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Financial Statement Analysis of Total Energies SE

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 Financial Statement Analysis of Total Energies SE

Fatima Bin Tarsh, Fatima Alfalahi, Hazza Alshamsi, Maitha AlShamsi, Mohammed Alwahedi,

Reem Almansoori

Supervised by:

Professor Haitham Nobanee

Abstract

Total SA, currently known as Total Energies SE is a France-based oil company that extracts,

refines, and distributes petroleum products while also trading in other energy and gas products.

The research paper analyzes the firm's financial position, with the data derived from its 4-year

financial records. The analysis is based on four major financial ratios: profitability, liquidity,

leverage, and cash flow ratios. The analysis revealed that the company had experienced a decline

in its revenues and profits, a factor that is attributed to the current COVID-19 pandemic. The

analyses of the liquidity ratios established that the company's quick and current ratios are above 1,

implying that it can settle its current debts without selling its fixed assets. Also, the leverage ratios

revealed that the company generates revenues from its assets and shareholders' equity. However,

the analysis established that most of the firm's fixed assets are financed by debts, thus putting the

company in a risky financial position. Therefore, the investments should consider the company for

investment since the firm is financially stable based on the analyzed ratios.

Keywords: Liquidity, Gross Profit, Net Sales, Profit Margin

1.0 Introduction

The oil and gas industry has been perceived to be one of the most lucrative sectors globally.

Firms in this industry report greater revenues and profits that outdo those of other companies in

different sectors. Total SA is one of the firms operating in the oil and gas industry in France. It

was founded in 1924 and has been reported to be among the seven supermajor oil companies

globally. Total SA's business covers a significant portion of the oil, and gas chain. According to

Total Energies (2021), the firm trades in natural gas and crude oil, production and generation of

power, oil refining, and marketing petroleum products. Total SA produces and markets crude and

refined oil, low carbon electricity, and natural gas. It also engaged in the exploration and extraction

of oil and gas and chemicals that it also refines after the extraction (Reference for Business, 2021).

It also distributes various oil and gas products to the end consumer. The firm operates through

multiple chains, the significant segments being exploration and production, refining and

marketing, and distribution. It has 105,476 employees, with average annual sales reported at

$119.7 billion and a market capitalization of $118.4 billion (Forbes, 2021). Total SA was ranked

29th largest public company globally by Forbes Global 2000 (Forbes, 2021). It was also ranked

the 25th largest company on the globe by the Fortune Global 500 in the same year (Fortune, 2021).

The company was founded as Total SA in 1924 and later changed its name to Total Energies on

28 May 2021 (Total Energies, 2020). It thus operates with the new trade name.

2
2.0 Literature Review

Inventors are willing and ready to work with financially stable firms and those whose

market share is above average. The best method of establishing the financial performance of

companies is through the analysis of their financial ratios. Even though sites like Yahoo Finance

report the position of the firms in terms of revenues, profits, assets, and liabilities, they fail to

compute the requisite ratios for determining the stability of the organizations. Thus, the data they

provide are computed separately using the standard formulas to establish the best and worst-

performing areas in an organization and the possibility of investors considering them for their

investment decisions.

2.1 Current Assets

These are assets that can be conveniently be sold, exhausted, consumed, or used in the day-

to-day operations of an organization. According to Hayes (2021), the current assets are used within

one year and easily converted into cash. Current assets include prepaid liabilities, marketable

securities, inventory and cash equivalents, and accounts receivables. These assets are important to

organizations since they can be easily converted into cash, thereby funding the daily operations of

the enterprises (Hayes, 2021). Important to note is that current assets should only include items

capable of being liquidated within a year at a fair price. For instance, the first moving consumer

goods can easily be sold out to fund the firms' operations. On the contrary, some types of inventory,

though considered as current assets, may take more than a year before being liquidated. For Total

SA, its current assets can include barrels of crude oil, foreign currency, productions in progress,

and liquid cash it holds in the accounting department.

