46552317 financial analysis of pso

7/31/2019 46552317 Financial Analysis of PSO

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NUST SCHOOL OF ELECTRICAL

ENGINEERING AND COMPUTER SCIENCE

ACCOUTINGs PROJECT REPORT

FINANCIAL ANALYSIS OF PSO

GROUP MEMBERS:

SABEEN JAVAID

SABA MANZOOR

SHEHZADI NAZ

AKBAR ALI

JAHANZEB MAQBOOL


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TABLE OF CONTENTS

INTRODUCTION OF PSOo HISTORY OF PSOo PRINCIPLE DIVISIONSo PRINCIPLE COMPETITORS

INTRODUCTION OF SHELL PAKISTAN FINANCIAL STATEMENTS FOR PAKISTAN OIL COMPANY LTD.(PSO)

o BALANCE SHEET COVER A PERIOD FROM YEAR 2005-2008o INCOME STATEMENT OF YEAR 2005-2008

TREND ANALYSIS OF FINANCIAL STATEMENTS OF PAKISTAN STATEOIL OVER THE YEAR 2007 AND 2008

o

COMPONENT %AGES OF INCOME STATEMENT OF YEAR ENDED AT2ND JULY, 2008.

o COMPONENT %AGES OF BALANCE SHEET AS AT 2ND JULY, 2008.o COMPONENT %AGES OF INCOME STATEMENT OF YEAR ENDED AT

2ND JULY, 2007.

o COMPONENT %AGES OF BALANCE SHEET AS OF 2ND JULY, 2007.o TREND ANALYSIS OF YEAR 2007-2008

FINANCIAL COMPARISON OF PSO WITH SHELL PAKISTAN FOR THEYEARS 2007 & 2008

o PSO CURRENT RATIO QUICK RATIO DEBT RATIO


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GROSS PROFIT MARGIN NET PROFIT MARGIN EARNING PER SHARE (EPS) RETURN ON EQUITY WORKING CAPITAL RECEIVABLE TURNOVER RATE INVENTORY TURNOVER RATE

o SHELL CURRENT RATIO QUICK RATIO DEBT RATIO GROSS PROFIT MARGIN NET PROFIT MARGIN EARNING PER SHARE (EPS) RETURN ON EQUITY WORKING CAPITAL RECEIVABLE TURNOVER RATE INVENTORY TURNOVER RATE

o RATIO TABLEo GRAPHS COMPARING ABOVE RATIOS OF SHELL & PSO


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Introduction of PSOPSO is a public company with 1,940 employees. It is the leading oil company ofPakistan. The Pakistani government's move toward a nationalized oil sectorbegan in 1974, with the passage of Petroleum Products (Federal Control) Act.Under the new legislation, the government took control of the two Pakistanioil companies, Pakistan National and Dawood Petroleum. Following thetakeover, Dawood was renamed Premier Oil Company. Also in 1974, thegovernment founded a new agency, the Petroleum Storage DevelopmentCorporation (PSDC). That entity was subsequently renamed Pakistan State Oil(PSO) in 1976.

Following the adoption of the new name, PSO then took over both PakistanNational and Premier, in what was then the largest ever merger to take placein Pakistan. One month later, the government also took over the operationsofEsso in Pakistan, which were placed under PSO. As such, PSO becamethe undisputed leader in the Pakistani market.

Pakistan State Oil Company Limited is that country's leading oil marketing

and distribution company. Formerly a state-run agency, PSO controlsapproximately 70 percent of Pakistan's total finished fuel products market,and as much as 80 percent of the total furnace oil market, the main fuel oilmarket in the country. PSO also controls 60 percent of the country's diesel fuelmarket. Despite a nationally operating network of more than 3,750 PSO-branded filling stations, many of which include convenience stores, PSO'sshare of the consumer gasoline and lubricants markets has dropped to just 40percent, in large part due to Shell Pakistan's aggressive expansion of its ownretail network. Other major competitors include Total and refinery operators

Attock and Caltex. PSO itself has engaged in a strategy of developing verticallyintegrated operations, including backing the construction of a new refinery.

