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Table of Contents
PAKISTAN STATE OIL (PSO) ..................................................................................................... 4
INTRODUCTION OF THE ORGANIZATION: ....................................................................... 4
HISTORY OF PSO: .................................................................................................................... 4
VISION STATEMENT: ......................................................................................................... 5
MISSION STATEMENT: ...................................................................................................... 5
CORE AREA OF BUSINESS: ................................................................................................... 5
CORE VALUES: ........................................................................................................................ 5
LOCATION: ................................................................................................................................... 6
HEAD OFFICE:.......................................................................................................................... 6
DIVISION OFFICES: ................................................................................................................. 7
HONDA ATLAS CARS (PAKISTAN) LIMITED ........................................................................ 8
INTRODUCTION OF COMPANY: .......................................................................................... 8
HISTORY OF HONDA ATLAS CARS (PAKISTAN) LIMITED: .......................................... 8
VISION STATEMENT: ......................................................................................................... 9
MISSION STATEMENT: ...................................................................................................... 9
CORE AREA OF BUSINESS: ................................................................................................... 9
CORE VALUES: ...................................................................................................................... 10
LOCATION: ................................................................................................................................. 10
FACTORY / HEAD OFFICE: .................................................................................................. 10
REGISTERED OFFICE: .......................................................................................................... 10
BALANCE SHEET OF PSO ........................................................................................................ 11
INCOME STATEMENT OF PSO................................................................................................ 14
RATIO ANAYSIS OF PSO: ........................................................................................................ 16
1. Liquidity Ratios: ................................................................................................................ 16
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2. Activity Ratio: .................................................................................................................... 17
3. Solvency Ratio: .................................................................................................................. 19
4. Profitability Ratios: ............................................................................................................ 21
BALANCE SHEET OF HONDA ATLAS (CARS) ..................................................................... 24
INCOME STATEMENT HONDA ATLAS (CARS)................................................................... 26
RATIO ANALYSIS OF HONDA ATLAS (CARS): ................................................................... 27
1. Liquidity Ratios: ................................................................................................................ 27
2. Activity Ratios: .................................................................................................................. 28
3. Solvency Ratios: ................................................................................................................ 29
4. Profitability Ratios: ............................................................................................................ 31
QUESTIONS?............................................................................................................................... 33
REFRENCES: ............................................................................................................................... 40







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PAKISTAN STAE OIL (PSO) AND HONDA ATLAS
RATIO ANALYSIS AND DECISION FOR PORTFOLIO
INVESTMENT






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PAKISTAN STATE OIL (PSO)
INTRODUCTION OF THE ORGANIZATION:
Pakistan State Oil (PSO), the largest oil marketing company in Pakistan (with a market share of
80%), was formed in 1976 through the merger of Pakistan National Oil, Premiere Oil, and Essos
operates 3,600 retail outlets, including more than 1,600 New Vision Retail Outlets that offer,
besides the usual gas-station services, an Internet kiosk, car wash. The company additionally
sells a full range of petroleum and related products, including fuel oil, industrial oils, and
petrochemicals. The Government of Pakistan controls a majority stake in the publicly traded
PSO.
HISTORY OF PSO:
Pakistan State Oil (PSO) was established in year 1974, when on 1st January the government took
over and merged Pakistan National Oil (PNO) and Dawood Petroleum Limited (DPL) as
Premiere Oil Company Limited (POCL).
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. At the end of that year that is 30th December 1976 Premier Oil Company Limited and
State Oil Company Limited merged with each other Pakistan state Oil (PSO) was formed.
After PSOs formation 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 cross functional teams. This new corporate renewal program has
divided the companys major operations into independent activities supported by legal, financial,
informative and other services. In order to reinforce and monitor this structural change.
Human Resource Development became one of the main priorities on the companys 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
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PSO has been able to maintain its market leadership in a highly competitive business
environment.
VISION STATEMENT:
To excel in delivering value to customers as an innovative and dynamic energy company that
gets to the future first.
MISSION STATEMENT:
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:
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.
CORE AREA OF BUSINESS:
PSO is the market leader in Pakistans energy sector. The company has the largest network of
retail outlets to serve the automotive sector and is the major fuel supplier to aviation, railways,
power projects, armed forces and agriculture sector. PSO also provides Jet Fuel to Refueling
Facilities at 9 airports in Pakistan and ship fuel at 3 ports. The company takes pride in continuing
the tradition of excellence and is fully committed to meet the energy needs of today and rising
challenges of tomorrow. It also provide lubricants like engine oils for the automobiles. Some
core products Motor Gasoline, High Speed Diesel, Furnace Oil, Jet Fuel, Kerosene, LPG, CNG,
Petrochemicals, Lubricants.
CORE 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
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We endeavor to achieve higher collective and individual goals through team. This is inculcated
in the organization through effective communication.

Respect
We provide Opportunity for 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
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.


