Time Series Financial Analysis of PSO

Submitted to : Madam AyeshaSubmitted By:Muhammad Usman Khan bbafal11069Zain Mehmood bbafal11116IqraAltaf Mayo bbafal11122Muhammad ZeeshanSaeed bbafal11055Muhammad SaadSamee bbafal11048

Final Project Financial Management

1

Table of Content Introduction 3

Chapter 1 History of Company 3

Mission and Vision 4

Balance sheet 8

Income Statement 9

Chapter 2. Profitability Ratios 10

Gross Profit Margin 11

Operating Profit Margin 12 Net Profit Margin 13 Earning per Share 14 Return on Total Assets 15 Return on Common Equity 16

Chapter 3. Market Ratio 17

Price/Earning Ratio 18 Market/book Ratio 19

Chapter 4. Liquidity Ratio 21

Current Ratio 21

Quick Ratio 22

Chapter 5 Activity Ratio 23

Inventory Turn Over Ratio 23

Average Collection Period 24-25

Average Payment Period 26

Total Asset Turn over 27

Chapter 6. Debt Ratios 28

Debt Ratio 29 Time Interest Earning Ratio 30

Annexures and Reference 31

2

Introduction:

Pakistan State Oil is a multi-million and global competitive state-owned megacorporation and the leading

oil market presiding entity in Pakistan. Headquartered in Karachi, Sindh Province of Pakistan, it has several

state divisions in the different cities in Pakistan, with administrative management business network

infrastructure well expanded, and built at par with international standards, represents 82% of country’s

national energy sources.

The PSO is horizontally integrated and is the largest state-owned energy megacorporation active in every

area 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. The

megacorporation 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-30

Index. The PSO is the third largest entity to be placed in the KSE, ranking behind the Shell Pakistan— a

subsidiary of Royal Dutch Shell.

History:

The creation of Pakistan State Oil (PSO) can be traced back to the year 1974, when on January 1st; the

government took over and merged Pakistan National Oil (PNO) and Dawood Petroleum Limited (DPL) as

Premiere Oil Company Limited (POCL).

Soon after that, on 3rd June 1974, Petroleum Storage Development Corporation (PSDC) came into

existence. 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 in

SOCL. The end of that year (30th December 1976) saw the merger of the Premier Oil Company Limited

and 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 fully

implemented in 2004. This program over the years included the revamping of the organizational

architecture, rationalization of staff, employee empowerment and transparency in decision making through

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cross functional teams. This new corporate renewal program has divided the company’s major operations

into independent activities supported by legal, financial, informative and other services. In order to

reinforce and monitor this structural change, related check and balances have been established by

incorporating monitoring and control systems.

Human Resource Development became one of the main priorities on the company’s agenda under this

corporate reform.

It is due to this effective implementation of corporate reform and consistent application of the best

industrial practices and business development strategies, that PSO has been able to maintain its market

leadership in a highly competitive business environment.

For the past 35 years, Pakistan State Oil has been fuelling the needs of the nation. Acknowledged as the

leading Public Sector Company of Pakistan, PSO has been driving the wheels of the national economy and

is 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 including

Motor 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 3,500

retail outlets and is also the major fuel supplier to aviation, railways, power projects, armed forces, marine

and agriculture sectors. The Company also possesses the country’s largest storage capacity representing

nearly 74% of the nation's 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 be

able to reduce dependence on external supply sources and develop self-sufficiency in the energy sector. The

Company’s future plans also include exploring new product markets, expanding the lubricants product

range, 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 the

future

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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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Values

Excellence:

We believe that excellence in our core activities emerges from a passion for satisfying our customers' needs

in 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 the

organization 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 reward

and recognition program.

Integrity:

We uphold our values and Business Ethics principles in every action and decision. Professional and

personal honesty, dedication and commitment are the landmarks of our success. Open and transparent

business 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 existing

already. We encourage Creative Ideas from all stakeholders.

Corporate Responsibility:

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We promote Health, Safety and Environment culture both internally and externally. We emphasize on

Community Development and aspire to make society a better place to live in.

Upcoming Initiatives:

Establishment of Refinery in Khyber Pakhtunkhwa:

An important step in PSO's efforts to secure the national energy supply chain, the Company plans to

establish a state-of-the-art (EURO IV) refinery with a capacity of 40,000 barrels per day in Khyber

Pakhtunwa.

