With the given information below, Complete Part F ( Explain in terms of Insolvency and liquidity)

References:

Suncor Energy -https://ca.finance.yahoo.com/quote/SU/balance-sheet?p=SU

Imperial Oil -https://finance.yahoo.com/quote/IMO.TO/balance-sheet/

https://www.readyratios.com/sec/industry/13/

https://corporatefinanceinstitute.com/resources/knowledge/finance/debt-to-asset-ratio/

https://www.investopedia.com/terms/d/debtratio.asp

https://corporatefinanceinstitute.com/resources/knowledge/finance/current-ratio-formula/

A) IMPERIAL OIL

Imperial has exhibited constant high standards, pioneering Canadian spirit, innovation, and leadership in the difficult energy industry since 1880. The company's mission is to operate in an environmentally, socially, and economically responsible manner while providing excellent long-term value. Imperial believes that it can have a robust economy, reliable and economical energy, and a clean environment. Imperial explores for, produces, refines, and markets important societal products as an integrated energy firm. Their work serves to secure Canada's quality of life and energy future, whether it is finding oil and gas, manufacturing and selling high-quality petroleum products, or investing in innovative research. Imperial helps to ensure that Canadians have access to reliable and affordable oil and gas supplies. We invest billions of dollars to pick the greatest quality resources from prospects in varied geological and geographical contexts, and we play a key role in developing Canada's oil and gas resources from coast to coast. Imperial is Canada's largest petroleum product refiner. They refine crude hydrocarbons into over 650 petroleum products used by consumers and industries, including gasoline, diesel, heating oil, natural gas, lubricants, and plastic chemicals. It is difficult to picture a world without hydrocarbon-based products. They provide energy for our economy, provide heat for our homes, and make our lives easier and more joyful. Imperial sells these goods and services to people across Canada and internationally.

Business snapshot

Sector: Energy

Industry: Petroleum

Company Size: 5,800 Employees

Products: petrochemicals and others

Revenue: $26.888 billion CAN (2015)

Net income:$1.122 billion CAN (2015)

Total assets:$43.170 billion CAN (2015)

Total equity:$23.425 billionCAN (2015)

Suncor Energy

Suncor Energy is one of Canada's largest integrated energy companies based in Calgary, Alberta. In the 2020 Forbes Global 2000, Suncor Energy was ranked as the 252nd-largest public company in the world. Suncor's main business activities include the production of synthetic crude from oil sands.

Its Scope also involves the development and production of oil and natural gas in Western Canada, Colorado, and offshore drilling in eastern Canada. Its international efforts include offshore developments in the North Sea, and conventional, land-based efforts in Libya, Syria, and Trinidad and Tobago.

Suncor operates refineries in Edmonton, Alberta; Sarnia, Ontario; Montreal, Quebec and Commerce City, Colorado. These refineries supply industrial, retail and commercial consumers. The company is also one of the largest Canadian retailers of petroleum products.

Business snapshot:

Sector: Energy

Industry: Oil & Gas

Company Size: 12,591 Employees

Products: Petroleum, natural gas, petrochemicals and others

Revenue: $38.989 billion CAN (2019)

Net income: $2.899 billion CAN (2019)

Total assets: CAN$89.435 billion (2019)

Total equity: CAN $42.042 billion (2019)

B)Financial Statements for Suncor Energy and Imperial Oil were obtained from Yahoo! Finance where the values were represented in Canadian Dollars.