LOCATION:
HEAD OFFICE:
Address: PSO House, Khayaban-e-Iqbal, Clifton,
P.O.Box 3983, Karachi 75600, Pakistan
UAN: 021-111 111 PSO (776)
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DIVISION OFFICES:


Islamabad
ZTBL Building ,
Zero Point G-/1,
Islamabad
Tel #: (051) 9252651
Fax:(051) 9252652
Lahore
8-Edward Road,
Lahore
Tel #: (042) 37353984
Fax: (042) 37312484
Multan
2nd Floor Park Lane Tower
Office Colony Khanewal
Road
Multan
Tel #: (061) 6510686-7
Fax: (061) 6510694

Sahiwal
63/C, Farid Town
Tel # (040) 99200193-4
Fax : (040) 99200195
Faisalabad
3rd Floor,
Statelife Building, Liaqat
Road,
Faisalabad.
Tel # (041) 99201276
Fax: (041) 99201278
Hyderabad
7th Floor, State Life Building
Thandi Sarak,
Hyderabad
Tel #: (022) 9200784
Fax: (022) 9200879

Peshawar
House # 25/III/AB
Jamrod Lane
University Town
Peshawar
Tel #: (091) 9216812
Fax: (091) 99216814
Bahawalpur
PSO Divisional Office,
8/2-B Tipu Shahed Road
Model Town-A, Bahawalpur
Tel #: (062) 99255284
Fax: (062) 99255286
D.I.K
State Life Building
Circular Road,
D.I.K
Tel # (0966) 711774
Fax: (0966) 731284

Jehlum
3 A/1 . Aziz Bhutti Road
Jehlum Cantt
Jehlum
Tel # (0544) 9270022
Fax: (0544) 9270359
Sukkur
138 Sindhi Housing Society
Airport Road
Sukkur
Tel # (071) 5630327
Fax: (071) 5630935
Gujranwala
Super Asia Building No.4
G.T Road
Gujranwala
Tel #: (055) 4555423
fax: (055) 4555422


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HONDA ATLAS CARS (PAKISTAN) LIMITED
INTRODUCTION OF COMPANY:
Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motor Company Limited
Japan, and the Atlas Group of Companies, Pakistan. The company was incorporated in 1992 and
joint venture agreement was signed in 1993. The ground breaking ceremony was held on April
17, 1993 and within a record time of 11 months, construction and erection of machinery was
completed.
The first car rolled off the assembly line on May 26, 1994. The company is listed on Karachi,
Lahore and Islamabad Stock Exchanges. On July 14, 1994, car bookings started at six
dealerships in Karachi, Lahore, and Islamabad. Since then the Dealerships Network has
expanded and now the company has sixteen 3S (Sales, Service and Spare Parts) and thirty 2S
(Service and Spare Parts) Pit stops network in all major cities of Pakistan. Honda Atlas Cars
(Pakistan) Limited has Dealership Network covering all of Pakistan, and Dealership are
equipped with all the facilities a modern dealership should have. The facilities include Sale,
Service and Spare parts.
HISTORY OF HONDA ATLAS CARS (PAKISTAN) LIMITED:
Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motor Company Limited
Japan, and the Atlas Group of Companies, Pakistan. The company was incorporated on
November 04, 1992 and joint venture agreement was signed on August 05, 1993. The ground
breaking ceremony was held on April 17, 1993 and within a record time of 11 months,
construction and erection of machinery was completed. The first car rolled off the assembly line
on May 26, 1994. Official inauguration was done by then President of Pakistan, Sardar Farooq
Ahmad Khan Leghari, Mr.Kawamoto, President of Honda Motor Company Limited Japan was
also present to grace the occasion. The company is listed in Karachi, Lahore and Islamabad
Stock Exchanges.
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On July 14, 1994, car bookings started at six dealerships in Karachi, Lahore, and Islamabad.
Since then the Dealerships network has expanded and now the company has Twenty One 3S
(Sales, Service and Spare Parts), Eighteen 2S (Service and Spare Parts) and Five 1S (Spare Parts)
authorized dealerships network in all major cities of Pakistan.
Since the commencement of production in 1994, the company has produced and sold more than
200,000 cars till July 12, 2012.All dealerships are constructed in accordance with the standards
defined by Honda World over.
Honda always strive to give outstanding service to valued customers. In addition to providing
regular service to customers, the company also regularly conducts Service Campaigns, to
facilitate customer's need for service. This has given our customers absolute confidence in our
cars, clearly evident from the ever increasing sale volumes. Currently, HONDA is offering
Honda Accord, Honda CR-V, Honda CR-Z, Honda Civic (four models) and Honda City (four
models) in wide range of colors with advanced technological features.
VISION STATEMENT:
Striving to be a company that society wants to exist by sharing joys with people throughout the
world creating products that maximize the joy of customers, with speed, affordability and low
carbon dioxide.
MISSION STATEMENT:
In our culture buying a car is the most important decision after purchasing a house. Many since
their childhood fanaticize about buying their dream car one day. When the time comes, we at
Honda Centre help them fulfill their lifelong dream. Therefore, we not only have, The Power of
Dreams but we go beyond to Turning Dreams into Reality. This is the mission we go by
everyday by striving to help our clients achieve their dreams and happiness.
CORE AREA OF BUSINESS:
Honda Atlas core business is automobile and motorcycle manufacturing however aside from its
core business Honda Altas is also involved in manufacturing of garden equipment, marine
engines, and power generators.
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CORE VALUES:
Initiative
Initiative means not to be bound, but to think creatively and act on your own initiative and
judgment, while understanding that you must take responsibility for the results of those
actions.

