French Total company - Research Paper Example

Total Company, TOT: Total Company: Introduction: Total company is a French company whose headquarters is in Paris, it is an oil company whose business includes oil and natural gas exploration, refining, marketing and transportation of oil products. The total company was founded in 1924 and was referred to as the French company of petroleum. In 1985 it changed its name to total CFP and finally its name changed to total in the year 2003. This paper discusses the company's financial statement and financial ratios: Financial Ratios: Financial ratios are important in that they indicate the current state and performance of a company, for the financial ratios for the total company the data was retrieved from the balance sheet, the cash flow statement and the income statement retrieved from yahoo finance available at Retrieved from Current Ratio: This is a Liquidity ratio that indicates the firms position in meeting its financial obligations in the short run, the current ratio is determined by dividing the current assets by the current liabilities, for total company we determine the current ratio over the last three years: Current ratio 2007 December 2006 December 2005 December Total Current Liabilities 52526560.00 44259097.00 39605152.00 Total Current Assets 71049750.00 56469231.00 51794996.00 current ratio 1.352644262 1.275878516 1.3077843 From the above table it is evident that for the last three years from 2005 to 2007 the current ratio range is 1.27 to 1.35. Creditors will prefer a higher ratio because it reduces the risk of repaying the amount owed. On the other hand investors prefer a lower current ratio and this is due to the fact that a lower current ratio indicates that the company is utilising its assets more in their operations. Debt ratio: The debt ratio is a measure of a company's solvency; this ratio is calculated by dividing the total debts by the total assets, it a measure that indicates the credit worthiness of a company, the following is the debt ratio of the total company for the period 2005 to 2007. debt ratio 2007 December 2006 December 2005 December Total Assets 167,234,539 183,726,347 166,967,237 Long Term Debt 21,910,860 18,790,510 16,075,861 debt ratio 0.131018748 0.102274444 0.09628153 The above trend shows an increase in the debt ratio, this means that companies creditworthiness is improving but this increase in the ratio indicates a reduction in the usage of assets. Debt equity ratio: The debt equity ratio indicates whether a company finances more using debts or equity, this is an important ratio in that it helps in decision making whereby a company may want to raise more capital either through debt or equity, the debt equity ratio is calculated by dividing total debt by total equity, the following is a summary of the debt equity ratio debt equity ratio 2007 December 2006 December 2005 December Long Term Debt 21,910,860 18,790,510 16,075,861 Total Stockholder Equity 66,071,348 94,908,445 86,526,342 debt ratio 0.331624231 0.197985648 0.185791525 From the above table it is evident that the debt equity ratio has increased over the years, this ratio shows that the company finances more through equity than debts, the trend also show that there has been a reduction in finance through equity and an increase in debt financing. Gross profit margin: The gross profit margin is a financial ratio that indicates the gross profit earned on sales, this ratio is calculated by dividing gross profits by sales, this ratio considers the costs of goods sold excluding other cost, the following table summarises the company gross profit margin: gross profit margin 2007 December 2006 December 2005 December Gross Profit 72,197,139 40,102,792 58,740,318 Total Revenue 233,825,821 175,189,287 145,228,759 gross profit margin 0.308764612 0.228911212 0.404467534 For the year 2007 the gross profit margin was 0.3038 which is an increase compared to the 2006 ratio. This ratio shows the proportion of gross profit in sales, from the trend there has been a decline in this margin in the period considered with 2005 recording the lowest value. Return on assets: This is a financial ratio that indicates the efficiency of a company in using its assets to generate revenue. It is calculated by dividing net income of a company by its total assets. The following is a summary of the return on assets for the total company: return on assets 2007 December 2006 December 2005 December Net Income 19,935,702 15,051,420 13,735,487 Total Assets 167,234,539 183,726,347 166,967,237 return on assets 0.119208042 0.081923035 0.082264564 From the above table it is evident that the return on asset for 2007 was 0.1192 and the trend shows that there has been an increase in the ratio and this indicates improved efficiency in utilising its assets. Return on equity: Return on equity is also an important financial ratio that indicates the amount earned by share holders, this ratio is calculated by dividing net income by total equity, the following table summarises the company return on equity level. return on equity 2007 December 2006 December 2005 December Total Stockholder Equity 66,071,348 94,908,445 86,526,342 Net Income 19,935,702 15,051,420 13,735,487 return on equity 0.301729912 0.158588838 0.158743415 The above table summarises the return on equity for the year 2005, 2006 and 2007, from the above trend it is evident that there has been an increase in the return on equity and this shows that this ratio will continue increasing in future. This data is important for investors when making investment decisions where investors will invest in companies with higher return on equity. It is also important to a company in that it improves the company ability to raise capital through equity. Conclusion: From the above discussion it is evident that the company fiancs more suing equity, this is evident from the debt equity ratio, however the trend of this ratio over the years show that the company equity level is declining and an increase in debts. The other observation is that the return on equity has improved over the years and this shows that this return ratio will increase in future. The other observation is that the return on assets has improved and shows an improvement in asset utilisation efficiency. The gross profit margin has declined over the years; this ratio was highest in 2005, declined in 2006 and slightly increased in 2007. This shows that the profitability of the company is expected to rise although the trend shows a decline in profitability. References: Yahoo Finance 2009. Total Company, TOT balance sheet, income statement and cash flow statement. 2nd January. Appendixes: Income statement: Income Statement PERIOD 2007 December 2006 December 2005 December Total Revenue 233,825,821 175,189,287 145,228,759 Cost of Revenue 161,628,682 135,086,495 86,488,441 Gross Profit 72,197,139 40,102,792 58,740,318 Operating Income or Loss 37,265,843 31,378,250 25,568,827 Net Income 19,935,702 15,051,420 13,735,487 Net Income Applicable To Common Shares 19,935,702 15,051,420 13,735,487 Retrieved from Balance sheet: Balance Sheet PERIOD ENDING 2007 December 2006 December 2005 December Assets Total Current Assets 71,049,750 56,469,231 51,794,996 Total Assets 167,234,539 183,726,347 166,967,237 Liabilities Total Current Liabilities 52,526,560 44,259,097 39,605,152 Total Liabilities 101,163,191 88,817,901 80,440,895 Common Stock 8,821,198 8,006,299 7,285,244 Retained Earnings - 55,776,074 43,685,410 Total Stockholder Equity 66,071,348 94,908,445 86,526,342 Net Tangible Assets 59,222,363 54,655,139 50,116,702 Retrieved from Cash flow statement: Cash Flow PERIOD 2007 December 2006 December 2005 December Net Income 19,935,702 15,051,420 13,735,487 Total Cash Flow From Operating Activities 26,049,709 21,205,338 17,373,964 Other Cash flows from Investing Activities -14721636.00 -12682802.00 -1749359.00 Total Cash Flows From Investing Activities -14973501.00 -12640552.00 -11970731.00 Total Cash Flows From Financing Activities -4922432.00 -9779462.00 -6000170.00 Change In Cash and Cash Equivalents 5,147,786 -2409548.00 542,455 Retrieved from Read More