By establishing this refinery, PSO will be able to diversify its business offerings, improve availability of

POL products in the country, reduce supply lines and transport costs for the northern region as well as help

save substantial foreign exchange savings for the national exchequer. This project will also help drive

economic growth in the region by offering job opportunities for both skilled and unskilled labor as well as

increase foreign investment in the area.

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BALANCE SHEETAs per Audited for last 5 years

2012 2011 2010 2009 2008 2007

Rupees in '000

ASSETS

Non- Current Assets

Property, plant and equipment 5831993 6084731 637523 6987025 7460549 8012317

Intangibles 299991 28822 36250 68872 105502 126212

Long term investments 1968073 2314168 2019270 2153514 2701097 2990591

Long term loans, advances and receivables 385497 324554 317889 405780 477745 627972

Long term deposits and prepayments 123740 148748 125951 83655 79098 65913

Deferred tax 1202316 957487 5033273 407337 401037

9631610 9858510 8874593 14732119 11231328 12224042

Current Assets

Stores, spare parts and loose tools 134431 115339 113863 112143 115814 127891

Stock-in-trade 88523794 95378393 58598668 40698209 62360067 29562055

Trade debts 218022292 124721832 117501074 80509830 33904728 13599966

Loans and advances 526118 430716 409987 418015 396220 365974

Deposits and short term prepayments 2528406 1027381 367378 551803 401433 1583913

Other receivables 2122166 2252028 14557542 12806779 15681790 15751198

Taxation –net 5314752 6311951 46580 709627

Cash and bank balances 1624025 2309006 1778056 2883118 3018640 1522276

337795984 252814896 193373148 138689524 115878692 62513273

Net Assets in Bangladesh - - - - - -

total Assets 347427594 262673406 202247741 153421643 127110020 74737315

EQUITY AND LIABILITIES

Share Capital 1715190 1715190 1715190 1715190 1715190 1715190

Reserves 48244718 40187795 27620868 19155595 29249864 19224027

49959908 41902985 29336058 20876785 30965054 20939217

Non-Current Liabilities

Long term deposits 1176078 1023531 948476 854718 834598 768308

Retirement and other service benefits 2518502 2233717 1887751 1673020 1574148 1644063

3694580 3257248 2836227 2527738 2408746 2412371

Current liabilities

Trade and other payables 246767460 191851017 156035716 110123702 81067565 41431075

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Provosions 688512 688512 688312 688512 726116 688512

Accrued interest / mark-up 544485 432133 3330213 5556380 217928 131961

Short term borrowings 45772649 24541511 13021015 18654526 10997908 9064781

Taxes payable - - - - 726703 79398

293773106 217513511 170075456 130023120 93736220 51385727

Total equity And Liabilities 347427594 262973406 20247741 153421643 127110020 74737315

PROFIT AND LOSS ACCOUNT

As per audited for last 5 years

2012 2011 2010 2009 2008 2007

Rupees in '000

Sales - net of trade discounts and allowances 1199927902 974917064 877173254 71982176 583213959 411057592

Less:

- Sales tax -163861410 -137969158 -118563577 -97386723 -742494721 -52418310

- Inland freight equalization margin -11642892 -16417542 -15851726 -9199864 -136859541 -8932956

-175504302 -154386700 134415303 -106586587 -879354261 -61351266

Net sales 1024423605 820530364 742757951 612695589 495278533 349706326

Cost of products sold -990101083 -786250059 -713591707 -609685478 -465254907 -337446896

Gross profit 24322522 34280305 29166244 3010111 30023626 12259430

Other operating income 2133994 1815951 1479054 1451666 1396527 1278932

Operating costs

Transportation costs -1205394 -810423 -631849 -513673 -337886 -369328

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Distribution and marketing expenses -5863170 -5178233 -4055238 -3960953 -3264599 -2745289

