Financial Analysis of Oil Marketing Companies

? synopsis OF OIL AND GAS MARKETING SECTOR- AN OVERVEW OF ITS GROWTH OVER THE LAST cinque YEARS (2001 2005) AUTHOR Akhlaq Ahmad Enroll No. 111031-004 Cell no 03215008455 BBA-6 (Morning) executive curriculum Mr. Musbashir Sadiq Bahria Institute of Management & Computer Sciences, Bahria University Shangrila Road, sphere E-8, Islamabad ABSTRACT Pakistans parsimony is undergoing signifi back tootht morphological changes since 1999-2000. The watercourse GDP suppuration is accelerating e very(prenominal)where the fail tail fin days. Over the abutting quin old age, 7-8 percent development is targeted to be sustained, which give demand a huge rise in the sinew intention.The energy field in Pakistan comprises of fossil embrocate colour, inborn blow reveal, power (hydro and nuclear) and coal. The coarse crude oil and gas vault of heaven has a lot of probable in Pakistan. Pakistan is classify as low priority by foreign investors because of the unstable stinting a nd semipolitical situation. However, efforts atomic number 18 macrocosm make by the Government to capture investment in the oil and gas ara, by various incentives more than(prenominal) as liberal granting of exploration licenses, restructuring and reform of the oil and gas sectors, deregulating of prices, and privatization of selected assets.The reform has enhance transp arncy, making finish makers aware of the various The documentary of this thesis is to analyze whether the fossil oil and gasconade sector in Pakistan has in reality wined and whether there are meliorate opportunities for investment and growth in this sector now than there were in the past. For the purpose of determining the purport of growth in the inunct and splatter Sector, quaternion oil color and Gas trade Companies (O&GMC) were selected and their fiscal education analyzed over a period of five days (2001 2005). monetary information relevant to the sample companies was gathered fr om wee-wee accounts of the companies, in their annual reports. This data was condensed and summed up for the four companies and presented in tables and thus employ for analytic thinking. The results were held to be representative of the entire inunct Marketing Sector and seem to show a pronounced trend of growth in the fiscal indicators reveal that there has been a marked improvement in the growth of this industry. ACKNOWLEDGMENT First of any I am very much thankful to ALLAH ALMIGHTY, who gave me strength & power to complete this task expeditiously & effectively.I am in like manner very much thankful to my parents who gave me the staple knowledge of how to read & write, who excessively prayed for me either time, especially in the moment of exact & trouble. Thanks to my to the senior highest degree 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 con ramp localize during the whole period of data collection. I am also very grateful to all those who helped me & gave me up-to-date information or any some other information regarding this summary man completing this task. Thank you in anticipation.DADICATION TO MY LOVING PARENTS assert board OF CONTENTS ABSTRACTi ACKNOWLEDGMENTiii DADICATIONiv TABLE OF CONTENTSv inclination OF TABLESvi LIST OF FIGURESix CHAPTER 11 INTRODUCTION1 un detail both(prenominal)er Area/Background1 Rationale5 Problem relegatement6 Objectives of the learn7 Research Questions8 Limitations9 CHAPTER 210 LITERATURE REVIEW10 CHAPTER 315 METHOD15 Procedure17 CHAPTER 421 RESULTS AND handling21 CHAPTER 566 CONCLUSION AND RECOMMENDATION66 Conclusion66 Recommendations 68 GLOSSARY 69 REFERENCES73 LIST OF TABLES circuit card 4. 1 Pakistan pronounce Oil federation express ratio Sheets (2001-2005)21 elude 4. Pakistan State Oil alliance peculiar(a) Income controversys (2001-2005)22 display boa rd 4. 3 Pakistan State Oil office staffy control perpendicular popular size of sense of equilibrium Sheets (2001-2005)23 mesa 4. 4 Pakistan State Oil divorcey exceptional unsloped Common size of it of Income instruction (2001-2005)24 get across 4. 5 Pakistan State Oil confederation particular(a) swimming Common surface of rest Sheets (2001-2005)25 bow 4. 6 Pakistan State Oil family Limited plane Common size of it of Income statement (2001-2005)27 Table 4. 7 eccentric Pakistan Limited parallelism Sheets (2001-2005)28 Table 4. Shell Pakistan Limited Income educational activitys (2001-2005)29 Table 4. 9 Shell Pakistan Limited Vertical Common size of symmetry 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 flat Common Size of Balance Sheets (2001-2005)32 Table 4. 12 Shell Pakistan Limited naiant Common Size of Income Statements (2001-2005)34 Table 4. 13 Sui N orthern Gas Pipelines Limited Balance Sheets (2001-2005)35 Table 4. 14 Sui Northern Gas Pipelines Limited Income Statements (2001-2005)36 Table 4. 5 Sui Northern Gas Pipelines Limited Vertical Common Size of Balance Sheets (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 grey 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 Horizon tal 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 Consolidated 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 measuring the Liquidity of the sector 55 Table 4. 33 Ratios for measuring the extensive line Debt gainful Ability57 T able 4. 34 Ratios for measuring the profit competency of the sector59 Table 4. 35 Ratios of the bar of the market value of the sector63 LIST OF FIGURES cast 4. 1 Ratios for measuring the foresightful bourn Debt remunerative(a) Ability55 Figure 4. 2 Ratios for measuring the capacious limit Debt Paying Ability57 Figure 4. 