Equality
Equality means to recognize and respect individual differences in one another and treat each
other fairly.
Trust
The relationship among associates at Honda should be based on mutual trust. Trust is created
by recognizing each other as individuals, helping out where others sharing our knowledge,
and making a sincere effort to fulfill our responsibilities.
LOCATION:
FACTORY / HEAD OFFICE:
43 km, Multan Road
Manga Mandi, Lahore
Ph: (042) 35384671-80
Fax: (042) 35384691-92
E-mail: info@honda.com.pk
REGISTERED OFFICE:
1-Mcleod Road, Lahore
Ph: (042) 37225015-17
Fax: (042) 37233518
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REGIONAL OFFICES:
Lahore Office Karachi Office:
1-XX, Phase III, DHA C-16, KDA Scheme.
Ph: (042) 35694851-3 No. 1, Karsaaz Road


BALANCE SHEET OF PSO
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2012 2011 2010
Rupees in 000
ASSETS
Non- Current Assets
Property, plant and equipment 5831993 6084731 637523
Intangibles 299991 28822 36250
Long term investments 1968073 2314168 2019270
Long term loans, advances and
receivables
385497 324554 317889
Long term deposits and
prepayments
123740 148748 125951
Deferred tax 1202316 957487
9631610 9858510 8874593

Current Assets
Stores, spare parts and loose tools 134431 115339 113863
Stock-in-trade 88523794 95378393 58598668
Trade debts 218022292 124721832 117501074
Loans and advances 526118 430716 409987
Deposits and short term
prepayments
2528406 1027381 367378
Other receivables 2122166 2252028 14557542
Taxation net 5314752 6311951 46580
Cash and bank balances 1624025 2309006 1778056
337795984 252814896 193373148
Net Assets in Bangladesh - - -
total Assets 347427594 262673406 202247741

EQUITY AND LIABILITIES
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Share Capital 1715190 1715190 1715190
Reserves 48244718 40187795 27620868
49959908 41902985 29336058
Non-Current Liabilities
Long term deposits 1176078 1023531 948476
Retirement and other service
benefits
2518502 2233717 1887751
3694580 3257248 2836227
Current liabilities
Trade and other payables 246767460 191851017 156035716
Provisions 688512 688512 688312
Accrued interest / mark-up 544485 432133 3330213
Short term borrowings 45772649 24541511 13021015
293773106 217513511 170075456
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INCOME STATEMENT OF PSO
2012 2011 2010
Rupees in 000
Sales - net of trade discounts
and allowances
1199927907 974917064 877173254

Less:
- Sales tax -163861410 -137969158 -118563577
- Inland freight equalization
margin
-11642892 -16417542 -15851726
-175504302 -154386700 134415303
Net sales 1024423605 820530364 742757951
Cost of products sold -990101083 -786250059 -713591707

Gross profit 24322522 34280305 29166244

Other operating income 2133994 1815951 1479054

Operating costs
Transportation costs -1205394 -810423 -631849
Distribution and marketing
expenses
-5863170 -5178233 -4055238
Administrative expenses -1659530 -1514532 -1125891
Depreciation -1127587 -1120999 -1137637
Amortization -15491 -18210 -44752
Other operating expenses -9272048 -2239725 -2416518
-19143220 -10879122 -9411885
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Profit From Operations 17313296 25217134 21233413

Other Income 7550581 4143710 6095348
Finance costs -11658928 -11903162 -9882010
13204949 17457682 17446751
Share of profit of associates 469468 516752 516401
Profit before taxation 13674417 17974434 17963152
Taxation -4618362 3195120 -8913556

Profit for the year 9056055 14779314 9049596

Earnings per share - basic and
diluted
52.8 86.17 52.76
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RATIO ANAYSIS OF PSO:
1. Liquidity Ratios:
Ratios 2012 2011 2010
Current Ratio 1.14 1.16 1.14
Quick Ratio 0.84 0.72 0.79

I. Current Ratio = Current Assets
Current Liabilities
i. Current Ratio for 2012 = 337795984 = 1.14
293773106
ii. Current Ratio for 2011 = 252816896 = 1.16
217513173
iii. Current Ratio for 2010 = 193373148 = 1.14
170075456
Interpretations:
The Ratio tells the ability to full fill its short term obligation Company data shows that for
every one rupees of liability there is 1.14 rupees of asset in 2012. The ratio was 1.16, 1.14
in the year 2011, 2010. Company can improve its current ratios by increasing its accounts
receivables and by decreasing the account payables.
II. Quick Ratio = Current Assets Inventory
Current Liabilities
i. Quick Ratio for 2012 = 337795984-88523794 = 0.84
293773106
ii. Quick Ratio for 2011 = 252814896-95378393 = 0.72
217513173
iii. Quick Ratio for 2010 = 193373148-58598668 = 0.79
170075456

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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 2011 to 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 company can
increase its quick ratio by maximum utilization of inventory.
2. Activity Ratio:
Ratio 2012 2011 2010
Inventory Turnover Ratio 11.57 8.60 11.57
Total Asset Turnover 3.45 3.71 4.3
Fixed Asset Turnover 106.3 83.2 83.6