3
2.2 Current Liabilities

Liabilities are also used to finance the operations of businesses. They are legal obligations

or debt owed to service providers such as employees, insurance firms, suppliers, and contractors

to settle within one year after service delivery (Corporate Finance Institute, 2021a). Therefore,

liabilities are future sacrifices associated with economic benefits that firms must settle due to past

transactions or credit agreements. Current liabilities are the short-term financial obligations that

organizations need to pay within a year. They are in most cases settled using the current assets,

meaning that the latter must be more than the former for the organizations to meet their obligations

(Corporate Finance Institute, 2021). The current liabilities include but are not limited to interest

payable on borrowed funds, income tax and bills payable, bank overdrafts, and accrued expenses.

3.0 Data and Methodology

Total SA's data on its financial performance was obtained from its major accounting

statements. The current assets and liabilities are computed, giving no reason for analyzing them in

this paper. However, these figures would be used to calculate other ratios used to assess the

financial strength. In this section, the paper discusses the aspects that would be used to calculate

the financial ratios in the next chapter, paying attention to current assets, current liabilities, sales,

and profits.

Table 1: Financial Data of Total SA in 4 billions

Item/Year 2020 2019 2018 2017

Current Assets 79.679 85.265 79.799 84.948

Current Liabilities 79.679 85.265 79.799 84.948

4
Inventories 14.730 17.132 14.880 16.520

Cash 35.769 31.199 31.516 36.406

Receivables 25.753 34.253 31.093 28.258

Total Assets 266.132 273.294 256.762 242.631

Total Liabilities 160.047 153.989 138.648 128.594

Total Equity 106.085 119.305 118.114 114.037

Sales 119.704 176.249 184.106 149.099

Cost of Goods Sold100.093 132.218 140.033 115.706

EBIT -4.981 19.416 19.480 12.264

Interest -1.439 -1.863 -1.327 -0.842

Net Income -7.265 15.352 15.262 7.019

Operating Cash
14.803 24.685 24.703 22.319
Flow

Note: all values displayed in billion USD, fiscal years end in December. Source: Yahoo Finance,

2021

Different ratios will be used in this analysis. The first is the profitability ratios. The

financial analysts use the profitability ratios to assess the degree to which the organizations realize

profits from their operations and investments. The gross margin, operating margin, return on asset

ratio and equity ratio are the major categories in the group. The gross margin ratio assesses the

percentage of profit a firm generates to its net sales (Corporate Finance Institute (CFI), 2021). This

ratio is obtained by dividing the gross profit by the net sales. In most cases, 5%, 10%, and 20%

gross margin ratio is considered low, average, and good (CFI, 2021). The operating profit margin

measures the gross profit the company generates from its operations before subtracting the interest

5
accrued on money borrowed and taxes. The analysts divide the operating profit by the total revenue

to realize the operating profit margin ratio. A good operating margin should be above 15% (CFI,

2021). The firm managers, therefore, need to target this value to foster the stability of their

companies.

There is also the return to asset ratio. Analysts use it to measure the degree to which the

firm generates revenues from its assets. They divide the net income by the total assets to get the

return on asset ratio. The higher the ratio, the more capable the firm is of using its assets to generate

revenue. The last is the return on equity ratio which assesses an organization's ability to generate

revenues using the shareholder's equity (CFI, 2021). The return on equity ratio is obtained by

dividing the firm's net income by shareholders' equity. A significant ratio implies that the firm is

efficient in the utilization of capital to generate revenue.

The financial analysts and investors use the liquidity ratios to establish the capability of

firms to use their first moving assets to settle their current liabilities. The main liquidity ratios are

cash, current and quick ratios. The current ratio is used by analysts to assess the capability of firms

to meet their short-term obligations using the current liabilities (CFI, 2021). The ratio is established

by dividing the current assets by the current liabilities. A ratio of more than 1 implies that the

company has adequate current assets that can be quickly be converted into cash to settle the short-

term financial obligations (CFI, 2021). There is no limit for how much ratio is good for the firm.

