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Financial Analysis of Hascol

Submitted by: Ahmed Waqas Malik (IZ- 4014)

Inzamam M Abbasi (IZ- 4027)

Muhammad Ibrahim (IZ- 4042)

Submitted to: Dr. Fauzia Mubarik

Date: 25/05/2018
Introduction:

Hascol Petroleum Limited is engaged in the purchase, storage and sale of petroleum

products such as Fuel Oil, High Speed Diesel, Gasoline, Jet A-1, LPG and Lubricants. The

company was incorporated in 2001 under the Companies Ordinance 1984, primarily to take

advantage of the petroleum sector deregulation and undertake a program for owning, leasing

and renting oil storage facilities as well as importing petroleum products for its own account.

In February 2005 Hascol was granted a full marketing license by the Government of

Pakistan and since then, Hascol has been engaged in developing a retail network under

HASCOL brand and by 31st December 2012 we have commissioned two hundred retail

outlets, in the three provinces of Pakistan. This number will rise to 250 by the end of 2013.

Hascol is also developing storage facilities at Machike and Shikarpur. Work is already

completed at Shikarpur, and land has been acquired at Machike and work is in progress. At

Keamari Hascol has leased tankage at Al-Rahim Terminal.

Hascol has in place Hospitality arrangements with Pakistan State Oil Company & Shell

Pakistan for storage and handling of products at Keamari, Shikarpur, Machike and Sahiwal.

Prior to the incorporation of the company, the main personnel have been involved in the

Pakistan oil industry for over thirty years, dealing with imports and marketing of refined

products such as Gasoil, Fuel Oil, Kerosene, Gasoline and Base Oil. Hascol Petroleum

Limited has, independently or through its associated company Hascombe Limited, extensive

links with the domestic and international oil trading companies.

Hascol has concluded arrangements with Fuchs Lubricants of Germany to produce

and market full range of Automotive / Industrial Lubricants & Greases. In the initial stages,

Hascol is getting the lubricants blended under a Toll Blending Agreement and will

subsequently put up its own blending plant in Karachi. Hascol is a major supplier of

Lubricants to the Pakistan Army.


Hascol has started a Bunkering Division and will be able to provide bonded supplies

of High Sulphur Fuel Oil (HSFO) and Marine Gas Oil (MGO) at Karachi and Port Qasim.

Hascol has signed a Technical Services Agreement (TSA) with Emirates National Oil

Company Limited (E.N.O.C) UAE, to start aircraft refuelling services at Karachi and other

main airports in Pakistan. We have applied for land at Karachi Airport and as soon as Civil

Aviation Authority allocates the land we will start aircraft refuelling service.

Hascol has also started to market LPG as an automotive fuel through its retail

network, and for this necessary license has been obtained from OGRA and supply

arrangements have been made with well-known LPG marketing companies in Pakistan.
Analysis of Financial Statement (2011, 2012, 2013)

Balance Sheet:

ASSETS 2013 2012 2011

NON – CURRENT ASSETS

Property, plant and equipment 2,286,425 1,723,990 876,999

Intangible asset 7,054 13,717 -

Long term investments - - -

Long term deposits 27,113 34,989 50,847

Deferred taxation-net 327,508 142,998 286,591

Total non-current assets 2,648,100 1,915,649 1,214,437

CURRENT ASSETS

Stock in trade 3,153,723 617,090 311,262

Trade debts 2,116,118 1,300,814 533,036

Advances 464,647 151,429 72,350

Trade deposits short term 40,584 21,347 20,791

Other receivables 66,786 58,567 28,733

Sales tax receivable - - 60,462

Cash and bank balances 864,748 445,902 109,398

Total current assets 6,706,606 2,595,149 1,136,032

TOTAL ASSETS 9,354,706 4,510,843 2,350,469


SHARE CAPITAL AND RESERVERS 2013 2012 2011

Share capital 181,864 181,864 656,060

Share premium 3,300 3,300 3,300

Unappointed profit 426,162 1,185 218,838

Total equity 1085426 660,485 440,462

Surplus on revaluation of fixed assets - net of tax 358,376 396,201 19,168

NON – CURRENT LIABILITIES

Long-term financing 97,732 2,109,331 -

Long term deposit 90,872 81,423 64,272

Liabilities against assets subject to finance lease 45,693 63,952 129,262

Deferred liability -gratuity 47,054 31,093 11,456

Total noncurrent liabilities 281,351 387,399 204,990

CURRENT LIABILITIES

Trade and other payables 6,404,267 2,221,920 1,093,512

Accrued mark-up accrued 18,001 7,906 13,270

Current maturity of long-term financing 124,237 173,593

Current maturity of liabilities against assets 49,309 91,573 116,696

Sales tax payable 4,028 18,448

Taxation net 349,995 1,199,916 148,982

Short term running finance 679,680 353,402 313,391

Total current liability 7,629,517 3,066,758 1,685,851

TOTAL LIABILITES 7,910,868 3,454,157 1,890,841

Total equity and liability 9,354,706 4,510,843 2,350,469


Profit and Loss Account:

