Time Series Financial Analysis of PSOSubmitted to : Madam AyeshaSubmitted By:Muhammad Usman Khan bbafal11069Zain Mehmood b...
1Table of ContentIntroduction 3Chapter 1 History of Company 3Mission and Vision 4Balance sheet 8Income Statement 9Chapter ...
2Introduction:Pakistan State Oil is a multi-million and global competitive state-owned megacorporation and the leadingoil ...
3reinforce and monitor this structural change, related check and balances have been established byincorporating monitoring...
4We are committed to leadership in energy market through competitive advantage in providing the highestquality petroleum p...
5ValuesExcellence:We believe that excellence in our core activities emerges from a passion for satisfying our customers ne...
6Upcoming Initiatives:Establishment of Refinery in Khyber Pakhtunkhwa:An important step in PSOs efforts to secure the nati...
7BALANCE SHEETAs per Audited for last 5 years2012 2011 2010 2009 2008 2007Rupees in 000ASSETSNon- Current AssetsProperty, ...
8PROFIT AND LOSS ACCOUNTAs per audited for last 5 years2012 2011 2010 2009 2008 2007Rupees in 000Sales - net of trade disc...
9Profitability Ratios:Ratios 2012 2011 2010 2009 2008 2007Gross ProfitMargin2.9% 3.5% 3.3% 0.4% 5.1% 3.0%OperatingProfit M...
10Graph:Interpretations:The gross profit Margin shows the margin of profit after excluding the cost of goods sold from sal...
11Operating Profit Margin :Operating ProfitSalesOperating Profit Margin for 2012 = 17313296 = 1.4%1199927907Operating Prof...
12Interpretations:Operating profit margin gives an estimate of how much PSO generates on each rupee of sales before intere...
13Interpretations:Net Profit Ratio indicates how much of Sales PSO has secured as profit or in other words it is the actua...
14Graph:Interpretations:This ratio indicates the amount PSO earn from each outstanding share of common stock. Ratio for 20...
15Graph:Interpretations:This indicates how effectively a company is using its assets. The values for 2012 is 2.6% which is...
16Return on Common Equity for 2009 = (6698535) = -32%20870785Return on Common Equity for 2008 = 14053795 = 45%30965054Retu...
17Market RatiosRatios 2012 2011 2010 2009 2008 2007Price /EarningsRatio4.46 03.07 4.93 (5.47) 5.09 14.31Market/bookRatio0....
18Graph:Interpretations:Price/Earning ratio measures the amount that investors are willing to pay for each rupee of PSO’s ...
19Market/Book Ratio for 2010 = 260.20 = 1.52 where Book Value per share = 29336058000 = 171.03171.03 171518901Market/Book ...
20Liquidity RatiosRatios 2012 2011 2010 2009 2008CurrentRatio1.14 1.16 1.13 1.06 1.23QuickRatio0.84 0.72 0.79 0.75 0.57Cur...
21Interpretations:The Ratio tells the ability to full fill its short term obligationCompany data shows that for every one ...
22Interpretations:The Ratio tells more precisely and accurately companies the ability to full fill its short term obligati...
23Inventory Turnover Ratio for 2009 = 719282176 = 13.9%51529138Inventory Turnover Ratio for 2008 = 583213959 = 12.1%459610...
24Average Collection Period for 2011 = 121111453 x 365 = 45.34974917064Average Collection Period for 2010 = 99005452 x 365...
25Average Payment Period: Average Creditors x 365PurchasesAverage Payment Period for 2012 = 1693092385 x 365 = 62.85983246...
26Total Assets Turnover: SalesTotal AssetsTotal Assets Turnover for 2012 = 1199927907 = 3.45347427594Total Assets Turnover...
27Interpretations:The total asset turnover ratio measures the ability of a company to use its assets to efficiently genera...
28Graph:Interpretations:Debt Ratio Measures what proportion of debts a company has as compared to its assets. Thus it show...
29Times Interest Earned Ratio for 2010 = 17963152 + 9882010 =2.819882010Times Interest Earned Ratio for 2009 = (110356864)...
30AnnexuresAnnexure (1)References:http://www.psopk.com
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To Madam Ayesha...Financial Analysis of PSO

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This is the financial analysis with all financial ratios calculated. I feel very sorry to say that my project was considered copy paste.Although it was a damn 1 day work out.