Suncor Energy -https://ca.finance.yahoo.com/quote/SU/balance-sheet?p=SU

Imperial Oil -https://finance.yahoo.com/quote/IMO.TO/balance-sheet/

Company	Category	Ratio	Formula	2020	2019	2018
Suncor Energy	Liquidity	Current Ratio	Current Assets/Current Liabilities	0.89:1	0.94:1	0.84:1
Imperial Oil	Liquidity	Current Ratio	Current Assets/Current Liabilities	1.34:1	1.38:1	1.35:1
Suncor Energy	Solvency	Debt Ratio	(Total Liabilities/Total Assets) * 100%	57.74% 0.58:1	52.99% 0.53:1	50.88% 0.51:1
Imperial Oil	Solvency	Debt Ratio	(Total Liabilities/Total Assets) * 100%	43.68% 0.44:1	42.46% 0.42:1	40.93% 0.41:1

C)From the above table it is clear that the current ratio of Suncor Energy is fluctuating. It is increasing from 2018 to 2019 but fall down in 2020.On the other hand, the current ratio of Imperial Oil increasing from 2018 to 2019 but decreases a bit in 2020.

Debt ratio of Suncor Energy goes upward from 2018 to 2020 while debt ratio of Imperial Oil also slightly increases from 2018 to 2020.

D) Current ratio of Suncor Energy indicates that company is not able to meet the short-term debts whereasImperial Oil have enough liquid assets to cover its short-term liabilities.

Solvency ratio of Imperial Oil indicates that portion of funds provided by long-term lenders is comparison to the owners is only 0.44. Whereas it shows that long term solvency position of Suncor Energy is very sound.

E) Suncor Energy

Current ratio of Suncor is 0.84:1 in 2018 this means company has poor liquidity. It has only 0.84cents of current asset for every 1$ of current liability. In 2019 it increased a bit to 0.94 :1 but still it can be said that the company is not performing well as it has 0.94 cents for every 1 $ of liability and in 2020 it again declined to 0.89:1. from above analysis it can be clearly said that the company is not able to pay its short-term obligation, it indicates that the company will not be able to generate enough cash to pay off all its debts once they become due. Average Current ratio of oil and gas industry is 1.08:1 in 2020,1.04:1 in 2019 and 1.07:1 in 2018. When we compare this with Suncor energy current ratio it is lower than the industry average this may indicate a higher risk of distress or default. When a company's current ratio is lower than the industry average it has lower short term (liquidity) position than its competitors.

Debt Ratio of Suncor energy in year 2020 was 57.74% which indicates company's solvency. It is a acceptable rate, it states that 57.74% of company's asset are financed by debts. Lower the debt ratio is better for the company to borrow money. Average industry ratio in 2020 was 52% which is lower than Suncor energy's debt ratio this means Suncor energy is less solvent than its competitors. Company should try to improve and get the business at or under the industry standard, doing this will able to meet current and future obligation and can generate return on investment.

In summary it can be said that company has poor liquidity but its debt position is balanced and it can raise money to meet its short-term liquidity needs.

Imperial Oil

Current Ratio of imperial oil in year 2020 was 1.34:1 it is considered good. in this situation company has 1.34 current asset to cover its 1$ liability, company has enough cash to meet its liabilities. Current ratio above 1 indicates that the business has enough money in short term to pay its obligations. Average industry ratio is 1.80 which is lower than Imperial oil current ratio this means company good liquidity compared to its competitors.

Debt ratio of imperial oil in year 2020 was 43.68% which is considered good. Only 43.68% of company's asset are financed by debt. This indicates that imperial oil is doing well and is stable as its overall debt is less than its assets. Average debt ratio of industry is 52% which is higher than Imperial oil. This states that company is more solvent than its competitors and is in outstanding position.

In conclusion, it can be said that Imperial oil is performing better and is more stable compared Suncor energy as its liquidity and solvency is higher than Suncor energy.

F) Researchand provide some referenced explanations/comments on the underlying business reasons that have contributed to the trends you have identified.Why exactly are these trends are occurring, what are the underlying business environment or strategic/management reasons that may be causing the company performances to be different or similar, and whether they are strengths or concerns. You can look for additional relevant analysis commentary on the web, and/orwithin each company's financial reports and management comments therein. Such information can be found in financial news, company press releases, or the MD&A (management discussion and analysis) in the annual reports. ( Explain in terms of insolvency and liquidity. Please provide weblinks of your references )