2013 2012 2011

Sales
57,469,448 2,977,529 19,583,772
Sales tax
(7,649,848) (3,845,221) (2,513,430)
Net sale
49,819,601 2,593,075 17,070,342
Other revenue
46,988 62,269 23,361
Net revenue
49,866,589 25,992,344 17,093,703
Cost of sales
(48,506,431) (24,996,331) (1,639,426)
Gross profit
1,360,158 996,013 699,277
Distribution cost
(591,652) (4,488,777) (331,418)
Administrative expenses
(229,242) (141,863) (134,670)

(820,894) (630,640) (466,088)


Other operating income
39,735 36,327 23,613
Operating profit and loss of the year
578,999 401,700 256,802
Finance cost
(110,476) (101,410) (201,696)
Investment of long term
- - (12,029)
(Loss)/ profit before taxation
425,046 291,944 43,077
Taxation
(33,495) (73,661) (38,529)
(Loss)/ profit of the year
391,551 218,283 81,606
(Loss)/ earnings per share –base and diluted 5.97 3.33 1.94
Ratio Analysis

2013 2012 2011

LEVERAGE RATIOS

Long Term Debt Ratio 6.05 3.67 2.96

Debt Equity Ratio 7.29 5.23 4.29

Total Debt Ratio 0.8456 0.7657 0.8044

Time Interest Earned 3.85 2.88 0.21

Cash Coverage Ratio 4.72 3.57 0.46

LIQUIDITY RATIOS

Current Ratio 0.8790 0.8462 0.6739

Quick Ratio 0.4656 0.6450 0.4892

Cash Ratio 11.09% 14.54% 6.94%

Net Working Capital -922911 -471609 -549819

NWC turnover -53.98 -54.98 -31.05

EFFICIENCY RATIOS

Fixed assets turnover 21.07 15.54 16.13

Total Asset Turnover 5.32 5.75 7.26

Inventory Turnover 15.38 40.51 52.67

Days’ Sales in Inventories 23.73 days 9.01 days 6.93 day

Receivable turnover 27.16 22.89 36.74

Days sales in receivable 13.44days 15.94days 9.93days

PROFITABILIT Y RATIOS

Profit Margin 0.78% 0.84% 0.47%

Return on Assets 4.18% 4.84% 3.47%


Earnings per Share 5.97 3.33 1.93

Return on equity 0.36072 0.33049 0.18527

Equity multiplier 8.6182 6.7352 5.3364

Leverage Ratios

LONG-TERM DEBT RATIO = TOTAL ASSETS - TOTAL EQUITY/ LONG-TERM DEBT + TOTAL EQUITY

2013 2012 2011

6.05 3.67 2.96

Interpretation:

 In 2011, Long Term Debt Ratio is low which means that company is not highly

leveraged because debt is 2.96 which shows that 2.96 of every rupee from capital is in

the form of long term debt.

 In 2012, Long Term Debt Ratio is the higher than the base year 2011, which shows

that the large amount of capital is in form of long term debt as compared to year 2011.

 In 2013, Long Term Debt Ratio has increased and it is still higher than the base year

2011 which represents that the increase exists in amount of capital in the form of long

term debt as compared to the year 2011.

Conclusion:

The Long Term Debt Ratio has increased, when we compare it with the past 3 year’s

performance. Therefore, in order to decrease Long Term Debt Ratio, company should

decrease its debt from its equity. In this way company’s leverage can be in a better position.
Debt to Equity Ratio:

DEBT / EQUITY RATIO=TOTAL DEBT / TOTAL EQUITY

2013 2012 2011

7.29 5.23 4.29

Interpretation:

 In 2011, the Debt Equity Ratio is higher which represents that debt is 4.29 higher than

the equity which shows the higher risk for company in bad times.

 In 2012, the Debt Equity Ratio for the company is higher as compared to the base

year 2011 which represents that the debt is much higher than the equity and therefore,

the risk is also the higher.

