FINANCIAL STATEMENT

Financial statement was an essential part in determining whether a

company, like Barakah Offshore Petroleum eligible to make a loan from the bank.
Usually, financial statement of a public listed company was providing inside their
annual report, where annual report was a comprehensive report on a companys
activities throughout preceding year. Besides, annual reports are intended to
give the information regarding the companys activities and their financial
performance to their shareholders or interested people. Thus, by referring to the
Barakah Offshore Petroleum, the Board that assisted by the ARMC had reviews
the financial statements to ensure that the Groups financial statements are
prepared in accordance with the provisions of the Companies Act 1965 and the
applicable approved Financial Reporting Standard where it can prove that their
annual report was genuine.

Analysis on Financial Ratio

Therefore, by referring to their financial statements for three year
consecutively, here the analysis on their financial ratio:
Liquidity Ratio

YEAR
Current ratio,
times
Quick ratio, times

Liquidity ratio
2013
2014

2015

2.20

2.16

2.18

2.19

1.68

0.96

Efficiency Ratio

YEAR
Inventory turnover
Average collection
period, days

Efficiency ratio
2013
2014
139.70
125.58

76.74

2015
68.08

Barakah Offshore Petroleum report for efficiency ratio for the three years
from 2013 to 2015. Inventory turnover explain firm efficiency in converting
inventory to sales. The higher, the better, because the firm is not overstocked. In
report Barakah Offshore Petroleum from 2013 until 2015 showed was 139.70 for
2013, while for 2014 and 2015 is zero.
For the average collection period Measures the ability of firms to collect
debts from customers. Measuring the ability of firms to collect debts from
customers. It shows the average time taken to collect debts from customers or
accounts receivable. Normally, the ratio of the low average collection period is
considered good because it shows the company managed to recover the
accounts receivable in the short term. Barakah Offshore Petroleum report
showed a decrease in average collection period from 2013 to 2015 out of 125.58
for 2013, 76.74 for 2014, and 68.08 for 2015. This means the company's
operations became more efficient.

Profitability Ratio

YEAR
Gross profit margin
Net profit margin
Return on assets
Return on equity

Profitability ratio (%)

2013
2014
41.0
23.0
14.0
8.0
9.0
11.0
24.0
23.0

2015
16.0
3.0
3.0
6.0

Profitability ratio was tells the bank that either the company perform well or
not in their business activities. Based on the data, it shows that the gross profit
margin for their company was kept decreasing. This ratio reflects on the pricing
decisions and product costs. Moreover, this ratio is a way to measure how

efficiently the company turn revenue into profits. Therefore, in year 2013 their
gross profit margin was 41.0% where this percentage indicate that the 41.0%
gross margin for the Barakah Offshore Petroleum shows that 41.0% of revenues
generated by the firm are used to pay for the cost of goods sold. Meanwhile, at
year 2014 the gross profit margin decrease as much as 18.0% from year 2013
where equal to 23.0%. This percentage keeps decrease until year 2015 which
decline to 16.0%. If the declining in gross profit margin temporarily where maybe
as a businesss ultimate goals that company want to raise its profit margin, then
it might beneficial for the long run planning. Decreasing in gross profit margin
also may because of the company lowering the cost of goods sold or by using
higher quality of equipment. This eventually may raise the profit margin back
because the company may attract the customers with their lower prices in
providing their services by using higher quality equipment. Besides, there were
other reasons that may cause the declining in gross profit margin where is
maybe there are increasing in the supplier cost. This is due to that the
companys supplier naturally wants to increase their own revenue and margins.
Thus, this factors can be solve by doing negotiate with the supplier or looked for
other alternatives such as looking for new supplier. Furthermore, for most of the
firm, gross profit margin will suffer as a competition increases. This is because,
Barakah Offshore Petroleum was not the first mover in oil and gases industry,
thus the gross profit margin forces downward because there are many company
that fight in this industry.
Barakah Offshore Petroleum also shows decreasing figures on their net profit
margin. Net profit margin measure a companys ability to translate sales into
earning for shareholders. In year 2013, the net profit margin was 14.0%, where
this value indicates that for every RM1 of revenue generated by the firm, RM0.14
is created for the shareholder. This ratio keep decreasing for year 2014 and year
2015, where are 8.0% and 3.0% respectively. This value cannot attract the
investors since it may did not give any profit to the investors, because the value
was not stable. From the net profit margin data, it shows that the firm was
unsuccessful company since the management cannot control all the factors that
influence the profitability.
As for the return on assets (ROA), Barakah Offshore Petroleum also gives a
fluctuate value from year 2013 to year 2015. In year 2013 the value was 9.0%,
then it rise as much as 2.0% at year 2014 that total 11.0%. But this value fall

drastically to 3.0% at year 2015. Return on assets (ROA) measure of how

efficiently a company utilizes its assets. The higher the ratio, the efficient the
company generate earnings using its assets. Therefore, Barakah Offshore
Petroleum shows that the firm management was not capable enough in
managing their assets to generate profits.
Same goes for the return on equity (ROE) that show declining figures. In year
2013 the value was 24.0%, where the value declines as much 1.0% which total
23.0% in year 2014. Meanwhile, in year 2015, the value had decrease drastically
same as the ROA to 6.0%. ROE measure the level of income attributed to
shareholders against the investment that shareholders put into the firm. ROE
represent the return on investment by the shareholders. If this figure keeps
decreasing, thus, this company shows that they are not enough profit to
compensate for the risk of being in the business.

Leverage Ratio

YEAR
Debt-to-equity
Debt-to-asset

Leverage ratio
2013
2014
1.7216
1.1594
0.6326
0.5369

2015
1.1569
0.5364

Leverage ratio for offshore petroleum blessed in report showed decline

from 2013 until 2015. The leverage ratio gives an overview of a company's
ability to meet their obligations to the member loan. Furthermore, this ratio also
measure the effectiveness of the management company managing the loan
capital. It exists when a company uses debt or loans as a source of financing.
But, more and more debt, the higher the risk the company could not explain the
loan interest, especially during the economic downturn. In Debt-to-equity, this
ratio allows analysts to measure the ratio of debt financing and equity. A low
ratio guarantee more protection to creditors. This ratio also explains the debt
and equity capital position. Normally, the ratio exceeds 1.00 are considered high
risk to investors because the company owes too large. A low ratio indicates a
large investment to owners. The debt-to-equity report showed declined from
2013 to 2015. As for 2013 is 1.7216 while the 2015 is 1.1569. A debt to equity
ratio of 1 would mean that investors and creditors have an equal stake in the
business assets.

The debt-to-asset measures the extent to which the firm's assets are
financed through debt. The debt component consists of all current liabilities and
long term debt. This ratio is also known as debt to total asset that tells you what
percentage of debt capital used to finance the company's total assets. Total
assets include total current assets and total assets. In practice, the higher the
percentage of debt capital, the greater the company burdened by financial
expenses. In other words, the lower the ratio, the better the company's creditors
since they will receive more protection in the event of the company's
investment. The debt-to-asset show from 2013 until 2015. The decrease for 2013
is 0.6326, 2014 is 0.5369, and 0.5364 for 2015. This shows the company is at a
ratio of less than 1. If a ratio greater than 1 also indicates that a company may
be putting itself at risk of not being able to pay back its debts, which is a
particular problem when a business is located in a highly cyclical industry where
cash flows can suddenly decline.