Comment Given To Improve Project

Virtual University of Pakistan
Evaluation Sheet for Project Spring 2011

FIN619: Final Project (Finance) Credit Hours:3 Evaluation Criteria Proposal Students Name: ___Ali Dayan___________ Students ID: __mc070401068____________ Final Project Written Work Status Presentation & Viva Voce Final Result Result Valid Needs Improvements Needs Improvement s
NEEDS IMPROVEMENT
Dear Student: Some deficiencies are highlighted in your Final Project. Improve the highlighted areas, look at the instructions and guidelines and resubmit your Final Project for evaluation. You have to make the analysis of last three years i-e 2008-2009-2010, so make the analysis of year 2010 as well. Download all the material from VULMS of your course under the tab of DOWNLOADS after clicking COURSE WEBSITE at VULMS. Read all the material carefully and then resubmit your Final Project. Read the announcement regarding the submission of improved Internship Report.
WARNING: Consider it the last chance for your

improvement. Otherwise you will be declared FAIL in your course. For any further guidance about your final project, ask your queries via MDB or email at fin619@vu.edu.pk Or Contact on the following phone numbers 042-111-880-880 Ext: 394 042-36373048 Ext: 394 Final Project Activity Ratio Analysis of Pakistan State Oil, Shell Pakistan and Attock Petroleum Ltd for FY 2007, 2008 and 2009
A REPORT SUBMITTED TO THE DEPARTMENT OF MANAGEMENT SCIENCES VIRTUAL UNIVERSITY OF PAKISTAN IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTERS IN BUSINESS ADMINISTRATION AT VIRTUAL UNIVERSITY OF PAKISTAN Submitted By
MC070401068 Ali Dayyan Date of submission: 15-04-2011
Department of Management Sciences, Virtual University of Pakistan
LETTER OF UNDERTAKING
DEDICATION
I dedicate this work to my parents and teachers, whose untiring support and encouragement helped me to reach this milestone in my academic life. Also to my friends who helped in academics during my period of illness. And last but not certainly least I am most thankful to Almighty ALLAH who has been very kind and generous to me, for all the love and happiness HE has bestowed upon me.
ACKNOWLEDGEMENT
Well there are many people who I owe acknowledgement. But I feel indebt to the management of Virtual University of Pakistan campus located in my city. Had they not supported the students during baffling energy crisis, getting online degree in business administration would have been a far cry. I must also acknowledge the efforts of Mr. Mian Muhammad Maqbool who guided me and persuaded to continue professional study along with my job.
EXECUTIVE SUMMARY
Energy sector is very dynamic. It has so many dimensions, from political stability of oil producing countries to international trade conditions. Nevertheless, oil runs economies of the countries the world over. Pakistani economy is no exception. I have chosen to compare and analyze efficiency of major oil marketing companies in Pakistan. For this purpose I have chosen leading oil marketing companies in Pakistan. Before proceeding further, I must narrate the reason that why this efficiency measurement through ratio analysis is so important. Well, all three oil marketing companies are engaged in same business, and there is no product differentiation. It means that one oil company can of perform better from other merely because its product is superior than competing companys product. So, it is organizational efficacy in managing inventories and other factors which makes that company more successful than other. Furthermore, Pakistan State Oil national oil supplier to the country. It is main supplier to all large state enterprises like WAPDA, Pakistan Railway, PIA and IPPs. This further makes this comparison interesting. The tree companies whose activity ratio analysis has been conducted in this report are Pakistan State Oil, Shell Pakistan, and Attock Refinery Ltd. I have obtained all financial information from the audited annual financial reports of these companies as published at there respected websites. Web links to these financial reports has been given in report. I have also mentioned the proper note to account as reference in my calculation of ratios so that any one who wishes to verify the figures may consult notes to accounts for further clearance. After calculating the ratios I found that almost all companies has there short comings. Pakistan State Oil, the largest oil marketing company in Pakistan, faced severe difficulties in collecting receivables from large public sector enterprises. Furthermore, inventory management of Shell Pakistan needs to pay attention. Where as Attock petroleum, has proved it self be relatively better performing, partly because of better inventory management but also tight credit policies as well. Further details are discussed at length at Conclusions/ Recommendations portion of the report.
TABLE OF CONTENT
Page No.
Introduction of the Project (Table of contents) should start from page no.1; follow the Formatting guidelines given in the lesson # 5 of this course.
Title Letter of undertaking Dedication Acknowledgement Executive Summary 1 2 3 4 5
Chapter no. 1
1.1 1.2 1.3 1.4 1.5
INTRODUCTION AND BACKGROUND Introduction of project Background Financial period under consideration Objectives Significance
Page No.
8 9-12 13 14 15
Chapter no. 2
2.1 2.2 2.3 2.4
DATA PROCESSING AND CALCULATIONS Project sections Data source Tools and method of analysis Ratios calculation, Graphical representation of outcome 16 17 18-19 20-106
and trend analysis
Chapter No. 3
ANALYSIS AND RECOMMENDATIONS
3.1
Conclusion & Recommendations
106-107
Chapter No. 4
INTRODUCTION OF STUDENT
108
Chapter No. 5
APPENDIX
111
Chapter No. 6
BIBLIOGRAPHY
110
Chapter no. 1
INTRODUCTION AND BACKGROUND
1.1
Introduction of Project:
Financial world is ever dynamic and constantly stimulated by real world
phenomenons. Business and macro economic conditions of countries are main factors responsible for different trends in financial management. In view of above, it is absolutely imperative for business school graduates to have apt knowledge and experience regarding different techniques being utilized in industry for making comparison between two business entities engaged in same industry. What makes this comparison so important? If we simple compare profits of two companies, would not it be suffice? Well answer is not that simple. Because Items contained in financial statement have their own importance. Each items represents significant financial importance. Therefore every item must be carefully analyzed and compared with other entity. The project, I have proposed to make activity ratio analysis of three leading entities of oil refining sector in Pakistan. i.e. Pakistan State Oil, Shell Pakistan and Attock Refinery Ltd. All these oil refining entities have huge customer base. Shell Pakistan and Pakistan State Oil also distribute oil directly to its filling stations throughout country. Where as Attock Refinery is sell its refined oil through other distribution companies. Also, Government of Pakistan is principal share holder in Pakistan State Oil and has large share in Attock Refinery Ltd. In current project, the basic aim is to analyze all three business entities from operational point of view. For this matter a very detailed activity ratios analysis is going to be carried out so that operational efficacy of these companies may be evaluated.
1.2
Background:
Every year, worlds energy crisis increases by many folds. Since worlds
reserves of hydrocarbon based energy resources are getting scarce, there arises a need for better management of these energy resources. OPEC, the international body comprising of major oil producing nations of world, is responsible for formulating policies vis a vis extracting and refining oil. Pakistan has a developing economy, whose energy requirements are increasing every year. It is estimated that Pakistans estimated crude oil production from its own resources is 60,000 barrels of oil per day. This serves for only 1/6 of countrys requirement. Rest is imported from Saudi Arabia, Kuwait, and Iran. Since, this oil is in crude form; therefore it is refined in Pakistan, and then distributed through oil distribution companies. Three, major Oil distribution companies in Pakistan are, Shell Pakistan, Pakistan State Oil, and Attock Refinery Ltd. Before, going into the detail of project, it is imperative that history and functional capacity of these companies may be understood. Sell Pakistan in 2nd largest oil marketing company in Pakistan, having 30% market share. Shell oil, started its business as a small oil distribution store, some 200 years ago in London. Since then it has expanded many folds. Now, its a global group of energy and petrochemicals companies with around 93,000 employees in more than 90 countries and territories. Shell believes that their innovative approach ensures that they are ready to help tackle the challenges of the new energy future. Currently Shell in Pakistan is headed by Mr. Zaiviji Ismail bin Abdullah, Chairman and Managing Director of Shell Pakistan Limited (SPL) and Chairman of Shell Companies in Pakistan. Shell Pakistan is divided into 8 functional areas i.e. Retail, Lubricants, Aviation, Operations, Finance, Corporate, Human Resource and Commercial Fuels. It has played a leading role in abridging the growing energy demand gap in Pakistan. Sell Pakistan, sells two brands of oil in Pakistan, first is Shell unleaded petrol and other is Shell Diesel. Shell Pakistan produced 24, 81,547 tons of refined oil in 2009, which generated sales revenue of Rs. 77,110 (in million).
Pakistan state oil is largest oil marketing company in Pakistan. PSO came into being in the mid-1970s when the Government of Pakistan amalgamated three oil marketing companies: Esso Eastern, Pakistan National Oil (PNO) and Dawood Petroleum as part of its nationalization plan. Pakistan State Oil current holds share of 59% of white oil market in Pakistan. Government of Pakistan holds 54% shares in Pakistan State Oil. Pakistan State Oils major products include mogas, high speed diesel (HSD), fuel oil, jet fuel, and kerosene, liquid petroleum gas (LPG), compressed natural gas (CNG) and petrochemicals. Pakistan State Oil produced 13.2 million tons of refined oil in 2009, which generated sales revenue of Rs. 7, 19,282 (in million). 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. Pakistan State Oil, the largest oil marketing company in the country, is currently engaged in storage, distribution and marketing of various POL products. The companys current market share of 82.3% in the black oil market and 59.4% share in the white oil market, alone speak volumes about its success. Attock Refinery Limited (ARL) was incorporated as a Private Limited Company in November, 1978 to take over the business of the Attock Oil Company Limited (AOC) relating to refining of crude oil and supplying of refined petroleum products. It was subsequently converted into a Public Limited Company in June, 1979 and is listed on the three Stock Exchanges of the country. Attock Refinery Limited (ARL) is the pioneer in crude oil refining in the country with its operations dating back to the early nineteen hundreds. Backed by a rich experience of more than 80 years of successful operations. ARLs capacity stands at 42,000 barrels of oil per day during 2009 and its revenue for same financial year was Rs. 76,546 (in million). Original paid-up capital of the Company was Rs 80 million which was subscribed by the holding company i.e. AOC, Government of Pakistan, investment
companies and general public. The present Paid-up capital of the Company is Rs. 852.93 million. ARL is the pioneer of crude oil refining in the country with its operations dating back to 1922. Backed by a rich experience of more than 85 years of successful operations, ARLs plants have been gradually upgraded/replaced with state-of-the-art hardware to remain competitive and meet new challenges and requirements. It all began in February 1922, when two small stills of 2,500 barrel per day (bpd) came on stream at Morgah following the first discovery of oil at Khaur where drilling started on January 22, 1915 and at very shallow depth of 223 feet 5,000 barrels of oil flowed. After discovery of oil in Dhulian in 1937, the Refinery was expanded in late thirties and early fourties. A 5,500 bpd Lummus Two-Stage-Distillation Unit, a Dubbs Thermal Cracker, Lubricating Oil Refinery and Wax Purification facility and the Edeleanu Solvent Extraction unit for smoke-point correction of Kerosene were added. There were subsequent discoveries of oil at Meyal and Toot (1968). Reservoir studies during the period 1970-78 further indicated high potential for crude oil production of around 20,000 bpd. In 1981, the capacity of Refinery was increased by the addition of two distillation units of 20,000 and 5,000 bpd capacity, respectively. Due to their vintage, the old units for lube/wax production, as well as Edelman, were closed down in 1986. In 1999, ARL commenced JP-1 pipeline dispatches, and in 2000, a Captive Power Plant with installed capacity of 7.5 Megawatt was commissioned. Another expansion and up gradation project was completed in 1999 with the installation of a Heavy Crude Unit of 10,000 bpd and a Catalytic Reformer of 5,000 bpd. ARLs current nameplate capacity stands at 42,000 bpd and it possesses the capability to process lightest to heaviest (10-65 API) crudes. Activity analysis of Shell Pakistan, Pakistan State Oil and Attock Refinery Ltd will help in gaining vital practical experience which is of utmost importance for any business graduate, in order to acquire practical knowledge. The basic aim behind initiating this project is that petroleum industry is often under stated in financial circles, when it comes in terms of their performance. Economists, finance managers and business executives treat each and every oil extraction and refining company as same. This monolithic approach towards this sector easily makes it unattended. Furthermore, since the basic operational
differentiation is minimal, the case study in this project makes it interesting as one has to investigate that why one oil refinery is making more profit from the other. It is because of above mention peculiarity that has drawn my attention towards it. Activity analysis will not only help me understand the operational efficiency of these companies but will also help in acquiring practical knowledge regarding real world financial analysis. I will cover the financial years, starting from 2007 to 2009. For this purpose I have obtained audited annual financial statements of all three companies. I have obtained this data from the companys websites. Web links of these financial reports have been given in the bibliography portion of project proposal. So far I have gathered all necessary data require conducting activity analysis of the all three companies. I have further studied the notes to the accounts of respective companies vis a vis their financial statements. And have observed utmost care that a uniform policy regarding preparation of financial statements is observed. Furthermore, I have also read the auditors report to asses the level of care being done to make accounting record as clear and true as possible.
1.3
Financial Period under Consideration

