Financial Analysis of Oil Marketing Companies

?ANALYSIS OF OIL AND bollix MARKETING SECTOR- AN OVERVEW OF ITS GROWTH OVER THE LAST FIVE YEARS (2001 2005) AUTHOR Akhlaq Ahmad Enroll No. 111031-004 kiosk no 03215008455 BBA-6 (Morning) SUPERVISOR Mr. Musbashir Sadiq Bahria Institute of Management & Computer Sciences, Bahria University Shangrila Road, field E-8, Islamabad ABSTRACT Pakistans frugality is undergoing significant structural changes since 1999-2000. The real GDP fruit is accelerating over the ending quintet yrs. Over the undermentioned five years, 7-8 pct adjoin is targeted to be sustained, which will demand a huge rise in the force use.The brawniness celestial sphere in Pakistan comprises of inunct colour, natural sport, cater (hydro and nuclear) and coal. The oil and hitman vault of heaven has a lot of potential in Pakistan. Pakistan is classified as low priority by foreign investors because of the dubious economic and political situation. However, efforts be beingness made by the Government to promote investing in the oil and atom smasher atomic number 18a, by respective(a) incentives such as liberal granting of exploration licenses, restructuring and reform of the oil and gas areas, deregulation of prices, and privatization of selected assets.The reform has enhanced transpargonncy, making decision makers a fighte of the various The objective of this thesis is to analyze whether the vegetable oil and tout sector in Pakistan has really progressed and whether there are better opportunities for investiture and ontogenesis in this sector now than there were in the past. For the aspiration of de vergeining the abbreviate of development in the cover and mess up field, four cover and foul up merchandise Companies (O&GMC) were selected and their fiscal data canvas over a consummation of five years (2001 2005). pecuniary data relevant to the sample companies was collected from published accounts of the companies, in their annual fibs. This data was conden sed and summed up for the four companies and presented in tables and then use for psychoanalysis. The turn ups were held to be representative of the entire oil merchandising Sector and watch outm to show a marked trend of offshoot in the financial indicators reveal that there has been a marked improvement in the growth of this industry. ACKNOWLEDGMENT First of all I am very much thankful to ALLAH ALMIGHTY, who gave me strength & power to complete this task efficiently & effectively.I am in any case very much thankful to my parents who gave me the radical knowledge of how to read & write, who also prayed for me every cartridge clip, e specially in the hour of need & trouble. Thanks to my nigh prestigious Supervisor Mr. Mubashir Sadik for providing me guidelines for each & every aspect. Thanks to Mr. Abdul Ahad Maud and Mr. Faisal Subhan who were very cooperative and considerate during the whole boundary of data collection. I am also very grateful to all those who helpe d me & gave me up-to-date teaching or any opposite information regarding this analysis while completing this task. Thank you in anticipation.DADICATION TO MY LOVING PARENTS put back OF CONTENTS ABSTRACTi ACKNOWLEDGMENTiii DADICATIONiv TABLE OF CONTENTSv LIST OF TABLESvi LIST OF FIGURESix CHAPTER 11 INTRODUCTION1 Broad Problem Area/Background1 pro fragmentnale5 Problem differentiatement6 Objectives of the carry7 enquiry Questions8 Limitations9 CHAPTER 210 LITERATURE REVIEW10 CHAPTER 315 METHOD15 Procedure17 CHAPTER 421 RESULTS AND DISCUSSION21 CHAPTER 566 CONCLUSION AND RECOMMENDATION66 Conclusion66 Recommendations 68 GLOSSARY 69 REFERENCES73 LIST OF TABLES dining table 4. 1 Pakistan State Oil troupe check eternal sleep Sheets (2001-2005)21 control panel 4. Pakistan State Oil play a broad express Income Statements (2001-2005)22 put back 4. 3 Pakistan State Oil Company moderate straight crude sizing of Balance Sheets (2001-2005)23 fudge 4. 4 Pakistan State Oil Company Limited Vertical familiar Size of Income statement (2001-2005)24 card 4. 5 Pakistan State Oil Company Limited plane general Size of Balance Sheets (2001-2005)25 Table 4. 6 Pakistan State Oil Company Limited flat reciprocalplace Size of Income statement (2001-2005)27 Table 4. 7 welt Pakistan Limited Balance Sheets (2001-2005)28 Table 4. guinea pig Pakistan Limited Income Statements (2001-2005)29 Table 4. 9 Shell Pakistan Limited Vertical Common Size of Balance Sheets (2001-2005)30 Table 4. 10 Shell Pakistan Limited Vertical Common Size of Income Statements (2001-2005)31 Table 4. 