Abstract
This work evaluates the impact of Acquisition on Firms’ Financial Performance. That is a case study of Total Petroleum Ghana. Acquisition is a corporate strategy by which companies take over other company without necessarily buying the other company. The main reasons behind this study were to assess Pre and Post-Acquisition liquidity of total petroleum Ghana, and also to determine the Pre and post-Acquisition profitability of total petroleum Ghana. Moreover to evaluate Pre and Post-Acquisition asset utilization of total petroleum Ghana Company Limited. The results of the findings show that in terms of liquidity, there was a significant impact of the acquisition on the performance. Post-acquisition liquidity ratios indicated significantly higher performance. Moreover, for the profitability and assets utilization, the pre-acquisition performances were better than the four years of the post-acquisition period, though these differences were statistically insignificant. By making references to the findings it can be concluded that the acquisition of Mobil oil by Total petroleum has not been profitable to the company within the first four years. This work recommends that management of the company need to pay more attention on the external environment. Keywords: Acquisition, Petroleum, Profitability, Performance, Firms DOI: 10.7176/EJBM/12-30-08 Publication date: October 31 st 2020
Highlights
Background to the studyAcquisition is a very important phenomenon in business, as evidence shows an increase in volume of M&A activities in the past and recent years (Anderson et al, 2001)
3.1.1.1 Net Profit Margin When calculating the Profit Margin is a ratio of profitability as calculated as the net income divided by revenues or the net profits divided by sales
3.2 Organizational Profile The background of the two companies have been compiled as follows; 3.2.1 Total Petroleum Ghana LTD History and Background Mobil Oil Ghana Ltd ( Total Petroleum Ghana Ltd (TPGL)) was incorporated on December 31, 1951 in accordance with the provisions of Companies Cap 193 of the Laws of Gold Coast under the name of Socony-Vacuum Oil Company (Gold Coast Limited), as a wholly owned subsidiary of Socony-Vacuum Oil Company, a company incorporated under the Laws of the State of New York in the United States of America
Summary
3.1.1 Profitability Ratio A class of financial tools that are used to assess company’s ability to generate earnings as compared to their expenses and other useful costs incurred during a particular time. 3.1.1.1 Net Profit Margin When calculating the Profit Margin is a ratio of profitability as calculated as the net income divided by revenues or the net profits divided by sales It measures how much out of every Ghana cedi of sales a company keeps in earnings. The intent is to obtain the speed at which assets generate revenue Under this ratio assets turnover and fixed asset turnover were assessed. 3.1.2.1 Asset Turnover The total asset turnover ratio measures the ability of a company to use its assets to efficiently generate sales. This ratio considers all assets, noncurrent and current assets including plant and equipment, property, building, inventory, cash etc. Under this ratio current ratio and Acid Test Radio were assessed
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