In oil sector, a financial year comprises of 12 months, which starts in
January and ends in December. Furthermore the financial period is divided into four smaller periods also known as financial quarters. I have decided to conduct activity ratio analysis of Pakistan State Oil, Shell Pakistan and Attock Refinery Ltd, for three consecutive years starting from 2007 to 2009. By analyzing the activity ratios of these oil marketing companies for three consecutive years will help me in understanding the trend prevailing in industry during this period.
Key Financial figures of PSO, Shell Pakistan and AR Ltd.

For the financial years, 2007, 2008, 2009. S. No. 1 2 3 Company Financial Year 2007 2008 2009 2007 2008 2009 2007 2008 2009 Gross profit
Rupees ( 000)
Operating profit
Rupees ( 000)
Earning per share

Rupees
Pakistan State Oil Shell Pakistan Attock Refinery Ltd
12,259,430 30,023,626 3,010,111 6,380,502 15,150,218 12,902,182 8,66,237 4,007,932 1,918,404
7,949,786 22,450,992 5,576,658 1,134,581 8,481,359 4,886,625 9,60,883 2,887,223 1,072,629
27.34 81.94 (39.05) 12.90 93.76 37.42 10.54 66.83 16.01
1.4
Objectives:
The core objective for conducting activity analysis of Shell Pakistan, Pakistan State Oil and Attock Refinery Ltd is to asses the operational efficacy of these companies furthermore it will help me gaining vital practical experience which is of utmost importance for any business graduate, in order to acquire practical knowledge. The basic aim behind initiating this project is that petroleum industry is often under stated in financial circles, when it comes in terms of their performance. Economists, finance managers and business executives treat each and every oil extraction and refining company as same. This monolithic approach towards this sector easily makes it unattended. Furthermore, since the basic operational differentiation is minimal, the case study in this project makes it interesting as one has to investigate that why one oil refinery is making more profit than the other. It if further stated that current project will cover three consecutive financial years starting from 2007 to 2009. Last financial year i.e. 2010 is left for analytical process because final consolidated financial reports are not available for all three companies. Furthermore time duration for completion of project will be approximately 5 weeks. Since necessary data has already been gathered and project is at the verge of completion now.
While conducting activity ratio analysis it is observed that both Shell Pakistan and Pakistan State Oil enjoy a operational scale as both not only engage in business of refining oil but also in its distribution and marketing by their own brand names. This factor gives them edge over Attock Refinery Ltd, which is basically engaged in refinery industry. These factors and other issues will be analyzed thoroughly in SWAT analysis of the companies. You was guided to include the objectives as your project objectives which were given in the format of Activity ratio analysis: i-e This Project will highlight: 1 Which of the selected companies is effectively managing the two specific asset groups-receivables and inventories-and its total assets in general. 2 The reason(s) that why this company is able to manage its assets effectively. 3 The reason(s) that why this company is NOT able to manage its assets effetively.
Project proposal
1.4
Significance of project:
Outcome of any project is crucial for its logical development. Without clear
outcome no project can meet its objectives. In view of this, I have kept each and every aspect of this project in such a manner that outcome of this project will help reader to understand not only financial gimmicks involved but also it will help to understand industry and its dynamics. Furthermore it will help in understanding the operational efficiency of these companies as well. This research project will help in understanding the organizational structure of the oil refinery company. Also, the operational efficacy of these firms will be discussed in detail which will lead to through investigative report making definitive conclusion about the low and high performance companies in the sector. Furthermore, this research will also help investors, who primarily rely on fundamental analysis of entity before investing into its shares. But current research will not only serve general public but will help investors to understand the different factors behind the good performance of one company and bad performance of other company in oil refining and distribution sector. Also mention how it benefit to you and other stake holders Since this project is being conducted as a private individual, it is not plausible that any official recognition vis a vis its results and recommendation is ever going to be implemented by the companies. However, this will not hamper the quality of project and if clear guide line will be given while making ration analysis regarding different operational aspects of business entity.
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Chapter no. 2
DATA PROCESSING AND CALCULATIONS
2.1
PROJECT SECTIONS:
The project will be divided into four main sections. These sections will be tentative and help to understand the various phases of research. First section will be introductory. This section will deal with the detail introduction of each company. Along with its operational capacity and normal activity levels of production along with rough performance estimates in future. Second section will deal with the general industry analysis and trends at both national and international level. Because with out understanding the overall market trends it becomes impossible for end user to understand the reason for decline in performance. Third section will form the crux of research. As this section will include all the calculations of activity ratios and their effect on the performance of company. Fourth section will deal with the conclusive remarks along with set of advice to improve the operational activities of the company.
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2.2
DATA SOURCE:
The main source of information for conduction research on the companies has been their websites. These websites not only provide information regarding financial data, but also provided information regarding organizational structure, goals and future plans. Source for financial data of Shell Pakistan is following web link. Mention here is it primary source of data or secondary one. http://www.shell.com.pk/home/content/pak/aboutshell/media_centre/financi al_reports/ Similarly, following link is Source for financial data of information for Pakistan State Oil. http://www.psopk.com/investors/financial_reports.php And for Attock Refinery Ltd, following link provided Source for financial data. http://www.arl.com.pk/financials.php Furthermore, I have visited PSO regional office located on Mouj Darya Road Lahore. This has helped me to understand the organization structure of organization. As, for other two companies, their head offices are located in Karachi personal visit could not accomplished. Nevertheless, secondary information has been gathered from various sources.
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2.3
TOOLS AND METHOD OF ANALYSIS: Activity ratios are measures companies ability to turn its non cash assets
into cash and cash equivalents. These ratios are therefore also called efficiency ratios. Because they measure the efficiency of business operations. While formulating the methodology of the project, it is kept in mind that not only financial data analysis but overall industry analysis may be kept in mind while inferring any result from the analysis. Because with out following overall trends in the industry, it will become impossible to analyze the financial data. Furthermore, effort has been made to understand the different factors being mentioned in notes to the accounts so that as peculiar difference between financial statements of two entities might be notices at the earliest. Also, audited reports are being used to analyze the activity ratios of different companies. As, auditors have mentions and advices the management regarding various future pitfalls. This also helps in understanding the commitment and goal achievement nature of management. Justification to follow above mentioned methodology is that it will bring symmetry in whole project and it will also help in keeping common ground for analyzing each and every company. Several activity ratios have been calculated. Some of these ratios are as following. 1. 2. 3. 4. 5. Accounts Receivable turnover Inventory turnover ratio Average collection period Accounts Payable Turnover Average Payment Period 20
Project proposal
6. 7. 8. 9.
Average Age of Inventory Operating Cycle Fixed asset turnover ratio Total asset turnover ratio There are several other activity ratios like inventory turn over ratio which
has also been calculated and analyzed. Furthermore, I have used Microsoft Word software for compiling my project report. I have also used Microsoft Power point and excel for designing slides and calculating different ratios.
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2.4 RATIOS CALCULATION, GRAPHICAL REPRESENTATION OF OUTCOME AND TREND ANALYSIS:

