ACCOUTINGs PROJECT REPORT

FINANCIAL ANALYSIS OF PSO

TABLE OF CONTENTS

INTRODUCTION OF PSO
o HISTORY OF PSO o PRINCIPLE DIVISIONS o PRINCIPLE COMPETITORS

INTRODUCTION OF SHELL PAKISTAN FINANCIAL STATEMENTS FOR PAKISTAN OIL COMPANY LTD.(PSO)
o BALANCE SHEET COVER A PERIOD FROM YEAR 2005-2008 o 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 TABLE o 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 PSObranded 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 Pakistan

The 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 in Millions of Pakistan Rupees Assets As of: Jul 02 2005 Jul 02 2006 Jul 02 2007 Jul 02 2008

Cash and Equivalents Short-Term Investments TOTAL CASH AND SHORT TERM INVESTMENTS Accounts Receivable

1,921.9 10.1 1,932.0 6,791.1

1,898.9 -1,898.9

1,522.3 -1,522.3

3,018.6 -3,018.6

11,715.9 13,600.0 33,904.7

Notes Receivable Other Receivables TOTAL RECEIVABLES Inventory Prepaid Expenses Other Current Assets TOTAL CURRENT ASSETS Gross Property Plant and Equipment Accumulated Depreciation NET PROPERTY PLANT AND EQUIPMENT Long-Term Investments Accounts Receivable, Long Term Loans Receivable, Long Term Deferred Tax Assets, Long Term Other Long-Term Assets TOTAL ASSETS LIABILITIES & EQUITY Accounts Payable

28.5

25.7

53.2

55.5

10,358.0 14,562.6 15,751.2 15,681.8 17,177.6 26,304.1 29,404.4 49,642.1 20,713.9 28,293.7 29,689.9 62,475.9 67.9 842.9 62.6 1,475.4 73.0 1,823.7 206.0 536.1

40,734.4 58,034.7 62,513.3 115,878.7 14,329.3 14,656.4 16,223.0 16,757.2 -6,217.8 -7,156.1 -8,231.7 -9,314.0 8,111.5 2,317.8 -45.2 124.7 829.6 7,500.3 3,279.0 655.6 39.6 408.3 96.3 7,991.3 2,990.6 498.6 127.8 401.0 214.7 7,443.2 2,701.1 354.1 123.2 407.3 202.4

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

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

Accrued Expenses Short-Term Borrowings Current Income Taxes Payable Other Current Liabilities, Total TOTAL CURRENT LIABILITIES Pension & Other Post-Retirement Benefits Other Non-Current Liabilities TOTAL LIABILITIES Common Stock Retained Earnings Comprehensive Income and Other TOTAL COMMON EQUITY TOTAL EQUITY TOTAL LIABILITIES AND EQUITY

4,425.1 4,811.6 -6,625.5

4,058.2 7,648.9 1,695.3 6,488.3

3,387.0 9,064.8 69.4 6,482.5

6,385.6 10,997.9 726.7 6,283.8

32,764.2 47,056.6 51,385.8 93,736.2 1,323.7 675.2 1,554.9 744.0 1,644.1 768.3 1,574.2 834.6

34,763.1 49,355.5 53,798.2 96,145.0 1,715.2 1,715.2 1,715.2 1,715.2

15,077.3 18,142.5 18,029.7 28,310.1 752.4 955.4 1,194.3 939.7

17,544.8 20,813.1 20,939.2 30,965.0 17,544.8 20,813.1 20,939.2 30,965.0 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 in Millions of Pakistan Rupees Revenues As of: Jul 02 2005 Jul 02 2006 Jul 02 2007 Jul 02 2008

212,503.7 298,250.0 349,706.3 495,278.5 212,503.7 298,250.0 349,706.3 495,278.5 199,431.0 281,965.7 338,388.5 466,217.4 13,072.6 2,861.4 984.0 83.0 3,928.5 9,144.1 -257.0 16,284.4 2,923.8 1,082.4 903.8 4,910.0 11,374.4 -622.3 11,317.8 3,188.5 1,140.1 -674.2 3,654.3 7,663.5 -891.6 29,061.1 3,808.7 1,166.8 257.7 5,233.3 23,827.8 -745.5

