Financial Statement Analysis of Jamuna Oil Company Ltd.

1. Evaluation of Financial Performance
A Study on Jamuna Oil Company Limited
(JOCL)
Fahim M.D. Nizam Uddin
Metric No: B 121031
Program: BBA
Major: Accounting Information System
Semester: Autumn 2015
Department of Business Administration
Faculty of Business Studies
International Islamic University Chittagong

2. To know about the company
To find out company’s financial
situation by using Ratio Analysis
To find out the changes in different
trend by using Trend Analysis
To recommend some corrective
measures to overcome the problem
related to the performance
Objectives of the
Study

3. Methodology of the Study
Sources of data:
• All the necessary information to prepare this report is collected from
both primary and secondary sources of data.
Primary data sources:
• 1. Personal interview of the officers.
• 2. Personal observation
• 3. Face to face conversation with customers and dealers.
Secondary data sources:
• Operational manual
• Official Website
• Annual Report
• BPC newsletters
• Other necessary websites.

4. Corporate Headquarter
• Jamuna Bhaban, Sheikh Mujib
Road, Agrabad C/A, Chittagong-
4100, Bangladesh.
Main Installation
• Guptakhal,Patenga,Chittagong-
4100, Bangladesh.
Year of Incorporation
• 27th April, 1965.
Business Line
• Producing, Storing, Transporting,
Marketing of Petroleum
Products, Lubricant & grease,
Bitumen & LPG.
Depot
•16 Depot in whole Bangladesh.
Listing Status
•Public Limited Company.
Stock Exchange Listing
•DSE, CSE
Authorized Capital
•3,000 Million Taka.
Paid up Capital
•1003.83 Million Taka.
Number of Share
•100,38,60,000.
Number of Employees
•656.
CompanyProfile
Overview of the Company

5. Organizational Goals
For various activities JOCL use different
software. The software names are as follows:
•To ensure smooth
supplies of products all
over the Country.
•To ensure excellent
service to the
consumers.
•To ensure effective cost
control & profit.
•To maintain effective
management system.
•To create effective
manpower for the
Company.
Activities Names of Software
Product, Invoice, Credit
Control
Credit Control
Management System
Cash, Bill, Book Keeping Banking Management
System
Salary, Provident Fund Pay Roll System for JOCL
Store Store Inventory System
for JOCl
LPG LPG Sales Ledger Module
for JOCL
Share Market Share Management
System

6. Evaluation of Financial Performance through
Ratio Analysis
A. Liquidity Ratio
1. Current Ratio
2. Quick Ratio
3. Sales to Working Capital
B. Leverage Ratio
1. Debt to Equity
2. Debt Ratio
C. Efficiency Ratio
1. Fixed Asset Turnover
2. Day’s Sales Inventory
3. Inventory Turnover
D. Profitability Ratio
1. Net profit Margin
2. Basic Earning Power
3. ROA
4. ROE
E. Market Prospect Ratios
1. EPS
2. Dividend Payout Ratio
3. P/E Ratio
4. Dividend Yield
Financial ratios are useful indicators of a firm’s performance and financial
situation. Ratio Analysis defined as the systematic use of the ratio to
interpret the financial statements so that the strength and weakness of a
firm as well as its historical performance and current financial condition
can be determined.

7. 1.09
0.62
0.73
1.12
0.59
0.65
1.11
0.35
0.94
0
0.2
0.4
0.6
0.8
1
1.2
Current Ratio Quick Ratio Sales to Working
capital
Year-2015-2014
Year-2014-2013
Year-2013-2012
Liquidity Ratio
Current Ratio: It indicates a firm’s ability to
pay off its short term liabilities with current
assets. CR for the year 2015, 2014 & 2013
are 1.09, 1.12 & 1.11 respectively.
Industry Average: 2:1
Quick Ratio: Measures the ability of a
company to pay off its current liabilities with
quick assets. QR for the year 2015,2014 &
2013 are 0.62, 0.59 & 0.35.
Industry Average: 1:1
Sales to Working Capital: It indicates the turnover in working capital per year.
SWCR for the year 2015,2014 & 2013 are 0.73,0.65 & 0.94.
Industry Average: 2:1

8. 63.67%
62.06%
58.33%
2.84%
1.97%
2.31%
Year-2015-2014
Year-2014-2013
Year-2013-2012
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%
Debt to Equity
Debt Ratio
Leverage Ratio
Debt to Equity Ratio: It indicates the portion of a company that is financed by the debt
versus equity. The Debt to Equity Ratio for the year 2015,2014 & 2013 are 2.84%, 1.97% &
2.31% which indicates low portion of debts and high portion of equity are being used to
finance the assets of JOCL.
Debt Ratio: Also known as debt to assets ratio. It indicates the portion of a firm’s total
assets that are being financed by borrowed funds. Debt Ratio for the year 2015,2014 &
2013 are 63.57%,62.06% & 58.33%.
Acceptable Range: 50%

9. 28.52
12.79
22.35
16.32
0
5
10
15
20
25
30
Day's Sales
Inventory
Inventory
Turnover
Year-2015-2014
Year-2014-2013
2.33 2.27
2.82
0
0.5
1
1.5
2
2.5
3
Fixed Assets
Turnover
Efficiency Ratio
Fixed Asset Turnover: This ratio indicates the productivity of fixed assets in generating
revenues. A company having high turnover ratio indicates the efficiency at managing its
fixed assets. The ratio was high in 2013.
Day’s Sales Inventory: It indicates the
number of days it will take to sell its
inventory. In case of JOCL it indicates
that the company can convert its
inventory into cash sooner.
Inventory Turnover: It indicates how
efficiently inventory is managed by
comparing cost of goods sold with average
inventory for a period. So it is important to
have a high turn. The ratio shows that the
company doesn’t overspend by buying too
much inventory.