However, a high ratio may imply that the firm is leaving much of its cash unused rather than

investing in growing the organization.

The next is the quick ratio which establishes the ability of an organization to settle its current

liabilities using the most liquid and moving assets. The former refers to the assets that can easily

be converted into cash to meet the financial obligations of an organization. The ratio measures the

6
amount of money within the organization that would be used to pay an equal amount of current

liabilities (Seth, 2021). In some cases, the inventory in a firm may not be liquidated, making it

incapable of helping the firm meet its current liabilities. Thus, the quick ratio eliminates the

challenge posed by the inventory by ensuring that its value is not used in establishing the ability

of firms to settle their short-term debts. Thus, the quick ratio is the difference between the current

assets and inventories divided by the current liabilities. A quick ratio of 1 suggests that the firm

can settle its short-term debts without converting its inventory into cash (Seth, 2021). The ratio is

therefore effective in assessing the firm with a slow moving inventory.

The cash ratio is the last liquidity ratio used in assessing the firm's ability to settle its short-

term debts. It assesses the ability of the firm to settle its current liabilities using the available cash

and cash equivalent. The method is a striker and more conservative than the other two since it only

uses cash and cash equivalent, unlike the others that employ all current assets. The analysts obtain

the ratio by dividing cash equivalents by the current liabilities (CFI, 2021). The figure above

implies that a company has enough liquid cash and cash equivalent to pay the short-term debts

(CFI, 2021). Therefore, the ratio implies that a figure excess of 1 would be left in the firm after

short-term debts have been settled.

Additionally, there are the leverage ratios. These ratios measure the amount of capital

sourced from debts. They are thus used to establish the debt levs of an organization. There are

different ways that firms use in funding their projects. Even though shareholder equity is the most

common and preferred method, some of the companies do not have enough capital from the

stockholders (Franquesa & Vera, 2021). They are thus left with the option of seeking loans from

financial institutions and other players within their industries. Debt financing is important since it

allows companies to have access to adequate capital to duns their projects. However, caution needs

7
to be paid to ensure that the funding sources only contribute to a small portion of capital, with the

significant portion coming from the shareholders. The leverage ratios are used to establish the level

of funds that are sourced from external parties.

The common ratios are debt ratio and debt to equity ratio. The debt ratio provides the

percentage of assets financed by borrowing. The higher rate implies that debts fund a significant

portion of the assets, thus posing a financial risk to an organization. The ratio is obtained by

dividing the total liabilities by total assets. Next is the debt to equity ratio, which measures the

weight of the debts and the financial implications to the capital generated by the shareholders. The

ratio is obtained by dividing the total liabilities by the shareholder equity. A ratio of 0.5 suggests

that the firm has a debt of $0.50 for every $1 of equity (CFI, 2021). A stable organization has a

large portion of its operations financed by shareholders' equity and not debts.

The last is the cash ratios. These ratios assess the ability of an organization to raise revenues

from its assets. They thus measure how efficiently the organizations utilize the resources to

generate more funds to aid in their operations. The first is the asset turnover ratio which assesses

the ability of organizations to generate sales from assets. It is calculated by dividing the net sales

by the total assets. An asset turnover ratio above 1 implies that the firm is using its assets to raise

revenue (Alneyadi et al. 2021). The next ratio is the inventory turnover. It measures the number of

times the firm replaces its inventory. The ratio is obtained by dividing the value of the cost of

goods sold by the inventory. A high turnover implies that goods are sold faster and quickly

replaced, leading to high cash flows (CFI, 2021). Effective analysis of the ratio would help in

establishing the cash flow levels in the company.