TOTAL REVENUES Cost of Goods Sold GROSS PROFIT Selling General & Admin Expenses, Total Depreciation & Amortization, Total Other Operating Expenses OTHER OPERATING EXPENSES, TOTAL OPERATING INCOME Interest Expense

Interest and Investment Income NET INTEREST EXPENSE Income (Loss) on Equity Investments Currency Exchange Gains (Loss) Other Non-Operating Income (Expenses) EBT, EXCLUDING UNUSUAL ITEMS Gain (Loss) on Sale of Assets Other Unusual Items, Total Legal Settlements Other Unusual Items EBT, INCLUDING UNUSUAL ITEMS Income Tax Expense Earnings from Continuing Operations NET INCOME NET INCOME TO COMMON INCLUDING EXTRA ITEMS NET INCOME TO COMMON

20.1 -236.9 221.8 32.6 -113.7 9,047.9 -4.9 148.5 -148.5 9,191.4 3,535.6 5,655.9 5,655.9 5,655.9 5,655.9

--622.3 1,038.9 -110.8 -261.8 11,418.3 ----11,418.3 3,893.6 7,524.7 7,524.7 7,524.7 7,524.7

20.0 -871.6 330.3 -6.5 -266.5 6,849.2 26.1 246.7 78.6 184.8 7,122.0 2,432.2 4,689.8 4,689.8 4,689.8 4,689.8

77.1 -668.4 294.3 -1,558.9 -622.4 21,272.4 31.2 73.7 -37.6 113.1 21,377.4 7,323.6 14,053.8 14,053.8 14,053.8 14,053.8

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 Cost of goods sold Gross Profit Expenses Net Income Consider Net Sales = 495278.5 as 100%. I. II. III. Cost of goods sold as a %age of Net Sales = (466217.4/495278.5)x100=94.13% Expenses as a %age of Net Sales = (15007.3/495278.5)x100 = 3.03% Net income as a %age of Net Sales = (14053.8/495278.5)x100= 2.83% 495278.5 466217.4 29061.1 15007.3 14053.8

Component %ages of income statement for the year ended at 2nd July, 2007

Net Sales Cost of goods sold Gross Profit Expenses Net Income

349706.3 338388.5 11317.8 6628.0 4689.8

Consider Net Sales = 349706.3 as 100%. I. II. III. Cost of goods sold as a %age of Net Sales = (338388.5/349706.3)x100= 96.76% Expenses as a %age of Net Sales =(6628.0/346706.3)x100= 1.89% 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 Total Liabilities Total Equity/capital Current Assets Fixed Assets

127110.0 96145.0 30965.0 115878.7 11231.3

Consider Total Assets 127110 as 100% I. Total Liabilities as a %age of Total Assets=(96145/127110)x100 = 75639% Capital as a %age of Total Assets = (30965/127110)x100 = 24.36%

II.

III.

Current Assets as %age of Total Assets = (115878.7/127110)x100 = 91.16% Fixed Assets as %age of Total Assets = (11231.3/127110)x100= 8.836%

IV.

Total Liabilities Current Liabilities Long term Liabilities

96145.0 93736.2 2408.8

Consider Total Liabilities 96145.0 as 100% I. Current Liabilities as % of Total Liabilities = (93736.2/96145.0)x100 = 97.494% Long Term Liabilities as % of Total Liabilities = (2408.8/96145.0)x100 = 2.505%

II.

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% A/C Receivable as a %age of Current Assets = (33904.7/115878.7)x100 = 29.25% Notes Receivable as a %age of Current Assets = (55.5/115878.7)x100 = 0.04789% Other Receivable as a %age of Current Assets = (15681.8/115878.7)x100 = 13.53% Inventory as a %age of Current Assets = (62475.9/115878.7)x100 = 53.915% Prepaid Exp as a %age of Current Assets = (206/115878.7) x100 = 0.178% Other Current Assets as a %age of Current Assets = (536.1/115878.7)x100 = 0.46%

II.