The company also produces and markets a variety of products under its ownbrand, including motor oils and lubricants. PSO's sales extend to jet fuels andmarine fuels, LPG, CNG, kerosene, and other petrochemicals. The company isalso the leading supplier to Pakistan's utility and industrial sectors.
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Nonetheless, retail sales remain the company's largest revenue-generator,representing some 90 percent of the group's sales. These topped PKR254 billion ($4.27 billion) in 2005, making PSO Pakistan's largest companyand the flagship of the Pakistani government's privatization effort in the early

2000s. The Pakistani government continues to hold more than 25.5 percent ofPSO's shares, while a group of institutional investors, primarily banks, controlmore than 37.5 percent of group stock. PSO has been hailed for itsdramatic turnaround, from inefficientgovernment-run organization toa streamlined, modern corporation, a transformation largely credited to theleadership of Managing Director Tariq Kirmani. PSO is listed on the KarachiStock Exchange.

Principal Divisions:

Audit Department; Aviation Marine; Corporate Planning; Imports; IndustrialConsumer; IT Achievement; Lube Sales & Agency; Lubricants; Non Fuel Retail;Operations Department; Power Projects; Product Movement; Product Storage;PSO Cards; Quality Assurance; Retail Departments; Retail News; SecurityServices.

Principal Competitors:

Shell remains PSO's largest competitor in the country, with a market share ofmore than 25 percent. Shell Pakistan Limited; Total Parco Pakistan Limited;Attock Oil Company Limited; Caltex Oil Pakistan Limited.
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Introduction of Shell PakistanThe Shell brand name enjoys a 100-year history in this part of the world,dating back to 1899 when Asiatic Petroleum, the far eastern marketing arm oftwo companies: Shell Transport Company and Royal Dutch PetroleumCompany, began importing kerosene oil from Azerbaijan into thesubcontinent. Even today, the legacy of the past is visible in a storage tankcarrying the date - 1898.

The documented history of Royal Dutch Shell plc in Indo-Pakistansubcontinent dates back to 1903 when partnership was struck between TheShell Transport & Trading Company and the Royal Dutch Petroleum Companyto supply petroleum to Asia.

In 1928, to enhance their distribution capabilities, the marketing interest

ofRoyal Dutch Shell plc and the Burmah Oil Company Limited in India were

merged and Burmah Shell Oil Storage & Distribution company of India was

born. After the independence of Pakistan in 1947, the name was changed to

the Burmah Shell Oil Distribution Company of Pakistan. In 1970, when 51% ofthe shareholding was transferred to Pakistani investors, the name of changed

to Pakistan Burmah Shell (PBS) Limited. The Shell and the Burmah Groups,

retained the remaining 49% in equal propostions. In February of 1993, as

economic liberalisation began to take root and the Burmah divested from PBS,

Shell Petroleum stepped into raise its stake to 51%. The years 2001-2 have

seen the Shell Petroleum Company successively increasing its share, with the

Group now having a 76% stake in Shell Pakistan Ltd (SPL)- an expression of

confidence.


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Financial Statements for Pakistan State Oil

Company Ltd. (PSO)

Although debt as a percent of total capital decreased at Pakistan State OilCompany Ltd. over the last fiscal year to 26.21%, it is still in-line with the Oil,Gas and Consumable Fuels industry's norm. Additionally, even though thereare not enough liquid assets to satisfy current obligations, Operating Profitsare more than adequate to service the debt. Accounts Receivable are among

the industry's worst with 17.55 days worth of sales outstanding. This impliesthat revenues are not being collected in an efficient manner. Last, inventoriesseem to be well managed as the Inventory Processing Period is typical for theindustry, at 36.18 days.