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To Madam Ayesha...Financial Analysis of PSO

  1. 1. Time Series Financial Analysis of PSOSubmitted to : Madam AyeshaSubmitted By:Muhammad Usman Khan bbafal11069Zain Mehmood bbafal11116IqraAltaf Mayo bbafal11122Muhammad ZeeshanSaeed bbafal11055Muhammad SaadSamee bbafal11048Final Project Financial Management
  2. 2. 1Table of ContentIntroduction 3Chapter 1 History of Company 3Mission and Vision 4Balance sheet 8Income Statement 9Chapter 2. Profitability Ratios 10Gross Profit Margin 11Operating Profit Margin 12Net Profit Margin 13Earning per Share 14Return on Total Assets 15Return on Common Equity 16Chapter 3. Market Ratio 17Price/Earning Ratio 18Market/book Ratio 19Chapter 4. Liquidity Ratio 21Current Ratio 21Quick Ratio 22Chapter 5 Activity Ratio 23Inventory Turn Over Ratio 23Average Collection Period 24-25Average Payment Period 26Total Asset Turn over 27Chapter 6. Debt Ratios 28Debt Ratio 29Time Interest Earning Ratio 30Annexures and Reference 31
  3. 3. 2Introduction:Pakistan State Oil is a multi-million and global competitive state-owned megacorporation and the leadingoil market presiding entity in Pakistan. Headquartered in Karachi, Sindh Province of Pakistan, it has severalstate divisions in the different cities in Pakistan, with administrative management business networkinfrastructure well expanded, and built at par with international standards, represents 82% of country’snational energy sources.The PSO is horizontally integrated and is the largest state-owned energy megacorporation active in everyarea of the oil and gas industry, including exploration and production, refining, distribution and marketing,petrochemicals, power generation and trading. The PSO conducts major renewable energy activities,including in biofuels, hydrogen, solar, nuclear and wind power as well as defence management. Themegacorporation is the largest entity in the country, with well expanded business presence in abroad.The PSO has a primary listing at the Karachi Stock Exchange (KSE), and is a constituent of the KSE-30Index. The PSO is the third largest entity to be placed in the KSE, ranking behind the Shell Pakistan— asubsidiary of Royal Dutch Shell.History:The creation of Pakistan State Oil (PSO) can be traced back to the year 1974, when on January 1st; thegovernment took over and merged Pakistan National Oil (PNO) and Dawood Petroleum Limited (DPL) asPremiere Oil Company Limited (POCL).Soon after that, on 3rd June 1974, Petroleum Storage Development Corporation (PSDC) came intoexistence. PSDC was then renamed as State Oil Company Limited (SOCL) on August 23rd 1976.Following that, the ESSO undertakings were purchased on 15th September 1976 and control was vested inSOCL. The end of that year (30th December 1976) saw the merger of the Premier Oil Company Limitedand State Oil Company Limited, giving way to Pakistan state Oil (PSO).After PSO’s inception, the corporate culture underwent a comprehensive renewal program which was fullyimplemented in 2004. This program over the years included the revamping of the organizationalarchitecture, rationalization of staff, employee empowerment and transparency in decision making throughcross functional teams. This new corporate renewal program has divided the company’s major operationsinto independent activities supported by legal, financial, informative and other services. In order to
  4. 4. 3reinforce and monitor this structural change, related check and balances have been established byincorporating monitoring and control systems.Human Resource Development became one of the main priorities on the company’s agenda under thiscorporate reform.It is due to this effective implementation of corporate reform and consistent application of the bestindustrial practices and business development strategies, that PSO has been able to maintain its marketleadership in a highly competitive business environment.For the past 35 years, Pakistan State Oil has been fuelling the needs of the nation. Acknowledged as theleading Public Sector Company of Pakistan, PSO has been driving the wheels of the national economy andis the first public company to pass the 1 Trillion rupee revenue mark.Currently the Company is engaged in the marketing and distribution of various POL products includingMotor Gasoline , High Speed Diesel (HSD), Furnace Oil (FO), Jet Fuel (JP-1), Kerosene, CNG, LPG,Petrochemicals and Lubricants. PSO has the most wide-spread retail network in the country with over 3,500retail outlets and is also the major fuel supplier to aviation, railways, power projects, armed forces, marineand agriculture sectors. The Company also possesses the country’s largest storage capacity representingnearly 74% of the nations total storage capacity.PSO is now on the road to becoming a fully integrated firm encompassing facets of exploration, refining,transportation and shipping. Through this plan, PSO will not only reduce operational costs, it will also beable to reduce dependence on external supply sources and develop self-sufficiency in the energy sector. TheCompany’s future plans also include exploring new product markets, expanding the lubricants productrange, further expansion of the company retail network, and reducing product movement costs.Vision:To excel in delivering value to customers as an innovative and dynamic energy company that gets to thefuture
  5. 5. 4We are committed to leadership in energy market through competitive advantage in providing the highestquality petroleum products and services to our customers, based on. Professionally trained, high quality, motivated workforce, working as a team in an environment, whichrecognizes and rewards performance, innovation and creativity, and provides for personal growth anddevelopment. 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.