 In 2013, the Debt equity Ratio for the company is higher as compared to the base year

2011 which represents the debt 7.29 times higher than its equity & has much

increased than the equity and the risk has also increased for the company.

Conclusion:

The Debt Equity Ratio is higher as compared to the three years’ analysis of the

company. Therefore, in order to decrease the Debt Equity Ratio, the company should

decrease its long term debt and increase its equity. As a matter of fact, equity can be

increased by increasing revenues, decreasing expenses, selling and increasing outstanding

number of shares etc.


Total Debt Ratio:

TOTAL DEBT RATIO=TOTAL ASSETS –TOTAL EQUITY / TOTAL ASSETS

2013 2012 2011

0.8456 0.7657 0.8044

Interpretation:

 In 2011, the Total Debt Ratio is 0.8044 which shows that 0.8044 cents of every rupee

from capital is in the form of total debt (short term debt and long term debt). This

represents that the company is highly leveraged and fluctuations in interest rate will

cause higher risk for the company as the equity is much lower than the total debt.

 In 2012, the Total Debt Ratio had decreased a little as compared to the base year 2011

which shows that the debt and risk are decreased a little.

 In 2013, the Total Debt Ratio for the company is increased as compared to the base

year 2011, which represents that in 2013 the debt, and risk were high and equity was

lower than the year 2011.

Conclusion:

The Total Debt Ratio is higher but fluctuations are seen in the three years’ analysis of

the company. Therefore, the company is considered to be as highly leveraged and in order to

increase the total debt ratio, company should decrease its debt and Increase its equity which

can be increased by generating revenues, decreasing expenses, selling and increasing

outstanding number of shares etc.


Time Interest Earned:

TIME INTREST EARN RATIO=EBIT/INTEREST

2013 2012 2011

3.85 2.88 0.21

Interpretation:

 In 2011, the Time Interest Earned also knows as Margin of Safety is 0.21 times which

shows that the earnings of the company are just 21% than its interest payable. This

was the very dangerous financial situation for the company.

 In 2012, the Time Interest Earned has increase which shows that the earnings of the

company has increased as compared to the base year 2011 and the company is still

able to meet its interest payable with its earnings by 2.88 times.

 In 2013, the Time Interest Earned has increased as compared to the base year 2011

which shows that the earnings of the company have also increased.

Conclusion:

The Time Interest Earned has fluctuation which shows that during the three years, the

company’s ability to pay interest with the passage of time, the company managed to increase

its Time Interest Earned and became able to pay its interest payable but the company still

needs to increase its interest payable which can be increased by increasing the earnings of the

company.
Cash Coverage Ratio:

CASH COVERAGE RATIO=EBIT+DEPRECIATON / INTEREST

2013 2012 2011

4.72 3.57 0.46

Interpretation:

 In 2011, the Cash Coverage Ratio shows that the company has the highest cash from

the operations to pay its interest payments with cash is just 49%. 49% is not sufficient

to pay because no amount will be left for other operations. Still company is not able to

pay its interest payments.

 In 2012, the Cash Coverage ratio is increased as compared to the base year 2011

which represents that the company’s ability to pay its interest payments with cash has

increased.

 In 2013, the Cash Coverage Ratio has increased as compared to the base year 2011

which shows that the company’s ability to pay its interest payments with its cash has

also increased.

Conclusion:

The Cash Coverage Ratio of the company through the overall analysis of three years

shows the company’s ability to pay its interest was low in the beginning but with the passage

of time, it started increasing. Improvements are seen in the last two year. Therefore, in order

to increase the Cash Coverage Ratio, the company must increase its earnings and should

make depreciation conservative because depreciation is the amount which never goes out of

the company and its helps the company to decrease its payables.
Liquidity Ratio

Current Ratio:

CURRENT RATIO= CURRENT ASSETS / CURRENT LIABILITIES

2013 2012 2011

0.8790 0.8462 0.6739

Interpretation:

 In 2011, the Current Ratio of the company is 0.6793 which shows the company’s

ability to meet its short term liabilities is 0.6793 times. This value is not so high to be

considered as ideal as the value is too minimal.

 In 2012, the Current Ratio of the company has increased as compared to the base year

2011 due to which company’s ability to pay its current liabilities has increased to a

great extent.

 In 2013, the Current Ratio of the company was high as compared to the base year

 2011 which comprises of that the company’s ability to pay its current liabilities was

increased.