4.0 Results and Discussion

8
 Table 2: Liquidity Ratios of Total SA

Item 2017 2018 2019 2020

Current Ratio =$84.948/56.70 =$79.799/$62. =$85.265/$70. =$79.679/$64.67

Current ratio =current 5 234 244 6

assets/current liabilities =1.50 =1.28 =1.21 =1.23

Quick Ratio =(84.948- =(79.799- =(85.265- =(79.679-

(Current assets – Inventories) / 16.520)/56.705 14.880)/70.244 17.132)/70.244 14.730)/64.676

Current liabilities =1.21 =0.92 =0.96 =1.00

Cash Ratio =36.406/56.705 31.516/62.234 =31.199/70.24 =35.769/64.676

Cash and Cash equivalents / 0.64 =0.51 4 =0.55

Current Liabilities =0.44

Figure 1: Current ratio of Total SA

CURRENT RATIO OF TOTAL SA

1.5

1.28

1.23
1.21
Ratio

2017 2018 2019 2020

Year

9
Figure 2: Quick Ratio of Total SA

Quick Ratio of Total SA

1.21

1
0.96
0.92
Ratio

2017 2018 2019 2020

Year

Figure 3: Cash Ratio of Total SA

Cash Ratio of Total SA

0.7

0.6

0.5

0.4
Ratio

0.3

0.2

0.1

0
2017 2018 2019 2020
Year

10
Table 3: Activity Ratios of Total SA

Ratio/Year 2020 2019 2018 2017

Receivable Turnover 0.88 1.18 1.87 3.22

Total Asset Turnover 0.24 0.34 0.64 0.17

Figure 4: Receivable Turnover for Total SA

Receivable turnover ratio for Total SA

3.5

2.5

2
Ratio

1.5

0.5

0
2017 2018 2019 2020
year

Figure 5: Total Asset Turnover for Total SA

Asset Turnover Ratio For Total SA

0.7
0.6
0.5
RATIO

0.4
0.3
0.2
0.1
0
2017 2018 2019 2020
YEAR

11
 The firm has reported a current ratio of more than 1 for the last 4 years based on the above

results. The rations, therefore, imply that Total SA is capable of meeting its short-term financial

obligations. The other aspect is the quick ratio used by financial analysts to establish the firms'

ability to settle their short-term obligations using quick assets. The analysis established that the

quick ratio is unstable since the firm could only pay its short-term debts in 2017 and 2020 when

the quick ratio was above 1 (see the table above). However, the company could not pay its short-

term liabilities using the quick asset in 2018 and 2019 since the quick ratio values are below 1 (see

the table above). Thus, the firm's quick assets cannot be relied upon in settling the current

liabilities. The above analysis reported a cash ratio of 0.64, 0.51, 0.44, and 0.55 in 2017, 2018,

2019, and 2020. A cash ratio of more than 1 implies that the firm has enough cash and cash

equivalent to settle its current liabilities (Alneyadi et al. 2021). In this case, the company lacks

enough funds for this purpose, suggesting that it would depend on fixed assets to pay its current

liabilities. The asset turnover ratio measures the ability of firms to use assets in raising revenue

(CFI, 2021). The analysis revealed that the firm reported an asset turnover ratio of 0.61, 0.67, 0.64,

and 0.46 in 2017, 2018, 2019, and 2020. These figures are below 1 and therefore suggest that the

firm is not efficient in the use of assets to generate revenue. Thus, a significant portion of the

company's revenues is sourced from other sources and not assets.

Table 4: Debt Ratios of Total SA

Item 2017 2018 2019 2020

Debt Ratio =128.594/24 =138.648 =153.989/ =160.047

Debt Ratio=Total liabilities/total assets 2.631 /273.294 273.294 /262.132

=0.53 =0.50 =0.56 =0.61

12
 Times Interest Earned Ratio = Cost of 7.00 9.41 7.72 6.80

goods sold / Average inventory

Source: Yahoo Finance, 2021

Figure 6: Debt Ratio for Total SA

Debt Ratio for Total SA

0.7
0.6
0.5
0.4
Ratio

0.3
0.2
0.1
0
2017 2018 2019 2020

Year

Figure 7: Times Interest Earned Ratio for Total SA

Times Interest Earned Ratio for Total SA

10

6
RATIO

0
2017 2018 2019 2020
YEAR

13
 The debt ratio is an essential assessment to establish the value of the firms' assets financed

by debt. In the figure above, the company's debt to asset ratio has been increasing since 2017. The

firm reported 0.53, 0.50, 0.56, and 0.61 in 2017, 2018, 2019 and 2020 (Yahoo Finance, 2021).