  6. 6. 5ValuesExcellence:We believe that excellence in our core activities emerges from a passion for satisfying our customers needsin terms of total quality management. Our foremost goal is to retain our corporate leadership.Cohesiveness:We endeavor to achieve higher collective and individual goals through team. This is inculcated in theorganization through effective communication.Respect:We are an Equal Opportunity Employer attracting and recruiting the finest people from around the country.We value contribution of individuals and teams. Individual contributions are recognized through our rewardand recognition program.Integrity:We uphold our values and Business Ethics principles in every action and decision. Professional andpersonal honesty, dedication and commitment are the landmarks of our success. Open and transparentbusiness practices are based on ethical values and respect for employees, communities and the environment.Innovation:We are committed to continuous improvement, both in New Product and Processes as well as those existingalready. We encourage Creative Ideas from all stakeholders.Corporate Responsibility:We promote Health, Safety and Environment culture both internally and externally. We emphasize onCommunity Development and aspire to make society a better place to live in.
  7. 7. 6Upcoming Initiatives:Establishment of Refinery in Khyber Pakhtunkhwa:An important step in PSOs efforts to secure the national energy supply chain, the Company plans toestablish a state-of-the-art (EURO IV) refinery with a capacity of 40,000 barrels per day in KhyberPakhtunwa.By establishing this refinery, PSO will be able to diversify its business offerings, improve availability ofPOL products in the country, reduce supply lines and transport costs for the northern region as well as helpsave substantial foreign exchange savings for the national exchequer. This project will also help driveeconomic growth in the region by offering job opportunities for both skilled and unskilled labor as well asincrease foreign investment in the area.
  8. 8. 7BALANCE SHEETAs per Audited for last 5 years2012 2011 2010 2009 2008 2007Rupees in 000ASSETSNon- Current AssetsProperty, plant and equipment 5831993 6084731 637523 6987025 7460549 8012317Intangibles 299991 28822 36250 68872 105502 126212Long term investments 1968073 2314168 2019270 2153514 2701097 2990591Long term loans, advances and receivables 385497 324554 317889 405780 477745 627972Long term deposits and prepayments 123740 148748 125951 83655 79098 65913Deferred tax 1202316 957487 5033273 407337 4010379631610 9858510 8874593 14732119 11231328 12224042Current AssetsStores, spare parts and loose tools 134431 115339 113863 112143 115814 127891Stock-in-trade 88523794 95378393 58598668 40698209 62360067 29562055Trade debts 218022292 124721832 117501074 80509830 33904728 13599966Loans and advances 526118 430716 409987 418015 396220 365974Deposits and short term prepayments 2528406 1027381 367378 551803 401433 1583913Other receivables 2122166 2252028 14557542 12806779 15681790 15751198Taxation –net 5314752 6311951 46580 709627Cash and bank balances 1624025 2309006 1778056 2883118 3018640 1522276337795984 252814896 193373148 138689524 115878692 62513273Net Assets in Bangladesh - - - - - -total Assets 347427594 262673406 202247741 153421643 127110020 74737315EQUITY AND LIABILITIESShare Capital 1715190 1715190 1715190 1715190 1715190 1715190Reserves 48244718 40187795 27620868 19155595 29249864 1922402749959908 41902985 29336058 20876785 30965054 20939217Non-Current LiabilitiesLong term deposits 1176078 1023531 948476 854718 834598 768308Retirement and other service benefits 2518502 2233717 1887751 1673020 1574148 16440633694580 3257248 2836227 2527738 2408746 2412371Current liabilitiesTrade and other payables 246767460 191851017 156035716 110123702 81067565 41431075Provosions 688512 688512 688312 688512 726116 688512Accrued interest / mark-up 544485 432133 3330213 5556380 217928 131961Short term borrowings 45772649 24541511 13021015 18654526 10997908 9064781Taxes payable - - - - 726703 79398293773106 217513511 170075456 130023120 93736220 51385727Total equity And Liabilities 347427594 262973406 20247741 153421643 127110020 74737315