Balance Sheet:

Currencyin

Millions of

Pakistan

Rupees

As of: Jul 022005

Jul 022006

Jul 022007

Jul 022008

Assets

Cash and Equivalents 1,921.9 1,898.9 1,522.3 3,018.6

Short-Term Investments 10.1 -- -- --

TOTAL CASH AND SHORT TERM

INVESTMENTS

1,932.0 1,898.9 1,522.3 3,018.6

Accounts Receivable 6,791.1 11,715.9 13,600.0 33,904.7


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Notes Receivable 28.5 25.7 53.2 55.5

Other Receivables 10,358.0 14,562.6 15,751.2 15,681.8

TOTAL RECEIVABLES 17,177.6 26,304.1 29,404.4 49,642.1

Inventory 20,713.9 28,293.7 29,689.9 62,475.9

Prepaid Expenses 67.9 62.6 73.0 206.0

Other Current Assets 842.9 1,475.4 1,823.7 536.1

TOTAL CURRENT ASSETS 40,734.4 58,034.7 62,513.3 115,878.7

Gross Property Plant andEquipment

14,329.3 14,656.4 16,223.0 16,757.2

Accumulated Depreciation -6,217.8 -7,156.1 -8,231.7 -9,314.0

NET PROPERTY PLANT AND

EQUIPMENT

8,111.5 7,500.3 7,991.3 7,443.2

Long-Term Investments 2,317.8 3,279.0 2,990.6 2,701.1

Accounts Receivable, Long Term -- 655.6 498.6 354.1

Loans Receivable, Long Term 45.2 39.6 127.8 123.2

Deferred Tax Assets, Long Term 124.7 408.3 401.0 407.3

Other Long-Term Assets 829.6 96.3 214.7 202.4

TOTAL ASSETS 52,307.9 70,168.5 74,737.3 127,110.0

LIABILITIES & EQUITY

Accounts Payable 16,902.1 27,165.9 32,382.1 69,342.2


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Accrued Expenses 4,425.1 4,058.2 3,387.0 6,385.6

Short-Term Borrowings 4,811.6 7,648.9 9,064.8 10,997.9

Current Income Taxes Payable -- 1,695.3 69.4 726.7

Other Current Liabilities, Total 6,625.5 6,488.3 6,482.5 6,283.8

TOTAL CURRENT LIABILITIES 32,764.2 47,056.6 51,385.8 93,736.2

Pension & Other Post-RetirementBenefits

1,323.7 1,554.9 1,644.1 1,574.2

Other Non-Current Liabilities 675.2 744.0 768.3 834.6

TOTAL LIABILITIES 34,763.1 49,355.5 53,798.2 96,145.0

Common Stock 1,715.2 1,715.2 1,715.2 1,715.2

Retained Earnings 15,077.3 18,142.5 18,029.7 28,310.1

Comprehensive Income and Other 752.4 955.4 1,194.3 939.7

TOTAL COMMON EQUITY 17,544.8 20,813.1 20,939.2 30,965.0

TOTAL EQUITY 17,544.8 20,813.1 20,939.2 30,965.0

TOTAL LIABILITIES AND

EQUITY

52,307.9 70,168.5 74,737.3 127,110.0


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Income Statements for Pakistan State Oil Company Ltd. (PSO)

Year over year, Pakistan State Oil Company Ltd. has been able to growrevenues from 349.7B to 495.3B. Most impressively, the company has been

able to reduce the percentage of sales devoted to cost of goods sold from96.76% to 94.13%. This was a driver that led to a bottom line growth from4.7B to 14.1B.

Income Statement:

Currency inMillions of

PakistanRupees

As of: Jul 022005

Jul 022006

Jul 022007

Jul 022008

Revenues 212,503.7 298,250.0 349,706.3 495,278.5

TOTAL REVENUES 212,503.7 298,250.0 349,706.3 495,278.5

Cost of Goods Sold 199,431.0 281,965.7 338,388.5 466,217.4

GROSS PROFIT 13,072.6 16,284.4 11,317.8 29,061.1

Selling General & AdminExpenses, Total

2,861.4 2,923.8 3,188.5 3,808.7

Depreciation & Amortization,Total

984.0 1,082.4 1,140.1 1,166.8

Other Operating Expenses 83.0 903.8 -674.2 257.7

OTHER OPERATINGEXPENSES, TOTAL

3,928.5 4,910.0 3,654.3 5,233.3

OPERATING INCOME 9,144.1 11,374.4 7,663.5 23,827.8

Interest Expense -257.0 -622.3 -891.6 -745.5


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Interest and InvestmentIncome