11 Shell Pakistan Limited plain Common Size of Balance Sheets (2001-2005)32 Table 4. 12 Shell Pakistan Limited Horizontal Common Size of Income Statements (2001-2005)34 Table 4. 13 Sui Yankee Gas Pipelines Limited Balance Sheets (2001-2005)35 Table 4. 14 Sui Union Gas Pipelines Limited Income Statements (2001-2005)36 Table 4. 5 Sui Northern Gas Pipelines Limited Vertical Common Size of Balance S heets (2001-2005)37 Table 4. 16 Sui Northern Gas Pipelines Limited Vertical Common Size of Income Statements (2001-2005)38 Table 4. 17 Sui Northern Gas Pipelines Limited Horizontal Common Size of Balance Sheets (2001-2005)39 Table 4. 18 Sui Northern Gas Pipelines Limited Horizontal Common Size of Income Statements (2001-2005)40 Table 4. 19 Sui Confederate Gas Company Balance Sheets (2001-2005)41 Table 4. 20 Sui Southern Gas Company Income Statements (2001-2005)42 Table 4. 1 Sui Southern Gas Company Vertical Common Size of Balance Sheets (2001-2005)43 Table 4. 22 Sui Southern Gas Company Vertical Common Size of Income Statements (2001-2005)44 Table 4. 23 Sui Southern Gas Company Horizontal Common Size of Balance Sheets (2001-2005)45 Table 4. 24 Sui Southern Gas Company Horizontal Common Size of Income Statements (2001-2005)46 Table 4. 25 Oil and Gas Marketing Sector Consolidated Balance Sheets (PSO, Shell, SNGPL, SSGC) (2001-2005)47 Table 4. 26 Oil and Gas Marketing Sector Consolida ted Income Statement (PSO, Shell, SNGPL, SSGC) (2001-2005)48 Table 4. 7 Oil and Gas Marketing Sector Vertical Common Size of Balance Sheet (PSO, Shell, SNGPL, SSGC) (2001-2005)49 Table 4. 28 Oil and Gas Marketing Sector Vertical Common Size of Income Statement (PSO, Shell, SNGPL, SSGC) (2001-2005)51 Table 4. 29 Oil and Gas Marketing Sector Horizontal Common Size of Consolidated Balance Sheet (PSO, Shell, SNGPL, SSGC) (2001-2005)52 Table 4. 30 Oil and Gas Marketing Sector Horizontal Common Size of Consolidated Income Statement (PSO, Shell, SNGPL, SSGC) (2001-2005)53 Table 4. 31 Important figures to be used in the calculating the ratios54 Table 4. 2 Ratios for bill the Liquidity of the sector 55 Table 4. 33 Ratios for measuring the languish limitinal Debt Paying Ability57 Table 4. 34 Ratios for measuring the lettuce force of the sector59 Table 4. 35 Ratios of the measurement of the market value of the sector63 LIST OF FIGURES insert 4. 1 Ratios for measuring the Long edge Debt Paying Ability55 Figure 4. 2 Ratios for measuring the Long Term Debt Paying Ability57 Figure 4. 3 Ratios for measuring the Long Term Debt Paying Ability59 Figure 4. 4 Ratios for measuring the Long Term Debt Paying Ability61 Figure 4. Ratios for measuring the Long Term Debt Paying Ability63 Figure 4. 6 Graphs to specify the growth of the oil & gas marketing companies65 CHAPTER 1 INTRODUCTION Broad Problem Area/Background It is universally recognized that push button is one of the most important inputs for economic growth and national development. The enjoyment of force is one of the comminuted indicators of the level of development of any country. Developed countries use to a greater extent(prenominal) energy per unit of economic outfit and far more energy per capita than developing countries.Economic growth is the key to this situation and for economic growth we need energy. Pakistans economy is undergoing significant structural changes since 1999-2000. The real GDP growth is accelerating over the eventually five years. Over the next five years, 7-8 percent growth is targeted to be sustained, which will demand a huge rise in the energy use. The energy sector in Pakistan comprises of oil, natural gas, power (hydro and nuclear) and coal. The chalk up primary energy supplies measured in terms of oil equivalent (toe) stood at 50. one thousand million tonnes in 2003-04. Oil and gas account for or so 80% of the energy sector of Pakistan with oil and gas being 29. 9 percent and 49. 7 percent respectively. In order to measure the growth of the energy sector the best proxy might be to evaluate the performance of the oil marketing companies. As these are the companies which are not moreover selling the oil establish products which meet the major needs of the energy in Pakistan but also these companies are dealing in the recently made popular mean Natural Gas.As this Oil and Gas sector represents more than 80% of the energy consumed in Pakistan so the compa nies which are dealing with the marketing of these fuels need to be assessed for their financial performance and results in the past a couple of(prenominal) years. If these companies are showing growth we might assume that the energy sector is growing and the economy is on the right path. The first gas field was discovered in at Sui in 1952 and nominates the basis for Pakistans big gas network. Pakistan imports crude oil (it only promotes 17% to 20% of what it needs), however is self sufficient in natural gas.Of the companies that are being researched in the present study, Pakistan State Oil Company Limited (PSOCL) and Shell Pakistan are the main planks in the oil industry. Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC), distributes major portion of the natural gas. Pakistan declared 1997-98 an Oil and Gas Year. As a result of offering incentives to potential investors, including foreign companies, some $2. 5 billion of investment was attracted. O il and Gas habit Figures? Oil Consumption (In tones) 1999-00 2000-01 2001-02 2002-03 2003-04 17,768,000 17,648,000 16,950,000 6,542,000 13,421,000 Gas Consumption 2003 ( In mmcft) 1999-00 2000-01 2001-02 2002-03 2003-04 712,001 768,068 872,604 872,264 1,051,418 Consumption of oil and gas has been fairly plastered throughout the 1990s with the gas role increasing at a rate of 4. 9 percent while the oil consumption increasing at a slightly reduced rate of 2. 5 percent. Until 1999, the government tightly controlled the oil and gas industries of Pakistan. No decision could be made without referring to the high authorities, and when decisions were made, they were very much based on political as opposed to economic considerations.Since early 2000, an ambitious pro-market reform design is being implemented, and gradually, the straightjacket under which the industry used to operate is being dismantled. As a result, the sector has changed dramatically over the last five years, and Paki stan now leads South Asia in sector reform (Economic bailiwick of Pakistan, 2004-05). The government actions have focused on promoting private investments in the upstream, deregulating most of the market for crude products, establishing a regulatory agency for the gas sector, and introducing market-related price caps for crude products.The governments long term goal is to create a competitive, efficiently-run, financially smooth, and a largely privatized oil and gas sector providing supplies to a large share of population. It is important to note that a structural shift is taking place since 2000-01. The last five years have seen a positive trend towards greater gas consumption and a negative trend in the petroleum products consumption. Substantial progress has been made in the restructuring and reform of the oil and gas sectors, deregulation of prices, and privatization of selected assets.The reform has enhanced transparency, making decision makers aware of the various aspects o f the business. Rationale Oil and Gas is an important sector in Pakistan economy and it largely affects the GDP of Pakistan, therefore there is a great emphasis on exploration and marketing. The consumption of Oil was 16. 45 million tonnes in 2002-3 and consumption of gas was 872,264 million cubic feet. The acceleration in growth of energy consumption is not strike when seen over against a 15. 4 percent growth in large scale manufacturing and an 8. 5 percent growth in real GDP. Higher consumption of energy simply reflects the rising of economic activity in a country. Oil and natural gas are an integral part of the everyday life. Not only do they make the economy move, they heat and cool our homes and tin electricity. A large number of products are made from oil and gas, including plastics, life-saving medications, art silk, cosmetics, and many other items you whitethorn use daily. Even from Strategic intelligence and defense view point Pakistan is dependent on oil and gas. Prob lem StatementOil and gas sector of Pakistan has changed dramatically over the last five years and Pakistan now leads South Asia in sector reform. The endeavors made to increase the oil and gas supplies need to be analyzed and companies encouraged. With this premise in mind four, Oil and Gas marketing companies have been selected to analyze their financial performance that would also indicate their success. Objectives of the study The objective of research study is to analyze the growth and development of the Oil and Gas Marketing Sector in Pakistan. veritablely according to the Board of Investment of Pakistan there are 26 (local and international) companies operating in upstream, 7 downstream companies, and 4 refineries. The focus of this analysis is on the progress of downstream companies that are based in Pakistan. Four leading downstream companies have been selected and their financial performance studied for a period of five years from 2001 to 2005 to see whether these companies are financially stronger and what their rate of growth is and to determine reasons behind(predicate) the growth. question Questions 1.What is the importance of Oil and Gas sector in Pakistan economy? 