  9. 9. 8PROFIT AND LOSS ACCOUNTAs per audited for last 5 years2012 2011 2010 2009 2008 2007Rupees in 000Sales - net of trade discounts and allowances 1199927902 974917064 877173254 71982176 583213959 411057592Less:- Sales tax -163861410 -137969158 -118563577 -97386723 -742494721 -52418310- Inland freight equalization margin -11642892 -16417542 -15851726 -9199864 -136859541 -8932956-175504302 -154386700 134415303 -106586587 -879354261 -61351266Net sales 1024423605 820530364 742757951 612695589 495278533 349706326Cost of products sold -990101083 -786250059 -713591707 -609685478 -465254907 -337446896Gross profit 24322522 34280305 29166244 3010111 30023626 12259430Other operating income 2133994 1815951 1479054 1451666 1396527 1278932Operating costsTransportation costs -1205394 -810423 -631849 -513673 -337886 -369328Distribution and marketing expenses -5863170 -5178233 -4055238 -3960953 -3264599 -2745289Administrative expenses -1659530 -1514532 -1125891 -1151793 -116074 -1002712Depreciation -1127587 -1120999 -1137637 -1141698 -1119137 -1098157Amortisation -15491 -18210 -44752 -52615 -47689 -41908Other operating expenses -9272048 -2239725 -2416518 -3994389 -3352969 -755420-19143220 -10879122 -9411885 10815121 -9283021 -6012814Profit From Operations 17313296 25217134 21233413 -6353344 313860 424238Other Income 7550581 4143710 6095348 776686 22450992 7949786Finance costs -11658928 -11903162 -9882010 -6232056 -1367898 -115811213204949 17457682 17446751 -11808714 21083694 6791674Share of profit of associates 469468 516752 516401 451850 294318 330306Profit before taxation 13674417 17974434 17963152 -11356864 21377412 7121980Taxation -4618362 3195120 -8913556 4658329 -7323617 -2432182Profit for the year 9056055 14779314 9049596 -6698535 14053795 4689798In RupeesEarnings per share - basic and diluted 52.8 86.17 52.76 -39.05 81.94 27.34
  10. 10. 9Profitability Ratios:Ratios 2012 2011 2010 2009 2008 2007Gross ProfitMargin2.9% 3.5% 3.3% 0.4% 5.1% 3.0%OperatingProfit Margin1.4% 2.6% 2.4% (0.9%) 3.8% 1.9%Net ProfitMargin0.7% 1.5% 1.0% (0.9%) 2.4% 1.1%Earnings perShare(in Rs.)52.80 86.17 52.76 39.05 81.99 27.34Return onTotal assets2.6.% 5.6% 4.4% (4.3%) 11% 6.2%Return onCommon Equity18% 35% 30% (32%) 45% 22%Calculationsand InterpretationsGross Profit Margin : Gross ProfitSalesGross Profit Margin for 2012 = 34322522 = 2.9%1199927907Gross Profit Margin for 2011 = 34280305 = 3.5%974917064Gross Profit Margin for 2010 = 29166244 = 3.3%877173254Gross Profit Margin for 2009 = 3010111 = 0.4%719282176Gross Profit Margin for 2008 = 30023626 = 5.1%583213959Gross Profit Margin for 2007 = 12259430 = 3.0%411057592
  11. 11. 10Graph:Interpretations:The gross profit Margin shows the margin of profit after excluding the cost of goods sold from sales. A higher gross profitmargin is estimated.Now we consider the PSO’s financial position, in 2007 the ratio was 3.0% which means that for each rupee of salesgenerated 0.03 rupee is retained for further operating expenses, interest payment, taxation and distribution of shareswhich is very low. Companies usually have much greater gross profit margin(depending upon the type of company). Thismay be explained in terms of high value of cost of goods sold which is almost 81% of sales. The reason behind higherCOGS can be explained in terms of increasing prices of petroleum. We can see improvement in 2008 as the ratioincreased to 5.1% , while in 2009 the margin is very low i.e. 0.4%. After that ratios improved from 3.3% to 3.5% in 2010and 2011 respectively. Yet again the margin declined in 2012 which is 2.9%. However if we consider public utility then itis quite acceptable. This lower margin of gross profit is the cause of other profitability ratios to be low.The overall effect of gross profit margin can be seen in above graph.01234562012 2011 2010 2009 2008 2007Gross profit margin
  12. 12. 11Operating Profit Margin :Operating ProfitSalesOperating Profit Margin for 2012 = 17313296 = 1.4%1199927907Operating Profit Margin for 2011 = 25217134 = 2.6%974917064Operating Profit Margin for 2010 = 21233413 = 2.4%877173254Operating Profit Margin for 2009 = (6353344) = -0.9%719282176Operating Profit Margin for 2008 = 22450992 = 3.8%583213959Operating Profit Margin for 2007 = 7949786 = 1.9%411057592Graph:-2-10123452012 2011 2010 2009 2008 2007Operating Profit MarginOperating Profit Margin