3 Ratios for measuring the Long boundary 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 limit the growth of the oil & gas merchandising companies65 CHAPTER 1 INTRODUCTION Broad Problem Area/Background It is universally recognized that energy is virtuoso of the most important inputs for scotch growth and national development. The purpose of energy is unrivalled of the critical indicators of the level of development of any country. Developed countries use to a greater extent energy per unit of economic output and far more ene rgy per capita than developing countries.Economic growth is the key to this situation and for economic growth we need energy. Pakistans economy is undergoing profound structural changes since 1999-2000. The real GDP growth is accelerating over the last five grades. Over the next five twelvemonths, 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, inbred gas, power (hydro and nuclear) and coal. The total primary energy supplies measured in terms of oil equivalent (toe) stood at 50. billion tonnes in 2003-04. Oil and gas account for nearly 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 legate might be to evaluate the achievement of the oil selling companies. As these are the companies which are not only selling the oil establish products which meet the major needs of the energy in Pakistan but also these companies are dealing in the recently do popular besotted Natural Gas.As this Oil and Gas sector represents more than 80% of the energy consumed in Pakistan so the companies which are dealing with the marketing of these fuels need to be assessed for their m unmatchedtary functioning and results in the past few years. If these companies are showing growth we might assume that the energy sector is evolution and the economy is on the right path. The first gas field was observe in at Sui in 1952 and provides the basis for Pakistans extensive gas net act. Pakistan imports natural oil (it only produces 17% to 20% of what it needs), however is self sufficient in natural gas.Of the companies that are being researched in the present champaign, 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 bunch of the natural gas. Pakistan declared 1997-98 an Oil and Gas category. As a result of offering incentives to potential investors, including foreign companies, many $2. 5 billion of investment was attracted. Oil and Gas Consumption 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 steady through with(predicate)out the 1990s with the gas consumption change magnitude at a rate of 4. 9 percent while the oil consumption increasing at a reasonably reduced rate of 2. 5 percent. Until 1999, the organization 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 often based on political as opposed to economic considerations.Since earl y 2000, an ambitious pro-market reform program 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 Pakistan now leads South Asia in sector reform (Economic Survey of Pakistan, 2004-05). The government actions project focused on promoting private investments in the upstream, deregulating most of the market for petroleum products, establishing a regulatory agency for the gas sector, and introducing market-related price caps for petroleum products.The governments long term goal is to create a competitive, efficiently-run, monetaryly smooth, and a immensely 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 get to 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 of the line of merchandise. Rationale Oil and Gas is an important sector in Pakistan economy and it largely affects the GDP of Pakistan, wherefore there is a great emphasis on exploration and marketing. The consumption of Oil was 16. 45 trillion tonnes in 2002-3 and consumption of gas was 872,264 meg cubic feet. The acceleration in growth of energy consumption is not surprising when seen against a 15. 4 percent growth in large scale manufacturing and an 8. 5 percent growth in real GDP. high 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 passionateness and cool our homes and provid e 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. correct from Strategic point and defense view point Pakistan is dependent on oil and gas. Problem 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 improver the oil and gas supplies need to be analyzed and companies encouraged. With this premise in mind four, Oil and Gas marketing companies own been selected to analyze their financial deed that would also indicate their success. Objectives of the reading The objective of research study is to analyze the growth and development of the Oil and Gas Marketing Sector in Pakistan.Currently according to the instrument panel of Investment of Pakistan there are 26 (local and international) companies operating in upstream, 7 trim backriver compa nies, and 4 refineries. The focus of this analytic thinking 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 substructure the growth. Research 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 certain limitations that are not easy for the tec to overcome at this level. The general level of inflation has not been familiarised for.Overall prices of oil have cast upd due to unavoidable natural phenomenon like war in Iraq and Hurricane Katrina. The profitability of the oil marketing companies could be due to accession in prices of petroleum and it may not be the true measure of their financial performance. Some secondary data was not easily visible(prenominal) and was very difficult to obtain. As the research resolve was given to the researcher during the semester so the time constraint played its role. contempt time constraint, the researcher has conducted a comprehensive research.The limited make in the research field is also a matter of consideration. This is the first study that goes to researchers credit. Hence, the researcher does not possess any experience in the field. CHAPTER 2 LITERATURE REVIEW The firm itself and distant providers of superior- creditors and investors all undertake financial statement psycho abstract. The type of analysis varies according to the specific pursuits of the party involved. Trade creditors (suppliers owed money for well(p)s and services) are primarily interested in the liquid state of a firm.Their claims are short term, and the ability to pay these claims quick is best judged by an analysis of firms liquidity. The claims of bond bondholders, on the other 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 expectant structure of the firm, the major sources and uses and uses of funds, the firms profitability over time, and projections of next profitability over time, and projections of future profitability.The purpose of financial statement analysis is to examine past and current financial data so that a fraternitys performance and financial send can be evaluated and future risks and potential can be estimated. Financial statement analysis can give in valuable information about trends and re lationships, the quality of a corporations earnings, and the strengths and weaknesses of its financial position (Woelfel, 1989). Investors in a connections common stock are principally concerned with present and expected future earnings as well as with the stability of these earnings about a trend line.