2. What is the growth scenario of Oil and Gas Marketing companies in Pakistan? 3. What is the financial performance of the selected Oil and Gas marketing companies during the research period (2001-2005)? 4. What conclusions can be drawn about the industry based on the financial performance of the selected companies? Limitations Limitations This research study has plastered limitations that are not easy for the researcher to overcome at this level. The general level of inflation has not been adjusted for.Overall prices of oil have increased collectible to unavoidable natural phenomenon like war in Iraq and Hurricane Katrina. The profit force of the oil marketing companies could be due to increase in prices of petroleum and it may not be the true measure of their financial performan ce. Some secondary data was not easy available and was very difficult to obtain. As the research work was given to the researcher during the semester so the time constraint played its role. Despite time constraint, the researcher has conducted a comprehensive research.The limited experience in the research field is also a matter of consideration. This is the first study that goes to researchers confidence. Hence, the researcher does not possess any experience in the field. CHAPTER 2 LITERATURE REVIEW The house itself and away providers of nifty- creditors and investors all undertake financial statement analysis. The type of analysis varies according to the specific interests of the party involved. vocation creditors (suppliers owed money for goods and services) are primarily interested in the liquidity of a firm.Their claims are short term, and the office to digest these claims quickly is best judged by an analysis of firms liquidity. The claims of bond bondholders, on the o ther hand are long-term. Accordingly, bondholders are more interested in the cash flow ability of the firm to service debt over a long period of time. They may evaluate this ability by analyzing the capital structure of the firm, the major sources and uses and uses of funds, the firms profitability over time, and projections of hereafter profitability over time, and projections of future profitability.The purpose of financial statement analysis is to examine past and latest financial data so that a companys performance and financial position can be evaluated and future risks and potential can be estimated. Financial statement analysis can yield valuable information about trends and sexual congressships, the quality of a companys internet, and the strengths and weaknesses of its financial position (Woelfel, 1989). Investors in a companys everyday stock are chiefly concerned with present and expected future earnings as well as with the stability of these earnings about a trend l ine.As a result, investors usually focus on analyzing profitability. They would also be concerned with the firms financial condition insofar as it affects the ability of the firm to pay dividends and avoid bankruptcy. Internally, direction also employs financial analysis for the purpose of internal control and to better provide what capital suppliers seek in financial condition and performance from the firm. From an internal control stand point, management needs to undertake financial analysis in order to plan and control effectively.To plan for the future, the financial manager must assess the firms present financial position and evaluates opportunities in relation to this current position. With respect to internal control, the financial manager is particularly concerned with the return on investment provided by various assets of the company and in the efficiency of asset management. Finally, to bargain effectively for outside funds, the financial manager needs to be attuned to al l aspects of financial analysis that outside suppliers of capital use in evaluating the firm (Horne & Wachowicz, 2001).Financial analysis of a company should include an examination of the financial statements of the company, including notes to the financial statements, and the auditors report. The auditors report will state whether the financial statements have been audited in accordance with generally accepted auditing standards. The report also