  13. 13. 12Interpretations:Operating profit margin gives an estimate of how much PSO generates on each rupee of sales before interest, taxationand distribution of shares. It determine the pricing strategy and operating efficiency of PSO. Usually a high or increasingoperating margin is expected.In the present scenario, the margin is low because of low gross profit. However being public utility it is quite acceptable.The Margin is 1.4% for 2012, 2.6% for 2011, 2.4% for 2010, -0.9% for 2009, 3.8% for 2008 and 1.9% for 2007. Thedifference is because of difference in operations. Higher operations tend to have higher sales.Overall margin for past 6 years can be seen in graph.Net Profit Margin :Net ProfitSalesNet Profit Margin for 2012 = 9056055 = 0.7%1199927907Net Profit Margin for 2011 = 14779314 = 1.5%974917064Net Profit Margin for 2010 = 9049596 = 1.0%877173254Net Profit Margin for 2009 = (6698535) = -0.9%719282176Net Profit Margin for 2008 = 14053795 = 2.4%583213959Net Profit Margin for 2007 = 4689798 = 1.1%411057592Graph:-2-101232012 2011 2010 2009 2008 2007Net Profit MarginNet Profit Margin
  14. 14. 13Interpretations:Net Profit Ratio indicates how much of Sales PSO has secured as profit or in other words it is the actual earning of PSO.The margin is 0.7% in 2012 which is less than that of 2011 i.e. 1.5%. Similarly 2011 can be compared with 2010’s valuethat is 1.0% and so on up to 2007’s value.The lower values are due to higher COGS which is due to increasing prices of petroleum. The lower value indicates theless efficient operations and thus leads to lesser reserves and low earning available for stockholders.Earnings per Share :Earnings available for common stockholders :Number of shares of common stock outstansing(1)Earnings per share for 2012 = 90560550 = 52.801715190Earnings per share for 2011 = 147793140 = 86.171715190Earnings per share for 2010 = 90495960 = 52.761715190Earnings per share for 2009 = 66985350 =(39.05)1715190Earnings per share for 2008 = 140537950 = 81.941715190Earnings per share for 2007 = 46897980 = 27.341715190
  15. 15. 14Graph:Interpretations:This ratio indicates the amount PSO earn from each outstanding share of common stock. Ratio for 2012 is 52.80 whichmeans that PSO earn Rupees : 52.80/- from each share of common stock. 2011 has the highest EPS among the last 6years Rupees: 86.17/- per share of common stock. Company can improve its EPS by either decreasing the number ofshares of common stock outstanding or by increasing the earnings available for common stock holders.Return on Total Assets :Earnings available for common stockholdersTotal AssetsReturn on Total Assets for 2012 = 9056055 = 2.6%347427594Return on Total Assets for 2011 = 14779314 = 5.6%262673406Return on Total Assets for 2010 = 9049596 = 4.9%202247741Return on Total Assets for 2009 = (6698535) = 4.3%153421643Return on Total Assets for 2008 = 14053795 = 11%127110020Return on Total Assets for 2007 = 4689798 = 6.2%747373150204060801002012 2011 2010 2009 2008 2007Earning per ShareEarning per Share
  16. 16. 15Graph:Interpretations:This indicates how effectively a company is using its assets. The values for 2012 is 2.6% which is low as compared to 5.6%of 2011. This indicates that in 2012 the total assets are not used effectively as compared to 2011, although total assetswere more in 2012. Higher COGS is one of the major reason for this result. Similarly the later years can be comparedrelatively. However the most efficient one was 2008 where maximum output was taken from the total assets.The collective trend is shown in table.Return on Common Equity :Earnings available for common stockholders x 100Common Stock EquityReturn on Common Equity for 2012 = 905605500 = 18%49959908Return on Common Equity for 2011 = 14779314 = 35%41902985Return on Common Equity for 2010 = 9049596 = 30%29336058-6-4-20246810122012 2011 2010 2009 2008 2007Return on total AssetsReturn on total Assets