20.1 -- 20.0 77.1

NET INTEREST EXPENSE -236.9 -622.3 -871.6 -668.4

Income (Loss) on EquityInvestments

221.8 1,038.9 330.3 294.3

Currency Exchange Gains(Loss)

32.6 -110.8 -6.5 -1,558.9

Other Non-Operating Income(Expenses)

-113.7 -261.8 -266.5 -622.4

EBT, EXCLUDING UNUSUAL

ITEMS

9,047.9 11,418.3 6,849.2 21,272.4

Gain (Loss) on Sale of Assets -4.9 -- 26.1 31.2

Other Unusual Items, Total 148.5 -- 246.7 73.7

Legal Settlements -- -- 78.6 -37.6

Other Unusual Items 148.5 -- 184.8 113.1

EBT, INCLUDING UNUSUAL

ITEMS

9,191.4 11,418.3 7,122.0 21,377.4

Income Tax Expense 3,535.6 3,893.6 2,432.2 7,323.6

Earnings from ContinuingOperations

5,655.9 7,524.7 4,689.8 14,053.8

NET INCOME 5,655.9 7,524.7 4,689.8 14,053.8

NET INCOME TO COMMON

INCLUDING EXTRA ITEMS

5,655.9 7,524.7 4,689.8 14,053.8

NET INCOME TO COMMON 5,655.9 7,524.7 4,689.8 14,053.8


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EXCLUDING EXTRA ITEMS

Trend analysis of Financial Statements of

Pakistan State Oil over the year 2007 and

2008

Component %ages of income statement for the year ended at

2nd July, 2008

Net Sales 495278.5

Cost of goods sold 466217.4

Gross Profit 29061.1

Expenses 15007.3

Net Income 14053.8

Consider Net Sales = 495278.5 as 100%.

I. Cost of goods sold as a %age of Net Sales =(466217.4/495278.5)x100=94.13%

II. Expenses as a %age of Net Sales = (15007.3/495278.5)x100 = 3.03%III.

Net income as a %age of Net Sales = (14053.8/495278.5)x100= 2.83%


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Component %ages of income statement for the year ended at

2nd July, 2007

Net Sales 349706.3

Cost of goods sold 338388.5

Gross Profit 11317.8

Expenses 6628.0

Net Income 4689.8

Consider Net Sales = 349706.3 as 100%.

I. Cost of goods sold as a %age of Net Sales =(338388.5/349706.3)x100= 96.76%

II. Expenses as a %age of Net Sales =(6628.0/346706.3)x100= 1.89%III. Net Income as a %age of Net Sales = (4689.8/349706.3)x100= 1.35%

Component %ages of Balance Sheet as at 2nd July, 2008

Total Assets 127110.0

Total Liabilities 96145.0

Total Equity/capital 30965.0

Current Assets 115878.7

Fixed Assets 11231.3


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Consider Total Assets 127110 as 100%

I. Total Liabilities as a %age of Total Assets=(96145/127110)x100= 75639%

II. Capital as a %age of Total Assets = (30965/127110)x100 = 24.36%

III. Current Assets as %age of Total Assets = (115878.7/127110)x100 =91.16%

IV.

Fixed Assets as %age of Total Assets = (11231.3/127110)x100= 8.836%


Current Liabilities 93736.2

Long term Liabilities 2408.8

Consider Total Liabilities 96145.0 as 100%

I. Current Liabilities as % of Total Liabilities = (93736.2/96145.0)x100= 97.494%

II. Long Term Liabilities as % of Total Liabilities = (2408.8/96145.0)x100= 2.505%


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Consider Total Current Assets 115878.7 as 100%