Administrative expenses -1659530 -1514532 -1125891 -1151793 -116074 -1002712

Depreciation -1127587 -1120999 -1137637 -1141698 -1119137 -1098157

Amortisation -15491 -18210 -44752 -52615 -47689 -41908

Other operating expenses -9272048 -2239725 -2416518 -3994389 -3352969 -755420

-19143220 -10879122 -9411885 10815121 -9283021 -6012814

Profit From Operations 17313296 25217134 21233413 -6353344 313860 424238

Other Income 7550581 4143710 6095348 776686 22450992 7949786

Finance costs -11658928 -11903162 -9882010 -6232056 -1367898 -1158112

13204949 17457682 17446751 -11808714 21083694 6791674

Share of profit of associates 469468 516752 516401 451850 294318 330306

Profit before taxation 13674417 17974434 17963152 -11356864 21377412 7121980

Taxation -4618362 3195120 -8913556 4658329 -7323617 -2432182

Profit for the year 9056055 14779314 9049596 -6698535 14053795 4689798

In Rupees

Earnings per share - basic and diluted 52.8 86.17 52.76 -39.05 81.94 27.34

Profitability Ratios:

Ratios 2012 2011 2010 2009 2008 2007

Gross Profit Margin

2.9% 3.5% 3.3% 0.4% 5.1% 3.0%

Operating Profit Margin

1.4% 2.6% 2.4% (0.9%) 3.8% 1.9%

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Net Profit Margin

0.7% 1.5% 1.0% (0.9%) 2.4% 1.1%

Earnings per Share(in Rs.)

52.80 86.17 52.76 39.05 81.99 27.34

Return on Total assets

2.6.% 5.6% 4.4% (4.3%) 11% 6.2%

Return on Common Equity

18% 35% 30% (32%) 45% 22%

Calculationsand Interpretations

Gross Profit Margin : Gross Profit Sales

Gross Profit Margin for 2012 = 34322522 = 2.9% 1199927907

Gross Profit Margin for 2011 = 34280305 = 3.5% 974917064

Gross Profit Margin for 2010 = 29166244 = 3.3% 877173254

Gross Profit Margin for 2009 = 3010111 = 0.4% 719282176

Gross Profit Margin for 2008 = 30023626 = 5.1% 583213959

Gross Profit Margin for 2007 = 12259430 = 3.0% 411057592

Graph:

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2012 2011 2010 2009 2008 20070

1

2

3

4

5

6

Gross profit margin

Interpretations:The gross profit Margin shows the margin of profit after excluding the cost of goods sold from sales. A higher gross profit margin is estimated.Now we consider the PSO’s financial position, in 2007 the ratio was 3.0% which means that for each rupee of sales generated 0.03 rupee is retained for further operating expenses, interest payment, taxation and distribution of shares which is very low. Companies usually have much greater gross profit margin(depending upon the type of company). This may be explained in terms of high value of cost of goods sold which is almost 81% of sales. The reason behind higher COGS can be explained in terms of increasing prices of petroleum. We can see improvement in 2008 as the ratio increased 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 2010 and 2011 respectively. Yet again the margin declined in 2012 which is 2.9%. However if we consider public utility then it is 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.

Operating Profit Margin :Operating Profit Sales

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Operating Profit Margin for 2012 = 17313296 = 1.4% 1199927907

Operating Profit Margin for 2011 = 25217134 = 2.6% 974917064

Operating Profit Margin for 2010 = 21233413 = 2.4% 877173254

Operating Profit Margin for 2009 = (6353344) = -0.9% 719282176

Operating Profit Margin for 2008 = 22450992 = 3.8% 583213959

Operating Profit Margin for 2007 = 7949786 = 1.9% 411057592

Graph:

2012 2011 2010 2009 2008 2007

-2

-1

0

1

2

3

4

5

Operating Profit Margin

Operating Profit Margin

Interpretations:

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Operating profit margin gives an estimate of how much PSO generates on each rupee of sales before interest, taxation and distribution of shares. It determine the pricing strategy and operating efficiency of PSO. Usually a high or increasing operating 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. The difference 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 Profit SalesNet Profit Margin for 2012 = 9056055 = 0.7% 1199927907

Net Profit Margin for 2011 = 14779314 = 1.5% 974917064

Net Profit Margin for 2010 = 9049596 = 1.0% 877173254

Net Profit Margin for 2009 = (6698535) = -0.9% 719282176

Net Profit Margin for 2008 = 14053795 = 2.4% 583213959

Net Profit Margin for 2007 = 4689798 = 1.1% 411057592

Graph:

2012 2011 2010 2009 2008 2007

-1.5-1

-0.50

0.51

1.52

2.53

Net Profit Margin

Net Profit Margin

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Interpretations:

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 value that 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 the less 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 = 52.80 1715190