  17. 17. 16Return on Common Equity for 2009 = (6698535) = -32%20870785Return on Common Equity for 2008 = 14053795 = 45%30965054Return on Common Equity for 2007 = 4689798 = 22%20939217Graph:Interpretations:This ratio indicates how much profit PSO has generated with the investments of common stockholders. The ratio for2012 is 18% which is almost have of 2011 that is 35% although the investment of 2011 is less than 2012. This leads tothe lack of proper asset allocation or might be the oil prices are the cause of low outcome. Similarly 2011 has highervalue than 2010 which is 30%. 2009 was lowest with -32% value. 2008 was the highest in last 6 years which was 45%.The general detail can be studied from graph.-0.4-0.3-0.2-0.100.10.20.30.40.52012 2011 2010 2009 2008 2007Return On ToTal EquityReturn On ToTal Equity
  18. 18. 17Market RatiosRatios 2012 2011 2010 2009 2008 2007Price /EarningsRatio4.46 03.07 4.93 (5.47) 5.09 14.31Market/bookRatio0.81 1.08 1.52 1.76 3.2 2.31Calculations and InterpretationsPrice/Earning Ratio :Market Price per share of Common StockEarnings per sharePrice/Earning Ratio for 2012 = 235.8 = 4.4652.80Price/Earning Ratio for 2011 = 264.58 = 3.0786.17Price/Earning Ratio for 2010 = 260.20 = 4.9352.76Price/Earning Ratio for 2009 = 213.65 = (5.47)39.05Price/Earning Ratio for 2008 = 417.24 = 5.0981.94Price/Earning ratio for 2007 = 391.5 = 14.3127.34
  19. 19. 18Graph:Interpretations:Price/Earning ratio measures the amount that investors are willing to pay for each rupee of PSO’s earnings. It alsoindicates the degree of confidence that investors have in firm’s future performance. Higher value indicates higherconfidence.If we consider the value of 2012 which is 4.46 and compare it with that of 2011 that is 3.07 then we can say thatinvestors has more confidence in 2012 performance than of 2011 performance. Similar comparison can be done for therest of years. 2009 was worst where the value was -5.47 indicating a very poor confidence of investors. 2008 has thehighest value in 5 year analysis with 5.09 confidence level. The two major factors affecting this ratio are market priceper share of common stock and earnings available for common stockholders.Market/Book Ratio :Market Price per share of Common StockBook Value per share of Common StockWhereBook Value per Share = Common Stock Equity :Number of Shares of Common Stock outstandingMarket/Book Ratio for 2012 = 235.8 = 0.81 where Book value per share = 49959908000 = 291.5291.28 171518901Market/Book Ratio for 2011 = 264.58 = 1.08 where Book Value per share = 41902985000 = 244.30144.30 171518901-10-5051015202012 2011 2010 2009 2008 2007Price Earning RatioPrice Earning Ratio
  20. 20. 19Market/Book Ratio for 2010 = 260.20 = 1.52 where Book Value per share = 29336058000 = 171.03171.03 171518901Market/Book Ratio for 2009 = 213.65 = 1.76 where Book Value per share = 20870785000 = 121.68121.68 171518901Market/Book Ratio for 2008 = 417.24 = 2.31 where Book Value per share = 30965054000 = 180.53180.53 171518901Market/Book Ratio for 2007 = 391.5 = 3.20 where Book Value per share = 20939217000 = 122.08122.08 171518901Graph:Interpretations:This ratio relates the company’s book value per share of common stock with market value per share of common stock. Itprovides an assessment of how investors view the company’s performance.In 2012, the ratio was 0.81 which indicates that investors payed 0.81 rupee for each 1 rupee of book value of PSO’sstock which is low in terms of earnings and in terms of investors’ confidence. The condition was quite satisfactory in therest of the past 6 years, however we saw a declining effect in the ratio from 2007 to 2011 from value 3.20 to 1.08 whichshowed the decreasing confidence of investor about companies performance.00.511.522.533.52012 2011 2010 2009 2008 2007Market/Book RatioMarket/Book Ratio
  21. 21. 20Liquidity RatiosRatios 2012 2011 2010 2009 2008CurrentRatio1.14 1.16 1.13 1.06 1.23QuickRatio0.84 0.72 0.79 0.75 0.57Current Ratio: Current Assets :Current LiabilitiesCurrent Ratio for 2012 = 337795984 = 1.1429773106Current Ratio for 2011 = 252816896 = 1.16217513173Current Ratio for 2010 = 193373148 = 1.13170075456Current Ratio for 2009 = 138689524 = 1.06130023120Current Ratio for 2008 = 115878692 = 1.2393736220Graph:0.9511.051.11.151.21.252012 2011 2010 2009 2008 2007Current RatioCurrent Ratio
