FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is the collective name for the tools and techniques that are intended to provide relevant information to decision-makers. The primary objective of financial reporting is to provide information to present and potential investors, creditors, and others in making rational investment, credit and other decisions. Effective decision-making requires evaluation of the past performance of companies and assessment of their future prospects.

Purpose of financial statement analysis: The purpose of this analysis is to assess a companys financial health and performance. Financial statement analysis consists of comparisons for the same company over periods of time and for different companies in the same industry or different industries. Financial statement analysis enables investors and creditors to Evaluate past performance and financial position; and Predict future performance.

Standards of comparison: Financial analysts look for pertinent standards of comparisons to determine whether the results of their financial statement analysis are favourable or unfavourable. For this purpose, comparisons are made with the following: General rule-of-thumb indicators Past performance of the company Internal standards Industry standards

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS The most commonly used analytical techniques are: 1. Horizontal analysis 2. Trend analysis 3. Vertical analysis 4. Ratio analysis

RATIO ANALYSIS
Ratio analysis involves establishing a relevant financial relationship between components of financial statements. Two companies may have earned the same amount of profit in a year, but unless the profit is related to sales or total assets, it is not possible to conclude which of them is more profitable. Ratio analysis helps in identifying significant relationship between financial statement items for further investigation. If used with understanding of industry factors and general economic conditions, it can be a powerful tool for recognizing a companys strength s as well as its potential trouble spots. Commonly used financial ratios are as follows:

PROFITABILITY RATIO

LIABILITY RATIO

SOLVENCY RATIO

CAPITAL RATIO

Profit margin Asset turnover Return on assets Return on equity Earnings per share

Current ratio Quick ratio Debtors turnover

Debt on equity Liability to equity Interest coverage

Price earnings Dividend yield Price to book ratio

Thus financial ratios are used to evaluate profitability, liquidity, solvency, and capital market strength.

PROFITABILITY RATIO
Profitability ratios measure the degree of operating success of a company. Investors are keen to learn about the ability of the company to earn revenues in excess of its expenses. They will not be interested in a company that does not earn a sufficient margin on its sales. Failure to earn an adequate rate of profit over a period will also drain the companys cash and impair its liquidity. The commonly used rations to evaluate profitability are: 1. Profit margin 2. Asset turnover 3. Return on assets 4. Return on equity 5. Earnings per share

1. PROFIT MARGIN
EXPLANATION: This ratio is also known as return on sales (ROS). It measures the amount of net profit earned by each rupee of revenue.
100

HINDUSTAN PETROLEUM
Year 2010-2011
1539.01 100 = 1.24 % 123772.42

BHARAT PETROLEUM
Year 2010-2011
1546.68 100 = .95% 163218.21

Year 2011-2012
991.43 100 = 0.55 % 178139.23

Year 2011-2012
1311.27 100 = .618% 5211972.97

Year 2012-2013
904.71 100 = 0.43 % 206529.34

Year 2012-2013
2642.90 100 = 1.10% 240115.75

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-11 1.24 .95

2011-2012 0.55 .61

2012-2013 0.43 1.10

INTERPRETATION:
INTERCOMPANY COMPARISON: Between HP and BP it can be analyzed that there is a very little profit margin difference i.e. its just 0.29% in 2010-11, .06% in 2011-12, 0.67% in 2012-13.

INTRACOMPANY COMPARISON HP: In case of HP, profit margin ratio is consistent with only very little variation i.e. from 20102011till 2012-2013, it has shown a consistent decrease of 0.69% and 0.12% which is not a good indicator. It indicates that there is an increase in material cost, salaries and wages and other operating expenses. BP: in case of BP, profit margin ratio is not consistent, it shows varied variations i.e. from 2010-11 to 2011-12, it shows a decrease of 0.34% and from 2011-12 to 2012-13, it shows an increase of 0.49%, which is good indicator.