III.

IV.

V.

VI. VII.

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

II.

III.

A/C Receivable Long Term as a %age Fixed Assets = (354.1/11231.3)x100 = 3.153% Loans Receivable Long Term as a %age Fixed Assets = (123.2/11231.3)x100 = 1.097% Deferred Tax as a %age Fixed Assets = (407.3/11231.3)x100 = 3.63% Other Long term Assets as a %age Fixed Assets = (202.4/11231.3)x100 = 1.81%

IV.

V.

VI.

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% Accrued Exp as a %age of Current Liabilities = (6385.6/93736.2)x100 = 6.812% Short Term Borrowings as %age of Current Liabilities = (10997.9/93736.2)x100 = 11.73% Current Income Tax payable as a % of Current Liabilities = (726.7/93736.2)x100 = 0.775% Other Current Liabilities as a %age of Current Liabilities = (6283.8/93736.2)x100 = 6.71%

II.

III.

IV.

V.

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

II.

Total Capital

30965.0

Consider Total Capital 30965.0 as 100% I. II. Common Stock as a % of Total capital = (1715.2/30965)x100 = 5.54% Retained Earnings as a % of Total capital = (28310.1/30965)x100 = 91.43% Comprehensive income & other as a % of Total capital = (939.7/30965)x100=3.03%

III.

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

Total Assets Total Liabilities Total Equity/Capital Current Assets

74737.3 53798.1 20939.2 62513.3

Fixed Assets Current Liabilities Long Term Liabilities Consider total Assets 74737.3 as 100% I.

1224.0 51385.7 2412.4

Total Liabilities as a %age of total assets = (53798.1/74737.3)x100 = 71.98% Total Capital as a %age of total assets = (20939.2/74737.3)x100 = 28.02% Current Assets as a %age of total assets = (62513.3/74737.3)x100 = 83.644% Fixed Assets as a %age of total assets = (12224.0/74737.3)x100 = 16.356%

II. III.

IV.

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

II.

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% Notes Receivable as a %age of Current Assets = (53.2/62513.3)x100 = 0.085% Other Receivable as a %age of Current Assets = (15751.2/62513.3)x100 = 25.196% Inventory as a %age of Current Assets = (29689.9/62513.3)x100 = 47.49% Prepaid Exp as a %age of Current Assets = (73/62513.3)x100 = 0.12% Other Current Assets as a %age of Current Assets = (1823.7/62513.3)x100 = 2.92%

III.

IV.

V. VI. VII.

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% Long term investments as a %age Fixed Assets = (2990.6/12224)x100 = 24.46% A/C Receivable Long Term as a %age Fixed Assets = (498.6/12224)x100 = 4.08% Loans Receivable Long Term as a %age Fixed Assets = (127.8/12224)x100 = 1.05% Deferred Tax as a %age Fixed Assets = (401/12224)x100 = 3.28%

II.

III.

IV.

V.

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% Accrued Exp as a %age of Current Liabilities = (3387/51385.8)x100 = 6.59% Short term Borrowings as %age of Current Liabilities = (9064.8/51385.8)x100 = 17.64% Current Income Tax payable as a % of Current Liabilities = (69.4/51385.8)x100 = 0.14% Other Current Liabilities as a %age of Current Liabilities = (6482.5/51385.8)x100 = 12.62%

II.

III.

IV.

V.

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

II.

Total Capital

20939.2

Consider Total Capital 20939.2 as 100% I. II. Common Stock as a % of Total capital = (1715.2/20939.2)x100 = 8.19% Retained Earnings as a % of Total capital = (18029.7/20939.2)x100 = 86.11% Comprehensive income & other as % of Total capital = (1194.3/20939.2)x100=5.7%

III.