Activity ratio is measure of companys efficiency in using its resources and assets. It is gives the operating efficiency of business entity. Following is activity ratio analysis of Pakistan State Oil, Shell Pakistan and Attock Refinery Ltd.
1. ACCOUNTS RECEIVABLE TURNOVER:

Accounts receivable turnover ratio is measure of firms effectiveness in extending credit as well as collecting debts. It is measure of firms ability to collect from debtors or accounts receivables. Higher accounts receivable ratio means company is maintaining its affairs very effectively or sells goods on cash basis.
Formula Net credit sales Accounts receivable turn over ratio = ______________________ Average accounts receivable It is required to make the analysis of last three financial years i-e 2008-2009-2010, so also calculate and analyze the ratios of 2010. Average account receivables = opening trade debts/receivables + closing trade debts/receivables) TABULAR FORM Year 2007 Year 2008 Year 2009
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349,706,326,000 / PSO 12657917000 = 27.62 115,045,434,000 / Shell Pakistan 4905639500 =23.45 44,130,536,000 / 2,502,737,000 =17.63
495,278,533,000 / 23,752,347,000 = 20.85 139,844,689,000 / 4809706000 =29.07 53,242,330,000 / 4,164,433,500 =12.78
612,695,589,000 / 57207279000 =10.71 156,000,098,000 / 3149996000 = 49.52 61,863,152,000 / 3,415,347,500 =18.11
Attock Petroleum WORKING:
PAKISTAN STATE OIL

FINANCIAL YEAR 2007
(All values in Pak rupees)
Net credit Sales = 349,706,326,000 Opening Accounts Receivable = 11,715,868,000 Closing Accounts Receivable = 13,599,966,000 Average Accounts Receivable = (11,715,868,000 + 13,599,966,000) / 2 = 12657917000
(Under note to accounts no 11)
Net credit sales Accounts receivable turn over ratio = ______________________ Average accounts receivable
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= 349,706,326,000 / 12657917000 = 27.62
FINANCIAL YEAR 2008

Net credit Sales = 495,278,533,000 Opening Accounts Receivable = 13,599,966,000 Closing Accounts Receivable = 33,904,728,000 Average Accounts Receivable = (13,599,966,000 + 33,904,728,000) / 2 = 23,752,347,000
Net credit sales Accounts receivable turn over ratio = ______________________ Average accounts receivable = 495,278,533,000 / 23,752,347,000 = 20.85 FINANCIAL YEAR 2009
Net credit Sales = 612,695,589,000 Opening Accounts Receivable = 33,904,728,000

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Closing Accounts Receivable = 80,509,830,000 Average Accounts Receivable = (33,904,728,000 + 80,509,830,000) / 2 = 57,207,279,000
Net credit sales Accounts receivable turn over ratio = ______________________ Average accounts receivable = 612,695,589,000 / 57207279000 = 10.71
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SHELL PAKISTAN
FINANCIAL YEAR 2007
Net credit Sales = 115,045,434,000 Opening Accounts Receivable = 5,231,727,000 (Under note to accounts no 10) Closing Accounts Receivable = 4,579,552,000 Average Accounts Receivable = (5,231,727,000 + 4,579,552,000) / 2 = 4905639500
Net credit sales Accounts receivable turn over ratio = ______________________ Average accounts receivable = 115,045,434,000 / 4905639500
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= 23.45
FINANCIAL YEAR 2008

Net credit Sales = 139,844,689,000 Opening Accounts Receivable = 4,579,552,000 (Under note to accounts no 11) Closing Accounts Receivable = 5,039,860,000 Average Accounts Receivable = (4,579,552,000+ 5,039,860,000) / 2 = 4,809,706,000
FINANCIAL YEAR 2009

Net credit Sales = 156,000,098,000 Opening Accounts Receivable = 5,039,860,000 (Under note to accounts no 11)
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Closing Accounts Receivable = 1,260,132,000 Average Accounts Receivable = (5,039,860,000 + 1,260,132,000) / 2 = 3,149,996,000
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ATTOCK REFINERY LTD

FINANCIAL YEAR 2007
Net credit sales Accounts receivable turn over ratio = ______________________ Average accounts receivable = 44,130,536,000 / 2,502,737,000
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= 17.63 FINANCIAL YEAR 2008

Net credit sales Accounts receivable turn over ratio = ______________________ Average accounts receivable = 53,242,330,000 / 4,164,433,500 = 12.78
FINANCIAL YEAR 2009

Net credit Sales = 61,863,152,000 Opening Accounts Receivable = 5,825,869,000 (Under note to accounts no 11) Closing Accounts Receivable = 7,835,521,000 30
Project proposal
Average Accounts Receivable = (5,825,869,000+ 7,835,521,000) / 2 = 3,415,347,500 Net credit sales Accounts receivable turn over ratio = ______________________ Average accounts receivable = 61,863,152,000 / 3,415,347,500 = 18.13
GRAPHICAL REPRESENTATION OF RATIO :
50 40 30 20 10 0 Year 2007 Year 2008 Year 2009 PSO Shell Pakistan Attock Petroleum
INTERPRETATION: Accounts receivable turn over ratio indicates how quickly a business entity is recovering from its trade debtors. This means higher the accounts receivable turnover ratio, better it is for business. Now if we analyze the above graphically represented data, we come to following conclusion. 1. Pakistan Sate Oil:
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Pakistan State Oil, a public sector, oil marketing entity, shows highest accounts receivable turn over ratio during financial year 2007, ratio being 27.62 times. In following year, 2008 its debtors collection performance declined and ratio falls to 20.85 times. Next year, debtors collection performance further deteriorated. And ratio falls to lowest among all three financial years, to 10.71 times. The decrease in accounts receivable ratio shows that business entity is facing difficulty in recovering its receivable from its debtors timely. However, when I investigated, I found that during these financial years, Pakistan State Oil, faced tremendous pressure from public sector enterprises like WAPDA, Pakistan Railways, and PIA. Being major public sector oil marketing company, Pakistan State Oil has to supply oil to meet the energy needs of large public sector enterprises, mentioned above, at extended credit period. Now, during the financial year, 2007 till 2009, Government of Pakistan was in great jeopardy since, it faced largest circular debt in history of this country. Pakistan State Oil being Public Sector Company could not recover its receivables timely from large public sector enterprises. This unique quagmire is faced by PSO, while other private oil marketing companies remained free from such woes. 2.SHELL PAKISTAN: Shell Pakistan is subsidiary of Royal Dutch Shell International, and major oil marketing company in Pakistan. During 2007, accounts receivable turnover ratio of Shell Pakistan remained at 23.45 times. In next financial year, accounts receivable ratio increased to 29.07 times. Similarly in next financial year the performance further improved and account receivable ratio reached 49.52 times. When analyzing the activities of Shell Pakistan, we find that firm is showed steady improvement in collecting receivables from debtors. This further implies that shell Pakistan is following tight credit policy and recovering its receivables efficiently.
3.
ATTOCK PETROLEUM:
Attock Petroleum is most successful business venture of Attock group of
companies. During, the financial year 2007 the company shows, accounts receivable
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ratio of 17.63 times. In next financial year its receivable performance decreased and falls to the level of 12.78 times. And in financial year 2009, the Attock Petroleum improves its accounts receivable ratio and showed healthy ratio of 18.11
times. When we look at the trend of accounts receivables for three years, we find
that Attock Petroleum showed healthy accounts receivable ratio in 2007 but did not performed as well in financial year 2008. In 2009, however remained best performing year than the preceding two years and showed highest receivable collection ratio of 18.11 times.
2.
INVENTORY TURNOVER RATIO:

Inventory turn over ratio also known as stock turn over ratio. It is measure of firms efficiency that how efficiently it is using its inventory. This ratio describes relationship between the cost of goods sold during a particular period of time and the cost of average inventory during a particular period. It is expressed in number of times.
Formula Cost of Goods Sold Inventory turn over ratio =____________________________ Average inventory at cost Tabular form Year 2007 337,446,896,00 PSO 0/ 28,886,800,000 =11.68 Shell Pakistan 108,444,932,00 0 / 567,271,500 = 191.16 Year 2008 465,254,907,000 / 45,982,517,000 = 10.11 124,694,471,000 / 808,860,50 = 154.16 Year 2009 609,685,478,000 / 51,550,594,000 = 11.82 1, 43,097,916,000 / 927,540,000 = 154.27 33
Project proposal
Attock Petroleum
42,085,565,000 / 207,961,000 = 202.37
50,493,929,000 / 320,397,000 = 157.59
58,570,802,000 / 220,299,500 = 265.86
WORKING:
PAKISTAN STATE OIL

FINANCIAL YEAR 2007
Cost of Goods Sold = 337,446,896,000 Opening Stock = 28,190,089,000 Closing Stock = 29,583,511,000 Average Inventory = (28,190,089,000+ 29,583,511,000) / 2 = 28,886,800,000 Cost of Goods Sold Inventory turn over ratio =____________________________ Average inventory at cost = 337,446,896,000 / 28,886,800,000 = 11.68
FINANCIAL YEAR 2008