This data implies that 53%, 50%, 56%, and 61% of the company's assets in 2017, 2018, 2019, and

2020 were financed by debts. These findings reveal that the firm over depends on external

borrowing to fund its assets, a factor that places it at financial risk.

Next is the times interest earned ratio which measures the number of times a firm's

inventory is replaced (CFI, 2021). In the last 3 years, the inventory replacement ratio has been

reducing. The firm reported an inventory turnover ratio of 9.41, 7.72, and 6.80 in 2018, 2019, and

2020, respectively (see table above). Thus, the reduction implies that the commodities stay on the

shelves for long without being sold or used to manufacture other products (Almansoori et al. 2021).

In the long run, the revenues of the company reduce. Therefore, the firm has more debts than the

amount invested by the stockholders. The leverage ratios indicate that the firm is operating on

debts, thus at a financial risk.

Table 5: Profitability Ratios of Total SA

Ratio/Year 2017 2018 2019 2020

Gross margin ratio = Gross profit / Net sales 0.22 0.24 .25 0.16

Operating margin ratio = Operating income / Net sales 0.05 0.08 0.09 0.06

Return on total assets ratio = Net income / Total assets 0.61 0.72 0.64 0.46

Return on equity ratio = Net income / Shareholder’s 1.31 =1.56 1.48 1.13

equity

14
Figure 8: Return on equity ratio for Total SA

Return on equity ratio for Total SA

2020

2019
Year

2018

2017

0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8

Ratio

Figure 9: Return on Total Assets Ratio for Total SA

Return On Total Asset Ratio

0.8

0.6
Date

0.4

0.2

0
2017 2018 2019 2020
Year

15
Figure 10: Operating margin ratio for Total SA

Operating Margin Ratio

2020

2019
year

2018

2017

0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.1
Ratio

Figure 11: Gross Margin of Total SA

Gross Margin
0.3

0.25

0.2
Year

0.15

0.1

0.05

0
2017 2018 2019 2020
Ratio

The analysis above reveals that the firm's gross margin ratio for the last four years has been

22%,24%,25%, and 16% in 2017, 2018, 2019, and 2020, respectively (see table above). Even

though there is a decline between 2019 and 2020, the ratio still indicates that the firm can generate

profits from its sales. The operating profit margin measures the gross profit the company generates

from its operations before subtracting the taxes and interest charges. The operating profit margin

16
based on the firm was 5%, 8%,9%, and 6% in 2017, 2018, 2019, and 2020, respectively (see table

above). The values are below average since a good operating profit margin is 15% (CFI, 2021).

Based on the return to asset ratio, the company reported 61%, 72%, 64%, and 46% in 2017, 2018,

2019, and 2020, respectively (see table above). The percentages indicate that, on average, the firm

is using its assets to generate profits. The last is the return on equity ratio, which assesses an

organization's ability to generate revenues using the shareholder's equity (Almansoori et al. 2021).

Total SA reported 1.31, 1.56, 1.48 and 1.13 in 2017, 2018, 2019, and 2020, respectively (see table

above). This data implies that for every $1 invested, the firm made a profit of the ratio figures.

Therefore, the company is making good use of the shareholders' equity to generate profits.