Earnings per share for 2011 = 147793140 = 86.17 1715190

Earnings per share for 2010 = 90495960 = 52.76 1715190

Earnings per share for 2009 = 66985350 =(39.05) 1715190

Earnings per share for 2008 = 140537950 = 81.94 1715190

Earnings per share for 2007 = 46897980 = 27.34 1715190

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Graph:

2012 2011 2010 2009 2008 20070

102030405060708090

100

Earning per Share

Earning per Share

Interpretations:

This ratio indicates the amount PSO earn from each outstanding share of common stock. Ratio for 2012 is 52.80 which means that PSO earn Rupees : 52.80/- from each share of common stock. 2011 has the highest EPS among the last 6 years Rupees: 86.17/- per share of common stock. Company can improve its EPS by either decreasing the number of shares of common stock outstanding or by increasing the earnings available for common stock holders.

Return on Total Assets :Earnings available for common stockholders Total Assets

Return on Total Assets for 2012 = 9056055 = 2.6% 347427594

Return on Total Assets for 2011 = 14779314 = 5.6% 262673406

Return on Total Assets for 2010 = 9049596 = 4.9% 202247741

Return on Total Assets for 2009 = (6698535) = 4.3% 153421643

Return on Total Assets for 2008 = 14053795 = 11% 127110020

Return on Total Assets for 2007 = 4689798 = 6.2%

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74737315

Graph:

2012 2011 2010 2009 2008 2007

-6

-4

-2

0

2

4

6

8

10

12

Return on total Assets

Return on total Assets

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 assets were more in 2012. Higher COGS is one of the major reason for this result. Similarly the later years can be compared relatively. 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 100 Common Stock Equity

Return on Common Equity for 2012 = 905605500 = 18%49959908

Return on Common Equity for 2011 = 14779314 = 35% 41902985

Return on Common Equity for 2010 = 9049596 = 30%

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29336058

Return on Common Equity for 2009 = (6698535) = -32% 20870785

Return on Common Equity for 2008 = 14053795 = 45% 30965054

Return on Common Equity for 2007 = 4689798 = 22% 20939217

Graph:

2012 2011 2010 2009 2008 2007

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

Return On ToTal Equity

Return On ToTal Equity

Interpretations:This ratio indicates how much profit PSO has generated with the investments of common stockholders. The ratio for 2012 is 18% which is almost have of 2011 that is 35% although the investment of 2011 is less than 2012. This leads to the lack of proper asset allocation or might be the oil prices are the cause of low outcome. Similarly 2011 has higher value 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.

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Market RatiosRatios 2012 2011 2010 2009 2008 2007Price /Earnings Ratio

4.46 03.07 4.93 (5.47) 5.09 14.31

Market/book Ratio

0.81 1.08 1.52 1.76 3.2 2.31

Calculations and Interpretations

Price/Earning Ratio :Market Price per share of Common Stock Earnings per share

Price/Earning Ratio for 2012 = 235.8 = 4.46 52.80

Price/Earning Ratio for 2011 = 264.58 = 3.07 86.17

Price/Earning Ratio for 2010 = 260.20 = 4.93 52.76

Price/Earning Ratio for 2009 = 213.65 = (5.47) 39.05

Price/Earning Ratio for 2008 = 417.24 = 5.09 81.94

Price/Earning ratio for 2007 = 391.5 = 14.31 27.34

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Graph:

2012 2011 2010 2009 2008 2007

-10

-5

0

5

10

15

20

Price Earning Ratio

Price Earning Ratio

Interpretations:Price/Earning ratio measures the amount that investors are willing to pay for each rupee of PSO’s earnings. It also indicates the degree of confidence that investors have in firm’s future performance. Higher value indicates higher confidence.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 that investors has more confidence in 2012 performance than of 2011 performance. Similar comparison can be done for the rest of years. 2009 was worst where the value was -5.47 indicating a very poor confidence of investors. 2008 has the highest value in 5 year analysis with 5.09 confidence level. The two major factors affecting this ratio are market price per share of common stock and earnings available for common stockholders.