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Cost of Goods Sold = 465,254,907,000 Opening Stock = 29,583,511,000 Closing Stock = 62,381,523,000 Average Inventory = (29,583,511,000 + 62,381,523,000) / 2 = 45,982,517,000
Cost of Goods Sold Inventory turn over ratio =____________________________ Average inventory at cost = 465,254,907,000 / 45,982,517,000 = 10.11 FINANCIAL YEAR 2009
Cost of Goods Sold = 609,685,478,000 Opening Stock = 62,381,523,000 Closing Stock = 40,719,665,000 Average Inventory = (62,381,523,000 + 40,719,665,000) / 2 = 51,550,594,000 35
Project proposal
Cost of Goods Sold Inventory turn over ratio =____________________________ Average inventory at cost = 609,685,478,000 / 51,550,594,000 = 11.82
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SHELL PAKISTAN
FINANCIAL YEAR 2007
Cost of Goods Sold = 108,444,932,000 Opening Stock = 552,963,000 (Under note to accounts no 25) Closing Stock = 581,580,000 Average Inventory = (552,963,000 + 581,580,000) / 2 = 567,271,500
Cost of Goods Sold Inventory turn over ratio =____________________________ Average inventory at cost = 108,444,932,000 / 567,271,500 = 191.16 FINANCIAL YEAR 2008
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Cost of Goods Sold = 124,694,471,000 Opening Stock = 581,580,000 (Under note to accounts no 27) Closing Stock = 1,036,141,000 Average Inventory = (581,580,000 + 1,036,141,000) / 2 = 808,860,500
Cost of Goods Sold = 1, 43,097,916,000 Opening Stock = 1,036,141,000 (Under note to accounts no 26) Closing Stock = 818,939,000 Average Inventory = (1,036,141,000 + 818,939,000) / 2 = 927,540,000 38
Project proposal
Cost of Goods Sold Inventory turn over ratio =____________________________ Average inventory at cost = 1, 43,097,916,000 / 927,540,000 = 154.27
39
Project proposal
ATTOCK PETROLEUM
FINANCIAL YEAR 2007
Cost of Goods Sold = 42,085,565,000 Opening Stock = 74,220,000 Closing Stock = 341,702,000 Average Inventory = (74,220,000 + 341,702,000) / 2 = 207,961,000
40
Project proposal
Cost of Goods Sold = 50,493,929,000 Opening Stock = 341,702,000 (Under note to accounts no 20) Closing Stock = 299,092,000 Average Inventory = (341,702,000+ 299,092,000) / 2 = 320,397,000
Cost of Goods Sold = 58,570,802,000 Opening Stock = 299,092,000 (Under note to accounts no 26) Closing Stock = 141,507,000 Average Inventory = (299,092,000 + 141,507,000) / 2 = 220,299,500
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Project proposal
Cost of Goods Sold Inventory turn over ratio =____________________________ Average inventory at cost = 58,570,802,000 / 220,299,500 = 265.86
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Project proposal
GRAPHICAL REPRESENTATION OF INVENTORY TURNOVER RATIO:
300 250 200 150 100 50 0 Year 2007 Year 2008 Year 2009 PSO Shell Pakistan Attock Petroleum
INTERPRETATION
Inventory turnover ratio describe that how well a company is managing its inventories. Low inventory turnover ratio means that company is either storing the inventories or facing difficulties in selling goods. In either case, this translates into very high cost of storing the inventories. Therefore high inventory turn over shows healthy business activities. Following is analysis of inventory turnover ratios as calculated above.
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Project proposal
1.Pakistan Sate Oil: Pakistan State Oil is state owned oil marketing company. Its has largest no of petrol pump stations in Pakistan. Also it has large scale storage capacity as well. During financial year 2007, Pakistan State Oil showed inventory turnover ratio of
11.68 times. This is rather low inventory turnover ratio. In following year; 2008,
the inventory turnover ratio remained at 10.11 times. This is even lower than financial year 2007. In financial year 2009, inventory turn over ratio improved a little and remained at 11.82 times. This is highest inventory turnover ratio for all three consecutive financial years starting from 2007-2009. Low inventory turn over ration indicates that either Pakistan State Oil has very very large storage capacity or its debtors did not paid their dues on time which created negative cash flow in business as we have analyzed in Accounts receivable turnover ratio. 2.SHELL PAKISTAN: Shell Pakistan is subsidiary of Royal Dutch Shell International, and major oil marketing company in Pakistan. During 2007, inventory turnover ratio of Shell Pakistan remained at 191.16 times. In next financial year, inventory turnover ratio decreased to 154.16 times. Similarly in next financial year the performance improved slightly and inventory ratio reached 154.27 times. When analyzing the activities of Shell Pakistan, we find that firm is showed sharp decrease in inventory management activities. This further implies that shell Pakistan like Pakistan State Oil faced problems regarding circular debt of Government and thereby faced problems in ordering new inventories rapidly.
3.
ATTOCK PETROLEUM:
companies. During, the financial year 2007 the company shows, a health inventory turnover ratio of 202.37 times. In next financial year its inventory turnover ratio fell to the level of 157.59 times. But in financial year 2009, the Attock Petroleum improves its inventory management ratio and showed highest inventory turnover ratio 44
Project proposal
of all three oil marketing companies of 265.86 times. When we look at the trend of accounts receivables for three years, we find that Attock Petroleum showed healthy inventory turnover ratio in 2007 but did not performed as well in financial year 2008. In 2009, however remained best performing year than the preceding two years and showed highest inventory turnover ratio of 265.86 times.
3. AVERAGE COLLECTION PERIOD:

The average collection period ratio describes the average number of days for which a business entity has to wait before its debtors are converted into cash. It is expressed in days. Lower the collection period better it is for business. Formula (Trade debtors x 360) Average collection period = _______________________ Net Credit Sales Tabular form Year 2007 (13,599,966,000 x 360) / PSO 349,706,326,00 0 = 14 4,579,552,000 x Shell Pakistan 360 / 115,045,424,00 0 = 14.33 Year 2008 (33,904,728,000 x 360) / 495,278,533,00 0 = 24.64 (4,904,940,000 x 360)/ 139,844,689,000 = 12.62 (5,825,869,000 (2,502,998,000 Attock Petroleum x 360) / 44,130,536,000 = 20.41 x 360) / 53,242,330,000 = 39.39 (7,835,521,000 x 360) / 61,863,152,000 = 45.59 Year 2009 80,509,830,000 x 360 / 612,695,589,00 0 = 47.30 (1,239,213,000 * 360) / 156,000,098,00 0 = 2.859
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Project proposal
WORKING:
PAKISTAN STATE OIL

FINANCIAL YEAR 2007
Trade debtors = 13,599,966,000 Net credit sales = 349,706,326,000
(Trade debtors x 360) Average collection period = _______________________ Net Credit Sales
= (13,599,966,000 x 360) / 349,706,326,000 = 14 FINANCIAL YEAR 2008

(Trade debtors x 360) 46
Project proposal
Average collection period = _______________________ Net Credit Sales
= (33,904,728,000 x 360) / 495,278,533,000 = 24.64 FINANCIAL YEAR 2009

= 80,509,830,000 x 360 / 612,695,589,000 = 47.30
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Project proposal
SHELL PAKISTAN
FINANCIAL YEAR 2007
Trade debtors = 4,579,552,000 (Under note to accounts no 10) Net credit sales = 115,045,424,000
= 4,579,552,000 x 360 / 115,045,424,000 = 14.33 FINANCIAL YEAR 2008

(Trade debtors x 360) Average collection period = _______________________ 48
Project proposal
Net Credit Sales
= (4,904,940,000 x 360)/ 139,844,689,000 = 12.62 FINANCIAL YEAR 2009

(Under note to accounts no11)
= (1,239,213,000 * 360) / 156,000,098,000 = 2.859
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Project proposal
ATTOCK PETROLEUM
FINANCIAL YEAR 2007
= (2,502,998,000 x 360) / 44,130,536,000 = 20.41 FINANCIAL YEAR 2008

= (5,825,869,000 x 360) / 53,242,330,000 = 39.39 50
Project proposal
FINANCIAL YEAR 2009

= 7,835,521,000 x 360 / 61,863,152,000 = 45.59
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Project proposal
GRAPHICAL REPRESENTATION OF RATIO
50 45 40 35 30 25 20 15 10 5 0 PSO Shell Pakistan Attock Petroleum
Year 2007
Year 2008
Year 2009
INTERPRETATION
The average collection period ratio describes the average number of days for which a business entity has to wait before its debtors are converted into cash. It is expressed in days. Lower the collection period better it is for business. 1.Pakistan Sate Oil: Pakistan State Oil is state owned oil marketing company. Its has largest no of petrol pump stations in Pakistan. Also it has large scale storage capacity as well. 52
Project proposal
During financial year 2007, Pakistan State Oil showed average collection period of 14 days. This is rather good average collection period. In following year; 2008, the average collection period remained at 24.64 days. This shows benign credit policy of the company. But in next financial year 2009, situation got further worst as the collection period reached 47 days. 2.SHELL PAKISTAN: Shell Pakistan is subsidiary of Royal Dutch Shell International, and major oil marketing company in Pakistan. During 2007, average collection period of Shell Pakistan remained at 14.33 days. In next financial year, average collection period decreased which shows better credit management of company, 12.65 days. Similarly in next financial year the performance improved greatly and average collection period just 2.59 days. When analyzing the activities of Shell Pakistan, we find that firm is showed sharp improvement in average collection period. This further implies that shell Pakistan like Pakistan State Oil did not faced problems regarding circular debt of Government and thereby did not faced problems in ordering new inventories rapidly.
3.
ATTOCK PETROLEUM:
companies. During, the financial year 2007 the company shows, a health average collection period of 20 days. In next financial year its average collection period increased sharply to the level of 39 days. But in financial year 2009, the Attock Petroleum average collection period deteorated and reached 45 days. When we look at the trend of accounts receivables for three years, we find that Attock Petroleum showed very poor average collection period. But 2007, however remained best performing year than the following two years and showed lowed average collection period of 20 days.
4. ACCOUNTS PAYABLE TURNOVER:
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Project proposal
It is the measure of firms ability to payoff its debts. It means the credit period enjoyed by the firm in paying creditors. Accounts payable include both sundry creditors and bills payable. Higher the accounts payable turnover ratio, better it is for the firm. As such a firm can payoff its debts timely.
Formula
Net Credit Purchases Accounts payable Turnover Ratio = __________________________ Average Accounts payable
TABULAR FORM Year 2007 338,840,318,00 PSO 0/ 30,336,467,500 = 11.16 3,840,029,000 / Shell Pakistan 9,018,438,000 = 0.42.57 Year 2008 527,636,430,000 / 50,862,073,000 = 10.37 5,105,250,000 / 10,994,737,500 = 0.4643 42,353,047,000 / 3,643,450,500 = 11.62 50,003,616,000 / 6,133,775,500 = 8.1521 Year 2009 588,023,620,000 / 83,338,755,500 =7.055 4,819,071,000 / 10,812,310,000 = 0.4457 53,793,461,000 / 8,507,033,500 = 6.3234
Attock Petroleum
WORKING:
PAKISTAN STATE OIL