Table 6: Cash Flow Ratio of Total SA

Ratio/Year 2020 2019 2018 2017

Cash flow to total assets 0.05 0.09 1.0 1.0

Cash flow to sales 0.12 0.14 0.13 0.15

Profit Margin -0.06 0.09 0.08 0.05

Figure 12: Cash flow to total assets of Total SA

Cash Flow to Assets

1.2

0.8
Ratio

0.6

0.4

0.2

0
2017 2018 2019 2020
Year

17
Figure 13: Cash flow to sales of Total SA

Cash Flow to Sales

0.16

0.14

0.12

0.1
Ratio

0.08

0.06

0.04

0.02

0
2017 2018 2019 2020
Year

Figure 14: Profit Margin of Total SA

Profit Margin

2020

2019

2018

2017

-0.08 -0.06 -0.04 -0.02 0 0.02 0.04 0.06 0.08 0.1

Profit Margin

18
 The ratios are used to assess the efficiency of an organization. Based on the table above,

the firm’s cash flow to total asset ratio has been increasing. The ratio of 1 implies that the firm is

efficient in using its assets to generate cash. The ratio is based on the premise that the higher the

figure, the more efficient an organization is. Thus, the firm is efficient in utilizing its assets to

generate cash. However, the cash flow ratio to sales is low. For instance, the highest ratio is

0.15(see table above). The low ratios imply that the cost of production is high that the cash

generated from the sales remains low. The last is the profit margin. A profit margin above 0.50 is

considered good since it implies that a half of what is generated is equal to the profit generated.

Thus, the ratio implies that the firm is generating cash from assets and sales. The analysis of these

ratios has revealed that 2020 was the most unfavorable year for the company. The results align

with the arguments of Alhosnai et al. (2021) that most firms reported a decline in revenues due to

the adverse economic effects of the COVD-19 pandemic. The other years performed well, with

2020 showing declines in all the ratios. This suggests that the management needs to assess the

factors responsible for the decline in performance in 2020, although there are arguments attributing

the low performance to COVID-19.

11. Discussion

The company is doing well despite the few financial challenges established through the

analysis. The first concern relates to revenues and profits. Inventors tend to invest in firms that are

performing well in these areas since they are assured of positive returns on equity. Based on the

revenues, the firm's net incomes have declined significantly. Revenues are the first indicators of

the performance of an organization considering that they translate to profits. A decline in revues

may imply that the firm is either not efficient in utilization of its resources or has reduced the

customer base, leading to a reduction in its sales.

19
 Based on the figure above, the firm's revenues declined greatly between 2019 and 2020

although the other years had reported positive performance. According to Uddin et al. (2021), the

same scenario is observed in other sectors and attributed to the current COVID-19 pandemic,

resulting in the closure of markets and subsequent decline in revenues. There may also be other

factors responsible for the decline in the firm’s revenues. For instance, increased new entrants of

other firms in the industry would reduce the market share of the existing firms, leading to a decline

in the firm’s revenues. Also, negative shift of consumers’ demands against the products would

reduce their purchase volume, leading to a decline in sales. Therefore, based on history, the firm

has been performing well, confirming that its performance would be restored when the pandemic

comes to an end.

The profitability ratios of the firm indicate that the company is fairly stable. The analysis

of the company's gross margin, operating margin, return on asset ratio and return on equity ratio

indicate that the ratios are above average. They, therefore, suggest that the firm is stable and can

generate profits from its assets and the shareholder's equity. The cash flow ratios also imply that

the inventories within the company are replaced at an average of 7 times a year, implying that the

firm's products are first moving (see the cash flow ratio table analysis).

Finally, the assessment has also revealed that the firm has enough current assets to settle

its short-term liabilities. Based on the liquidity ratios, the company's current and quick ratios are

above 1 (see the liquidity ratio analysis in table 2 above). This data confirms that the company can

settle its short-term obligations without seeking funds from external sources or selling its fixed

assets. Additionally, there is the challenge of the high debt to asset ratio. It was established that

the company finances most of its assets by debts. In the table 4 above, the debt ratio in the last four

years are above 50% (see table 4 above). These figures suggest that at least 50% of the funds

20
incurred in purchasing assets result from external borrowing. This form of financing posts a

financial risk since the absence of external loaners would imply that the firm would not operate.