I. Cash & equiv. as a %age of Current Assets =(3018.6/115878.7)x100 = 2.62%

II. A/C Receivable as a %age of Current Assets =(33904.7/115878.7)x100 = 29.25%

III. Notes Receivable as a %age of Current Assets =(55.5/115878.7)x100 = 0.04789%

IV. Other Receivable as a %age of Current Assets =(15681.8/115878.7)x100 = 13.53%

V. Inventory as a %age of Current Assets =(62475.9/115878.7)x100 = 53.915%

VI. Prepaid Exp as a %age of Current Assets =(206/115878.7) x100 = 0.178%

VII. Other Current Assets as a %age of Current Assets =(536.1/115878.7)x100 = 0.46%


Consider Total Fixed Assets 11231.3 as 100%

I. Net Property plant & equip as %age Fixed Assets =(7443.2/11231.3)x100 = 66.27%

II. Long term investments as a %age Fixed Assets =(2701.1/11231.3)x100 = 24.05%


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III. A/C Receivable Long Term as a %age Fixed Assets =(354.1/11231.3)x100 = 3.153%

IV. Loans Receivable Long Term as a %age Fixed Assets =(123.2/11231.3)x100 = 1.097%

V. Deferred Tax as a %age Fixed Assets =(407.3/11231.3)x100 = 3.63%

VI. Other Long term Assets as a %age Fixed Assets =(202.4/11231.3)x100 = 1.81%


Consider Current Liabilities 93736.2 as 100%

I. A/C Payable as a %age of Current Liabilities =(69342.2/93736.2)x100 = 73.98%

II. Accrued Exp as a %age of Current Liabilities =(6385.6/93736.2)x100 = 6.812%

III. Short Term Borrowings as %age of Current Liabilities =(10997.9/93736.2)x100 = 11.73%

IV. Current Income Tax payable as a % of Current Liabilities =(726.7/93736.2)x100 = 0.775%

V. Other Current Liabilities as a %age of Current Liabilities =(6283.8/93736.2)x100 = 6.71%


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Consider Long Term Liabilities 2408.8 as 100%

I. Pension & Post Retirement as % of Long Term Liabilities =(1574.2/2408.8)x100 = 65.35%

II. Other Long Term Liabilities as % of Long Term Liabilities=(834.6/2408.8)x100 = 34.65%

Total Capital 30965.0Consider Total Capital 30965.0 as 100%

I. Common Stock as a % of Total capital = (1715.2/30965)x100 = 5.54%II. Retained Earnings as a % of Total capital = (28310.1/30965)x100 =

91.43%

III.

Comprehensive income & other as a % of Total capital =(939.7/30965)x100=3.03%

Component %ages of Balance Sheet as at 2nd July, 2007

Total Assets 74737.3


Total Equity/Capital 20939.2



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Fixed Assets 1224.0


Long Term Liabilities 2412.4

Consider total Assets 74737.3 as 100%

I. Total Liabilities as a %age of total assets = (53798.1/74737.3)x100 =71.98%

II. Total Capital as a %age of total assets = (20939.2/74737.3)x100 = 28.02%III. Current Assets as a %age of total assets = (62513.3/74737.3)x100 =

83.644%

IV. Fixed Assets as a %age of total assets = (12224.0/74737.3)x100 = 16.356%


Consider Total Liabilities 53798.1 as 100%

I. Current Liabilities as a %age of Total Liabilities =(51385.7/53798.1)x100 = 95.52%

II. Long Term Liabilities as a %age of Total Liabilities =(2412.4/53798.1)x100 = 4.48%


Consider Current Assets 62513.3 as 100%

I. Cash & equiv. as a %age of Current Assets = (1522.3/62513.3)x100 =2.44%


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II. A/C Receivable as a %age of Current Assets = (13600/62513.3)x100 =21.76%

III. Notes Receivable as a %age of Current Assets = (53.2/62513.3)x100 =0.085%

IV. Other Receivable as a %age of Current Assets = (15751.2/62513.3)x100 =25.196%

V. Inventory as a %age of Current Assets = (29689.9/62513.3)x100 = 47.49%VI. Prepaid Exp as a %age of Current Assets = (73/62513.3)x100 = 0.12%

