The impact of financial ratios on the financial performance of a chemical company. The case of LyondellBasell Industries
| Date | 14 April 2014 |
| DOI | https://doi.org/10.1108/WJEMSD-07-2013-0041 |
| Pages | 154-160 |
| Published date | 14 April 2014 |
| Author | Halimahton Borhan,Rozita Naina Mohamed,Nurnafisah Azmi |
| Subject Matter | Strategy,Business ethics,Sustainability |
The impact of financial ratios
on the financial performance
of a chemical company
The case of LyondellBasell Industries
Halimahton Borhan, Rozita Naina Mohamed and Nurnafisah Azmi
Faculty of Business Management, Universiti Teknologi Mara,
Shah Alam, Selangor, Malaysia
Abstract
Purpose – The purpose of this paper is to examine the impact of financial ratios on the financial
performance of a chemicalcompany: LyondellBasellIndustries (LYB).Some selected ratios: current ratio
(CR) and quick ratio (QR) represent the liquidity ratios, debt ratio (DR) and debt equity ratio (DTER)
representthe leverage ratios, whileoperating profit margin(OPM) and net profit margin (NPM)represent
the profitability ratios. LYB faced financial problems after its merger and the financial performance of
the company shrank to negative due to the world financial crisis. However, this companyhas bounced
back after a year and is now the world’s third largest chemical company based on revenue.
Design/methodology/approach – The financial ratios were measured from 2004 to 2011, quarterly.
A multiple regression model has been used and secondary data has been analyzed.
Findings – The results shows that CR, QR, DR and NPM have a positive relationship while
DTER and OPM have a negative relationship with the company’s financial performance. Among the
six ratios, CR, DR and NPM show the highest significant impact on the company’s performance.
Originality/value – This research paper contributed the result of the impact offinancial ratios on the
financial performance of a chemical company as the previous studies with this focus are hard to find
and some of the sources are not specifically related to the topic.
Keywords Economics, Sustainable development, Financial performance, Finance, Financial ratios,
Liquidity ratios, Leverage ratios, Profitability ratios
Paper type Research paper
Introduction
Mergers, acquisition, downsizing and divestiture activities have been front-page news
for a significant period of time. They are very common in the markets and industries
that are in the process of becoming more global. Sherman (2006) stated that during the
1980s, nearly half of all US companies were restructured, over 80,000 were acquired
or merged and over 700,000 sought bankruptcy protection in order to reorganize and
continue operations. The 1990s were equally dynamic in terms of companies evolving
through upsizing and growth, downsizing, roll-ups, divestitures and consolidation, but
with a different focus on operational synergies, scale efficiencies, increase in customer
bases, strategic alliances, market share and access to new technologies.
LyondellBasell Industries (LYB) claims to be one of the world’s largest polymers,
petrochemicals and fuels companies and a global leader in polyolefin’s technology,
production and marketing; a pioneer in propylene oxide (PO) and derivatives; and a
significant producer of fuels and refined products, including biofuels. On December 20,
2007, Lyondell and Basell completed its $19.4 billion (h13.6) merger, forming LYB with
headquarters in Rotterdam, the Netherlands. It is believed that the mergedL yondellBasell
company will have better upstream integration, linke d technologies and markets. The
merger provides scope for integration along the ethylene and propylene chains and
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/2042-5961.htm
Received 31 July 2013
Revised 31 July 2013
Accepted 31 July 2013
World Journal of Entrepreneurship,
Management and Sustainable
Development
Vol. 10 No. 2, 2014
pp. 154-160
rEmeraldGroup PublishingLimited
2042-5961
DOI 10.1108/W JEMSD-07-2013-00 41
154
WJEMSD
10,2
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