FINANCIAL YEAR 2007
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Project proposal
Net Credit Purchases = 338,840,318,000 Opening Accounts payables = 27,721,437,000 Closing Accounts payables = 32,, 951,498,000 Average Accounts payables = (27,721,437,000 = 30,336,467,500
+ 32, 951,498,000) / 2
= 338,840,318,000 / 30,336,467,500 = 11.16 FINANCIAL YEAR 2008

Net Credit Purchases = 498,052,919,000
Opening Accounts payables = 32,951,498,000 (Under note to accounts no 21) Closing Accounts payables =69,667,194,000 Average Accounts payables = (32,951,498,000+ 69,667,194,000) / 2 = 51,309,346,000
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Project proposal
= 498,052,919,000 / 51,309,346,000 =9.70 FINANCIAL YEAR 2009

Net Credit Purchases = 588,023,620,000
Opening Accounts payables = 69,667,194,000 (Under note to accounts no 21) Closing Accounts payables =97,010,317,000 Average Accounts payables = (69,667,194,000+97,010,317,000)/2 = 83,338,755,500
= 588,023,620,000 / 83,338,755,500 =7.055
SHELL PAKISTAN
FINANCIAL YEAR 2007
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Project proposal
Net Credit Purchases = 3,840,029,000 (Under note to accounts no 25) Opening Accounts payables = 4,917,382,000 + 4,134,093,000(Under note to accounts
no 18) = 9,051,475,000
Closing Accounts payables = 3934599000+5050802000 =8,985,401,000 Average Accounts payables = (9,051,475,000 + 8,985,401,000) /2 = 9,018,438,000
= 3,840,029,000 / 9,018,438,000 = 0.42.57
FINANCIAL YEAR 2008

Net Credit Purchases = 5,105,250,000 (Under note to accounts no27) Opening Accounts payables = 4,175,781,000+5,050,802,000 (Under note 22) = 9,226,583,000 Closing Accounts payables = 11,990,626,000+772,266,000 = 12,762,892,000
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Project proposal
Average Accounts payables = (9,226,583,000+ 12,762,892,000) / 2 = 10,994,737,500
= 5,105,250,000 / 10,994,737,500 = 0.4643 FINANCIAL YEAR 2009

Net Credit Purchases =4,819,071,000
Opening Accounts payables = 7,170,561,000+3,634,052,000 (note 21) = 10,804,613,000 Closing Accounts payables =8,121,075,000 + 2,698,932,000 = 10,820,007,000 Average Accounts payables= (10804613000+10820007000)/2 = 10,812,310,000
= 4,819,071,000 / 10,812,310,000
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= 0.4457
ATTOCK PETROLEUM
FINANCIAL YEAR 2007
Net Credit Purchases = 42,353,047,000 (Under note to accounts no 20)
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Project proposal
Opening Accounts payables = 42,163,000+3,255,656,000

accounts no 9) = 3,297,819,000
(Under note to
Closing Accounts payables =66,519,000+3,922,563,000 = 3,989,082,000 Average Accounts payables = (3,297,819,000+3,989,082,000)/2= 3,643,450,500
= 42,353,047,000 / 3,643,450,500 = 11.62 FINANCIAL YEAR 2008

Net Credit Purchases = 50,003,616,000 (Under note to accounts no 20) Opening Accounts payables = 66,519,000+3,922,563,000 = 3,989,082,000
Closing Accounts payables =190,476,000+8,087,993,000=8,278,469,000 Average Accounts payables = (3989082000+8278469000)/2=6,133,775,500
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= 50,003,616,000 / 6,133,775,500 = 8.1521
FINANCIAL YEAR 2009

Net Credit Purchases = 53,793,461,000 (Under note to accounts no 20) Opening Accounts payables 190476000+8087228000 =8,277,704,000 (under note 10) Closing Accounts payables =88994000+8647369000=8,736,363,000 Average Accounts payables = (8,277,704,000+8,736,363,000)/2 = 8,507,033,500
= 53,793,461,000 / 8,507,033,500 = 6.3234 GRAPHICAL REPRESENTATION OF RATIO
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Project proposal
12 10 8 6 4 2 0 Year 2007 Year 2008 Year 2009 PSO Shell Pakistan Attock Petroleum
INTERPRETATION
It is the measure of firms ability to payoff its debts. It means the credit period enjoyed by the firm in paying creditors. Accounts payable include both sundry creditors and bills payable. Higher the accounts payable turnover ratio, better it is for the firm. As such a firm can payoff its debts timely.
1.
Pakistan Sate Oil: Pakistan State Oil is state owned oil marketing company. Its has largest no of petrol pump stations in Pakistan. Also it has large scale storage capacity as well. During financial year 2007, Pakistan State Oil showed accounts payable turnover ratio of 11.16 times.. In following year; 2008, the accounts payable turnover ratio decreased just a little bit at 10.37 times. This is even lower than financial year 2007. In financial year 2009, accounts payable turn over ratio fall further to 7.055
times. When I analyzed the trend, it is found that during 2007-2009, company faced
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Project proposal
huge problems in collecting receivables from debtors. This has affected its ability to payoff creditors timely. 2.SHELL PAKISTAN: Shell Pakistan is subsidiary of Royal Dutch Shell International, and major oil marketing company in Pakistan. During 2007, accounts payable turnover ratio of Shell Pakistan remained at 0.4257 times, is very poor. In next financial year, accounts payable turnover ratio increased just a little to 0.4643 times. Similarly in next financial year the performance deteriorated slightly and accounts payable ratio reached 0.4457 times. When analyzing the activities of Shell Pakistan, we find that firm is showed decrease in credit management activities. This further implies that shell Pakistan like Pakistan State Oil faced problems regarding circular debt of Government and thereby faced problems in paying debts timely.
3.
ATTOCK PETROLEUM:
companies. During, the financial year 2007 the company shows, accounts payable turnover ratio of 11.62 times. In next financial year its accounts payable turnover ratio fell to the level of 8.15 times. But in financial year 2009, the Attock Petroleum faced problems in paying its creditors and showed lowest accounts payable turnover ratio of all three financial years of 6.3234 times. When we look at the trend of accounts receivables for three years, we find that Attock Petroleum showed rapid decrease in performance of accounts payable turnover ratio in 2009.
5. AVERAGE AGE OF INVENTORY:

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Project proposal
It is the average number of days a company holds its inventory before selling it to customer. Lower the average age of inventory, better it is for business, as it shows that business is flourishing and it also indicate low storage cost of inventory. Average age of inventory is derived by dividing inventory turn over ratio by no of days in a year.
Formula Average Inventory Average age of inventory = ______________________ x 360 Cost of goods sold All the answers of this ratio are in days Tabular form Year 2007 (178,685,123,00 PSO 0*360)/ 337,446,896,000 = 190.62 (567,271,500x36 Shell Pakistan 0)/ 108,444,932,000 = 1.88 (207,961,000 x 360)/ Attock Petroleum = 1.77 42,085,565,000 (320,397,000 x 360)/ 50,493,929,000 = 2.284 Year 2008 (45,982,517,000*3 60)/ 465,254,907,000 = 35.57days Year 2009 (51,550,594, 000 * 360)/ 609,685,478, 000 =30.43 (850,405,000 x 360)/ 143,097,916, 000 =2.13 220,299,500 x 360/ 58,570,802,0 00 = 1.35
(808,860,500 x 360)/ 124,694,471,000 =2.33
WORKING: PAKISTAN STATE OIL

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Project proposal
FINANCIAL YEAR 2007

Cost of goods sold = 337,446,896,000 Opening inventory = 327,786,735,000 Closing inventory = 29,583,511,000 Average inventory = (327,786,735,000 + 29,583,511,000) / 2 = 178,685,123,000
Average Inventory Average age of inventory = ______________________ x 360 Cost of goods sold
= (178,685,123,000*360)/ 337,446,896,000 = 190.62 days FINANCIAL YEAR 2008

Cost of goods sold = 465,254,907,000 Opening inventory = 29,583,511,000 Closing inventory = 62,381,523,000 Average inventory = (29,583,511,000 + 62,381,523,000) / 2 = 45,982,517,000
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Project proposal
= (45,982,517,000*360)/ 465,254,907,000 = 35.57 FINANCIAL YEAR 2009

Cost of goods sold = 609,685,478,000 Opening inventory = 62,381,523,000 Closing inventory = 40,719,665,000 Average inventory = (62,381,523,000 = 51,550,594,000 Average Inventory Average age of inventory = ______________________ x 360 Cost of goods sold = (51,550,594,000 * 360)/ 609,685,478,000 =30.43 + 40,719,665,000) / 2
SHELL PAKISTAN
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Project proposal
FINANCIAL YEAR 2007

