10 Gabriel Reginald D.

Castillo Business Finance

12 – SJT January 18, 2019
Petron VS Shell

Horizontal Analyses
Horizontal Analysis on Shell (in millions)

Particulars 2017 2016 2015 Increase/ % of Increase/

Decrease Decrease
ASSETS
Current Assets
Cash 6163.26 4274.27 3576.80 1888.99 697.47 44% 19%
Accounts 9737 7707.21 6506.29 2029.79 1200.92 26% 8%
Receivables
Inventory 21671.21 16381.40 11348.53 5289.81 5032.87 32% 44%
Total Current 45876.26 38856.35 36655.69 7017.91 2200.66 18% 6%
Assets
Noncurrent Assets
Property, Plant, 25434.37 23378.32 22309.08 2056.05 1069.24 9% 5%
and Equipment
Note Receivable 4238.96 4008.21 846.93 230.75 3161.28 6% 373%
Total Assets 81877.01 70609.25 66234.11 11267.76 4375.14 16% 7%

LIABILITIES AND OWNER’S EQUITY

Current Liabilities
Accounts Payable 16014.40 11748.95 11200.14 4265.45 548.81 36% 5%
Accrued Expenses 592 782.16 563.23 -190.16 218.93 -24% 39%
Short-Term Debt 4057 5370 2717 -1313 2653 -24% 98%
Total Current 31325 22400.83 18901.26 8914.17 3499.57 40% 19%
Liabilities
Noncurrent
Liabilities
Long-Term Debt 5000 11000 16000 -6000 -5000 -55% -31%
Total Debt 15057 16370 18717 -1313 -2347 -8% -13%
Total Liabilities 39741.62 37680.98 40138.98 2060.64 -2458 5% -6%
Total Equity 42135.39 32928.27 26095.13 9207.12 6833.14 28% 26%
Total Liabilities 81877.01 70609.25 66234.11 11267.76 4375.14 16% 7%
& Owner’s
Equity
Horizontal Analysis on Petron
Particulars 2017 2016 2015 Increase/ % of Increase/
Decrease Decrease
ASSETS
Current Assets
Cash 17,384 17,560 19,261 -176 -1,611 -1% -8%
Accounts 26,149 18,532 17,477 7,617 1,085 41% 6%
Receivables
Inventory 56,604 44,147 30,823 12,457 13,324 28% 43%
Total Current 145,490 125,818 115,725 19,672 10,083 15% 8%
Assets
Noncurrent Assets
Property, Plant, 177,690 176,604 161,597 1,086 15,007 0.6% 9%
and Equipment
Note Receivable 2,060 205 2,005 1,855 -1,800 904% -89%
Total Assets 338,030 318,893 294,267 19,137 24,626 6% 8%

LIABILITIES AND OWNER’S EQUITY

Current Liabilities
Accounts Payable 5,540 4,545 2,655 995 1,890 21% 71%
Accrued Expenses 1,506 1,801 1,738 -295 63 -14% 3%
Short-Term Debt 69,583 90,366 99,481 -20,783 -9,115 -22% -9%
Total Current 124,495 158,808 126,579 -34,313 32,229 -21% 25%
Liabilities
Noncurrent
Liabilities
Long-Term Debt 97,916 58,941 71,726 38,975 -12,785 66% -17%
Total Debt 171,288 170,218 171,901 1,070 -1,683 0.6% -0.9%
Total Liabilities 244,375 234,402 211,638 10,573 22,764 4% 10%
Total Equity 93,655 84,491 82,629 9,164 1,862 10% 2%
Total Liabilities 30,546 29,201 27,342 1,345 1,859 4% 6%
& Owner’s
Equity
 Vertical Analyses
Vertical Analysis on Shell

Particulars 2017 % 2016 % 2015 %

Total Revenue 169475.81 100% 136763.29 100% 156977.70 100%
Cost of Revenue 143070.57 84% 112461.55 82% 136976.85 87%
Gross Profit 26405.25 16% 24301.74 18% 20000.84 13%
Total Operating Expenses 156441.25 92% 125053.90 91% 150059.65 96%
Selling/General/Admin 12694.34 7% 12059.24 9% 12206.13 8%
Expenses
Depreciation/Amortization 1165.76 0.7% 1003.82 0.7% 1088.91 0.7%
Operating Income 13034.56 8% 11709.39 9% 6918.05 4%
Interest Income (Expense) (571.52) 0.3% (786.27) 0.6% (1515.79) 1%
Net Income Before Taxes 13760.22 8% 10828.12 8% 5223.01 3%
Income Tax 3391.99 2% 3384.34 2% 1669.81 1%
Net Income After Taxes 10368.23 6% 7443.77 5% 3553.20 2%

Vertical Analysis on Petron

Particulars 2017 % 2016 % 2015 %

Total Revenue 434,624 100% 343,840 100% 360,178 100%
Cost of Revenue 391,969 90.19% 306,125 89.03% 328,438 91.19%
Gross Profit 42,655 9.81% 37,715 10.97% 31,740 8.81%
Total Operating Expenses 406,986 93.64% 320,043 93.08% 342,044 94.97%
Selling/General/Admin 12,276 2.83% 10,773 3.13% 10,058 2.79%
Expenses
Depreciation/Amortization 2,740 0.63% 3,144 0.91% 3,547 0.98%
Operating Income 27,638 6.36% 23,797 6.92% 18,134 5.03%
Interest Income (Expense) 8,748 2.01% 8,538 2.48% 7,435 2.06%
Net Income Before Taxes 18,842 4.34% 14,378 4.18% 9,925 2.76%
Income Tax 4,755 1.09% 3,556 1.03% 3,655 1.01%
Net Income After Taxes 14,087 3.24% 10,822 3.15% 6,270 1.74%
 Financial Ratios
2017
Financial Ratios Shell Petron
Liquidity Ratios
Current Ratio 1.46 1.17
Quick Ratio 0.77 0.71

Asset Management Ratios

Accounts Receivables Turnover Ratio 19.43? 19.45?
Inventory Turnover Ratio 7.51 7.78
Average Age of Inventories 48.60 46.92
Average Age of Receivables 18.79 18.77
Operating Cycle 67.39 65.69
Total Assets Turnover Ratio 2.22 1.32

Solvency Ratios
Total Debt Ratio 0.48 0.72
Debt to Equity Ratio 0.94 2.61
Time Interest Earned Ratio 22.81? 3.16?

Profitability Ratios
Gross Profit Margin Ratio 0.16 = 16% 0.10 = 10%
Profit Margin on Sales 0.06 = 6% 0.03 = 3%
Return on Total Assets 0.14 = 14% 0.04 = 4%
Return on Equity 0.28 = 28%? 0.14 = 14%?
 Interpretation
Even though Petron has captured 30.4% of the market and Shell only captured 23% of the
market, Shell is the best gas company as of 2017. Comparing their financial statements I stand
that Shell is the best company to invest in as of 2017. This is because, according to the financial
ratios, Shell handles every sector of its business properly. Even though Petron has higher net
sales than Shell, Shell manages their assets pretty well that they can produce revenue and income
very well. They also have a good amount of liquidation of assets if the need ever arises so that
they can pay their short-term obligations. Also, they don’t have that much long-term debt in their
liabilities. Plus, Shell produces more profits than Petron that investors will get a 28% return on
investment in Shell compared to Petron where they will only get a 14% of return on investment.
The Financial Ratios prove these are true and that Shell, as of 2017, is the best gas company in
terms of its financing ability and that it is the best company to invest in.