  22. 22. 21Interpretations:The Ratio tells the ability to full fill its short term obligationCompany data shows that for every one rupees of liability there is 1.14 rupees of asset in2012. The ratio was 1.16, 1.13, 1.06, 1.23 in the year 2011, 2010, 2009 & 2008 respectively.Company can improve its current ratios by increasing its accounts receivables and by decreasing the account payables.Quick Ratio :Current Assets – InventoryCurrent LiabilitiesQuick Ratio for 2012 = 337795984-88523794 = 0.84293773106Quick Ratio for 2011 = 252814896-95378393 = 0.72217513173Quick Ratio for 2010 = 193373148-58598668 = 0.79170075456Quick Ratio for 2009 = 138689524-40698209 = 0.75130023120Quick Ratio for 2008 = 115878692-62360067 = 0.5793,736,220Graph:00.10.20.30.40.50.60.70.80.92012 2011 2010 2009 2008 2007Quick RatioQuick Ratio
  23. 23. 22Interpretations:The Ratio tells more precisely and accurately companies the ability to full fill its short term obligations.This ratio is more precisely because in this ratio we subtract the inventory; it is difficult to convert the inventory into thecash.To pay the 1 rupee current liability there is only 0.84 rupees of assets in 2012, while in 2011to pay the 1 rupee liability there is only 0.72 rupees of assets, to pay the liability of 1 rupeein 2010 there is only 0.79 rupees of assets , while in 2009 to pay the liability of 1 rupee thereis only assets of 0.75 rupees, in 2008 to pay the liability of one rupee there is 0.57 rupees of assetcompany can increase its quick ratio by maximum utilization of inventory .they should fully utilizes their all assstes ,theyshould also works on the average collection period timeActivity Ratio:Ratio 2012 2011 2010 2009 2008InventoryTurnoverRatio13% 12.6% 17% 13.9% 12.1%AverageCollectionPeriod52.12 45.34 41.19 28.93 14.86AveragePaymentPeriod62.85 77.14 41.42 59.33 44.86Total AssetTurnover3.45 3.71 4.3 4.6 4.58Inventory Turnover Ratio: Cost of Goods SoldAvg InventoryInventory Turnover Ratio for 2012 = 1199927907 = 13%91951093.5Inventory Turnover Ratio for 2011 = 974917064 = 12.7%76966530.5Inventory Turnover Ratio for 2010 = 877173254 = 17%49648438.5
  24. 24. 23Inventory Turnover Ratio for 2009 = 719282176 = 13.9%51529138Inventory Turnover Ratio for 2008 = 583213959 = 12.1%45961061Graph:Interpretations:Inventory Turnover Ratio measures companys efficiency in turning its inventory into sales. Its purpose is to measure theliquidity of the inventory. The company shows the greatest efficiency in 2010 where the company inventory turnover was17% which SHOWS GOOD LIQUIDITY OF INVENTRY.but later in following year it shows descending values .IN 2011 A SLITEIMPROVEMENT IN 2012Company can improves its inventory turnover by AVOIDING OVER STOCKING AND steps should be taken to increases insales to consume more inventoryAverage Collection Period: Average debtors x 365SalesAverage Collection Period for 2012 = 171372062 x 365 = 52.1211999279070246810121416182012 2011 2010 2009 2008 2007Inventory Turn OverInventory Turn Over
  25. 25. 24Average Collection Period for 2011 = 121111453 x 365 = 45.34974917064Average Collection Period for 2010 = 99005452 x 365 = 41.19877173254Average Collection Period for 2009 = 57207279 x 365 = 28.93719282176Average Collection Period for 2008 = 23752347 x 365 = 14.86583213959Graph:Interpretations:Average collection period is the number of days that i a company to collect its accounts receivables.52.12 45.34 41.19 28.93 14.86The company shows that average collection period is continuously increasing in following years.The company can increase it collection period by defining it polices to its debtors so that all accounts receivable should bereceived in prescribed time01020304050602012 2011 2010 2009 2008 2007Average Collection PeriodAverage Collection Period
  26. 26. 25Average Payment Period: Average Creditors x 365PurchasesAverage Payment Period for 2012 = 1693092385 x 365 = 62.85983246484Average Payment Period for 2011 = 173943366.5 x 365 = 77.14823029784Average Payment Period for 2010 = 83079709 x 365 = 41.42731492166Average Payment Period for 2009 = 95595633.5 x 365 = 59.33588023620Average Payment Period for 2008 = 61249320 x 365 = 44.86498052919Graph:Interpretations:It measures how many days it takes to pay off accounts payable.Company data shows a major variation in payment period. With, owes in 2011 which was 41 days and highest in2011showing 77 days. In 2012 it has approximately 62 days to pay it accounts pay able01020304050607080902012 2011 2010 2009 2008 2007Average payment PeriodAverage payment Period