10. 2.46 2.51 2.4
7.62
10.31
11.54
0
5
10
15
Year-2015-2014 Year-2014-2013 year-2013-2012
Net Profit Margin
Basic Earning Power 5.44
7.39 8.2
14.92
19.47 19.69
0
5
10
15
20
25
Year-2015-2014 Year-2014-2013 year-2013-2012
ROA
ROE
Profitability Ratio
Net Profit Margin: It gives us
the net profit that a business
is earning from per dollar of
sales. The profit margin of
JOCL on sales is poor.
Basic Earning Power: This ratio
indicates the ability of firm’s assets
to generate operating income. BEP
ratio decreasing consecutively in last
three year, which means the ability
of the firm’s assets to generate
operating income is not good for
asset management.
ROA: It measures how effectively a
company can earn a return on its
investment in assets. ROA of JOCL is in
decreasing mode.
ROE: It measures the amount of net
income earned by utilizing each dollar of
common net equity. Standard form of ROE
is 12%-15%. It means the ROE of JOCL still
is in satisfactory level.

11. 20.4
23.08 21.81
34.98
27.94 29.59
0
10
20
30
40
Year-2015-2014 Year-2014-2013 year-2013-2012
EPS
Dividend Payout Ratio
0.49
0.43
0.46
0.06 0.04 0.05
0
0.1
0.2
0.3
0.4
0.5
0.6
Year-2015-2014 Year-2014-2013 year-2013-2012
P/E Ratio
Dividend Yield
Market Prospect Ratio
EPS: It measures the amount of net
income earned per share of stock
outstanding. Highest EPS was earned in
year 2014-2013.
Dividend Payout Ratio: It measures
the percentage of net income that is
distributed to shareholders in the
form of dividend. The highest
dividend paid by JOCL was in 2015-
2014.
P/E Ratio: It indicates how much
investors are willing to pay per dollar of
current earnings. P/E ratio of JOCL is high
and increasing gradually.
Dividend Yield: It measures the amount
of cash dividends distributed to common
shareholders relative to market value per
share. Dividend yield of JOCL is poor.

12. Trend Analysis( Horizontal)
2015
Contents Increase Decrease
Non Current Assets 12.80
Current Assets 31.69
Investment 34.88
Total Equity 26.88
Non Current Liabilities 75.95
Current Liabilities 34.95
Total Expenses 45.05
Net Profit 2.35
Total Comprehensive Income 57.06

13. Findings
•Shortage of Manpower. JOCL has lack of qualified employee in Finance and
Accounting department that is slowing down its Financial Performance.
•Government rules and regulations. It is not possible to take quick decision
because of BPC control over the oil marketing companies.
•Current ratio 2:1 is considered satisfactory. JOCL’s Current Ratio is 1.09:1.
•Quick Ratio is 0.619. Standard form is 1:1.
•Debt ratio is in satisfactory level. 63.57% : 50%
•Fixed asset turnover is 2.33 times, that’s the positive atmosphere.
•Days Sales Inventory: It takes only 28 days to sell its entire inventory.
•Inventory Turnover: The Company does not overpowered by buying too much
inventory and doesn’t waste resource by storing non saleable items.
•Last three year ROA of Jamuna oil was lower than the industry average, which
means Jamuna oil has not been effectively using its assets to generate earnings.

14. • Current ROE is 14.92. Standard form of ROE is 12%-15%.
• Basic earning power (BEP) ratio decreases consecutively in
last three year, which means the ability of the firm’s assets to
generate operating income is not good for asset management.
• Current net profit margin is 2.46. Standard form is 6. The
profit margin of JOCL is low because Jamuna oil gets only a
portion of sales as commission from BPC. Jamuna oil get
commission for Petrol & Octane only 0.30 tk. For Diesel &
Kerosene only 0.25 tk. For Furnace oil 0.27 tk. per litter.
Findings

15. • The organization should recruit skilled employees to run the
Financial Activities smoothly.
• Profit margin on sales of JOCL should be increased.
Government should increase the percentage of commission
so that JOCL can create a fund for import crude oil.
• JOCL must try to improve the Current & Quick Ratio by
utilizing its assets efficiently. Proper handling of liabilities is
also required.
• It must try to retain its current debt ratio and fixed assets
turnover ratio.
• It must use its assets efficiently & effectively to increase ROA.
• ROE must be increased. Else investors will shift to another.
Recommendations

16. Recommendations
•Dividend payout ratio is good. And JOCL is giving dividend every
year to its shareholder. It must try to retain the ratio.
•JOCL must utilize its assets efficiently to generate high level of
operating income to cover the initial expenses.
•It must try to increase its earnings per share so that it can provide
a good return to its shareholder.
•Jamuna oil should maintain accounting activities by the only one
software for the better control of his records.
•BPC should give some decision making power to relevant
department. The monitoring and controlling process should be
rigid.
•Jamuna oil is perfect in their situation but they should reduce
their Loan and debt.

17. ThankYou