VII. Other Current Assets as a %age of Current Assets = (1823.7/62513.3)x100= 2.92%


Consider Fixed Assets 12224.0 as 100%

I. Net Property plant & equip as %age Fixed Assets =(7991.3/12224) x 100 = 65.37%

II. Long term investments as a %age Fixed Assets = (2990.6/12224)x100 =24.46%

III. A/C Receivable Long Term as a %age Fixed Assets = (498.6/12224)x100 =4.08%

IV. Loans Receivable Long Term as a %age Fixed Assets = (127.8/12224)x100= 1.05%

V. Deferred Tax as a %age Fixed Assets = (401/12224)x100 = 3.28%


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VI. Other Long term Assets as a %age Fixed Assets =(214.7/12224) x 100 = 1.76%


Consider current liabilities 51385.8 as 100%

I. A/C Payable as a %age of Current Liabilities = (32382.1/51385.8)x100 =63.01%

II. Accrued Exp as a %age of Current Liabilities = (3387/51385.8)x100 =6.59%

III. Short term Borrowings as %age of Current Liabilities =(9064.8/51385.8)x100 = 17.64%

IV. Current Income Tax payable as a % of Current Liabilities =(69.4/51385.8)x100 = 0.14%

V. Other Current Liabilities as a %age of Current Liabilities =(6482.5/51385.8)x100 = 12.62%


Consider Long Term Liabilities 2412.4 as 100%

I. Pension & Post Retirement as % of Long Term Liabilities =(1644.1/2412.4)x100 = 68.15%

II. Other Long Term Liabilities as % of Long Term Liabilities =(768.3/2412.4)x100 = 31.85%


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Total Capital 20939.2

Consider Total Capital 20939.2 as 100%

I. Common Stock as a % of Total capital = (1715.2/20939.2)x100 = 8.19%II. Retained Earnings as a % of Total capital = (18029.7/20939.2)x100 =

86.11%

III. Comprehensive income & other as % of Total capital =(1194.3/20939.2)x100=5.7%

Trend Analysis Over Year (2007-2008)

Total Revenue in 2007 349706.3

Total Revenue in 2008 495278.5

Amount 495278.5-349706.3 = 145572.2

%age 41.62%

Gross Profit in 2007 11317.8

Gross Profit in 2008 29061.1

Amount 29061.1-11317.8 = 17743.3

%age 156.77%

Cost of Goods sold in 2007 338388.5

Cost of Goods sold in 2008 466217.4


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Amount 466217.4-338388.5 = 127828.9

%age 37.78%

Net Income in 2007 4689.8

Net Income in 2008 14053.8

Amount 14053.8-4689.8 = 9364

%age 199.67%

Expenses in 2007 6628.0

Expenses in 2008 15007.3

Amount 15007.3-6628.0 = 8379.3

%age 126.42%

Cash & Short term investments in 2007 1522.3

Cash & Short term investments in 2008 3018.6

Amount 3018.6-1522.3 = 1496.3

%age 98.29%

Total Receivable in 2007 29404.3

Total Receivable in 2008 49642.1

Amount 49642.1-29404.3 = 20237.8

%age 68.83%


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Total Current Assets in 2007 62513.3

Total Current Assets in 2008 115878.7

Amount 115878.7-62513.3= 53365.4

%age 85.37%

Fixed Assets in 2007 12224

Fixed Assets in 2008 11231.3

Amount 11231.3-12224 = -992.7

%age -8.12%

Total Assets in 2007 74737.3

Total Assets in 2008 127110.0

Amount 127110.0-74737.3 = 52372.7

%age 70.075%

Current Liabilities in 2007 51385.8

Current Liabilities in 2008 93736.2

Amount 93736.3-51385.8 = 88550.4

%age 82.416%

Long Term Liabilities in 2007 2412.4


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Long Term Liabilities in 2008 2408.8

Amount 2408.8-2412.4 = -3.6

%age -0.15%

Total Liabilities in 2007 53798.2

Total Liabilities in 2008 96145.0

Amount 96145.0-53798.2= 42346.8

%age 78.72%

Total Capital in 2007 20939.2

Total Capital in 2008 30965.0

Amount 30965.0-20939.2 = 10025.8

%age 47.88%


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FINANCIAL COMPARISON OF PSO WITH SHELL

PAKISTAN FOR THE YEARS 2007 & 2008

PSO:

Current Ratio:Current Ratio = Current Assets / Current Liabilities

= 178,392 / 145,122 =1.2292

This result shows that current assets of PSO are slightly greater than itscurrent liabilities.