Market/Book Ratio :Market Price per share of Common Stock Book Value per share of Common StockWhere

Book Value per Share = Common Stock Equity : Number of Shares of Common Stock outstanding

Market/Book Ratio for 2012 = 235.8 = 0.81 where Book value per share = 49959908000 = 291.5 291.28 171518901

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Market/Book Ratio for 2011 = 264.58 = 1.08 where Book Value per share = 41902985000 = 244.30 144.30 171518901

Market/Book Ratio for 2010 = 260.20 = 1.52 where Book Value per share = 29336058000 = 171.03 171.03 171518901

Market/Book Ratio for 2009 = 213.65 = 1.76 where Book Value per share = 20870785000 = 121.68 121.68 171518901

Market/Book Ratio for 2008 = 417.24 = 2.31 where Book Value per share = 30965054000 = 180.53 180.53 171518901

Market/Book Ratio for 2007 = 391.5 = 3.20 where Book Value per share = 20939217000 = 122.08 122.08 171518901

Graph:

2012 2011 2010 2009 2008 20070

0.5

1

1.5

2

2.5

3

3.5

Market/Book Ratio

Market/Book Ratio

Interpretations:This ratio relates the company’s book value per share of common stock with market value per share of common stock. It provides 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’s stock which is low in terms of earnings and in terms of investors’ confidence. The condition was quite satisfactory in the

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rest 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 which showed the decreasing confidence of investor about companies performance.

Liquidity Ratios

Ratios 2012 2011 2010 2009 2008Current Ratio

1.14 1.16 1.13 1.06 1.23

Quick Ratio

0.84 0.72 0.79 0.75 0.57

Current Ratio: Current Assets : Current Liabilities Current Ratio for 2012 = 337795984 = 1.14 29773106

Current Ratio for 2011 = 252816896 = 1.16 217513173

Current Ratio for 2010 = 193373148 = 1.13 170075456

Current Ratio for 2009 = 138689524 = 1.06 130023120

Current Ratio for 2008 = 115878692 = 1.23 93736220

Graph:

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2012 2011 2010 2009 2008 20070.95

1

1.05

1.1

1.15

1.2

1.25

Current Ratio

Current Ratio

Interpretations: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 in 2012. 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 – Inventory Current Liabilities

Quick Ratio for 2012 = 337795984-88523794 = 0.84293773106

Quick Ratio for 2011 = 252814896-95378393 = 0.72217513173

Quick Ratio for 2010 = 193373148-58598668 = 0.79170075456

Quick Ratio for 2009 = 138689524-40698209 = 0.75130023120

Quick Ratio for 2008 = 115878692-62360067 = 0.5793,736,220

Graph:

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2012 2011 2010 2009 2008 20070

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Quick Ratio

Quick Ratio

Interpretations: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 the cash.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 rupee in 2010 there is only 0.79 rupees of assets , while in 2009 to pay the liability of 1 rupee there is 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 ,they should also works on the average collection period time

Activity Ratio:

Ratio 2012 2011 2010 2009 2008Inventory Turnover Ratio

13% 12.6% 17% 13.9% 12.1%

Average Collection Period

52.12 45.34 41.19 28.93 14.86

Average Payment Period

62.85 77.14 41.42 59.33 44.86

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Total Asset Turnover

3.45 3.71 4.3 4.6 4.58

Inventory Turnover Ratio: Cost of Goods Sold Avg Inventory

Inventory Turnover Ratio for 2012 = 1199927907 = 13% 91951093.5

Inventory Turnover Ratio for 2011 = 974917064 = 12.7% 76966530.5

Inventory Turnover Ratio for 2010 = 877173254 = 17% 49648438.5

Inventory Turnover Ratio for 2009 = 719282176 = 13.9% 51529138

Inventory Turnover Ratio for 2008 = 583213959 = 12.1% 45961061

Graph:

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2012 2011 2010 2009 2008 20070

2

4

6

8

10

12

14

16

18 Inventory Turn Over

Inventory Turn Over

Interpretations:

Inventory Turnover Ratio measures company's efficiency in turning its inventory into sales. Its purpose is to measure the liquidity of the inventory. The company shows the greatest efficiency in 2010 where the company inventory turnover was 17% which SHOWS GOOD LIQUIDITY OF INVENTRY.but later in following year it shows descending values .IN 2011 A SLITE IMPROVEMENT IN 2012Company can improves its inventory turnover by AVOIDING OVER STOCKING AND steps should be taken to increases in sales to consume more inventory

Average Collection Period: Average debtors x 365 Sales

Average Collection Period for 2012 = 171372062 x 365 = 52.12 1199927907

Average Collection Period for 2011 = 121111453 x 365 = 45.34 974917064

Average Collection Period for 2010 = 99005452 x 365 = 41.19 877173254

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Average Collection Period for 2009 = 57207279 x 365 = 28.93 719282176

