Petrochina

Comparing the ratio of PetroChina with its leader of the industry – Sinopec.

Ability to pay liabilities

There are three ratios to measure ability to pay current liabilities.

i) Working Capital

Working capital measures the ability to pay current liabilities with current assets. In general, the larger the working capital, the better the ability to pay debts. Working capital is current version of total capital.

Both PetroChina and Sinopec have negative working capital, however, it is normal in this industry.

ii) Current Ratio

The current ratio is a liquidity ratio that measures whether or not a firm has enough resources to meet its short-term and long-term obligations. It compares a firm's current assets to its current liabilities.

A ratio less than 1 represents the company isn't running efficiently and can't cover its current debt properly. Compared with Sinopec, after 2012, this ratio of PetroChina is bigger than Sinopec, which means PetroChina has more current assets to pay current liabilities.

iii) Acid-Test Ratio

The acid-test ratio (also known as quick ratio) is a strong indicator whether a firm has adequate short-term assets to pay off its current liabilities.

Companies with an acid-test ratio of less than 1 imply not having enough liquid assets to pay off their current liabilities and should pay attention. But this may not apply in all cases as it may vary from industries.

We can see from the table that