Cost of goods sold = 108,444,932,000 Opening inventory = 552,963,000 Closing inventory = 581,580,000 Average inventory = (552,963,000 + 581,580,000) / 2 = 567,271,500
= (567,271,500x360)/ 108,444,932,000 = 1.88
FINANCIAL YEAR 2008

Cost of goods sold = 124,694,471,000 Opening inventory = 581,580,000 Closing inventory = 1,036,141,000 Average inventory = (581,580,000 + 1,036,141,000) / 2 = 808,860,500
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Project proposal
= (808,860,500 x 360)/ 124,694,471,000 = 2.33 FINANCIAL YEAR 2009

= (850,405,000 x 360)/ 143,097,916,000 =2.13
ATTOCK PETROLEUM
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Project proposal
FINANCIAL YEAR 2007

Cost of goods sold = 42,085,565,000 Opening inventory = 74,220,000 Closing inventory =341,702,000 Average inventory = (74,220,000 + 341,702,000) / 2 = 207,961,000
= (207,961,000 x 360)/ 42,085,565,000 = 1.77 FINANCIAL YEAR 2008

Cost of goods sold = 50,493,929,000 Opening inventory = 341,702,000 Closing inventory = 299092000 Average inventory = (341,702,000 + 299,092,000) / 2 = 320,397,000
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Project proposal
= (320,397,000 x 360)/ 50,493,929,000 = 2.284
FINANCIAL YEAR 2009

= 220,299,500 x 360/ 58,570,802,000 = 1.35 70
Project proposal

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Project proposal
200 180 160 140 120 100 80 60 40 20 0
PSO Shell Pakistan Attock Petroleum Year 2007 Year 2008 Year 2009
INTERPRETATION:
It is the average number of days a company holds its inventory before selling it to customer. Lower the average age of inventory, better it is for business, as it shows that business is flourishing and it also indicate low storage cost of inventory. Average age of inventory is derived by dividing inventory turn over ratio by no of days in a year. 1.Pakistan Sate Oil: Pakistan State Oil is state owned oil marketing company. Its has largest no of petrol pump stations in Pakistan. Also it has large scale storage capacity as well. During financial year 2007, Pakistan State Oil showed a very high age of inventory of about 190.62 days. This shows that company is facing huge difficulty in selling inventories or there is some problem in bring these inventories to market. In following year; 2008, the 72
Project proposal
average of inventory decreased rapidly to 35 days. This is huge improvement over financial year 2007. In financial year 2009, average age of inventory improved further and decreased to 30 days. This is the lowest average age of inventory for all three consecutive financial years starting from 2007-2009. Low average age of inventory indicates that either Pakistan State Oil has very very large storage capacity or it is facing problem in selling its inventory. 2.SHELL PAKISTAN: Shell Pakistan is subsidiary of Royal Dutch Shell International, and major oil marketing company in Pakistan. During 2007, average age of inventory was 1.88
days. This is very healthy ratio. It means that company is selling its inventories very
effectively. In next financial year, ratio increased a little and reached 2.33 days. This still looks good. Similarly in 2009, company maintained similar performance and showed average collection period of 2.13 days. This performance is better than Pakistan State Oil. This shows marketing efficiency of Shell Pakistan is far better than PSO.
3.
ATTOCK PETROLEUM LTD:

companies. During, the financial year 2007 the company shows, a health average age of inventory of 1.77 days. In next financial year its average age of inventory increased to the level of 2.28 days. But in financial year 2009, the Attock Petroleum improves its average age of inventory and showed lowest average age of inventory of all three oil marketing companies of 1.35 days. When we look at the trend of inventories for three years, we find that Attock Petroleum showed healthy average of inventory in 2007 but did not perform as well in financial year 2008. In 2009, however remained best performing year than the preceding two years and showed lowed average of inventory ratio of 1.35 days. 6. Operating Cycle:
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Project proposal
Operating cycle means the net days a business entity takes to convert cash in to inventory and inventory in to accounts receivable and then into cash. Simple it can be described in following manner.
Cash
Formula
Inventory
Accounts Receivable Cash
Operating Cycle = Days inventory outstanding + Days sales outstanding Days payable outstanding Average inventory Days inventory outstanding = _________________ x 365 Cost of goods sold Average accounts receivable Days sales outstanding = _________________________ x 365 Net Sales Average accounts payable Days payable outstanding = ____________________________ x 365 Cost of goods sold
Tabular form
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Project proposal
Year 2007 197.7459 + PSO 13.211 - 32.81

= 178.141
Year 2008
Year 2009 30.86 +
34.07 36.074 + 17.504 54.65 = -1.072
49.89 = 15.04
(9,018,438,000
/ 108,454,932,0 00) x 365 =30.35
Shell Pakistan
23.67 + 12.55 -32.18 = 4.04 days
2.16 + 4.98 31.64 =
- 24.5
Attock Petroleum
1.803 + 20.69 31.59 = - 9.097
2.31 + 28.54 44.33 = -13.48
1.372+ 40.30 -53.01 = -11.338
Working
WORKING: PAKISTAN PAKISTAN STATE OIL

FINANCIAL YEAR 2007
Opening Inventory=28,190,089,000 Closing Inventory=337,446,896,000 Average Inventory=28,190,089,000+337,446,896,000 /2=182,818,492,500
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Project proposal
Cost of Goods sold=337,446,896,000 Opening accounts receivable=11,715,868,000 Closing Accounts Receivable=13,599,966,000 Average Accounts receivable=11,715,868,000+13,599,966,000/2=12,657,917,000 Net Sales= 349,706,326,000 Opening Accounts payable=27,721,437,000 Closing Accounts payable=32,951,498,000 Average Accounts Payable=27,721,437,000+32,951,498,000/2=30,336,467,500
Average inventory Days inventory outstanding = _________________ x 365 Cost of goods sold = (182,818,492,500/337,446,896,000 )x365=197.7459
Average accounts receivable Days sales outstanding = _________________________ x 365 Net Sales = (12,657,917,000 / 349,706,326,000) x 365 = 13.211
Average accounts payable Days payable outstanding = ____________________________ x 365 Cost of goods sold = (30,336,467,500/337,446,896,000) x 365
= 32.81
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Project proposal
Operating Cycle = Days inventory outstanding + Days sales outstanding Days payable outstanding =197.7459 + 13.211 - 32.81 = 178.141 days FINANCIAL YEAR 2008
Opening Inventory=29,583,511,000 Closing Inventory=62,381,523,000 Average Inventory=29,583,511,000+62,381,523,000/2=45,982,517,000 Cost of Goods sold=465,254,907,000 Opening accounts receivable=13,599,966,000 Closing Accounts Receivable=33,904,728,000 Average Accounts receivable=13,599,966,000+33,904,728,000/2=23,752,347,000 Net Sales= 495,278,533,000 Opening Accounts Payable=32,951,498,000 Closing Accounts Payable=69,667,194,000 Average Accounts Payable=32,951,498,000+69,667,194,000/2=51,309,346,000
Average inventory Days inventory outstanding = _________________ x 365 Cost of goods sold = ( 45,982,517,000 / 465,254,907,000 ) x 365 = 36.074
Average accounts receivable Days sales outstanding = _________________________ x 365 Net Sales = ( 23,752,347,000 / 495,278,533,000 ) x 365 = 17.504
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Project proposal
Average accounts payable Days payable outstanding = ____________________________ x 365 Cost of goods sold = (69,667,194,000/ 465,254,907,000) x 365
= 54.65
Operating Cycle = Days inventory outstanding + Days sales outstanding Days payable outstanding = 36.074 + 17.504 - 54.65 = -1.072
FINANCIAL YEAR 2009

Opening Inventory=62,381,523,000 Closing Inventory=40,719,665,000 Average Inventory=62,381,523,000+40,719,665,000/2=51,550,594,000 Cost of Goods sold=609,685,478,000 Opening accounts receivable=33,904,728,000 Closing Accounts Receivable=80,509,830,000 Average Accounts receivable=33,904,728,000+80,509,830,000/2=57,207,279,000 Net Sales= 612,695,589,000 Opening Accounts payable=69,667,194,000 Closing Accounts payable=97,010,317,000 Average Accounts Payable=69,667,194,000+97,010,317,000/2=83,338,755,500
Average inventory Days inventory outstanding = _________________ x 365 Cost of goods sold = (51,550,594,000 / 609,685,478,000) x 365
= 30.86
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Project proposal
Average accounts receivable Days sales outstanding = _________________________ x 365 Net Sales = (57,207,279,000 / 612,695,589,000) x 365
= 34.07
Average accounts payable Days payable outstanding = ____________________________ x 365 Cost of goods sold = (83,338,755,500 / 609,685,478,000 = 49.89 ) x 365
Operating Cycle = Days inventory outstanding + Days sales outstanding Days payable outstanding =30.86 + 34.07 - 49.89
= 15.04 days
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Project proposal
SHELL PAKISTAN
FINANCIAL YEAR 2007
Opening Inventory=552963000 Closing Inventory=581,580,000 Average Inventory=552963000+581,580,000/2=567,271,500 Cost of Goods sold=108,454,932,000 Opening accounts receivable=5,231,727,000 Closing Accounts Receivable=4,579,552,000 Average Accounts receivable=5,231,727,000+4,579,552,000/2=4,905,639,500 Net Sales=115,045,434,000 Opening Accounts Payable=4,917,382,000+4,134,093,000=9,051,475,000 Closing Accounts Payable=3,934,599,000+5,050,802,000=8,985,401,000 Average Accounts Payable=9,051,475,000+8,985,401,000/2=9,018,438,000
Average inventory Days inventory outstanding = _________________ x 365 Cost of goods sold = (567,271,500 / 108,454,932,000) x 365
= 1.909
Average accounts receivable Days sales outstanding = _________________________ x 365 80
Project proposal
Net Sales = ( 4,905,639,500 / = 15.56