2. ASSET TURNOVER
EXPLANATION: This is a measure of a firms efficiency in utilizing its assets. It indicates how many times the assets were turned over in a period in order to generate sales. If the asset turnover is high, we can infer that the enterprise is managing its assets efficiently. A low asset turnover implies the presence of more assets than a business needs for its operations.
Asset turnover = .

HINDUSTAN PETROLEUM
Year 2010-2011
123772.42 = 3.28 37715.46

BHARAT PETROLEUM
Year 2010-2011
163218.21 = 4.56 35089.12

Year 2011-2012
178139.23 = 2.70 65934.22

Year 2011-2012
211972.97 = 3.489 60741.46

Year 2012-2013
206529.34 = 2.80 73677.14

Year 2012-2013
240115.75 = 7.17 33493.67

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 3.28 4.56

2011-2012 2.7 3.48

2012-2013 2.8 7.17

INTERPRETATION:
INTERCOMPANY COMPARISON: Not much variation can be found in this case between the asset turnover ratios of both the companies, except for 2010-2011 and 2012-2013 with a difference of 1.28% and 4.34%. A higher asset turnover ratio in case of BP shows that the company is managing its assets in a very efficient manner as compared to HP.

. INTRACOMPANY COMPARISON: HP: The Company shows small degree of variation and its asset turnover ratio is gradually falling. However the magnitude of change is not very high. A falling asset turnover ratio shows there are more assets present in the business than it needs and are therefore not being utilized to its optimum use. BP: The Company shows a higher degree of variation of 3.69% from 2011-12 to 2012-13. In the year 2012-2013, it is the highest i.e. 7.17%, which indicates company is utilizing assets efficiently. However a fall in the previous year shows that there is either non availability of resources or it has not utilised resources to their optimum level.

3. RETURN ON ASSETS
EXPLANATION: It is also known return on investment. This is a measure of profitability from a given level of investment. It is an excellent indicator of a companys overall performance. Return on assets = Profit after Tax/Average Total Assets *100 HINDUSTAN PETROLEUM
Year 2010-2011
1539.01 100 = 4.08 % 37715.46

BHARAT PETROLEUM
Year 2010-2011
1546.58 100 = 4.40% 35089.12

Year 2011-2012
991.43 100 = 1.50 % 65934.22

Year 2011-2012
1311.27 100 = 2.15% 6074.46

Year 2012-2013
904.71 100 = 1.22% 73677.14

Year 2012-2013
2642.90 100 = 3.98% 66297.19

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 4.08 4.4

2011-2012 1.5 2.15

2012-2013 1.22 3.98

INTERPRETATION:
INTERCOMPANY COMPARISON: Between the 2 companies HP and BP there is not much difference in return on assets, except in the year 2012-13 i.e. 2.76% which s a quite good difference as compared to previous year. BP shows a higher return on asset as compared to HP. The highest difference being in the case of 2012-2013 i.e. Of 2.76 %, it shows that BP is able to acquire more profitability from its given level of investments as compared to HP. INTRACOMPANY COMPARISON: HP: The Company shows a high degree of variation in the year 2011-2012 i.e. of 2.58%. In 201213 it came down to 1.22% as compared to 1.50% of 2012-13. It indicates that company is not able

to acquire a high level of profitability from its investments. It therefore points towards a decreasing overall profitability of the company. BP: There is a much variation in case of BP can be seen in all the years i.e. in 2010-11, 2011-12 and 2012-13. In 2011-12, it recorded a fall of 2.25% as compared to the year 2010-11. But in 2012-13, it recorded an increase of 1.83%.This shows that there is not much consistency in acquiring a good level of profitability from its investments. The company is facing a decrease in the overall profitability on assets.