Quick Ratio:Quick Ratio

= (Current Assets Inventory Prepaid Expenses) / Current liabilities

= (178,392 92,165.8 279) / 145,122

=0.5922

Measure of liquidity is not satisfactory in this case. Because Quick Ratio

< 1. Debt Ratio:

Debt Ratio = (Total Liabilities / Total Assets) * 100

= (149,943.2 / 201,847.3) * 100

= 74.28 %

This shows that 74.28% of assets are financed by the creditors. It

indicates the relative size the equity position.

Gross Profit Margin:Gross Profit Margin = (Gross Profit / Net Sales) * 100

= (40,378.9 / 844,984.8) * 100

= 4.77%

This implies that companys sales are profitable upto 4.77%

Net Profit Margin:Net Profit Margin = (Net Profit after tax / Net Sales) * 100


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= (18,743.6 / 844,984.8) * 100

= 2.21%

Earnings Per Share (EPS):EPS = Net Profit after tax / Outstanding

= 18,743.6 / 171.518901

= 109.2 rupee per share

Return On Equity:Return on Equity = Net Income / Average Total Equity

= 18,743.6 / 25,952.1

= 0.722

This implies that return is earned on the equity at a rate of 0.722

Working Capital:Working Capital = Current Assets Current Liabilities

= 178,392 141,122

= 37,270 million rupee

Receivable Turnover Rate:Receivable Turnover Rate = Net Sales / Average Account Receivables

= 844,984.8 / 39,523.25

= 21.37 times

Average no. of Days to collect Receivables = 365/ 21.67 = 18 Days

Inventory Turnover Rate:Inventory Turnover Rate = Cost of Goods Sold / Average Inventory

= 804,605.9 / 46,082.9

= 17.45 times

Average no. of Days to sell Inventory = 365/17.45 =21 Days


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Shell:

Current Ratio:Current Ratio = Current Assets / Current Liabilities

= 49,933.8 /42,919.9 =1.16

This result shows that current assets of SHELL are 1.16times greater

than its current liabilities.

Quick Ratio:Quick Ratio = (Current Assets Inventory Prepaid Expenses) /

Current liabilities

= (49,933.8 26,383.2 230.9) / 42,919.9

= 0.54

Measure of liquidity is not satisfactory in this case. Because Quick Ratio

< 1.

Debt Ratio:Debt Ratio = (Total Liabilities / Total Assets) * 100

= (45,804.4/ 68,876.8) * 100

= 66.5 %

This shows that 66.5% of assets are financed by the creditors. Itindicates the relative size the equity position.

Gross Profit Margin:Gross Profit Margin = (Gross Profit / Net Sales) * 100

= (21,047.9/254,890.2) * 100

= 8.75 %

This implies that companys sales are profitable upto 4.77%

Net Profit Margin:Net Profit Margin = (Net Profit after tax / Net Sales) * 100

= (5843.753 / 254,890.2) * 100

= 2.29 %

Earnings Per Share (EPS):EPS = Net Profit after tax / Outstanding

= 5843.753 / 54.790313


28/35

= 106.65 rupee per share

Return On Equity:Return on Equity = Net Income / Average Total Equity

= 5843.753 / 11,536.2

= 0.50%

This implies that return is earned on the equity at a rate of 0.50%

Working Capital:Working Capital = Current Assets Current Liabilities

= 49,933.8 42,919.9

= 7,013.9 million rupee

Receivable Turnover Rate:Receivable Turnover Rate = Net Sales / Average Account Receivables

= 254,890.2 / 10,247.7= 24.87 times

Average no. of Days to collect receivables = 365 / 24.87=15 Days

Inventory Turnover Rate:Inventory Turnover Rate = Cost of Goods Sold / Average Inventory

= 233,842.3 / 13,191.6

= 17.72 times

Averages no. of Days to sell Inventory = 365/17.72=21 Days


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o TABLE COMPARING RATIOS OF PSO & SHELL

SERIEL

NO.

