would be RM1.01 as the company earns greater profits to distribute to its shareholders.
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6033.MY | Petronas gas Bhd annual income statement - WSJ. (n.d.). https://www.wsj.com/market-

data/quotes/MY/XKLS/6033/financials/annual/income-statement

Glossary - Bankrate.com. (n.d.). Bankrate. https://www.bankrate.com/glossary/n/

(2018, August 7). Investopedia. https://www.investopedia.com/