ACC5264 Finance & Accounting for Business Decisions – Petronas Analysis

Background

This coursework has been developed as an integral part of the module to enable learners to apply what they have learnt in a real-world scenario and to exercise critical analyses in developing viable recommendations and making sound conclusions.

Instructions

1. From the companies which are listed on the Bursa Malaysia select a company that is a signatory to the United Nations Sustainable Development Goals / On the basis of its audited financial statements found in its most recent annual report, as well as official company sources and external literature, prepare a written report not exceeding 3,000 words.

2. Your written report, containing critical reflections, must be original and should synthesise the following twin tasks:

a. Analysis of a selected company’s financial position and financial performance using but not limited to appropriate common-size analysis and selected financial ratios, highlighting the financial issues that the company needs to address. (50%)

b. Assessment of the financial outlook of the firm with respect to the company’s sustainability-related initiatives, programmes and reporting practices, including recommendations to enhance its value for shareholders and environmental regulators, as well as its employees, suppliers and customers. (50%)

Experts Answer on Above Questions on Financial Analysis

Financial performance and sustainability assessment of Petronas

Introduction

Petronas is the national Energy company of Malaysia, and the primary business areas includes oil, gas, renewable energy and petrochemical products. The company supports several United Nations sustainable development goals particularly SDG 7, 8 and 13 that aims at affordable and clean energy, decent work and economic growth, and climate action.

Financial performance analysis

Financial position – An analysis of the financial position of Petronas reveals that the company maintains a strong asset base through its upstream and downstream operations. It accounts for significant cash reserves, and infrastructure assets that help the company in financing large scale projects.
Revenue performance – the company’s operation depends significantly on global energy demand, and the recent year has witnessed a significant rise in the price level for oil and gas which contributed significantly towards its revenue generation.
Profitability performance – the profitability performance of the company is also strong because of integrated business operations, efficient cost management, and diversified revenue streams across oil, gas and energy solutions.
Liquidity position – the liquidity is also healthy as reflected in the strong operating cash flows, significant cash and cash equivalents, and strong ability to meet its short term obligations.
Financial issues that need attention – the profitability performance of the company significantly depends on the global oil and gas prices, and the increasing pressure from environmental regulation has a significant impact on its business operations.

Sustainability assessment and financial Outlook

An analysis of the sustainability performance of Petronas indicates that the company has undertaken several sustainability initiatives including renewable energy investment where the company is expanding into solar energy projects, hydrogen development and low carbon energy solutions. Along with this, it has carbon emission reduction goals whereby it performs investments in carbon capture and storage technologies. The community development initiatives undertaken by the company are education programmes, community development projects and workforce development initiatives. Responsible supply chain management is another important area whereby Petronas maintain high sustainability standards by requiring suppliers to follow the environmental best practices.

Financial Outlook

The analysis leads to identification of positive factors such as growing investment in the renewable energy sector, strong brand reputation, and strong financial position to support future investments. However, the risks are mainly from the volatility in the global energy market, competition from renewable energy providers and climate related regulations.

Recommendations

It is important to increase the investment in renewable energy assets, and improve its transparency in environmental reporting. It is also important for the company to expand its sustainability related training programs for the employees and encourage suppliers to follow sustainable energy solutions.

Want Detailed Answers with References?

The above financial analysis of Petronas is carried out in brief and if you need detailed analysis using financial ratios, common size financial statement analysis and more, get in touch with our accounting assignment helpers in Malaysia for best assignment writing assistance.