I. Inventory Turnover Ratio = Net Sales
Inventory
i. Inventory Turnover Ratio for 2012 = 1024423605 = 11.57
88523794
ii. Inventory Turnover Ratio for 2011 = 820530364 = 8.60
95378393
iii. Inventory Turnover Ratio for 2010 = 742757951 = 11.57
58598668
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 11.57 which shows good liquidity of
inventory but later in following year it shows descending values in 2011 a slite improvement in
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2012. Company can improves its inventory turnover by avoiding over stocking and steps should
be taken to increases in sales to consume more inventory.
II. Total Assets Turnover = Net Sales
Total Assets
i. Total Assets Turnover for 2012 = 1024423605 = 2.9
347427594
ii. Total Assets Turnover for 2011 = 820530364 = 3.1
262673406
iii. Total Assets Turnover for 2010 = 742,757,951 = 3.6
202247741
Interpretations:
The total asset turnover ratio measures the ability of a company to use its assets to efficiently
generate sales 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 methods. The 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.
III. Fixed Assets Turnover = Net Sales
Total Fixed Assets
i. Fixed Assets Turnover for 2012 = 1024423605 = 106.3
9631610
ii. Fixed Assets Turnover for 2011 = 820530364 = 83.2
9858510
iv. Fixed Assets Turnover for 2010 = 742,757,951 = 83.6
8874593
Interpretation:
The sales to fixed assets ratio is often called the asset turnover ratio. A low sales to fixed assets
ratio means inefficient utilization of fixed assets, which may be caused by excess capacity or
interruptions in the supply of raw materials. The ratio is increasing year by year which
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means that company is utilizing its assets efficiently. So we can say that this ratio is
favorable for the company. The ratio is increasing year by year which means that company
is utilizing its assets efficiently. So we can say that this ratio is favorable for the company.
3. Solvency Ratio:
Ratios 2012 2011 2010
Debt Ratio 0.85 0.84 0.85
Debt to Equity Ratio 6.0 5.2 5.9
Times Interest Earned Ratio 2.17 2.5 2.81

I. Debt Ratio = Current Liabilities + Non-current Liabilities
Total Assets
i. Debt Ratio for 2012 = 293773106 + 3694580 = 0.85
347427594
ii. Debt Ratio for 2011 = 217513173 + 3257248 = 0.84
262673406
iii. Debt Ratio for 2010 = 170075456 + 2836227 = 0.85
202247741
Interpretations:
Debt Ratio Measures what proportion of debts a company has as compared to its assets?
Thus it shows the measure of debt 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 companys
loans were more than assets. The values for 2011, 10 are 0.85 and 0.84.
II. Debt to Equity Ratio = Total Debt
Equity
i. Debt Ratio for 2012 = 3694580 + 293773106 = 6.0
49959908
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ii. Debt Ratio for 2011 = 3257248 + 217513511 = 5.2
41902985
iii. Debt Ratio for 2010 = 2836227 + 170075456 = 5.9
29336058
Interpretations:
A measure of a company's financial leverage calculated by dividing its total
liabilities by stockholders equity. It indicates what proportion of equity and debt the
company is using to finance its assets. A high debt/equity ratio generally means that a
company has been aggressive in financing its growth with debt. If this were to increase
earnings by a greater amount than the debt cost (interest), then the
shareholders benefit as more earnings are being spread among the same amount of
shareholders.
This ratio indicates that almost the company take 6.0 of financing for assets by taking debt
in 2012.
III. Times Interest Earned Ratio = Earnings before interest and tax
Interest
(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)
i. Times Interest Earned Ratio for 2012 = 13674417 + 11658928 = 2.17
11658928
ii. Times Interest Earned Ratio for 2011 = 17974434 + 11903162 = 2.5
11903162
iii. Times Interest Earned Ratio for 2010 = 17963152 + 9882010 = 2.81
9882010
Interpretations:
It indicates the companys ability to meet its debt obligations or interest obligations. Or
simply we can say 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.
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4. Profitability Ratios:
Ratios 2012 2011 2010
Gross Profit Margin 2.9% 3.5% 3.3%
Operating Profit Margin 1.4% 2.6% 2.4%
Net Profit Margin 0.75% 1.52% 1.03%
Return on Total assets 2.6.% 5.6% 4.4%

I. Gross Profit Margin = Gross Profit
Sales
i. Gross Profit Margin for 2012 = 34322522 = 2.9%
1199927907
ii. Gross Profit Margin for 2011 = 34280305 = 3.5%
974917064
iii. Gross Profit Margin for 2010 = 29166244 = 3.3%
877173254
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 PSOs financial
position, in 2010 the ratio was 3.3% which means that for each rupee of sales generated
0.033 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 3.5%
in 2011 respectively. Yet again the margin declined in 2012 which is 2.9.
II. Operating Profit Margin = Operating Profit
Sales

