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Profitability Ratios

Figure 1. Operating Margins of Pilipinas Shell and Petron Corporation from 2014 to 2016

Ratio Company 2014 2015 2016

Shell 0.73% 12.74% 17.77%


Operating Margin
Petron 4.03% 8.81% 10.97%

Pilipinas Shell

Operating Margin = Operating Income / Sales

2014 = 1,634,736 / 224,084,825


= 0.73%

2015 = 20,000,843 / 156,977,696


= 12.74%

2016 = 24,301,740 / 136,763,286


= 17.77%

Petron Corporation

Operating Margin = Operating Income / Sales

2014 = 19435 / 482535


= 4.03%

2015 = 31740/ 360178


= 8.81%

2016 = 37715 / 343840


= 10.97%

As shown in figure 1, Shells operating margin from the year 2014 to 2016 has
been continuously increasing. From 0.73% in the year 2014, it went up to 12.74% in year
2015, and also increased again to 17.77% in the year 2016. This great increase in the
companys operating margin can be attributed from the great increase also of its operating
income from 1,634,736 in the year 2014 to 24,301,740 in 2016. However, as shown in
the computation above, the companys sales from years 2014 has been continuously de-
creasing from 224,084,825 in 2014 to just 136,763,286 in 2016.This decrease in its sales
also caused the ratio to increase.
As to Petron, it also had an increasing trend in terms of its operating margin. From
4.03% in 2014, it grew to 8.81% in 2015, and to 10.97% in 2016. Comparing the two,
even though both are in an increasing trend, Shells trend is faster in phase and grows
greater than Petron as Shells operating income becomes bigger and bigger each year.

Figure 2. Profit Margins of Pilipinas Shell and Petron Corporation from 2014 to 2016
Ratio Company 2014 2015 2016

Shell (3.79%) 2.26% 5.44%


Profit Margin
Petron 0.62% 1.74% 3.15%

Pilipinas Shell

Profit Margin = Net Income / Sales

2014 = (8,488,580) / 224,084,825


= (3.79%)

2015 = 3,553,196 / 156,977,696


= 2.26%

2016 = 3,553,196 / 136,763,286


= 5.44%

Petron

Profit Margin = Net Income / Sales

2014 = 3009 / 482535


= 0.62%

2015 = 6270 / 360178


= 1.74%

2016 = 10822/ 343840


= 3.15%
As shown in figure 2, Shells profit margin had been increasing for the past three
years. In the year 2014, it had a profit margin of (3.79%) which increased to 2.26% in the
year 2015, which subsequently increased again in the year 2016 to 5.44%. As seen in
the computation above, this can be attributed from the continuously increasing profit also
of the company which previously had a net loss of (8,488,580) in the year 2014 but earned
net income 3,553,196 in 2015, and also net income of 7,443,775 in 2016. At the same
time, the low profit margin of the company can be attributed also to the decreasing trend
in the companys sales for the previous three years which is decreased from 224,084,825
in the year 2014 to 136,763,286 in 2016.

As to Petron, it also had an increasing trend in terms of its profit margin for the past three
years. From 0.62% in 2014, it increased to 1.74% in 2015, and to 3.15% in 2016. Com-
paring the two, Shells phase in an increasing trend is still faster than that of Petrons as
Shells Net income has been growing hugely these past three years.

Figure 3. Return on Total Assets of Pilipinas Shell and Petron Corporation from 2014 to 2016
Ratio Company 2014 2015 2016

Shell 11.55% 5.36% 10.54%


Return on Total Assets
(ROA)
Petron 0.77% 2.13% 3.39%

Pilipinas Shell

Return on Total Assets = Net Income / Total Assets

2014 = (8,488,580) / 73,502,706


= (11.55%)

2015 = 3,553,196 / 66,234,113


= 5.36%

2016 = 7,443,775 / 70,609,251


= 10.54%

Petron

Return on Total Assets = Net Income / Total Assets

2014 = 3009 / 391324


= 0.77%
2015 = 6270/ 294267
= 2.13%

2016 = 10822 / 318893


= 3.39%

As shown in figure 3, Shells return on total assets had been increasing for the past
three years. From (11.55%) in year 2014, it went up to 5.36% in 2015 which continued to
increase to 10.54% in year 2016. As ROA measures how effectively a company uses its
assets in generating profit, we could therefore conclude that the company has been man-
aging its assets efficiently from the previous years as also has been proven by the in-
crease in its profit from a net loss of 8,488,580 in 2014 to a net income of 3,553,196 in
2015, and also an increase in profit to 7,443,775 in 2016.

As to Petron, it also had an increasing trend for the past few years. From 0.77% in
the year 2014, it increased to 2.13% in 2015, which furtherly increased to 3.39% in 2016.
This increasing trend of Petrons return on assets can be attributed from the increasing
trend also in its net income for the past three years. Comparing the two, Shell still has a
better trend in terms of its return on Assets as Shells Net income has been increasing
hugely these past three years.

Figure 4. Return on Equity of Pilipinas Shell and Petron Corporation from 2014 to 2016
Ratio Company 2014 2015 2016

Shell 221.60% 13.62% 22.61%


Return on Common Eq-
uity (ROE)
Petron 2.65% 7.55% 12.18%

Pilipinas Shell

Return on Common Equity = Net Income / Common Equity

2014 = (8,488,580) / 3,830,642


= (221.60%)

2015 = 3,553,196 / 26,095,130


= 13.62%

2016 = 7,443,775 / 32,928,273


= 22.61%
Petron

Return on Common Equity = Net Income / Common Equity

2014 = 3009 / 113692


=2.65%

2015 = 6270 / 83100


= 7.55%

2016 = 10822 / 88820


= 12.18%

As shown in figure 4, Shells return on common equity had been in an increasing


trend for the past three years. From a (221.60%) ROE in the year 2014, the company had
been able to improve its ratio to 13.62% in 2015, and was able to improve it further to
22.61% in 2016.

As to Petron, it also had an increasing trend in terms of its Return on Common


Equity. From 2.65% in 2014, it increased to 7.55% in 2015, and furtherly increased to
12.18% in 2016. This can be attributed from the increasing trend also of its net income
for the past three years.