Therefore, there is a need for the management to consider other methods of self-sustaining as

opposed to overreliance on debts to fiancé its assets.

7.0 Recommendation

The investors should consider investing in Total SA. Even though the firm has reported a

significant decline in revenues and profits, the assessment of other ratios implies the company is

financially stable. The decline is thus justified by the COVID-19 pandemic that has affected

several firms, thereby lowering revenues and profit margins (Bhattacharya, Smark & Mir, 2021).

The liquidity ratios have established that the firm can settle its short-term obligations. According

to Wilkins (2021), current assets and current liabilities are the major drivers of firms considering

that they foster quick cash flow, thereby resulting in more profits. The assessment has revealed

that the quick and current ratio are above 1, which according to Wilkins (2021) suggests the ability

of the company to settle its obligations. Thus, the company has no issue with creditors, suppliers,

and service providers since it can settle their dues when demanded. Therefore, the management

should consider investing in the firm since it has positive future prospects.

The assessment of the cash flows implies that the company’s income is stable. The firm’s

cash flow increased between 2017 and 2018, with a slight decline in 2019. The table 1 shows that

2020 experienced the lower cash flow, a factor attributed to the closure of economies due to the

COVID1-19 pandemic. The firm’s cash flow to total asset ratio has been increasing. The ratio of

1 implies that the firm is efficient in using its assets to generate cash. The ratio is based on the

premise that the higher the figure, the more efficient an organization is (CFI, 2021). The investors

should not focus their analyses on the current year, but the history of performance of the

21
organization.

Based on history, the company has had high cash inflows, considering that it has a large

pool of clients with favorable purchasing abilities. Thus, the firm based on its cash flow and

revenue history has been performing well and should thus be considered for investment. Total SA

was ranked 29th largest public company globally by Forbes Global 2000 (Forbes, 2021). It was

also ranked the 25th largest company on the globe by the Fortune Global 500 in the same year

(Fortune, 2021). This ranking is another proof that the company is not only efficient in resource

utilization, but also profitable. It manages to beat other firms within the industry, considering that

it is profitable and sustainable, hence the need for the investors to consider it for investment.

8.0 Conclusion

Total SA, currently known as the Total Energies SE, is a well-established company in

France's oil and energy sector. It has been ranked among the top firms in the industry and in

business at large. Besides extracting, refining, and distributing petroleum products, the company

is also involved in producing other forms of energy, thereby having an expanded market. The

analysis aimed at establishing the firm's financial position. Information was obtained from the

income statement, balance sheet, and cash flow statement analyzed the performance. Despite

reporting a decline in revenues and profits, the findings revealed that the company has some

strengths. For instance, its liquidity ratios reveal that it can settle its short-term obligations, which

significantly affect the operations of an enterprise. Also, the analysis of the profitability, cash flow,

and leverage ratio revealed that the company's inventory is highly replaced and that it is generating

revenues from its assets and shareholders' equity. The significant weaknesses established is that a

significant portion of the firm's assets is financed by debt, a factor that places the firm in a risky

financial position. Debt financing may imply that the organization would not survive when the

22
donors or investors withdraw their support. However, it is important to note that the company has

adequate assets that can be converted into cash to fiancé its activities without relying on debts.

Based on the recommendation, the investors should invest in the company since it is financially

stable, despite the decline in revenues and profits attributed to the COVID-19 pandemic. The

firm’s financial performance in the last four years shows that it has generated high revenues and

profits. Also, its cash flows have remained stable for the last three years. It is only 2020 when the

firm has experienced financial challenges attributed to COVID-2019. Thus, Total SA is a

profitable and stable firm that should be considered for investment.

23
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Ibrahim and Aldhanhani, Wafaa and Mostafa, Souhail and Alhajiri, Shaima Mohamed

and Nobanee, Haitham, Financial Analysis of Johnson & Johnson in Light of the

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