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i. Operating Profit Margin for 2012 = 17313296 = 1.4%
1199927902
ii. Operating Profit Margin for 2011 = 25217134 = 2.6%
974917064
iii. Operating Profit Margin for 2010 = 21233413 = 2.4%
877173254
Interpretations:
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. The Margin is 1.4% for
2012, 2.6% for 2011, 2.4% for 2010.
III. Net Profit Margin = Net Profit
Sales
i. Net Profit Margin for 2012 = 9056055 = 0.75%
1199927907
ii. Net Profit Margin for 2011 = 14779314 = 1.52%
974917064
iii. Net Profit Margin for 2010 = 9049596 = 1.03%
877173254
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 0.75% in 2012 which is less than that of 2011 i.e. 1.52%.
Similarly 2011 can be compared with 2010s value that is 1.03%. 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.
IV. Return on Total Assets = Net income
Total Assets
i. Return on Total Assets for 2012 = 9056055 = 2.6%
347427594
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ii. Return on Total Assets for 2011 = 14779314 = 5.6%
262673406
iii. Return on Total Assets for 2010 = 9049596 = 4.9%
202247741
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.


















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BALANCE SHEET OF HONDA ATLAS (CARS)
Regular (in Thousands)
ASSETS 2010 2011 2012
property, plant and equipment 4,082,955 3,864,527 5,190,535
intangible asses 65,903 64,636 195,830
capital work-in-progress 191,842 80,746 19,226
long term loans, advance and deposits 32,196 33,141 35,545
deferred taxation 251,008 338,165 571,214
TOTAL NON-CURRENT ASSETS 4,623,904 4,381,215 6,012,350
stores and spares 50,316 83,101 101,942
stock-in-trade 2,704,946 1,612,696 2,954,091
trade and other receivables 706,092 507,852 853,218
cash and bank balances 219,859 231,880 20,487
TOTAL CURRENT ASSETS 3,681,213 2,435,529 3,929,738
TOTAL ASSETS 8,305,117 6,816,744 9,942,088
authorized capital 750,000 2,000,000 2,000,000
issued, subscribed and paid up capital 714,000 1,428,000 1,428,000
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reserves 1,991,000 1,727,000 1,801,500
unappropriated profit -264,332 74,678 -401,655
SHARE CAPITAL AND RESERVES 2,440,668 3,229,678 2,827,845
TOTAL NON-CURRENT LIABILITIES 1,958,334 500,000 1,500,000
current portion of long term finances 583,333
short term borrowings 2,151,601
mark up accrued on loans and other payables 39,627 32,029 75,048
trade and other payables 3,283,155 3,055,037 3,387,594
TOTAL CURRENT LIABILITIES 3,906,115 3,087,066 5,614,243
TOTAL EQUITY AND LIABILITIES 8,305,117 6,816,744 9,942,088












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INCOME STATEMENT HONDA ATLAS (CARS)
Regular (in Thousands)
Income Statement 2010 2011 2012
Sales 17,055,115 14,715,495 14,149,646
Cost of Sales 16,955,181 14,088,001 13,973,144
Gross Profit 99,934 627,494 176,502
Less: Distribution and Marketing Costs 214,889 209,677 190,088
Less: Administrative Expenses 147,274 139,163 139,749
Add: Other Operating Income 150,585 23,589 64,844
Less: Other Operating Expenses 64,514 4,975 311,025
Profit/Loss from Operations 176,158 297,268 399,516
Less: Finance Cost 305,491 233,651 222,769
Profit/Loss before taxation 481,649 63,617 622,285
Taxation 217,109 11,393 220,452
Profit/Loss after taxation 264,540 75,010 401,833
Earnings per Share (rupees) 2.08 0.55 2.81



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RATIO ANALYSIS OF HONDA ATLAS (CARS):
1. Liquidity Ratios:
Ratios 2010 2011 2012
Current Ratio 0.94 0.80 0.70
Quick Ratio 0.24 0.26 0.17

I. Current Ratio = Current Assets
Current Liabilities
i. Current Ratio for 2012 = 3,929,738 = 0.70
5,614,243
ii. Current Ratio for 2011 = 2,435,529 = 0.80
3,087,066
iii. Current Ratio for 2010 = 3,681,213 = 0.94
3,906,115
Interpretation:
Its current ratio has been less than one for three years which shows that its current liabilities are
greater than its current assets. Apparently it looks that its liquidity position is very weak but
actually it is not true because of the nature of its current liabilities. In its current liabilities one
main portion is its trade payables, as it purchases its raw material from parent company Honda
Japan so it can get a lot of relaxation in making payment to its parent company.
II. Quick Ratio = Current Assets Inventory
Current Liabilities
i. Quick Ratio for 2012 = 3,929,738 - 2,954,091 = 0.17
5,614,243
ii. Quick Ratio for 2011 = 2,435,529 - 1,612,696 = 0.26
3,087,066
iii. Quick Ratio for 2010 = 3,681,213 - 2,704,946 = 0.24
3,906,115
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Interpretation:
Its quick ratio is very low as most of the current assets consist of inventory, other assets like
receivables and cash are very low. Its receivables are very low or are nil as it makes sales on cash
even gets money in advance which further increases its current liabilities.
2. Activity Ratios:
Ratios 2010 2011 2012
Inventory Turnover 6.3 9.1 4.7
Total Asset turnover 2.05 2.16 1.42
Fixed Asset Turnover 3.68 3.35 2.35