Conclusion:

The Current Ratio has minor fluctuations over the time of three years which

represents that the company is able to pay its current liabilities with the help of its current

assets but this extent is not considered as ideal because the company’s liquidity is too

minimal. Therefore, the company must increase its current assets by increasing its receivables

(increasing sale) & selling and increasing outstanding number of shares.


Quick Ratio:

QUICK RATIO = CURRENT ASSETS – INVENTORY / CURRENT LIABILITIES

2013 2012 2011

0.4656 0.6450 0.4892

Interpretation:

 In 2011, the Quick Ratio of the company shows the company’s ability to pay (current

assets apart from inventory) is 0.4892 times than its current liabilities. This value is

not so high to be considered as ideal as the value is too minimal.

 In 2012, the Quick Ratio of the company is increased to a small extent as compared to

the base year 2011 which shows that the company’s ability to pay its current liabilities

has also increased.

 In 2013, the Quick Ratio of the company is decreased as compared to the base year

2011 which shows that the company’s ability to pay its current liabilities has

decreased.

Conclusion:

The Quick Ratio of the company has slight fluctuations which show that over the

period of three years’ the company’s ability to pay has not increased to a high extent apart

from its inventories. Therefore, the company possesses low liquidity. However, the company

can increase its liquidity by increasing sales to increase its accounts receivables and by

selling and increasing outstanding number of shares.


Cash Ratio:

CASH RATIO = CASH / CURRENT LIABILITIES

2013 2012 2011

11.09% 14.54% 6.94%

Interpretation:

 In 2011, the Cash Ratio of the company is 6.94% which represent the company’s most

liquid assets to pay its current liabilities. The Cash Ratio of the company is not

considered as ideal as the value is too minimal.

 In 2012, the Cash Ratio of the company has increased as compared to the base year

2011 which shows that the company’s ability to pay its current liabilities has also

increased.

 In 2013, the Cash Ratio of the company has increased as compared to the base year

2011 which shows that the company’s ability to pay its current liabilities has also

increased.

Conclusion:

The Cash Ratio of the company has fluctuations which represents that during the three

years’ analysis the company’s ability to pay for its current liabilities from its most liquid

assets has increased and the company is not ideally liquid to pay for its current liabilities.

Therefore, company should increase its cash by increasing sales and by selling and increasing

outstanding number of shares.


Net Working Capital Ratio:

NWC = CURRENT ASSETS – CURRENT LIABILITIES

2013 2012 2011

-922911 -471609 -549819

Interpretation:

 In 2011, the Net Working Capital of the company is negative which represents that

the company’s potential reservoir of cash is too low that the value has become

negative after meeting the company’s current liabilities.

 In 2012, the Net Working Capital of the company has decreased as compared to the

base year 2011 and negativity has decreased to a large extent.

 In 2013, the Net Working Capital of the company remains negative as compared to

the base year 2011 and the negativity has increased to a great extent.

Conclusion:

The Net Working Capital of the company has fluctuation over the period of three

years’ analysis but during this time the Net Working Capital of the company has remained

negative. Therefore, it is highly recommended that the company should increase its Net

Working Capital by increasing its current assets which can be increased by increase in sales,

accounts receivables & selling and increasing outstanding number of shares.


Net Working Capital Turnover:

NWC TURNOVER = SALES / NWC

2013 2012 2011

-53.98 -54.98 -31.05

Interpretation:

 In 2011, the Net Working Capital to Assets is -31.05 which represents the company’s

un potential reservoir of cash with proportion to the asset. Therefore, company’s cash

reservoir is negative in response to its assets.

 In 2012, the Net Working Capital to Assets has decreased to a great extent as

compared to the base year 2011 and it has become negative which shows that the

company’s cash reservoir too negative that is not even backed by the company’s total

assets.

 In 2013, the Net Working Capital to Assets has decreased to a great extent in

comparison with the base year 2011 and it remained negative. Therefore, company’s

cash reservoir is not able to be backed by company’s total assets.

Conclusion:

The Net Working Capital to Assets of the company has fluctuations during the three

years’ analysis which was negative at the start and then remained negative for the following

years. However, it is highly recommended to increase the company’s Current Assets by

increasing its accounts receivables & selling and increasing outstanding number of shares to

make the company’s cash reservoir positive so that the Net Working Capital can also be

increased.
Efficiency Ratio

Total Assets Turnover Ratio:

TOTAL ASSETS TURNOVER = SALES / TOTAL ASSETS

2013 2012 2011

5.32 5.75 7.26

Interpretation:

 In 2011, the Total Asset Turnover is 7.26 which represent that how hard the

company’s assets are being put to use. Therefore, it’s obvious that each rupee of asset

has produced 7.26 rupee of sale and the company is working close to its capacity.