4. RETURN ON EQUITY
This is a measure of profitability from shareholders standpoint. It measures the efficiency in the use of shareholders funds. Return on equity = Profit after Tax / Average Shareholders Equity*100 HINDUSTAN PETROLEUM
Year 2010-2011
1539.01 100 = 12.77 % 12051.88

BHARAT PETROLEUM
Year 2010-2011
1546.68 100 = 11.40% 13572.16

Year 2011-2012
991.43 100 = 7.72% 12834.16

Year 2011-2012
1311.27 100 = 16.01% 8185.74

Year 2012-2013
904.71 100 = 6.73% 13424.46

Year 2012-2013
2642.90 100 = 16.67% 15773.94

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 12.77 11.40

2011-2012 7.72 16.01

2012-2013 6.73 16.57

INTERPRETATION:

INTERCOMPANY COMPARISON: Between the 2 companies, BP shows a higher ROE as compared to HP except in the year 2010-11. Highest difference is in the year 2012-13 i.e. of 9.84. It shows that BP has a higher efficiency in the use of shareholders funds as compared to HP.

INTRACOMPANY COMPARISON: HP: The Year 2011-2012 shows the highest fall in the ROE which indicates that the company is not managing its funds in the most efficient manner.

BP: The Company managed to enjoy an increasing rate on ROE. In the year 2010-11, the ROE was 11.40%, which climbed to 16.01% in 2011-12, which further laddered to 16.57% in 2012-13. It indicates that the company is managing its funds in the most efficient manner.

5. EARNING PER SHARE

Financial analysts regard the earning per share (EPS) as an important measure of profitability. EPS is useful in comparison over time. Earnings per share =Profit after Tax / No. of shares

HINDUSTAN PETROLEUM
Year 2010-2011
1539.01 = 45.44 / 33.863

BHARAT PETROLEUM
Year 2010-2011
42.78 /

Year 2011-2012 Year 2011-2012

911.43 = 26.92 / 33.863 1311.27 = 36.29 / 36.15

Year 2012-2013 Year 2012-2013

904.71 = 26.71 / 33.863 2642.90 = 36.55 / 72.38

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 45.44 44.78

2011-2012 26.92 36.29

2012-2013 26.71 36.55

INTERPRETATION:

INTERCOMPANY COMPARISON: Between the two companies BP shows a higher EPS as compared to HP except in the year 2010-11. Major differences are in the year 2011-12 and 2012-13. It shows the earning of each shareholder on each share. Shareholders of BP are more likely to be in a more profitable position than of HP due to its higher EPS.

INTRACOMPANY COMPARISON: HP: The EPS is inconsistent, with highest in the year 2010-2011 and lowest in the year 2012-2013. It shows a consistent decrease in the EPS which is not a good indicator for the companys shareholders. BP: There is not much difference in the EPS in the year 2011-12 and 2012-13. But a difference of 8.49% can be seen between the years 2010-2011 and 2012-13. The EPS in the year 2012-13, indicates the declining profitability in holding the shares as compared to the year 2010-11.

LIQUIDITY RATIOS
Liquidity is the ability of a business to meet its short-term obligations when they fall due. An enterprise should have enough liquid and other current assets which can be converted into cash so that it can pay its suppliers and lenders on time. The commonly used ratios to evaluate liquidity are: 1. Current ratio 2. Quick ratio 3. Debtor turnover 4. Inventory turnover

1. CURRENT RATIO
This is the ratio of current assets to current liabilities. It is a widely used indicator of a companys ability to pay its debts in the short-term, and shows the amount of current assets a company has per rupee of current liabilities. A current ratio of more than one means that a business has more current assets per rupee of current liabilities, implying that it may be able to pays its current liabilities using its current5 assets. In other words, its operations will not be disrupted. Current ratio is expected to be at least 2:1. Current ratio = Current Assets / Current Liabilities

HINDUSTAN PETROLEUM
Year 2010-2011
26590.97 = 1.36: 1 19606.60

BHARAT PETROLEUM
Year 2010-2011
27604.21 = 1.25: 1 21958.43

Year 2011-2012
36759.74 = 0.86: 1 42700.36

Year 2011-2012
39445.33 = .84: 1 4667.55

Year 2012-2013
38230.64 = 0.88: 1 43262.65

Year 2012-2013
38389.81 = 0.90: 1 42693.40

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 1.36:1 1.25:1

2011-2012 .86:1 .84:1

2012-2013 .88:1 .90:1

INTERPRETATION:
INTERCOMPANY COMPARISON: Between HP and BP the current ratio is almost equal. It does not show very high level of variation. The highest difference is in the year 2010-11 i.e. 0.11%. It helps in measuring the liquidity of the business.

