Ratio Analysis of PSO

University of Education Okara Campus

By: Umair Ahmed: Ph: +923157532007

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Preface I present my “Term Report” authorized by you as a requirement for this course .In this report, I have tried to provide analysis of financial statements of PAKISTAN State Oil Ltd. I hope I have covered all financial ratio of my course.



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DEDICATICATION

My great mother

AND

Loving father whose prayers are great sources Of Strength to me in every venture.

MY

Loving brothers and sisters who supported me with lovely attitude and long

Passion for completing My work and who’s sincere invoke success throughout my life.

AND

My teachers who helped me through out the process

AND

All of those who love and help me in this process



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ACNOWLEDGMENT

All praise and countless thanks to Almighty Allah, the Compassionate, the Merciful who guide us in darkness and shows us the right oath and who is Master of the Day of Judgment. We seek to help in all the traits of life, all respect the Holy messenger of Allah, Hazrat Muhammad (PBUH), who brought the light of knowledge and truth when the humanity was wandering in the desert of ignorance and who was torch bears off all the values of all the mankind.

I would like to express my gratitude to my Finance teacher Mr.Yasir; who gave me this opportunity to fulfill this report.

UMAIR AHMED



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TABLE OF CONTENTS

1 Company’s Overiew VISION MISSION

5 6 7

2 Financial Statements 8

3 Ratio Analysis Long Term Analysis Short Term analysis Profitability Analysis Debt Paying Ability Investor analysis Dupont system

9 9 9 10 11 11 12

4 Conclusion 13



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Company’s Overview PSO is the market leader in Pakistan’s energy sector. The company has the largest network of retail outlets to serve the automotive sector and is the major fuel supplier to aviation, railways, power projects, armed forces and agriculture sector. PSO takes pride in continuing the tradition of excellence and is fully committed to meet the energy needs of today and rising challenges of tomorrow.

Pakistan State Oil, the largest oil marketing company in the country, is currently engaged in storage, distribution and marketing of various POL products. The company’s current value of Rs. 75 billion, its 82.1% share in the black oil market and 61.2% share in the white oil market, alone speak volumes about its success.

Board of Management:

Sardar Yasin Malik

Chairman BOM

Irfan K. Qureshi

Managing Director

Mr. Muhammad Ejaz Chaudhry

Member

Mr. Mahmood Akhtar

Member

Mr. Iskander Mohammed Khan

Member

Mr. Istaqbal Mehdi

Member



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Vision

To excel in delivering value to customers as an innovative and dynamic energy company that

gets to the future first.



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Mission We are committed to leadership in energy market through competitive advantage in providing the highest quality petroleum products and services to our customers, based on: Professionally trained, high quality, motivated workforce, working as a team in an environment, which recognizes and rewards performance, innovation and creativity, and provides for personal growth and development

Lowest cost operations and assured access to long-term and cost effective supply sources

Sustained growth in earnings in real terms

Highly ethical, safe environment friendly and socially responsible business practices



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Financial Statement

PAKISTAN STATE OIL LIMITED Balance Sheet

For the year ended on December 31,2008

ASSETS 2008 2007

Rs.(000) Rs.(000)

Fixed Assets 11231328 12224042

Current Assets 115878692 62513273

Total Net Assets 127110020 74737315

EQUITY AND LIABILITIES

Equity 30965054 20939217

Non-Current Liabilities 2408746 2412371

Current Liabilities 93736220 51385727

Total Equity and Liabilities 127110020 74737315

PAKISTAN STATE OIL LIMITED

Income statement For the year ended on December 31,2008

Description 2008 2007

Rs.(000) Rs.(000)

Sales 495278533 349706326

Cost of products sold (465254907) (337446896)

Gross Profit 30023626 12259430

Operating Expenses (9283021) (6012814)

Profit after operating expenses 20740605 6246616

Other Income 313860 424238

Other operating income 1396527 1278932

Profit from operations 22450992 7949786

Finance costs (1367898) (1158112)

Share of profit of association net of tax

294318 330306

profit before taxation 21377412 7121980

Taxation (7323617) (2432182)

Profit for the year 14053795 4689798



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Ratio Analysis

Long-Term Analysis Income Statement ratio:

Time Interest Earned ( Earning before income tax / interest exp)

Balance Sheet ratio:

Debt Ratio (Total Liabilities / Total Assets)*100

Debt / Equity Ratio (Debt / Total Equity)

Total Capitalization (LTD / LTD+C/S+P/S)

Analysis: Increase in TIER shows that the debt paying ability in2008 is better than 2007 but increase in Debt ratio and debt to equity ratio shows that the risk of company is also increases.

Short Term Analysis: Average collection period (365 Days / A/R Turnover)

Years 2008 2007

PSO 98.09 Times

53.97 Times

Years 2008 2007

PSO 76% 72%

Years 2008 2007

PSO 3.10 Times 2.57 Times

Years 2008 2007

PSO 0.072 Times

0.451 Times

Years 2008 2007

PSO Days =

21 12

Years 2008 2007



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Average payment period (365 Days / A/P Turnover)

Average age of inventory (365days / Inventory Turnover)

Analysis: Increase in ACP shows that chances for bad debts also increases and increase in APP Shows that company uses better its financial resources, but increases in Avg age of inventory shows management not properly work.

Profitability analysis: Net profit margin

(Net income / net sales)*100

Total Asset turnover (Net sales / total asset)

Return on asset (Net income / total asset)*100

Operating profit margin (Operating income / Net sales)*100

Fixed asset turnover (Net sales / total fixed asset)

PSO Days = 64 45

Years 2008 2007

PSO Days = 19 14

Years 2008 2007

PSO 2.84% 1.34%

Years 2008 2007

PSO 3.89 Times

4.68 Times

Years 2008 2007

PSO 11.06% 6.28%

Years 2008 2007

PSO 4.53% 2.27%

Years 2008 2007

PSO 44.00 Times

29.00 Times



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Return on total equity (Net income-P/S / owner’s equity)*100

Gross profit margin (Gross profit / net sales)*100

Analysis: The profitability of the firm is rapidly increases but the risk of insolvency also increases.

Debt Paying Ability: Net working capital

(Current asset – current liability)

Current ratio (Current asset / current liability)

Analysis: The Debt paying ability of the firm increases which is good.

Investor Analysis:

Earning per share (Earnings available for common stock holders / No. of shares of common stock outstanding)

Years 2008 2007

PSO 45.00% 22.00%

Years 2008 2007

PSO 6.00% 3.50%

Years 2008 2007

PSO 22142472 11127546

Years 2008 2007

PSO 1.24 Times

1.22 Times

Years 2008 2007

PSO 5.1 14.3

Years 2008 2007

PSO 81.94 27.34



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Price earning ratio (Market price of share / EPS)

Dividend Payout (Dividend Per Share / EPS)*100

Analysis: Company has unable to attract big invester because of low dividend payourt and price earning ratio

DuPont System of Analysis

ROA (Net profit margin * Total asset turnover)*100

ROE (ROA * FLM)

Times Times

Years 2008 2007

PSO 28.68% 76.80%

Years 2008 2007

PSO 11.06% 6.28%

Years 2008 2007

PSO 45.00% 22.00%



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Conclusion I learn a lot of things about making decision to investment in any company. With help of these ratios I can easily identify which sector is better for investment.

Documents

Ratio Analysis of PSO