RATIOS AS OF

2ND

JULY,2008.

PSO SHELL

1. Current Ratio 1.22 1.162. Quick Ratio 0.59 0.543. Debt Ratio 74.28 % 66.5 %

4. Gross Profit Margin 4.7786 % 8.25 %

5. Net Profit Margin 2.2182 % 2.29 %6. Earnings Per Share 109.28 rupee per

share106.65 rupee pershare

7. Return on Equity 0.7222 0.253

8. Working Capital 37,270 millionrupee

7,013.9 millionrupee

9. Receivable Turnover Rate 21.37 times 24.87 times

10. Inventory Turnover Rate 17.45 times 17.72 times

o GRAPHS: CURRENT RATIO: (times)

1.13

1.14

1.15

1.16

1.17

1.18

1.19

1.2

1.21

1.22

1.23

2008

PSO

SHELL


30/35

This shows that current assets of PSO are 1.22times greater than its current

liabilities and current assets of SHELL are 1.16times greater than its current

liabilities. This means that PSO has high ability of short-term debt-paying as

compare to SHELL.

QUICK RATIO: (times)

Measure of Liquidity of PSO and SHELL are almost same and are less than onethis means that they are not in a satisfactory position to pay back their current

liabilities.

0.51

0.52

0.53

0.54

0.55

0.56

0.57

0.58

0.59

0.6

2008

PSO

SHELL


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DEBT RATIO: (%)

74.28% of total assets of PSO are financed by its creditors. And 66.65%of total

assets of SHELL are financed by its creditors. This means under crucial

circumstances PSO will be facing more risk.

GROSS PROFIT MARGIN: (%)

Means sales of products of SHELL are more profitable.

62

64

66

68

70

72

74

76

2008

PSO

SHELL

0

1

2

3

4

5

6

7

8

9

2008

PSO

SHELL


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NET PROFIT MARGIN: (%)

EARNING PER SHARE: (rupee per share)

ESP of PSO is higher than shell. This means PSO is better option for an

investors to invest in, because in PSO net income applicable to each share of

common stock is higher.

2.16

2.18

2.2

2.22

2.24

2.26

2.28

2.3

2008

PSO

SHELL

105

105.5

106

106.5

107

107.5

108

108.5

109

109.5

2008

PSO

SHELL


33/35

RETURN ON EQUITY: (%)

ROT of PSO is higher than SHELL. This means PSO is financially more strong

and is a better option from investors point of view because it earn high return

on equity investment.

WORKING CAPITAL: (million of rupee)

PSO has a much higher ability to pay back its short-term debt.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2008

PSO

SHELL

0

5000

10000

15000

20000

25000

30000

35000

40000

2008

PSO

SHELL


34/35

RECIEVABLE TURNOVER RATE: (times)

Receivables are collected more quickly in SHELL as compare to PSO.

INVENTORY TURNOVER RATE: (times)

Inventory is sellout at almost equal rate in both companies.

19

20

21

22

23

24

25

26

2008

PSO

SHELL

17.3

17.35

17.4

17.45

17.5

17.55

17.6

17.65

17.7

17.75

2008

PSO

SHELL


35/35

CONCLUSION:

Since PSO has higher ability to pay back its short-term debts, so creditor will

be more willing to give loan to PSO as compare to SHELL. This means PSO can

expand its business more efficiently.

Since PSO has higher EPS and ROE as compare to SHELL, so investors are

more willing to invest in it. This means PSO can raise its capital more.

Also the inventory sold at SHELL is slightly higher than at PSO, this shows that

both companies have good retail sales.

46552317 financial analysis of pso

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