INTRACOMPANY COMPARISON: HP: The ideal current ratio is preferred as 2:1 but in case of HP it does not show the ideal condition in any of the three years. A lower current ratio indicates that there are fewer current assets than current liabilities. In the year 2011-12, it recorded a current ratio of 0.86:1 which is not a good indicator for the company, i.e. the company has the assets of only 0.86 times to its current liabilities.

BP: Just like HP, this company also does not show the ideal condition in any of the three years. In the year 2012-13 it recorded a current ratio of 0.90:1 which is not a good indicator for the company i.e. the company has the assets of only 0.90 times to its current liabilities.

2. QUICK RATIO
All current assets are not equally liquid. While cash is readily available to make payments to suppliers and debtors can be converted into cash with some effort, inventories are two steps away from cash. Thus a large current ratio by itself is not a satisfactory measure of liquidity when inventories constitute a major part of the current assets .Therefore, the quick ratio or acid test ratio is computed as a supplement to the current ratio. This ratio relates relatively more liquid current assets less inventories, to current liabilities. Quick ratio is expected to be 1:1 Quick ratio = Quick Assets / Current Liabilities

HINDUSTAN PETROLEUM
Year 2010-2011
9968.69 = 0.51: 1 19606.60

BHARAT PETROLEUM
Year 2010-2011
12228.92 = 0.55: 1 21958

Year 2011-2012
17305.21 = 0.40: 1 42700.36

Year 2011-2012
23497.27 = .5: 1 46667.55

Year 2012-2013
21791.94 = 0.50: 1 43262.65

Year 2012-2013
21699.44 = .50: 1 42693.40

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 .51 .55

2011-2012 .40 .5

2012-2013 .50 .5

INTERPRETATION:
INTERCOMPANY COMPARISON: Between HP and BP, there is not a much difference in the quick ratio. The ideal quick ratio is considered to be 1:1, but none of the two has managed to achieve it. Both of them are inefficient to convert its liquid assets into cash to pay off its liabilities.

INTRACOMPANY COMPARISON: HP: A lower quick ratio indicates that the company is inefficient to convert its current assets into cash in order to pay off its liabilities. The quick ratio is much below to ideal ratio i.e. 1:1 which indicates the company is inefficient to pay off its current obligations. BP: The quick ratio is lesser than the ideal ratio in all the years which indicates that the company does not have many liquid assets to pay off its current obligations. Inventories are not included as it might not be possible to sell off the inventories immediately.

3. .DEBTOR TURNOVER RATIO

A companys ability to collect from its customers in a prompt manner enhances its liquidity. The debtor turnover ratio measures the efficacy of a firms credit policy and collection mechanism and shows the number of times each year the debtor turn in to cash. It provides some indication of the quality of a firms debtors and collection effort .High debtor turnover indicates that debtors are being converted rapidly into cash and the quality of the companys portfolio is good. Debtors turnover ratio = Sales / Average Debtors

HINDUSTAN PETROLEUM
Year 2010-2011
123772.42 = 48.61 2545.86

BHARAT PETROLEUM
Year 2010-2011
163218.21 = 61.28 2363.55

Year 2011-2012
178139.23 = 53.64 3321.01

Year 2011-2012
211972.97 = 47.57 4455.59

Year 2012-2013
206529.34 = 48.59 4250.10

Year 2012-2013
241795.98 = 46.48 5201.76

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 48.61 61.28

2011-2012 53.64 47.57

2012-2013 48.59 46.48

INTERPRETATION:
INTERCOMPANY COMPARISON: Between HP and BP, HP showed higher turnover ratio except in the year 2010-11. which proves that HP has good quality debtors i.e. Debtors are rapidly converting into cash.

