NUST SCHOOL OF ELECTRICAL ENGINEERING AND COMPUTER SCIENCE

ACCOUTING’s PROJECT REPORT

FINANCIAL ANALYSIS OF PSO

GROUP MEMBERS:

SABEEN JAVAID

SABA MANZOOR

SHEHZADI NAZ

AKBAR ALI

JAHANZEB MAQBOOL

TABLE OF CONTENTS

INTRODUCTION OF PSO

o 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 STATE OIL OVER THE YEAR 2007 AND 2008

o COMPONENT %AGES OF INCOME STATEMENT OF YEAR ENDED AT 2ND 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 THE YEARS 2007 & 2008

o PSO 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 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

Introduction of PSO

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

Following the adoption of the new name, PSO then took over both Pakistan National and Premier, in what was then the largest ever merger to take place in Pakistan. One month later, the government also took over the operations of Esso in Pakistan, which were placed under PSO. As such, PSO became the 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 controls approximately 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 oil market in the country. PSO also controls 60 percent of the country's diesel fuel market. Despite a nationally operating network of more than 3,750 PSO-branded filling stations, many of which include convenience stores, PSO's share of the consumer gasoline and lubricants markets has dropped to just 40 percent, in large part due to Shell Pakistan's aggressive expansion of its own retail network. Other major competitors include Total and refinery operators Attock and Caltex. PSO itself has engaged in a strategy of developing vertically integrated operations, including backing the construction of a new refinery.

The company also produces and markets a variety of products under its own brand, including motor oils and lubricants. PSO's sales extend to jet fuels and marine fuels, LPG, CNG, kerosene, and other petrochemicals. The company is also the leading supplier to Pakistan's utility and industrial sectors.

Nonetheless, retail sales remain the company's largest revenue-generator, representing some 90 percent of the group's sales. These topped PKR 254 billion ($4.27 billion) in 2005, making PSO Pakistan's largest company and the flagship of the Pakistani government's privatization effort in the early 2000s. The Pakistani government continues to hold more than 25.5 percent of PSO's shares, while a group of institutional investors, primarily banks, control more than 37.5 percent of group stock. PSO has been hailed for its dramatic turnaround, from inefficient government-run organization to a streamlined, modern corporation, a transformation largely credited to the leadership of Managing Director Tariq Kirmani. PSO is listed on the Karachi Stock Exchange.

Principal Divisions:

Audit Department; Aviation Marine; Corporate Planning; Imports; Industrial Consumer; 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; Security Services.

Principal Competitors:

Shell remains PSO's largest competitor in the country, with a market share of more than 25 percent. Shell Pakistan Limited; Total Parco Pakistan Limited; Attock Oil Company Limited; Caltex Oil Pakistan Limited.

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 of two companies: Shell Transport Company and Royal Dutch Petroleum Company, began importing kerosene oil from Azerbaijan into the subcontinent. Even today, the legacy of the past is visible in a storage tank carrying the date - 1898. The documented history of Royal Dutch Shell plc in Indo-Pakistan subcontinent dates back to 1903 when partnership was struck between The Shell Transport & Trading Company and the Royal Dutch Petroleum Company to supply petroleum to Asia. In 1928, to enhance their distribution capabilities, the marketing interest of Royal 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% of the 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.

Financial Statements for Pakistan State Oil Company Ltd. (PSO)Although debt as a percent of total capital decreased at Pakistan State Oil Company 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 there are not enough liquid assets to satisfy current obligations, Operating Profits are more than adequate to service the debt. Accounts Receivable are among the industry's worst with 17.55 days worth of sales outstanding. This implies that revenues are not being collected in an efficient manner. Last, inventories seem to be well managed as the Inventory Processing Period is typical for the industry, at 36.18 days.

Balance Sheet:

Currency inMillions 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

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 and Equipment

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. 32,382.1 69,342.2

9Accrued Expenses 4,425.1 4,058.2 3,387.0 6,385.6Short-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-Retirement Benefits

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

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

Year over year, Pakistan State Oil Company Ltd. has been able to grow revenues 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 from 96.76% to 94.13%. This was a driver that led to a bottom line growth from 4.7B to 14.1B.

