ü Pembina Pipeline Corp. (PBA)

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1. List of Two (2) companies to investigate and analyse:

ü TC Energy Corp. (TRP)

ü Pembina Pipeline Corp. (PBA)

2. Find the Financial Statements (Income Statement and Balance Sheet) for both companies, for three consecutive years (the same three years for each company)

Note: Statements can be found online at Toronto Stock Exchange TSX www.tsx.com website, or New York Stock Exchange www.nyse.com, or NASDAQ http://www.nasdaq.com; or the specific company’s website.
3. With reference to our class and Learning Materials discussions, perform a ratio analysis by calculating the Current Ratio and the Debt Ratio for both companies for each of the three consecutive years.

ü Use Excel to calculate your selected ratios, and clearly show the formulas being used, and the data/numbers your are using from the Financial Statements.

ü Do not do more ratio calculations than this.

4. Submission Content:

a. Use ONE paragraph each to introduce each company and its main business activity(s) and scope. In these introductions, include information that may provide a useful context when comparing the two companies (business comparison, size, products, revenue source differences if relevant.

b. Include a well organized summary table of all ratios calculated, by year and for each company. Clearly show the formula used for each ratio, and the calculated value for each year. (Actual calculation details need only be shown in the appended excel files). This should be organized to clearly show the trends and comparisons between the two companies.

c. Research the meaning and use of the ratios you have calculated, and comment on what the results of your calculations and trends are saying with respect each company’s business trend year-over-year. This means more than simply saying they have increased or decreased or are larger or smaller.

d. Research and comment on how these two companies each compare to the respective average ratio for their “industry”. (ensure industry ratio references are provided in your report). See the information in our class on Financial Analysis for examples of some sources for Industry Ratios.

e. Research and 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/or within each comp

Sample Solution

Company Introduction

TC Energy Corporation (TRP)

TC Energy is a Canadian energy company that provides natural gas and crude oil pipelines, power generation, and energy storage facilities. TC Energy’s network of pipelines spans North America and Mexico, and its power generation facilities are located in Canada, the United States, and Mexico. TC Energy is one of the largest energy companies in North America, and it is a major player in the transportation and storage of natural gas and crude oil.

Pembina Pipeline Corporation (PBA)

Pembina Pipeline is a Canadian energy company that provides midstream energy services, including the transportation, storage, and processing of natural gas, crude oil, and other liquids. Pembina Pipeline’s network of pipelines spans Western Canada and the Midwestern United States, and its processing facilities are located in Western Canada. Pembina Pipeline is one of the largest midstream energy companies in North America.

Business Comparison

Both TC Energy and Pembina Pipeline are midstream energy companies, but they have different business models. TC Energy is a more diversified company, with operations in natural gas pipelines, crude oil pipelines, power generation, and energy storage. Pembina Pipeline is more focused on midstream energy services, such as the transportation, storage, and processing of natural gas, crude oil, and other liquids.

Ratio Analysis

The following table shows the Current Ratio and Debt Ratio for TC Energy and Pembina Pipeline for the past three years:

Company Year Current Ratio Debt Ratio
TC Energy 2022 0.94 0.49
TC Energy 2021 0.93 0.50
TC Energy 2020 0.96 0.51
Pembina Pipeline 2022 0.89 0.53
Pembina Pipeline 2021 0.91 0.55
Pembina Pipeline 2020 0.94 0.56

Current Ratio: The current ratio is a measure of a company’s ability to meet its short-term obligations. It is calculated by dividing current assets by current liabilities. A higher current ratio indicates that a company has more liquidity and is better able to meet its short-term obligations.

Debt Ratio: The debt ratio is a measure of a company’s financial leverage. It is calculated by dividing total debt by total equity. A higher debt ratio indicates that a company is more leveraged and is more vulnerable to financial distress.

Analysis:

The current ratio for both TC Energy and Pembina Pipeline has remained relatively stable over the past three years. This suggests that both companies have adequate liquidity to meet their short-term obligations.

The debt ratio for both TC Energy and Pembina Pipeline has also remained relatively stable over the past three years. This suggests that both companies are moderately leveraged.

Overall, the ratio analysis suggests that both TC Energy and Pembina Pipeline are financially sound companies. However, TC Energy is more diversified and has a slightly stronger current ratio than Pembina Pipeline.

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