INTRACOMPANY COMPARISON:

HP: A decrease in ratio from the year 2011-12 to 2012-13 indicates that the debtors are increasing while an increase in the ratio from 2010-11 to 2011-12, indicates that the debtors are decreasing and they are converting into cash. BP: This Company do not have good quality of debtors. The ratio has been decreased constantly, it indicates that debtors are not being converted into cash at a good rate.

AVERAGE DEBT COLLECTION It is common to express debtors turnover in AVERAGE DEBT COLLECTION PERIOD, in order to calculate relative to the companys credit period. Average debt collection period = 360 / Debtors Turnover

HINDUSTAN PETROLEUM
Year 2010-2011
360 = 7.40 48.61

BHARAT PETROLEUM
Year 2010-2011
360 = 5.87 61.27

Year 2011-2012
360 = 6.71 53.64

Year 2011-2012
360 = 7.56 47.57

Year 2012-2013
360 = 7.40 48.59

Year 2012-2013
360 = 7.74 46.48

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 7.40 5.87

2011-2012 6.71 7.56

2012-2013 7.40 7.74

INTERPRETATION

INTERCOMPANY COMPARISON: Between HP and BP, HP takes less time in collection of debts from its customers as compared to BP, except in the year 2010-11. . INTRACOMPANY COMPARISON: HP: The average debt collection period is decreasing from the year 2010-11 to 2011-12, it indicates that the company takes less time in collection of debts. But it showed an increase in avg. debt collection period from 2011-12 to 2012-13, i.e. 6.71 days to 7.40 days.

BP: The average debt collection period is increasing constantly, it indicates that the company takes more time in collection of debts.

4. INVENTORY TURNOVER RATIO

This ratio shows the number of times a companys inventory is turned to sales. Investment in inventory represents idle cash .The lesser the inventory, the greater the cash available for meeting operating needs. High inventory turnover is a sign of efficient inventory management. Inventory turnover management = Cost of Goods Sold / Average Inventory

HINDUSTAN PETROLEUM
Year 2010-2011
131184.13 = 8.98 14600.75

BHARAT PETROLEUM
Year 2010-2011
152933.34 = 11.16 13701.97

Year 2011-2012
170205.64 = 9.435 18038.40

Year 2011-2012
199381.59 = 12.73 15661.37

Year 2012-2013
198492.04 = 11.06 : 177946.60

Year 2012-2013
226532.27 = 13.88 16319.21

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 8.98 11.16

2011-2012 9.435 12.73

2012-2013 11.06 13.88

INTERPRETATION:
INTERCOMPANY COMPARISON: Between HP and BP, HP has a lower inventory turnover ratio which indicates that BP has better inventory management than HP. BP has fast moving inventory and it runs lower risk of obsolescence as compared to HP. INTRACOMPANY COMPARISON:

HP: An increase in ratio in the years 2010-11, 2011-12 and 2012-2013, indicates that the company is able to reduce its cost on interest, insurance and storage charges. . BP: An increase in ratio in the years 2010-11, 2011-12 and 2012-2013, indicates that the company is able to reduce its cost on interest, insurance and storage charges.

SOLVENCY RATIO
Long term solvency of a business is affected by extent of debt used to finance the assets of the company. The presence of heavy debt in company capital structure is thought to reduce company solvency because debt is more risky than equity. The debt to equity ratio and the interest coverage ratio are important indicator of solvency. The commonly used ratio to measure solvency are as follows: 1. Debt on equity ratio 2. Liability to equity ratio 3. Interest coverage ratio

1. DEBT EQUITY RATIO

A wise mix of debt and equity can increase the returns on equity : a) Debt is generally cheaper than equity b) Interest payments are tax deductible expenses. However, excessive use of debt financing is risky. A company has a legal obligation to make interest and principle payments at a due date .if a company takes on so much debts that it becomes unable to make the required interest and principle disbursements on time, the creditors may force liquidation of the company. The ratio indicates the extent of use of financial leverage .A high debt equity ratio indicates aggressive use of leverage. A low ratio suggests that the company has a small degree of leverage is too conservative. Debt to equity ratio = secured loans +unsecured loans / shareholders equity HINDUSTAN PETROLEUM
Year 2010-2011
25021.19 = 1.99: 1 12545.80