indicates whether the statements fairly present the companys financial position, results of operations, and changes in financial position in accordance with generally accepted accounting principles. Notes to the financial statements are a great deal more meaningful than the data found within the bole of the statements.The notes explain the accounting policies of the company and usually provide detailed explanations of how those policies were applied along with supporting details. Analysts often compare the financial statements of one com pany with other companies in the same industry and with the industry in which the company operates as well as with prior year statements of the company being analyzed (Foster, 1999). comparative financial statements provide analysts with significant information about trends and relationships over two or more years. comparative degree statements are more significant for evaluating a company than are single-year statements.The analysis of financial data employs various techniques to emphasize the comparative and relative importance of the data presented and to evaluate the position of the firm. These techniques include ratio analysis, common size analysis, study of difference in components of financial statements among industries, review of descriptive material, and comparisons of result with other types of data. The information derived from these types of analyses should be blended to determine overall position. No one type of analysis supports overall findings or serves all types o f users.Financial statement analysis is a judgmental process. One of the primary objectives is identification of major changes (turning points) in trends, amounts and relationships and investigation of the reasons underlying those changes. Often, a turning point may signal an early sample of a significant shift in the future success or failure of the business. The judgment process can be improved by experience and by the use of analytical tools. The components of financial statements, specially the balance sheet and the income statements, will vary by type of industry (Gibson, 1998).Economies all economies run on energy. Energy is needed to develop food and manufacture goods, power machines and appliances, transport raw materials and finished products, and provide heat and light. The more energy available to a society, the better its prospects for sustained growth when energy supplies dwindle, economies romance to a halt and the affected populations suffer (Klare, 2005). Since World War II, economic growth around the valet de chambre has been fueled largely by abundant supplies of hydrocarbons that is, by petroleum and natural gas.Since 1950, worldwide oil consumption has grown eightfold, from approximately 10 to 80 million barrels per day gas consumption, which began from a little base, has grown even more dramatically. Oil and gas will account for 65% of world energy in 2025, a larger share than at present and because no other source of energy is currently available to replace them, the future health of the global economy rests on our ability to produce and consume more and more of these hydrocarbons (U. S Department of Energy, 2004).Petroleum refers to crude oil and natural gas or simply oil and gas, found in petroleum reservoirs generally thousands of feet below the surface. Exploratory surface are drilled to discover petroleum wells, while development wells are drilled to produce a portion of previously discovered oil and gas. Estimated volumes o f recoverable gas within the reservoir are called oil and gas militia (Brock, Jennings & Feiten, 1990). The oil and gas sector or the petroleum industry has the spare-time activity four major segments 1. Exploration and Production r E&P where oil and gas companies research for underground reservoirs, and produce the discovered oil and gas using drilled wells. This thesis focuses on this sector of the oil and gas industry. 2. Hydrocarbon processing which includes oil refineries and gas processing plants. 3. Transport, Distribution and Storage by which petroleum is moved from the producing well areas to crude oil refineries and gas processing plants. Oil is moved by pipeline, truck, step on it or tanker and Natural gas is moved by pipeline. 