Trend Analysis Over Year (2007-2008)

Total Revenue in 2007 Total Revenue in 2008 Amount %age 349706.3 495278.5 495278.5-349706.3 = 145572.2 41.62%

Gross Profit in 2007 Gross Profit in 2008 Amount %age

11317.8 29061.1 29061.1-11317.8 = 17743.3 156.77%

Cost of Goods sold in 2007 Cost of Goods sold in 2008

338388.5 466217.4

 Amount %age

466217.4-338388.5 = 127828.9 37.78%

Net Income in 2007 Net Income in 2008 Amount %age

4689.8 14053.8 14053.8-4689.8 = 9364 199.67%

Expenses in 2007 Expenses in 2008 Amount %age

6628.0 15007.3 15007.3-6628.0 = 8379.3 126.42%

Cash & Short term investments in 2007 Cash & Short term investments in 2008 Amount %age

1522.3 3018.6 3018.6-1522.3 = 1496.3 98.29%

Total Receivable in 2007 Total Receivable in 2008 Amount %age

29404.3 49642.1 49642.1-29404.3 = 20237.8 68.83%

Total Current Assets in 2007 Total Current Assets in 2008 Amount %age

62513.3 115878.7 115878.7-62513.3= 53365.4 85.37%

Fixed Assets in 2007 Fixed Assets in 2008 Amount %age

12224 11231.3 11231.3-12224 = -992.7 -8.12%

Total Assets in 2007 Total Assets in 2008 Amount %age

74737.3 127110.0 127110.0-74737.3 = 52372.7 70.075%

Current Liabilities in 2007 Current Liabilities in 2008 Amount %age

51385.8 93736.2 93736.3-51385.8 = 88550.4 82.416%

Long Term Liabilities in 2007

2412.4

Long Term Liabilities in 2008 Amount %age

2408.8 2408.8-2412.4 = -3.6 -0.15%

Total Liabilities in 2007 Total Liabilities in 2008 Amount %age

53798.2 96145.0 96145.0-53798.2= 42346.8 78.72%

Total Capital in 2007 Total Capital in 2008 Amount %age

20939.2 30965.0 30965.0-20939.2 = 10025.8 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 =1.2292 This 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 =0.5922 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

= (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

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. 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 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

= 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

o TABLE COMPARING RATIOS OF PSO & SHELL SERIEL NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. RATIOS AS OF 2ND JULY, 2008. PSO 1.22 0.59 74.28 % 4.7786 % 2.2182 % 109.28 rupee per share 0.7222 37,270 million rupee 21.37 times 17.45 times SHELL 1.16 0.54 66.5 % 8.25 % 2.29 % 106.65 rupee per share 0.253 7,013.9 million rupee 24.87 times 17.72 times

Current Ratio Quick Ratio Debt Ratio Gross Profit Margin Net Profit Margin Earnings Per Share Return on Equity Working Capital Receivable Turnover Rate Inventory Turnover Rate

o GRAPHS: CURRENT RATIO: (times)

1.23 1.22 1.21 1.2 1.19 1.18 1.17 1.16 1.15 1.14 1.13 2008 PSO SHELL

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)

0.6 0.59 0.58 0.57 0.56 0.55 0.54 0.53 0.52 0.51 2008 PSO SHELL

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: (%)

76 74 72 70 PSO 68 66 64 62 2008 SHELL

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: (%)

9 8 7 6 5 4 3 2 1 0 2008 PSO SHELL

Means sales of products of SHELL are more profitable.

 NET PROFIT MARGIN: (%)

2.3 2.28 2.26 2.24 PSO 2.22 2.2 2.18 2.16 2008 SHELL

EARNING PER SHARE: (rupee per share)

109.5 109 108.5 108 107.5 107 106.5 106 105.5 105 2008 PSO SHELL

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.

 RETURN ON EQUITY: (%)

0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2008 PSO SHELL

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)

40000 35000 30000 25000 20000 15000 10000 5000 0 2008 PSO SHELL

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

 RECIEVABLE TURNOVER RATE: (times)

26 25 24 23 PSO 22 21 20 19 2008 SHELL

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

INVENTORY TURNOVER RATE: (times)

17.75 17.7 17.65 17.6 17.55 17.5 17.45 17.4 17.35 17.3 2008 PSO SHELL

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 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.