BHARAT PETROLEUM
Year 2010-2011
18971.87 = 1.34: 1 14057.62

Year 2011-2012
27479.259 = 2.09: 1 13122.52

Year 2011-2012
21246.44 = 1.42: 1 14913.86

Year 2012-2013
32458.27 = 2.37: 1 13726.40

Year 2012-2013
23546.21 = 1.41: 1 16634.02

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 1.99 1.34

2011-2012 2.09 1.42

2012-2013 2.37 1.41

INTERPRETATION:
INTERCOMPANY COMPARISON: In all the years HP has a high debt equity ratio as compared to BP which indicates that HP is more risky for creditors. INTRACOMPANY COMPARISON:

HP:There has been an increase in the ratio in all the years which indicates lower proportion of owner supplied capital.This indicates that the company is not safe for creditors and the company is not conservative. BP: There has been increase in ratio from 2010-11 to 2011-12 indicating that the company has become risky for creditors and it does aggressive use of leverage

2. LIABILITY TO EQUITY RATIO

A variant of the debt to equity ratio is the liabilities to equity ratio. It is especially useful in the case of firms that keep rolling over short term obligations Liability to equity ratio = all liabilities / shareholders equity HINDUSTAN PETROLEUM
Year 2010-2011
47823.42 = 3.81: 1 12545.80

BHARAT PETROLEUM
Year 2010-2011
19979.41 = 1.42: 1 14057.62

Year 2011-2012
58561.55 = 4.41: 1 12545.8

Year 2011-2012
50693.12 = 3.39: 1 14913.86

Year 2012-2013
62518.33 = 4.59: 1 13726.40

Year 2012-2013
50383.37 = 3.02: 1 16634.02

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2012 3.81 1.42

2011-2012 4.41 3.39

2012-2013 4.59 3.02

INTERPRETATION:
INTERCOMPANY COMPARISON: Both the companies have high ratio indicating that both the companies have become risky for creditors. INTRACOMPANY COMPARISON: HP: It has a consistent liability to equity ratio. BP: A much higher increase in ratio in the year 2011-12 indicates company has made aggressive use of leverage and is not safer for the creditors.

INTEREST COVERAGE RATIO

This is a measure of the protection available to creditors for payment of interest charges by the companies. The ratio shows whether the company has sufficient income to cover its interest requirement by a wide margin. A high ratio implies adequate safety for payment of interest even if there was to be a drop in the companys earnings. Interest coverage ratio = Profit before interest and tax / Interest expenses HINDUSTAN PETROLEUM
Year 2010-2011
3230.14 = 3.65 884

BHARAT PETROLEUM
Year 2010-2011
3522.74 = 3.20 1100.7

Year 2011-2012
3358.97 = 1.57 2139.24

Year 2011-2012
3683.76 = 2.05 1799.59

Year 2012-2013
3493.89 = 1.73 2019.33

Year 2012-2013
5860.93 = 3.21 1825.24

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 3.65 3.2

2011-2012 1.57 2.05

2012-2013 1.73 3.21

INTERPRETATION:
INTERCOMPANY COMPARISON: This ratio indicates whether the company has sufficient income to cover its interest payments.BP has a much higher interest coverage ratio as compared to HP which indicates BP has an adequate safety for payment of interest even if there is a drop in the companys earnings. INTRACOMPANY COMPARISON: HP: There has been a consistent decrease in ratio indicating that the company doesnt provide adequate protection to its creditors for payment of interest charges.

BP: There has been a decrease in ratio from 2010-11 to 2011-12 indicating that the company provides less protection to creditors for payment of interest charges as compared to previous year.