I. Inventory Turnover Ratio = Net Sales
Inventory
i. Inventory Turnover Ratio for 2012 = 14,149,646 = 4.7
2,954,091
ii. Inventory Turnover Ratio for 2011 = 14,715,495 = 9.1
1,612,696
iii. Inventory Turnover Ratio for 2010 = 17,055,115 = 6.3
2,704,946
Interpretation:
Its inventory turnover increased showing that it took longer for the company to sell its stock in
trade. It has increased from 43 to 78. Its basic reason is decrease in overall demand of cars due to
bad financing condition. The company has to make big batches of each model to reduce set up
cost but this over production takes time in selling as demand has decreased due to due to high
interest rates.
II. Total Asset turnover = Net Sales
Total Assets
i. Total Assets Turnover for 2012 = 14,149,646 = 1.42
9,942,088
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ii. Total Assets Turnover for 2011 = 14,715,495 = 2.16
6,816,744
iii. Total Assets Turnover for 2010 = 17,055,115 = 2.05
8,305,117
Interpretation:
The total asset turnover ratio has decreased showing that the assets are not being used efficiently
as it has been discussed that capacity is much higher than production and sales.
III. Fixed Asset turnover = Net Sales
Fixed Assets
i. Fixed Assets Turnover for 2012 = 14,149,646 = 2.35
6,012,350
ii. Fixed Assets Turnover for 2011 = 14,715,495 = 3.35
4,381,215
iii. Fixed Assets Turnover for 2010 = 17,055,115 = 3.68
4,623,904
Interpretation:
The ratio is decreasing year by year which means that company is not utilizing its assets
efficiently. So we can say that this ratio is unfavorable for the company. As shown above 3.68
for year 2010 and 3.35, 2.35 for years 2011 and 2010.
3. Solvency Ratios:
Ratios 2010 2011 2012
Debt Ratio 0.70 0.53 0.71
Debt to Equity Ratio 2.40 1.11 2.52
Times Interest Earned (Times) 0.58 1.27 1.79

I. Debt Ratio = Current Liabilities + Non-current Liabilities
Total Assets

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i. Debt Ratio for 2012 = 1,500,000 + 5,614,243 = 0.71
9,942,088
ii. Debt Ratio for 2011 = 500,000 + 3,087,066 = 0.53
6,816,744
iii. Debt Ratio for 2010 = 1,958,334 + 3,906,115 = 0.70
8,305,117
Interpretation:
A ratio that indicates what proportion of debt a company has relative to its assets. The measure
gives an idea to the leverage of the company along with the potential risks the company faces in
terms of its debt-load. Debt Ratio is also financial ratio that indicates the percentage of a
company's assets that are provided via debt. It is the ratio of total debt (the sum of current
liabilities and long-term liabilities) and total assets (the sum of current assets, fixed assets, and
other assets such as 'goodwill')
II. Debt to Equity Ratio = Total Debt
Equity
iv. Debt Ratio for 2012 = 1,500,000 + 5,614,243 = 2.52
2827845
v. Debt Ratio for 2011 = 500,000 + 3,087,066 = 1.11
3229678
vi. Debt Ratio for 2010 = 1,958,334 + 3,906,115 = 2.40
2440668
Interpretation:
The total liabilities of the company have almost doubled during 2011. Its major reason is that it
long term debt has doubled. A measure of a company's financial leverage calculated by
dividing its total liabilities by stockholders equity. It indicates what proportion of equity and
debt the company is using to finance its assets. A high debt/equity ratio generally means that a
company has been aggressive in financing its growth with debt. This can result in volatile
earnings as a result of the additional interest expense. If a lot of debt is used to finance increased
operations (high debt to equity), the company could potentially generate more earnings than it
would have without this outside financing.
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III. Times Interest Earned Ratio = Earnings before interest and tax
Interest
i. Times Interest Earned Ratio for 2012 = 399516 = 1.79
222,769
ii. Times Interest Earned Ratio for 2011 = 297,268 = 1.2
233,651
iii. Times Interest Earned Ratio for 2010 = 176,158 = 0.58
305,491
It indicates the companys 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. TIE ratio is
too low in 2010. But its increasing as through 2011 and 2012 i.e 1.2 and 1.79.
4. Profitability Ratios:
Ratios 2010 2011 2012
Net Profit Margin 1.55% 0.51% 2.8%
Gross Profit Margin 0.58% 4.2% 1.2%
Operating Profit Margin 0.88% 0.16% .45%
Return on Asset 3.1% 1.1% 4.0%

I. Net Profit Margin = Net Income
Sales
i. Net Profit Margin for 2012 = 401,833 = 2.8%
14149646
ii. Net Profit Margin for 2011 = 75,010 = 0.51%
14,715,495
iii. Net Profit Margin for 2010 = 264,540 = 1.55%
17,055,115

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Interpretation:
As the company has low profitability ratios in beginning however it get improved in 2012.
Actually in this type of business big fixed cost is involved which can only be recovered if
production is done at large scale but due to low demand it is very difficult to recover and which
converts the contribution generated from sale into loss. A low profit margin indicates a low
margin of safety: higher risk that a decline in sales will erase profits and result in a net loss.
Profit margin is an indicator of a company's pricing strategies and how well it controls costs.