4. Retail/Marketing which ultimately markets in various ways the refined products.CHAPTER 3 METHOD Sample For the sample selection of four marketing companies, out of the population of 7 companies listed in the KSE, the criteria used were 1. Sh are swell of the company 2. sales revenue enhancement 3. Distribution data of the companies Based on these criteria the four companies selected that are operating in Pakistan were the following Pakistan State Oil Company Limited (PSOCL) Pakistan State Oil Company Limited (PSOCL) is the market leader in Pakistan having 73% of the share of Black Oil Market and around 59% of the share of White Oil market.It is engaged in the import, storage, distribution and marketing of various petroleum products including Fuel oil, HSD, Jet Oil, petro-chemicals, LPG and CNG. Shell Pakistan Limited (SPL) The Shell brand name enjoys a deoxycytidine monophosphate-year history in this part of the world, dating back to 1899. Shell Pakistan has been taking a keen interest in expanding recently which shows the confidence in the economic growth and progress in the oil and gas sector. Shell is at present controlling approximately 30% share of the white oil products presently and during the last financia l year the Capital Expenditure amounted to Rs 1. billion. Sui Northern Gas Pipelines Limited (SNGPL) Sui Northern Gas Pipelines Limited (SNGPL, is the largest structured gas company serving more than 2 million consumers in North Central Pakistan through an extensive network in Punjab and NWFP. The Company has over 41 years of experience in operation and maintenance of high-pressure gas transmission system and distribution systems. It has also expanded its activities to undertake the planning, designing and construction of pipelines, both for itself and other organizations.SNGPL operates in that kingdom of the nation which has a rapidly growing demand for natural gas and power generation due to significant industrial development. Sui Southern Gas Company (SSGC) Sui Southern Gas Company (SSGC) is Pakistans leading integrated gas Company. The company is engaged in the business of transmission and distribution of natural gas withal construction of high pressure transmission and low pressure distribution systems SSGCL transmission system extends from Sui in Balochistan to Karachi in Sindh comprising over 2780 KM of high pressure pipeline ranging from 12 24 in diameter.The distribution activities covering over 650 towns in the Sindh and Balochistan are organized through its regional offices. An average of about 234,553 million cubic feet (MMCFD) gas was sold in 2001-2002 to over 1. 7 million industrial, commercial and domestic consumers in these regions through a distribution network of over 22,890 Km. Type of Study This study aims to analyze the financial statements of oil and gas marketing companies and then generalize the result for the whole industry. Thus due to the purpose of the study it is classifies as descriptive study.Procedure Base Year and Period of Analysis For the analysis, 2001 has been taken as the base year, and the performance in the next five years has been compared with the base year. Analysis Methods The analysis of financial data uses var ious methods to evaluate the relative importance of the data that was presented in financial statements of a firm. The methods used in the analysis of the marketing sector of Pakistan are a blend of Ratio analysis Common size analysis Ratio Analysis The following ratios were used on the composite data of five years 1.Liquidity Ratios related to the liquidity of short term assets and short term debt paying ability were Working Capital Current Ratio sales to Working Capital 2. earningsability Ratios measure the ability of a firm to generate earnings. The ratios used were Total Asset Turnover Operating Income Margin choke on Total Equity Return on Investment Gross net Margin realize advance Margin 3. Debt Ratios that measure the long term debt paying ability of the firm used were Debt Ratio Debt to Equity Ratio Fixed charge coverage 4. Market Value Ratios that measure the return that is being given to the stockholders were Earning per shareDividend per share Dividend Payout These financial ratios were calculated for each of the years from 2001 to 2005 and then plotted to see the general trend. They were then studied to identify various turning points in the trends, and to see the underlying reasons behind the changes in trends that were occurring. Common Size Analysis A common size analysis expresses comparisons in components. For the financial data there was -Horizontal and vertical analysis of the following balance sheet items, using 2001 as a base year ( flat) and total assets as base (vertical) Fixed assetCapital work in progress Long term investments Current assets Reserves & surplus Equity and liabilities were shown as a percentage of total liabilities. -Horizontal and vertical analysis of the following do good and Loss items with 2001 as a base year (horizontal) and Net Sales as base (vertical) Financial Charges Operating expense Gross Profits Taxes Profit in the beginning Tax CHAPTER 4 RESULTS AND DISCUSSION Table 4. 