115,045,434,000
) x 365
Average accounts payable Days payable outstanding = ____________________________ x 365 Cost of goods sold = (9,018,438,000 / 108,454,932,000) x 365
=30.35
Operating Cycle = Days inventory outstanding + Days sales outstanding Days payable outstanding =1.909 + 15.56 - 30.35
= - 12.88
FINANCIAL YEAR 2008

Opening Inventory=581580000 Closing Inventory=1036141000 Average Inventory=581,580,000+1,036,141,000/2=808,860,500 Cost of Goods sold=124,694,471,000 Opening accounts receivable=4579552000 Closing Accounts Receivable=5039860000 Average Accounts receivable=4579552000+5039860000/2=4,809,706,000 Net Sales= 139,844,689,000 Opening accounts payable=4,175,781,000+5,050,802,000=9,226,583,000
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Closing accounts payable=11,990,626,000+772,266,000=12,762,892,000 Average Accounts Payable=9,226,583,000+12,762,892,000/2=10,994,737,500
Average inventory Days inventory outstanding = _________________ x 365 Cost of goods sold = (808,860,500 / 124,694,471,000 ) x 365 = 23.67
Average accounts receivable Days sales outstanding = _________________________ x 365 Net Sales = (4,809,706,000 / 139,844,689,000) x 365
= 12.55
Average accounts payable Days payable outstanding = ____________________________ x 365 Cost of goods sold =(
10,994,737,500 / 124,694,471,000 ) x 365
= 32.18
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Operating Cycle = Days inventory outstanding + Days sales outstanding Days payable outstanding = 23.67 + 12.55 -32.18 = 4.04 days
FINANCIAL YEAR 2009

Opening Inventory=881,871,000 Closing Inventory=818,929,000 Average Inventory=881,871,000+818,929,000/2=850,400,000 Cost of Goods sold=143,097,916,000 Opening accounts receivable=2,999,342,000 Closing Accounts Receivable=1,260,132,000 Average Accounts receivable=2,999,342,000+1,260,132,000/2=2,129,737,000 Net Sales= 156,000,098,000 Opening accounts payable=7,170,561,000+3,634,052,000=10,804,613,000 Closing accounts payable=8,121,075,000+2,698,932,000=10,820,007,000 Average Accounts Payable=10,804,613,000+10,820,007,000/2=10,812,310,000
Average inventory Days inventory outstanding = _________________ x 365 Cost of goods sold = (850,400,000 / 143,097,916,000) x 365 = 2.16
Average accounts receivable
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Days sales outstanding = _________________________ x 365 Net Sales = ( 2,129,737,000 / 156,000,098,000 = 4.98 ) x 365
Average accounts payable Days payable outstanding = ____________________________ x 365 Cost of goods sold = (10,812,310,000 / 124,694,471,000) x 365
= 31.64
Operating Cycle = Days inventory outstanding + Days sales outstanding Days payable outstanding = 2.16 + 4.98 31.64 =
- 24.5
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ATTOCK PETROLEUM
FINANCIAL YEAR 2007
Opening Inventory=74,220,000 Closing Inventory=341,702,000 Average Inventory=74,220,000+341,702,000/2=207,961,000 Cost of Goods sold=42,085,565,000 Opening accounts receivable=2,502,476,000 Closing Accounts Receivable=2,502,998,000 Average Accounts receivable=2,502,476,000+2,502,998,000/2=2,502,737,000 Net Sales= 44,130,536,000 Opening accounts payable=42,163,000+3,255,656,000=3,297,819,000 Closing accounts payable=66,519,000+3,922,563,000=3,989,082,000 Average Accounts Payable=3,297,819,000+3,989,082,000/2=3,643,450,500
= 1.803
Average accounts receivable Days sales outstanding = _________________________ x 365 Net Sales
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= (2,502,737,000 / 44,130,536,000) x365

= 20.69
Average accounts payable Days payable outstanding = ____________________________ x 365 Cost of goods sold = ( 3,643,450,500 / 42,085,565,000 ) x 365 = 31.59
Operating Cycle = Days inventory outstanding + Days sales outstanding Days payable outstanding = 1.803 + 20.69 - 31.59 = - 9.097 FINANCIAL YEAR 2008
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= 2.31
Average accounts receivable Days sales outstanding = _________________________ x 365 Net Sales = ( 4,164,433,500 / 53,242,330,000) x 365 = 28.54
Average accounts payable Days payable outstanding = ____________________________ x 365 Cost of goods sold = (6,133,775,500 / 50,493,929,000 ) x 365 = 44.33
Operating Cycle = Days inventory outstanding + Days sales outstanding Days payable outstanding =2.31 + 28.54 - 44.33 = -13.48
FINANCIAL YEAR 2009
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= 1.372
Average accounts receivable Days sales outstanding = _________________________ x 365 Net Sales = ( 6,830,695,000 / 61,863,152,000 ) x 365 = 40.30
Average accounts payable
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Days payable outstanding = ____________________________ x 365 Cost of goods sold =(

8,507,033,500 / 58,570,802,000 ) x 365
= 53.01 Operating Cycle = Days inventory outstanding + Days sales outstanding Days payable outstanding = 1.372+ 40.30 -53.01 = -11.338
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7. FIXED ASSET TURNOVER RATIO: Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets. Formula Net Sales Fixed Assets Turnover Ratio = __________________________ Net Fixed Assets Tabular form Year 2007 Year 2008 495,278,533, 000 / 11,231,328,0 00 = 44.09 139,844,689, 115,045,424,000 / Shell Pakista n 9,170,068,000 = 000 / 9,444,650,00 0= 14.80 Year 2009 612,695,589 ,000 / 14,732,119, 000 = 41.58
349,706,326,000/12,224, PSO 042,000 = 28.60
156,000,098 ,000 / 12,290,483, 000= 12.69
12.54
Attock Petroleu m
44,130,536,000 / 988,572,000
53,242,330,0 00 / 1,631,702,00
61,863,152, 000 / 1,864,272,0
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0= 32.62 =44.64
00=33.18

FINANCIAL YEAR 2007
Net Sales =
349,706,326,000
Net Fixed Assets = 12,224,042,000 Net Sales Fixed Assets Turnover Ratio = __________________________ Net Fixed Assets = 349,706,326,000/12,224,042,000 = 28.60 FINANCIAL YEAR 2008
Net Sales =
495,278,533,000
Net Fixed Assets =11,231,328,000 Net Sales
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Fixed Assets Turnover Ratio = __________________________ Net Fixed Assets
= 495,278,533,000 / 11,231,328,000 = 44.09
FINANCIAL YEAR 2009

Net Sales =
612,695,589,000 14,732,119,000 Net Sales
Net Fixed Assets =
Fixed Assets Turnover Ratio = __________________________ Net Fixed Assets = 612,695,589,000 / 14,732,119,000 =
41.58
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SHELL PAKISTAN
FINANCIAL YEAR 2007
Net Sales =
115,045,424,000
Net Fixed Assets =9,170,068,000 Net Sales Fixed Assets Turnover Ratio = __________________________ Net Fixed Assets
= 115,045,424,000 / = 12.54
9,170,068,000
FINANCIAL YEAR 2008

Net Sales =
139,844,689,000
Net Fixed Assets =9,444,650,000 Net Sales Fixed Assets Turnover Ratio = __________________________ 93
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Net Fixed Assets
= 139,844,689,000 / 9,444,650,000 = 14.80 FINANCIAL YEAR 2009

Net Sales =
156,000,098,000
Net Fixed Assets =12,290,483,000 Net Sales Fixed Assets Turnover Ratio = __________________________ Net Fixed Assets = 156,000,098,000 / 12,290,483,000 = 12.69
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ATTOCK PETROLEUM
FINANCIAL YEAR 2007
Net Sales =
44,130,536,000 988,572,000 Net Sales
Net Fixed Assets =
Fixed Assets Turnover Ratio = __________________________ Net Fixed Assets = 44,130,536,000 / 988,572,000 =44.64 FINANCIAL YEAR 2008
Net Sales =
53,242,330,000 1,631,702,000 Net Sales
Net Fixed Assets =
Fixed Assets Turnover Ratio = __________________________ Net Fixed Assets = 53,242,330,000 / 1,631,702,000 95
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= 32.62
FINANCIAL YEAR 2009

Net Sales =
61,863,152,000 1,864,272,000 Net Sales
Net Fixed Assets =
Fixed Assets Turnover Ratio = __________________________ Net Fixed Assets = 61,863,152,000 / 1,864,272,000 =33.18
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45 40 35 30 25 20 15 10 5 0 Year 2007 Year 2008 Year 2009 Shell Pakistan Attock Petroleum PSO
INTERPRETATION
Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets.
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1.Pakistan Sate Oil: 2008 remained the highest utilization of fixed assets. While 2007 remained lowest performance year, followed by 2009. Company must use its fixed asset to their maximum potential. 2.SHELL PAKISTAN: Shell Pakistan fully utilized its fixed assets in the year 2008. Where as 2007 and 2009 remained under utilized and both have same ratios.
3.
ATTOCK PETROLEUM:
companies. During, the financial year 2007 the company shows, highest utilization of fixed assets. Where as 2008 and 2009 had almost same efficiency in utilizing fixed assets.
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8. TOTAL ASSET TURNOVER RATIO: The total asset turnover ratio measures the ability of a company to use its assets to generate sales. The total asset turnover ratio considers all assets including fixed assets, like plant and equipment, as well as inventory and accounts receivable.
Formula Net Sales Total Assets Turn Over Ratio = __________________ Total Assets Tabular form Year 2007 349,706,326,000/74,737,315,000 PSO = 4.67 Year 2008 495,278,533,000/ 127,110,020,000 = 3.896 115,045,434,000/ 29,211,927,000 = 3.938 139,844,689,000/ 39,664,859,000 = 3.525 53,242,330,000/ 15,513,336,000 = 3.432 Year 2009 612,695,589,000/ 153,421,643,000 = 3.993 156,000,098,000/ 33,653,733,000 = 4.635 61,863,152,000/ 18,270,355,000 = 3.385
Shell Pakistan
Attock Petroleum
44,130,536,000/ 8,983,767,000 = 4.9122
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FINANCIAL YEAR 2007
Net Sales = 349,706,326,000 Net Total Assets = 74,737,315,000 Net Sales Total Assets Turn Over Ratio = __________________ Total Assets = 349,706,326,000/74,737,315,000 = 4.67 FINANCIAL YEAR 2008
Net Sales =
495,278,533,000
Net total Assets =127,110,020,000 Net Sales Total Assets Turnover Ratio = __________________________ Net Total Assets
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= 495,278,533,000/ 127,110,020,000 = 3.896
FINANCIAL YEAR 2009