II. Gross Profit Margin = Gross Profit
Sales
i. Gross Profit Margin for 2012 = 176,502 = 1.2%
14,149,646

ii. Gross Profit Margin for 2011 = 627,494 = 4.2%
14,715,495
iii. Gross Profit Margin for 2010 = 99,934 = 0.58%
17,055,115
Interpretation:
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. A high gross profit margin indicates that a
business can make a reasonable profit on sales, as long as it keeps overhead costs in control.
However if we look at the Honda atlas ratios the gross profit margin is very low in 2010 that is
0.58% however is increases in 2011 to 4.2 % but in 2012 there is a downfall to 1.2%.
III. Operating Profit Margin = Operating Profit
Sales
i. Operating Profit Margin for 2012 = 64,844 = 0.45%
14,149,646
ii. Operating Profit Margin for 2011 = 23,589 = 0.16%
14,715,495

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iii. Operating Profit Margin for 2010 = 23,589 = 0.88%
17,055,115
Interpretation:
Operating profit margin gives an estimate of how much Honda generates on each rupee of sales
before interest, taxation and distribution of shares. It determine the pricing strategy and operating
efficiency of Honda. Usually a high or increasing operating margin is expected. In the present
scenario, the margin is low like 0.88 in 2010 0.16 in 2011 and 0.45 in 2012. Higher operations
tend to have higher sales.
IV. Return on Total Assets = Net Income
Total Assets
i. Return on Total Assets for 2012 = 401,833 = 4.0%
9942088

ii. Return on Total Assets for 2011 = 75,010 = 1.1%
6,816,744
iii. Return on Total Assets for 2010 = 264,540 = 3.1%
8305117
Interpretation:
An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to
how efficient management is at using its assets to generate earnings. Calculated by dividing a
company's annual earnings by its total assets, ROA is displayed as a percentage. Percentage
shows company profitable a company's assets are in generating revenue but it is not much
consistent and vary from year to year. And it is also declining as compare to previous years. So
improvement needs in this part.
QUESTIONS?
Q1. Provide a detailed description of your investment strategy, based upon the
goal of maximizing your portfolio value?
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As our goal is maximizing the portfolio value but we can maximize it by investing in the firms
which are safe for investment through our better investment strategy so first of all we must know
the position and situation of companies that we can know through the ratio analysis comparison
of both companies.
1. Liquidity Ratio:
Ratios PSO 2012 2011 2010
Current Ratio 1.14 1.16 1.14
Quick Ratio 0.84 0.72 0.79

Ratios Honda Atlas 2010 2011 2012
Current Ratio 0.94 0.80 0.70
Quick Ratio 0.24 0.26 0.17

Liquidity ratio of PSO include current ratio and quick ration same is the case with the Honda
Atlas but here if we compare the current ratios of PSO with Honda Atlas you will notice that
current ratio of PSO is more than 1 for three years which show that the company has sufficient
assets to fulfill its short term debts, but in case of Honda Atlas the value of the current ratio is
less than 1 and its decreasing year by year which means that the company do not have the
sufficient assets to fulfill its short term obligation.
Now take a look at Quick ratio of PSO and Honda Atlas the quick ratio of PSO is not better but
its improving year by year like 0.72 to 0.84 but still its quite better than the Honda Atlas whos
ratio is decreasing as shown 0.26 then 0.17. So from the above ratios we can conclude that the
PSO condition is better from liquidity point of view and is less risker then Honda Atlas which is
more risker.
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2. Activity Ratio:
Ratio PSO 2012 2011 2010
Inventory Turnover Ratio 11.57 8.60 11.57
Total Asset Turnover 3.45 3.71 4.3
Fixed Asset Turnover 106.3 83.2 83.6

Ratios Honda Atlas 2010 2011 2012
Inventory Turnover 6.3 9.1 4.7
Total Asset turnover 2.05 2.16 1.42
Fixed Asset Turnover 3.68 3.35 2.35

As the activity ratio tells about how efficiently an organization is using its assets either fixed or
current assets. If first of we observe inventory turnover ratio of PSO its good a little down fall in
second year but then it get maintained as shown 11.7, 8.6, 11.5. in case of Honda Atlas this ratio
is better but not above the PSO scenario, we can say in both the cases risk is low.
Now we take a look at the total asset turnover ratio again PSO lead however its value decline
year by year. In case of Honda its value also decreases year by year which show inefficient
utilization of assets. In case of fixed asset turn over Honda is quite improving year by year but
still PSO values are better which show PSO is more efficiently utilizing its assets and more better
production as compared to Honda. So PSO leads here too that PSO is less risker then Honda.