1 Pakistan State Oil Company L imited Balance Sheets (2001-2005) Table 4. 2 Pakistan State Oil Company Limited Income Statements (2001-2005) 2001 2002 2003 2004 2005 Sales (Net) 43305. 67 133136. 52 172445. 77 161537. 98 212503. 65 exist of Sales 136933. 58 126359. 13 163490. 58 152346. 86 198757. 32 Gross Profit 6372. 09 6777. 39 8955. 19 9191. 12 13746. 33 Operating Expenses 2367. 97 2210. 69 2750. 26 4223. 43 5443. 58 Operating Profit 4004. 12 4566. 7 6204. 93 4967. 69 8302. 75 Financial Charges 778. 7 979. 22 274. 78 189. 08 370. 7 Other income 225. 94 1549. 77 279. 17 1484. 36 1294. 34 Profit Before tax revenue 3451. 36 5137. 25 6209. 32 6262. 97 9226. 39 Taxation 1200 1949 2179 2181 2183 Profit After Taxation 2251. 36 3188. 25 4030. 32 4081. 97 7043. 39 Table 4. Pakistan State Oil Company Limited Vertical Common Size of Balance Sheets (2001-2005) 2001 2002 2003 2004 2005 Current Assets 81. 44% 74. 84% 69. 41% 74. 60% 78. 22% Fixed Assets (Gross) 21. 99% 24. 10% 29. 01% 25. 40% 21. 78% Depreciation 11. 02 % 11. 90% 13. 96% 12. 51% 12. 08% Fixed Assets (Net) 10. 97% 12. 21% 15. 05% 12. 89% 9. 70% Capital work in bring forward 2. 28% 2. 72% 3. 53% 2. 76% 2. 39% Long Term Investment & Deposits 5. 32% 10. 23% 12. 01% 9. 75% 9. 69% Total Assets one hundred. 00% 100. 00% 100. 00% 100. 00% 100. 00% Current Liabilities 63. 63% 62. 39% 55. 40% 59. 72% 62. 92% Deferred Taxation 0. 00% . 44% 1. 15% 1. 33% 1. 21% Long Term Liabilities 3. 82% 1. 85% 3. 05% 2. 53% 2. 63% Total Liabilities 67. 45% 65. 69% 59. 60% 63. 58% 66. 76% pay up Capital 4. 74% 4. 36% 5. 30% 4. 04% 3. 29% Reserves & tautological 27. 80% 29. 96% 35. 09% 32. 38% 29. 95% Total Liabilities & Capital 100. 00% 100. 00% 100. 00% 100. 00% 100. 00% Analysis The vertical common size of the B/S of PSO shows that the current as well as fixed assets are pretty much the same and there is major improvement in long term investment & deposits while on the liability side again the current and long term liabilities are pretty much constant.T he reserves & surplus have been increasing with the passage of time. Table 4. 4 Pakistan State Oil Company Limited Vertical Common Size of Income statement (2001-2005) 2001 2002 2003 2004 2005 Sales (Net) 100. 00% 100. 00% 100. 00% 100. 00% 100. 00% Cost of Sales 95. 55% 94. 91% 94. 81% 94. 31% 93. 53% Gross Profit 4. 45% 5. 09% 5. 19% 5. 69% 6. 47% Operating Expenses 1. 65% 1. 66% 1. 59% 2. 61% 2. 56% Operating Profit 2. 79% 3. 43% 3. 60% 3. 08% 3. 91% Financial Charges 0. 54% 0. 74% 0. 16% 0. 12% 0. 17% Other income 0. 16% 1. 16% 0. 16% 0. 92% 0. 61%Profit Before Taxation 2. 41% 3. 86% 3. 60% 3. 88% 4. 34% Taxation 0. 84% 1. 46% 1. 26% 1. 35% 1. 03% Profit After Taxation 1. 57% 2. 39% 2. 34% 2. 53% 3. 31% Analysis The detailed analysis of the I/S of PSO shows that the oil marketing company has been able to slightly reduce its cost of gross sales which has resulted in a significant increase in the gross profit while the operating profit has also shown an increase as the operating expenses have increased but in a lesser proportion. The financial charges have been drastically cut down due to a better financial performance.thither has been a marked improvement in the other income which shows that the company has increased its sources of income and all this has resulted in higher profits. Table 4. 5 Pakistan State Oil Company Limited Horizontal Common Size of Balance Sheets (2001-2005) 2001 2002 2003 2004 2005 Current Assets 100% -0. 001% -8. 54% 28. 90% 65. 98% Fixed Assets (Gross) 100% 19. 269% 41. 53% 62. 56% 71. 13% Depreciation 100% 17. 468% 35. 91% 59. 74% 89. 36% Fixed Assets (Net) 100% 21. 078% 47. 18% 65. 40% 52. 81% Capital work in Progress 100% 30. 150% 66. 47% 70. 52% 81. 58% Long Term Investment & Deposits 100% 109. 346% 142. 40% 158. 6% 214. 84% Total Assets 100% 8. 811% 7. 30% 40. 72% 72. 81% Current Liabilities 100% 6. 701% -6. 57% 32. 08% 70. 88% Deferred Taxation 100% 47200% 37250% 56425% 63018% Long Term Liabilities 100% -47. 371% -14. 53% -7. 05% 18. 70% Total Liabilities 100% 5. 958% -5. 19% 32. 63% 71. 02% Financed By Paid-Up Capital 100% 0. 000% 20. 00% 20. 00% 20. 00% Reserves & Surplus 100% 17. 237% 35. 44% 63. 87% 86. 15% Total Liabilities & Capital 100% 8. 811% 7. 