Average Collection Period for 2008 = 23752347 x 365 = 14.86 583213959

Graph:

2012 2011 2010 2009 2008 20070

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20

30

40

50

60

Average Collection Period

Average Collection Period

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 be received in prescribed time

Average Payment Period: Average Creditors x 365 Purchases

Average Payment Period for 2012 = 1693092385 x 365 = 62.85 983246484

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Average Payment Period for 2011 = 173943366.5 x 365 = 77.14 823029784

Average Payment Period for 2010 = 83079709 x 365 = 41.42 731492166

Average Payment Period for 2009 = 95595633.5 x 365 = 59.33 588023620

Average Payment Period for 2008 = 61249320 x 365 = 44.86 498052919

Graph:

2012 2011 2010 2009 2008 20070

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20

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70

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90

Average payment Period

Average payment Period

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 in2011 showing 77 days. In 2012 it has approximately 62 days to pay it accounts pay able

Total Assets Turnover: Sales Total Assets

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Total Assets Turnover for 2012 = 1199927907 = 3.45 347427594

Total Assets Turnover for 2011 = 974914064 = 3.71 262673406

Total Assets Turnover for 2010 = 877173254 = 4.3 202247741

Total Assets Turnover for 2009 = 719282176 = 4.6 153421643

Total Assets Turnover for 2008 = 583213959 = 4.58 127110020

Total Assets Turnover for 2007 = 411057592 = 5.50 74737315

Graph:

2012 2011 2010 2009 2008 20070

1

2

3

4

5

6

Total Asset Turn over

Total Asset Turn over

Interpretations:

The total asset turnover ratio measures the ability of a company to use its assets to efficiently generate sales

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The company total asset turnover ratio is not declining in every year which is not satisfactory. Low asset turnover ratio suggests 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 by maximum utilization of its resources e.g. inventory

Debt RatioRatios 2012 2011 2010 2009 2008 2007Debt Ratio

0.856 1.189 1.169 1.157 1.322 1.389

Times Interest Earned Ratio

2.17 2.5 2.81 -0.8 16.6 7.14

Debt Ratio: Current Liabilities + Non-current Liabilities Total Assets

Debt Ratio for 2012 = 293773106 + 3694580 = 0.856 347427594

Debt Ratio for 2011 = 217513173 + 3257248 = 1.189 262673406

Debt Ratio for 2010 = 170075456 + 2836227 = 1.169 202247741

Debt Ratio for 2009 = 130023120 + 2527738= 1.157 153421643

Debt Ratio for 2008 = 93736220 + 2408746 = 1.322 127110020

Debt Ratio for 2007 = 51385727 + 2412371 = 1.389 74737315

Graph:

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2012 2011 2010 2009 2008 20070

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

Debt Ratio

Debt Ratio

Interpretations:

Debt Ratio Measures what proportion of debts a company has as compared to its assets. Thus it shows the measure of debtness 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 than liabilities ensuring a safe side for investors. While in the previous years the ratio was greater than 1 which indicates that companies 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 tax Interest

(Note: As in the balance sheet, interest has already been deducted before taxation so we will add the value of tax as well in the below ratios)

Times Interest Earned Ratio for 2012 = 13674417 + 11658928 = 2.17 11658928

Times Interest Earned Ratio for 2011 = 17974434 + 11903162 = 2.5 11903162

Times Interest Earned Ratio for 2010 = 17963152 + 9882010 =2.81

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9882010

Times Interest Earned Ratio for 2009 = (110356864)+6232056 = (0.8) 6232056

Times Interest Earned Ratio for 2008 = 21377412 + 1367898 = 16.6 1367898

Times Interest Earned Ratio for 2007 = 7121980 + 1158112 = 7.14 1158112

Graph:

2012 2011 2010 2009 2008 2007-2

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16

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Time Interst Earned Ratio

Time Interst Earned Ratio

Interpretations:

It indicates the company’s ability to meet its debt obligations or interest obligations. Or simply we can that it indicates that for how much times the net operating profit covers the interest payment. Usually a value of 2 and greater is considered 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 value was in negative -0.8 which was very hopeless for PSO to pay off interest. Condition was much satisfactory for 2008 where the 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 off interest payments.

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Annexures

Annexure (1)

References:

http://www.psopk.com