P a g e | 36

3. Debt Ratio:
Ratios of PSO 2012 2011 2010
Debt Ratio 0.85 0.84 0.85
Debt to Equity 6.0 5.2 5.9
Times Interest Earned Ratio 2.17 2.5 2.81

Ratios of Honda Atlas 2010 2011 2012
Debt Ratio 0.70 0.53 0.71
Debt to Equity Ratio 2.40 1.11 2.52
Times Interest Earned (Times) 0.58 1.27 1.79

In case of Debt ratio of PSO and Honda Atlas before we go into detail we must know that debt
ratio it tells that the business is also funded by the creditors but how much of the total investment
is of debt. If we look at the table of the debt ratios of Honda and PSO the values are quite near to
each other, and less than 1 which show that the assets of companies are more than its debt so
both the companies have low risk in this case but the values of Honda show its more safe.
Now if we look at the Debt to equity ratio it show how much debt the company is using as
compared to equity. In case of PSO and Honda Atlas the ratios of Honda Atlas is lower then PSO
that is 2.4, 1.1 2.52 but in case of PSO values are 6.0, 5.2, 5.9 so its values must be lower so in
this case Honda Atlas is less risker then PSO.
If we look at the Time Interest Earned ratio the values lower than 1 is not good but values higher
then 1 are better, in case of PSO the values are good i.e. 2.17, 2.5, 2.81 as compared to the values
of Honda Atlas 0.58, 1.27, 1.79 but still values of Honda Atlas are increasing so we can say that
PSO and Honda Atlas are booth safe, and less risk is involved.
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4. Profitability Ratios:
Ratios of PSO 2012 2011 2010
Net Profit Margin 0.75% 1.52% 1.03%
Gross Profit Margin 2.9% 3.5% 3.3%
Operating Profit Margin 1.4% 2.6% 2.4%
Return on Total assets 2.6.% 5.6% 4.4%

Ratios of Honda Atlas 2010 2011 2012
Net Profit Margin 1.55% 0.51% 2.8%
Gross Profit Margin 0.58% 4.2% 1.2%
Operating Profit Margin 0.88% 0.16% 0.45%
Return on Total Asset 3.1% 1.1% 4.0%

First of all know that Profitability ratio it measure a companys ability to generate earnings
relative to sales, assets and equity. Profitability ratio include net profit margin, gross profit
margin, operating profit margin and return on asset. Now in case PSO and Honda Atlas Net
Profit Margin the values of PSO are fluctuating year by year that is first it increase and then
decrease to 0.75% same case happened with Honda Atlas the value decrease and then increase
but the values of Honda Atlas are better than PSO.
Now in case of Gross Profit Margin the values of PSO are quite stable and good as compared to
the values of the Honda Atlas as shown in the above table. So risk associated with PSO is low as
compared with Honda Atlas.
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The values of Operating Profit Margin of PSO show PSO position is better and is generating
more operating profit then the Honda Atlas because the values of Honda Atlas are lower and it is
generating low operating profit the PSO.
Now if look in the table at the values of the return on total assets the values of both companies
that is PSO and Honda Atlas are better and show that company is low risky. There is a decline in
the value of the PSO in year 2012 however the value of Honda Atlas increases. But both the
companies are safe.
Q2. Explain how you executed your investment strategy?
We will invest 65% in PSO Company and 35% in Honda Atlas Company because the Ratio
analysis show the health of both organizations but Ratio analysis of PSO company show the
stronger position in previous years and the ratio analysis of Honda also show the better position
of company but the PSO progress is rapid and good as compared to Honda Atlas. The ratio
Comparison above is evidenced for our investment strategy.
Q3. Discuss the risk characteristics of your investment strategy?
Investment risk is generally defined as the probability that an actual return on an investment will
be lower than the investor's expectations. Fear of losing some money is probably one reason why
people may choose conservative investments, even for long-term savings. While investment risk
does refer to the general risk of loss, it can be broken down into more specific classifications.
Performance:
This is the risk associated with investment. If you buy a stock or other security, it might gain or
lose value, creating a gain or loss for you. Of course, the aim of investment management is to
minimize this risk through the selection of diversified investments. Through a well-planned
diversification strategy, you can ensure that no particular security's performance will threaten
your overall portfolio performance
Market Risk:
Also known as systematic risk, market risk is the likelihood that the value of a security will move
up and down with its overall market. For example, if the stock market is experiencing a decline,
P a g e | 39

the stock mutual funds in your portfolio may decline as well. Decline occur in both companies
securities like oil prices increase this will also affect the cars usage.
Interest-Rate Risk:
It is the most often associated with fixed-income investments, this is the risk that the price of a
bond or the price of a bond fund will fall with rising interest rates. The relationship between
interest rates and the prices of fixed-rate securities, such as bonds, can expose your portfolio to
risk. As interest rates fall, the prices of fixed-rate securities generally rise. Conversely, the prices
of fixed-rate securities usually fall as interest rates rise. Investment management strategy can
balance this risk by adjusting the term of the fixed-rate securities you hold.
Inflation Risk:
As your investments gain and lose value in their individual markets, the rupees gains and loses
purchasing power. The rate of inflation can decrease the value of your portfolio. Your investment
management strategy must weigh bonds, and long-term investments and risk of inflation against
the risks of individual investments that may have rates of return higher than inflation.











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REFRENCES:
http://www.psopk.com/
http://www.honda.com.pk/index.html
http://www.psopk.com/investors/financial_reports.php
http://www.honda.com.pk/financial/
http://www.slideshare.net/BabasabPatil/investment-analysisandportfoliomanagement
https://us.axa.com/retirement/reducing-risk-in-your-portfolio.html
https://us.axa.com/retirement/reducing-risk-in-your-portfolio.html
https://www.key.com/html/risk-management-planning.html