30% 40. 72% 72. 81% Analysis The horizontal common size of the B/S of PSO significantly tells that the current assets have increased substantially mainly due to the increase in sales.Another important aspect to note is the great deal of increase in the long term investments which is due to various red-hot projects that have been undertaken and this shows that the company is expanding. The increase in current liabilities is mainly due to the increase in credit sales and also because a significant portion of long term loans has been converted into current portion while the increase in long term liabilities is mainly due to the increase in employee benefits which again shows that the company has been doing very well. Another good indicator of the good per formance is the increase in the reserves & surplus section of the B/S.Table 4. 6 Pakistan State Oil Company Limited Horizontal Common Size of Income statement (2001-2005) 2001 2002 2003 2004 2005 Sales (Net) 100% -7. 096% 20. 33% 12. 72% 48. 29% Cost of Sales 100% -7. 722% 19. 39% 11. 26% 45. 15% Gross Profit 100% 6. 361% 40. 54% 44. 24% 115. 73% Operating Expenses 100% -6. 642% 16. 14% 78. 36% 129. 88% Operating Profit 100% 14. 050% 54. 96% 24. 06% 107. 36% Financial Charges 100% 25. 751% -64. 71% -75. 72% -52. 40% Other income 100% 585. 921% 23. 56% 556. 97% 472. 87% Profit Before Taxation 100% 48. 847% 79. 91% 81. 46% 167. 33% Taxation 100% 62. 417% 81. 58% 81. 75% 81. 92%Profit After Taxation 100% 41. 614% 79. 02% 81. 31% 212. 85% Analysis The horizontal common size of the I/S clearly indicates the drastic improvement in the sales which is almost around 50% while due to a lesser increase in the cost of sales the gross profit is up by over 115%. The financial charges have been re duced to more than 50% and a huge increase in other sources of income has led to higher profit before taxation. Table 4. 7 Shell Pakistan Limited Balance Sheets (2001-2005) 2001 2002 2003 2004 2005 Current Assets 6470. 64 7145. 22 6149. 68 7912. 63 12725. 13 Fixed Assets (Gross) 6027. 49 6705. 37 7554. 29 8708. 5 9569. 78 Accumulated Depreciation 2189. 29 2738. 78 3290. 57 3852. 84 4532. 53 Fixed Assets (Net) 3838. 20 3966. 59 4263. 72 4855. 21 5037. 25 Capital Work in Progress 464. 52 534. 61 564. 44 544. 07 582. 38 Long Term Investment & Deposits 1294. 68 186. 27 1998. 93 2032. 22 1988. 13 Total Assets 12068. 04 11832. 69 12976. 77 15344. 13 20332. 89 Liabilities Current Liabilities 6470. 65 5934. 76 7029. 83 9042. 39 11951. 06 Long Term Liabilities 66. 84 47. 51 77. 86 43. 49 48. 22 Deferred Taxation 141 29. 24 17. 26 126. 42 20. 74 Financed By Paid-Up Capital 350. 66 350. 66 350. 66 350. 66 350. 66 Reserves & Surplus 038. 89 5470. 52 5501. 16 5781. 87 7962. 21 Total Liabilities & Equity 12068. 04 11832. 69 12976. 77 15344. 13 20332. 89 Table 4. 8 Shell Pakistan Limited Income Statements (2001-2005) 2001 2002 2003 2004 2005 Sales (Net) 65725. 15 69042. 05 77822. 82 79180. 35 98526. 62 Cost of Sales 61628. 48 64164. 23 72049. 47 72973. 11 89684. 58 Gross Profit 4096. 67 4877. 82 5773. 35 6207. 24 8842. 04 Operating Expenses 2486. 67 3292. 92 3794. 36 3806. 01 4609. 77 Operating Profit 1610. 00 1584. 90 1978. 99 2401. 23 4232. 27 Financial Charges 50. 27 46. 76 51. 48 224. 33 596. 55 Other Income 191. 72 154. 46 110. 32 12. 02 22. 33Profit Before Taxation 1630. 45 1572. 44 1899. 91 2188. 92 3658. 05 Taxation 574. 42 509. 62 644. 91 680. 91 1197. 19 Profit After Taxation 1056. 03 1062. 81 1255. 00 1508. 01 2460. 86 Table 4. 9 Shell Pakistan Limited Vertical Common Size of Balance Sheets (2001-2005) 2001 2002 2003 2004 2005 Current Assets 53. 62% 60. 39% 47. 39% 51. 57% 62. 58% Fixed Assets (Gross) 49. 95% 56. 67% 58. 21% 56. 75% 47. 07% Accumulated Depreciatio n 18. 14% 23. 15% 25. 36% 25. 11% 22. 29% Fixed Assets (Net) 31. 80% 33. 52% 32. 86% 31. 64% 24. 77% Capital Work in Progress 3. 85% 4. 52% 4. 35% 3. 55% 2. 86% Long Term Investment & Deposits 0. 73% 1. 57% 15. 40% 13. 24% 9. 78% Total Assets 100. 00% 100. 00% 100. 00% 100. 00% 100. 00% Current Liabilities 53. 62% 50. 16% 54. 17% 58. 93% 58. 78% Long Term Liabilities 0. 55% 0. 40% 0. 60% 0. 28% 0. 24% Deferred Taxation 1. 17% 0. 25% 0. 13% 0. 82% 0. 10% Financed By Paid-Up Capital 2. 91% 2. 96% 2. 70% 2. 29% 1. 72% Reserves & Surplus 41. 75% 46. 23% 42. 39% 37. 68% 39. 16% Total Liabilities & Equity 100. 00% 100. 00% 100. 00% 100. 00% 100. 00% Analysis Vertical common size of the B/S of Shell Pakistan shows that the company has been pretty much maintaining its proportion of all the assets, liabilities