CAPITAL MARKET RATIO

It relates the market price of a companys share to the companys earnings and dividend. The most commonly ratios that aid investors and analysts in understanding the strength of the company in the capital market are as follows: 1 Price earnings ratio 2 Dividend yield 3 Price to book ratio

1. PRICE EARNING RATIO

It measures extensively used in investment analysis. It is considered as an indicator of firms growth prospectus. Profit earnings ratio = Average Stock Price / Earnings Per Share

HINDUSTAN PETROLEUM
Year 2010-2011
356.88 = 11.86 45.448

BHARAT PETROLEUM
Year 2010-2011
306.67 = 7.16 42.78

Year 2011-2012

Year 2011-2012
347.24 = 9.5 36.26

295.27 = 10.96 26.92

Year 2012-2013
283.225 = 10.60 26.71

Year 2012-2013
377.7 = 10.33 36.55

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 11.86 7.16

2011-2012 10.96 9.5

2012-2013 10.60 10.33

INTERPRETATION:
INTERCOMPANY COMPARISON: There are some variations in the P.E ratio in all the years. If overall analysis is done it can be seen that HP has a higher P.E. ratio as compared to BP. INTRACOMPANY COMPARISON: HP: The year 2010-2011 shows the highest P.E. ratio which indicates stock market is confident in the company`s future earnings growth but it fell down in next two years but the difference was negligible as compared to previous year.

BP: The Year 2010-11 shows the lowest PROFIT EARNING ratio amongst all these years which indicates lower faith in in the company`s future earnings growth.

2. DIVIDEND YIELD RATIO

It represents the current cash return to shareholders. It is the ratio of dividend per share to current market price. The increase in the dividend yield indicates that the cash returns on share went up. Dividend yield ratio = Dividend per Share / Average Stock Price

HINDUSTAN PETROLEUM
Year 2010-2011
14 100 = 3.92% 356.88

BHARAT PETROLEUM
Year 2010-2011
14 100 = 4.56% 306.67

Year 2011-2012
8.5 100 = 2.87% 295.27

Year 2011-2012
11 100 = 3.16% 347.245

Year 2012-2013
8.5 100 = 3% 283.225

Year 2012-2013
11 100 = 2.91% 377.7

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 3.92 4.56

2011-2012 2.87 3.16

2012-2013 3 2.91

INTERPRETATION:
INTERCOMPANY COMPARISON: Between the 2 companies HP is the one which is giving a lesser dividend yield as compared to BP. The major difference being in the year 2010-11 between the dividend yield of both the companies. INTRACOMPANY COMPARISON: HP: The Company is providing a higher current cash return to its shareholders in the year 2010-11 as compared to following years.

BP: The Company is consistently providing higher dividend yield the highest being in the year 20102011. It shows the total return to shareholders in the form of dividend.

3. PRICE TO BOOK RATIO

This measure compares a companys stock price with the book value .Book value per share is the amount of shareholder equity dividend by the number of shares. A low P/B ratio is often seen as an indication of under-pricing of the stock. A price to book ratio of more than one means that the market expects the stock to earn at a rate higher than the required rate. Price to book ratio = average market price per share / book value per share Book value per share = shareholders equity / no. of equity shares

HINDUSTAN PETROLEUM
Year 2010-2011
356.88 = 0.96: 1 370.49

BHARAT PETROLEUM
Year 2010-2011
306.67 = 0.78: 1 388.86

Year 2011-2012
295.27 = 0.76: 1 387.51

Year 2011-2012
347.245 = 0.85: 1 408.5

Year 2012-2013
283.225 = 0.69: 1 405.35

Year 2012-2013
377.7 = 1.64: 1 230.06

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-2011 0.96:1 0.78:1

2011-2012 0.76:1 0.85:1

2012-2013 0.69:1 1.64:1

INTERPRETATION:
INTERCOMPANY COMPARISON: Between the two companies BP shows a higher price to book ratio in 2011-12 and 2012-13 as compared to HP. However the ratio was less 2010-11. A more than 1 ratio indicates that market expects the stock to earn at a rate higher than the required rate only in the year 2012-13 it achieved the ideal ratio.

INTRACOMPANY COMPARISON: HP: The Company shows a consistent low price to book ratio in all the years the lowest being in the year 2012-13. BP: The Company shows an increasing trend in this case.The highest being in the year 2012-13.