 In 2012, the Total Asset Turnover has decreased as compared to the base year 2011

which shows that the company has worked wider to its capacity.

 In 2013, the Total Asset Turnover has decreased as compared to the base year 2011

which shows that the company has more decreased its assets for sales.

Conclusion:

The Total Asset Turnover of the company has been analysed for three years which

shows that the company’s Total Asset Turnover was high in the beginning but it decreased

during its following years. In order to further decrease of Total Asset Turnover, the company

should increase its sales.


Fixed Asset Turnover Ratio:

FIXED ASSETS TURNOVER = SALES / TOTAL FIXED ASSETS

2013 2012 2011

21.07 15.54 16.13

Interpretation:

 In 2011, the Fixed Asset Turnover is 16.13 which represent that how hard the

company’s fixed assets are being put to use. Therefore, it’s obvious that each rupee of

fixed asset has produced 16.13 rupee of sale and the company is working close to its

capacity.

 In 2012, the Fixed Asset Turnover has decreased as compared to the base year 2011

which shows that the company has worked wider to its capacity.

 In 2013, the Total Asset Turnover has increased as compared to the base year 2011

which shows that the company has utilized more efficiently its fixed assets for sales.

Conclusion:

The Fixed Asset Turnover of the company has been analysed for three years which

shows that the company’s Fixed Asset Turnover was high in the beginning but it fluctuated

during its following years. In order to further decrease of Fixed Asset Turnover, the company

should increase its sales.


Inventory Turnover Ratio:

INVENTORY TURNOVER = COST OF GOODS SOLD / INVENTORY

2013 2012 2011

15.38 40.51 52.67

Interpretation:

 In 2011, the Inventory Turnover of the company is 52.67 which represent the rate at

which the company is turning over its inventories.

 In 2012, the Inventory Turnover of the company has decreased as compared to the

base year 2011 which shows they company’s ability for turning over its inventory has

decreased.

 In 2013, the Inventory Turnover of the company has decreased to a large extent as

compared to the base year 2011 which shows that the company’s ability for turning

over its inventory has decreased to a large extent.

Conclusion:

The Inventory Turnover of the company has minor fluctuations during the analysis of

three years’ which shows that the inventory turnover has decreased which is not a good

remark. But to be a big player in the market, Hascol has increased its inventory to compete

maximum in the market. It is also recommended, company should increase its sales volume

which will increase its cost of goods sold which will lead to the increase in its Inventory

Turnover.
Day’s Sales Inventory:

DAY’S SALES IN INVENTORY = 365 / INVENTORY TURNOVER

2013 2011 2011

23.73 days 9.01 days 6.93 day

Interpretation:

 In 2011, the Days’ Sales in Inventories is 6.93 which represents that on average the

company has not sufficient inventory to maintain sales for 6.93 days.

 In 2012, the Days’ Sales in Inventories was increased as compared to the base year

2011 which represents that the company had more inventories to maintain its sales.

 In 2013, the Days’ Sales in Inventories has increased as compared to the base year

2011 which shows that the inventory has increased but still has sufficient to maintain

its sales.

Conclusion:

The Days Sales in Inventories has been analysed for three years’ which shows that

throughout the analysed period the company had sufficient inventories to meet its daily sales.

Hascol has increased its inventory due to frequent strikes of Petroleum Transport

Association. In Future if there is any further strikes, Hascol will be able to meet its current

sale & no shortage will be faced by them during these strikes.


Receivable Turnover Ratio:

RECEIVABLE TURNOVER = SALES / A/C RECEIVABLE

2013 2012 2011

27.16 22.89 36.74

Interpretation:

 In 2011, the Receivable Turnover of the company is 36.74 which represent company

received 36.74 times its outstanding & re loaned it.

 In 2012, the Receivable Turnover of the company has decreased as compared to the

base year 2011 which shows they company’s ability to collect its outstanding has

decreased.

 In 2013, the Receivable Turnover of the company has decreased to a large extent as

compared to the base year 2011 which shows that the company’s ability to collect its

outstanding has decreased to a large extent.

Conclusion:

The Receivable Turnover of the company has minor fluctuations during the analysis

of three years’ which shows that the receivable turnover has decreased which is not a good

remark. But to be a great competitor in the market, Hascol has changed its credit policy. It is

also recommended, company should increase its Cash sales which will decrease the risk of

bad debts which will lead to a better collection policy.