  27. 27. 26Total Assets Turnover: SalesTotal AssetsTotal Assets Turnover for 2012 = 1199927907 = 3.45347427594Total Assets Turnover for 2011 = 974914064 = 3.71262673406Total Assets Turnover for 2010 = 877173254 = 4.3202247741Total Assets Turnover for 2009 = 719282176 = 4.6153421643Total Assets Turnover for 2008 = 583213959 = 4.58127110020Total Assets Turnover for 2007 = 411057592 = 5.5074737315Graph:01234562012 2011 2010 2009 2008 2007Total Asset Turn overTotal Asset Turn over
  28. 28. 27Interpretations:The total asset turnover ratio measures the ability of a company to use its assets to efficiently generate salesThe company total asset turnover ratio is not declining in every year which is not satisfactory. Low asset turnover ratiosuggests problems with excess production capacity, poor inventory management, or lax collection methodsThe company should have to utilizes it all resources .and plants to increase it sales.it should increase the sale bymaximum utilization of its resources e.g. inventoryDebt RatioRatios 2012 2011 2010 2009 2008 2007DebtRatio0.856 1.189 1.169 1.157 1.322 1.389Times InterestEarned Ratio2.17 2.5 2.81 -0.8 16.6 7.14Debt Ratio: Current Liabilities + Non-current LiabilitiesTotal AssetsDebt Ratio for 2012 = 293773106 + 3694580 = 0.856347427594Debt Ratio for 2011 = 217513173 + 3257248 = 1.189262673406Debt Ratio for 2010 = 170075456 + 2836227 = 1.169202247741Debt Ratio for 2009 = 130023120 + 2527738= 1.157153421643Debt Ratio for 2008 = 93736220 + 2408746 = 1.322127110020Debt Ratio for 2007 = 51385727 + 2412371 = 1.38974737315
  29. 29. 28Graph:Interpretations:Debt Ratio Measures what proportion of debts a company has as compared to its assets. Thus it shows the measure ofdebtness of a company. It helps investors determine the level of risk of an organization.Now we consider the present scenario, in 2012 the ratio was 0.856 which indicates that assets were greater thanliabilities ensuring a safe side for investors. While in the previous years the ratio was greater than 1 which indicates thatcompanies loans were more than assets. 2007 was worst where ratio was at extreme for last 6 years which was 1.389,however if we consider 5 years analysis then 2008 was worst with value 1.322. The values for 2011, 10 and 09 are 1.189,1.169 and 1.157 respectively.Times Interest Earned Ratio: Earnings before interest and taxInterest(Note: As in the balance sheet, interest has already been deducted before taxation so we will add the value of tax as wellin the below ratios)Times Interest Earned Ratio for 2012 = 13674417 + 11658928 = 2.1711658928Times Interest Earned Ratio for 2011 = 17974434 + 11903162 = 2.51190316200.20.40.60.811.21.41.62012 2011 2010 2009 2008 2007Debt RatioDebt Ratio
  30. 30. 29Times Interest Earned Ratio for 2010 = 17963152 + 9882010 =2.819882010Times Interest Earned Ratio for 2009 = (110356864)+6232056 = (0.8)6232056Times Interest Earned Ratio for 2008 = 21377412 + 1367898 = 16.61367898Times Interest Earned Ratio for 2007 = 7121980 + 1158112 = 7.141158112Graph:Interpretations:It indicates the company’s ability to meet its debt obligations or interest obligations. Or simply we can that it indicatesthat for how much times the net operating profit covers the interest payment. Usually a value of 2 and greater isconsidered to be acceptable.So the Condition was quite acceptable for 2012, 11 and 10 with values 2.17, 2.5 and 2.81. However for 2009 the valuewas in negative -0.8 which was very hopeless for PSO to pay off interest. Condition was much satisfactory for 2008 wherethe value was 16.6. It meant that if the PSO earnings were shrink by 93% (16.6-1.0/16.6), it would still be able to pay offinterest payments.-20246810121416182012 2011 2010 2009 2008 2007Time Interst Earned RatioTime Interst Earned Ratio
  31. 31. 30AnnexuresAnnexure (1)References:http://www.psopk.com

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