Income Statement:

Currency inMillions of Pakistan Rupees

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 & Admin Expenses, 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 OPERATING EXPENSES, 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

Interest and Investment Income

20.1 -- 20.0 77.1

NET INTEREST EXPENSE -236.9 -622.3 -871.6 -668.4

Income (Loss) on Equity Investments

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 Continuing Operations

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

EXCLUDING EXTRA ITEMS

Trend analysis of Financial Statements of Pakistan State Oil over the year 2007 and 2008Component %ages of income statement for the year ended at 2 nd 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%

Component %ages of income statement for the year ended at 2 nd 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 2 nd July, 2008

Total Assets 127110.0

Total Liabilities 96145.0

Total Equity/capital 30965.0

Current Assets 115878.7

Fixed Assets 11231.3

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%

Total Liabilities 96145.0Current Liabilities 93736.2Long 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%

Current Assets 115878.7

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%

Fixed Assets 11231.3

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%

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%

Current Liabilities 93736.2

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%

Long term Liabilities 2408.8

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 30965.0

Consider 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 2 nd July, 2007

Total Assets 74737.3

Total Liabilities 53798.1

Total Equity/Capital 20939.2

Current Assets 62513.3

Fixed Assets 1224.0

Current Liabilities 51385.7

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%

Total Liabilities 53798.1

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%

Current Assets 62513.3

Consider Current Assets 62513.3 as 100%

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

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%

Fixed Assets 12224.0

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%

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

Current Liabilities 51385.8

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%

Long term Liabilities 2412.4

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%

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

∆ 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%

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

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%

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 =1.2292This result shows that current assets of PSO are slightly greater than its current liabilities.

Quick Ratio:Quick Ratio = (Current Assets – Inventory – Prepaid Expenses) / Current liabilities = (178,392 – 92,165.8 – 279) / 145,122 =0.5922Measure 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 company’s sales are profitable upto 4.77%

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

= (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 = 0.722This 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 timesAverage 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 timesAverage no. of Days to sell Inventory = 365/17.45 =21 Days

Shell:

Current Ratio:Current Ratio = Current Assets / Current Liabilities = 49,933.8 /42,919.9 =1.16This 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 = 0.54Measure 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. It indicates 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 company’s 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

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

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 per share

7. Return on Equity 0.7222 0.2538. Working Capital 37,270 million

rupee 7,013.9 million rupee

9. Receivable Turnover Rate 21.37 times 24.87 times10. Inventory Turnover Rate 17.45 times 17.72 times

o GRAPHS: CURRENT RATIO: (times)

20081.12

1.14

1.16

1.18

1.2

1.22

1.24

PSOSHELL

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)

20080.51

0.52

0.53

0.54

0.55

0.56

0.57

0.58

0.59

0.6

PSOSHELL

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

DEBT RATIO: (%)

200862

64

66

68

70

72

74

76

PSOSHELL

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: (%)

20080

1

2

3

4

5

6

7

8

9

PSOSHELL

Means sales of products of SHELL are more profitable.

NET PROFIT MARGIN: (%)

20082.16

2.18

2.2

2.22

2.24

2.26

2.28

2.3

PSOSHELL

EARNING PER SHARE: (rupee per share)

2008105

105.5

106

106.5

107

107.5

108

108.5

109

109.5

PSOSHELL

ESP of PSO is higher than shell. This means PSO is better option for an investor’s to invest in, because in PSO net income applicable to each share of common stock is higher.

RETURN ON EQUITY: (%)

20080

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

PSOSHELL

ROT of PSO is higher than SHELL. This means PSO is financially more strong and is a better option from investor’s point of view because it earn high return on equity investment.

WORKING CAPITAL: (million of rupee)

20080

5000

10000

15000

20000

25000

30000

35000

40000

PSOSHELL

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

RECIEVABLE TURNOVER RATE: (times)

200819

20

21

22

23

24

25

26

PSOSHELL

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

INVENTORY TURNOVER RATE: (times)

200817.3

17.35

17.4

17.45

17.5

17.55

17.6

17.65

17.7

17.75

PSOSHELL

Inventory is sellout at almost equal rate in both companies.

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 mean 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.