Day’s Sales in Inventories:

DAY’S SALES IN RECEIVALBES = 365 / RECEIABLE TURNOVER

2013 2011 2011

13.44 days 15.94 days 9.93 day

Interpretation:

 In 2011, the Days’ Sales in Receivables is 9.93 which represents that on average the

company collects it’s outstanding in 9.93 days.

 In 2012, the Days’ Sales in Receivables was increased as compared to the base year

2011 which represents that the company giving more leverage to its creditors.

 In 2013, the Days’ Sales in Receivables has increased as compared to the base year

2011 which shows that the company has changed its credit policy & giving its

customers a more leverage in payment.

Conclusion:

The Days Sales in Receivables has been analysed for three years’ which shows that

throughout the analysed period the company had allowed its debtors to pay their debts more

easily. It will help him to create a better market, but it should collect its payment with a

period of less than 15 days.


Profitability Ratio

Net Profit Margin Ratio:

NET PROFIT MARGIN = NET INCOME / SALES

2013 2012 2011

0.78% 0.84% 0.47%

Interpretation:

 In 2011, the Net Profit Margin of the company is 0.47 % which represents that the

company’s revenue (inclusive of debt) throughout the year is 0.47 % which

determines that the company earns revenue and the company incurred less profit

during the year.

 In 2012, the Net Profit Margin of the company increased as compared to the base year

2011 which shows that the company’s revenue (inclusive of debt) increased.

 In 2013, the Net Profit Margin of the company has increased as compared to the base

year 2011 which shows that the company’s revenue (inclusive of debt) has also

increased.

Conclusion:

The Net Profit Margin of the Company has been analysed for three years’ which

shows fluctuations. Therefore, company should increase its Net Income by becoming more

cost efficient & selling and increasing outstanding number of shares.


Return on Asset Ratio:

ROA = NET INCOME / TOTAL ASSETS

2013 2012 2011

4.18% 4.84% 3.47%

Interpretation:

 In 2011, the Return on Assets of the company is 3.47% which represents the return on

company’s assets is 3.47. This return in considered as ideal.

 In 2012, the Return on Assets of the company has increased compared to the base

year 2011 which shows that the assets are more utilized in this year.

 In 2013, the Return on Assets of the company has increased to be the positive as

compared to the base year 2011 which shows that the assets are better utilized in this

year.

Conclusion:

The Return on Assets of the company has been analysed for three years and it has

been found that the company earned return on its assets but the return was minimal to be

considered as ideal. However, the company’s assets are fully utilized. Therefore, company

should increase its Net Income by becoming more cost efficient & selling and increasing

outstanding number of shares.


Return on Equity:

ROE = NET INCOME / TOTAL EQUITY

2013 2012 2011

0.36072 0.33049 0.18527

Interpretation:

 In 2011, the Return on Equity of the company is 0.18527 which represents that the

return on shareholder’s equity throughout the year.

 In 2012, the Return on Equity of the company has a slight increase which shows that

the return on shareholder’s equity has also slightly increased as compared to the base

year 2011.

 In 2013, the Return on Equity of the company has a slight increase which shows that

the return on shareholder’s equity has also slightly increased as compared to the base

year 2011.

Conclusion:

The Return on Equity of the company has been analysed for three years and it has

been concluded that the company equity has increased during the period of time. Therefore it

is highly recommended that the company should increase its Return on Equity by increasing

its Net Income which can be increased by being more cost efficient & selling and increasing

outstanding number of shares.


Equity Multiplier:

EQUITY MULTIPLIER = TOTAL ASSETS / TOTAL EQUITY

2013 2012 2011

8.6182 6.8296 5.3364

Interpretation:

 In 2011, the Assets of the company are higher than its equity 5.3364 times which

represents the company has tried to perform well as much it can do.

 In 2012, the equity multiplier is in better position compared to base year 2011, this

shows company’s strategy of utilizing its assets to maximize shareholder’s wealth.

 In 2013, the Equity Multiplier has increased to almost 60% compared to its base year

2011.

Conclusion:

The Equity Multiplier is a very important ratio to analyse the companies financing

mix. Through analysis of HPL financials, we analysed that the company is much depending

on financing their assets through debt. It can also be concluded that The Hascol Petroleum

has become more leveraged company. Therefore it is highly recommended that the company

should get maximum amount of Cash by increasing its Net Income which can be increased by

being more cost efficient & selling and increasing outstanding number of shares.
Sources:

www.reuters.com

www.linkedin.com

www.slideshare.net

www.hascol.com