Net Sales =
612,695,589,000
= 612,695,589,000/ 153,421,643,000 = 3.993
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SHELL PAKISTAN
FINANCIAL YEAR 2007
Net Sales =
115,045,434,000
Net total Assets =29,211,927,000 Net Sales Total Assets Turnover Ratio = __________________________ Net Total Assets = 115,045,434,000/ 29,211,927,000 = 3.938
FINANCIAL YEAR 2008

Net Sales =
139,844,689,000
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= 139,844,689,000/ 39,664,859,000 = 3.525 FINANCIAL YEAR 2009

Net Sales =
156,000,098,000
= 156,000,098,000/ 33,653,733,000 = 4.635
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ATTOCK PETROLEUM
FINANCIAL YEAR 2007
Net Sales =
44,130,536,000
= 44,130,536,000/ 8,983,767,000 = 4.9122 FINANCIAL YEAR 2008

Net Sales =
53,242,330,000
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= 53,242,330,000/ 15,513,336,000 = 3.432 FINANCIAL YEAR 2009

Net Sales =
61,863,152,000
= 61,863,152,000/ 18,270,355,000 = 3.385
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5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Year 2007 Year 2008 Year 2009 PSO Shell Pakistan Attock Petroleum
INTERPRETATION
The total asset turnover ratio measures the ability of a company to use its assets to generate sales. The total asset turnover ratio considers all assets including fixed assets, like plant and equipment, as well as inventory and accounts receivable. High total asset turnover means low profit, while low turn over means high profit. 1.Pakistan Sate Oil: In financial year 2007, PSO has total asset turnover of 4.67. But in next financial year turnover reduced slightly and fall to 3.896. In proceeding financial year, turnover increased slightly and reached 3.993. After analyzing data it is found 106
Project proposal
that PSO has higher profit in 2007 and less in 2008 and further in 2009 profit improved slightly. This means that company utilized its assets most efficiently in the year 2007. 2.SHELL PAKISTAN: Shell Pakistan has healthy asset turnover of 3.938 in financial year 2007.In next financial year total assets turnover ratio fall a little to 3.525. In third financial year, ration improved to 4.635. Considering this data it is concluded that company utilized its assets to their full potential in 2007 and in 2009.
3.
ATTOCK PETROLEUM:
2007 remained the highest performing year, as the company utilized its assets fully in this year. In following two years ratio fall to 3.432 and 3.385 respectively. The company must keep it assets in full utilization so that it may maximize its profit.
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Chapter No. 3
CONCLUSIONS AND RECOMMENDATIONS
CONCLUSIONS Write all major findings based on your ratio analysis. Mention all ratios those are not up to standard and those are good ones. Also mention any other deficiency or strength you found based on your ratio analysis. RECOMMENDATIONS As a Financial Analyst you have to provide comprehensive recommendations for improving the current position of your selected companies based on your conclusions, ratio analysis and according to your objectives.(i-e What these companies can do for improving their financial position?) Its better to present conclusion and recommendations in the form of bullets/numbers.
Following are some suggestions and recommendations which can help management improve it operational efficiency. 1. PAKISTAN STATE OIL: a) Pakistan State Oil needs to improve accounts receivable turnover ratio by following tighter credit policy and collecting receivables from debtors efficiently. b) Improve inventory turnover by enhancing sales and thereby reducing the cost of storing inventories. c) Should tight credit policy so that average collection period may improve. Last financial year 2009 was worst for company. d) Should improve cash inflow, so that company may pay accounts payable timely.
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e) Should take drastic measure in selling inventories other wise company will face huge financial loss if its average age of inventory is not reduced. 2. SHELL PAKISTAN: a) Maintain tight credit policy and thereby enhance accounts receivable ratio further. b) Like PSO, Shell Pakistan also suffered from national crisis of circular debt which resulted in slow placement of placing new inventory orders. Should reduce storing time. c) Maintain tight credit policy and thus maintain excellent average collection period. d) Improve cash flow by enhancing sales so that company may pay accounts payable timely. e) Maintain healthy average age of inventories. This will further ensure high turnover and better cash flows from operating activities.
3.
ATTOCK PETROLEUM: a) Maintain tight credit policy for avoiding any fall in accounts receivable turnover ratio. b) Improve inventory management so that less stock is stored and cost of storage is reduced. Although Attock Petroleum inventory management is remains highest as compared to other oil marketing companies. c) Very large collection period shows very poor performance of company, company should bring its average collection period to 15 days. d) Improve cash inflow by speeding up receivables and hence improve its accounts payable ratio by paying creditors timely. e) Maintain healthy average age of inventories. This will further ensure high turnover and better cash flows from operating activities
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Chapter No. 4
INTRODUCTION OF STUDENT
PERSONAL INFORMATION: Name Address Date of Birth ACADEMIC INFORMATION: 1. 2. 3. L.L.B B.COM F.sc Punjab University Law College Lahore. Hailey College of Commerce, PU, Lahore. Govt. Degree College for boys, Sheikhupura. Ali Dayyan Professor Colony, Govt. Degree College for boys, Civil Lines, 28.03.1984 Sheikhupura.
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EXPERIENCE: 1. 2. 3. Worked as Officer Grade III in MCB. Worked as Assistant Section Officer in S& GAD, Govt. of the Punjab. Attorney at law since Nov, 2009
Chapter No. 5
APPENDIX
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Chapter No. 6
BIBLIOGRAPHY
1. Clyde P. Stickney, Roman L. Weil, (2007), Financial Accounting: An Introduction to Concepts, Methods, and Uses, New York: South-Western College 2. 3. Richard Loth, (2010), Financial http://www.investopedia.com/university/ratios/ Wikipedia Online encyclopedia. http://en.wikipedia.org/wiki/Financial_ratio (n.d). Ratio Retrieved Tutorial. from
4. Lawrence J. Gitman, (2005), Principles of Managerial Edition), New York: Addison Wesley
Finance
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Virtual University of Pakistan

Evaluation Sheet for Project Spring 2011

WARNING: Consider it the last chance for your

MC070401068 Ali Dayyan Date of submission: 15-04-2011

Department of Management Sciences, Virtual University of Pakistan

and trend analysis

ANALYSIS AND RECOMMENDATIONS

Conclusion & Recommendations

INTRODUCTION AND BACKGROUND

Financial Period under Consideration

Key Financial figures of PSO, Shell Pakistan and AR Ltd.

Earning per share

Pakistan State Oil Shell Pakistan Attock Refinery Ltd

12,259,430 30,023,626 3,010,111 6,380,502 15,150,218 12,902,182 8,66,237 4,007,932 1,918,404

7,949,786 22,450,992 5,576,658 1,134,581 8,481,359 4,886,625 9,60,883 2,887,223 1,072,629

27.34 81.94 (39.05) 12.90 93.76 37.42 10.54 66.83 16.01

Virtual University of Pakistan

Virtual University of Pakistan

DATA PROCESSING AND CALCULATIONS

Virtual University of Pakistan

Virtual University of Pakistan

Virtual University of Pakistan

Virtual University of Pakistan

2.4 RATIOS CALCULATION, GRAPHICAL REPRESENTATION OF OUTCOME AND TREND ANALYSIS:

1. ACCOUNTS RECEIVABLE TURNOVER:

Virtual University of Pakistan

495,278,533,000 / 23,752,347,000 = 20.85 139,844,689,000 / 4809706000 =29.07 53,242,330,000 / 4,164,433,500 =12.78

612,695,589,000 / 57207279000 =10.71 156,000,098,000 / 3149996000 = 49.52 61,863,152,000 / 3,415,347,500 =18.11

Attock Petroleum WORKING:

PAKISTAN STATE OIL

Virtual University of Pakistan

= 349,706,326,000 / 12657917000 = 27.62

FINANCIAL YEAR 2008

Net credit Sales = 612,695,589,000 Opening Accounts Receivable = 33,904,728,000

Virtual University of Pakistan

Virtual University of Pakistan

Virtual University of Pakistan

FINANCIAL YEAR 2008

FINANCIAL YEAR 2009

Virtual University of Pakistan

Virtual University of Pakistan

ATTOCK REFINERY LTD

Virtual University of Pakistan

= 17.63 FINANCIAL YEAR 2008

FINANCIAL YEAR 2009

Virtual University of Pakistan

GRAPHICAL REPRESENTATION OF RATIO :

Virtual University of Pakistan

Virtual University of Pakistan

INVENTORY TURNOVER RATIO:

Virtual University of Pakistan

42,085,565,000 / 207,961,000 = 202.37

50,493,929,000 / 320,397,000 = 157.59

58,570,802,000 / 220,299,500 = 265.86

PAKISTAN STATE OIL

FINANCIAL YEAR 2008

Virtual University of Pakistan

Virtual University of Pakistan

Virtual University of Pakistan

Virtual University of Pakistan

Virtual University of Pakistan

Virtual University of Pakistan