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, management 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(prenominal) assess the firms present financial position and evaluates opportunities in relation to thi s current position. With respect to internal control, the financial manager is peculiarly 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 all 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 statement s are often more meaningful than the data found at heart the body of the statements.The notes explain the accounting policies of the company and usually provide lucubrate explanations of how those policies were applied along with supporting details. Analysts often compare the financial statements of one company 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 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 componen ts 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 of 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 warning 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 analytic 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 unavoidable to produce food and manufacture goods, po wer machines and appliances, transport raw materials and finish 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 grind to a halt and the abnormal populations suffer (Klare, 2005). Since World War II, economic growth round the manhood has been fueled largely by abundant supplies of hydrocarbons that is, by petroleum and natural gas.Since 1950, worldwide oil consumption has expectant eightfold, from approximately 10 to 80 million barrels per day gas consumption, which began from a smaller 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 cru de oil and natural gas or simply oil and gas, found in petroleum reservoirs generally thousands of feet below the surface. Exploratory well are drilled to discover petroleum come up, while development wells are drilled to produce a portion of previously detect oil and gas. Estimated volumes of recoverable gas within the reservoir are called oil and gas reserves (Brock, Jennings & Feiten, 1990). The oil and gas sector or the petroleum industry has the following four major segments 1. Exploration and Production r E&P where oil and gas companies explore 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 touch on 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 crease, truck, ignitor or tanker and N atural 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. Share superior of the company 2. sales Revenue 3. Distribution data of the companies mingyd 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 attracter 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, diffusion 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 cytosine-year history in this part of the world, dating back to 1899. Shell Pakistan has been takin g 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 authoritative approximately 30% share of the white oil products presently and during the last financial year the Capital Expenditure amounted to Rs 1. billion. Sui Northern Gas Pipelines Limited (SNGPL) Sui Northern Gas Pipelines Limited (SNGPL, is the largest integrated gas company suffice more than 2 million consumers in North Central Pakistan through an extensive interlock in Punjab and NWFP. The Company has over 41 years of experience in operation and maintenance of high-pressure gas transmission dodging 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 region of the nation which has a rapidly developing demand for natural gas and power generation due to significant industrial developm ent. 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 besides 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. therefrom due to the purpose of the study it is cl assifies as descriptive study.Procedure Base Year and Period of analytic thinking 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 various 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 running(a) Capital Current Ratio gross revenue to Working Capital 2. lucrativeness Ratios measure the ability of a firm to generate earnings. The ratios used were come up Asset Turnover operate Income boundary line Return on fall Equity Return on Investment Gross proceeds Margin Net Profit M argin 3. Debt Ratios that measure the long term debt paying ability of the firm used were Debt Ratio Debt to Equity Ratio ameliorate 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 bring up 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 percentages. For the financial data there was -Horizontal and vertical analysis of the following balance sheet items, using 2001 as a base year (horizontal) and total assets as base (vertical) fixed assetCapital work in progress Long term investments Current assets reserves & superabundance Equity and liabilities were shown as a percentage of total l iabilities. -Horizontal and vertical analysis of the following Profit and Loss items with 2001 as a base year (horizontal) and Net Sales as base (vertical) Financial Charges operational write off Gross Profits Taxes Profit before Tax CHAPTER 4 RESULTS AND DISCUSSION Table 4. 1 Pakistan State Oil Company Limited 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 Cost 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 onward receipts 3451. 36 5137. 25 6209. 32 6262. 97 9226. 39 tax revenue 1200 1949 2179 2181 2183 Profit After r eceipts 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% set(p) Assets (Gross) 21. 99% 24. 10% 29. 01% 25. 40% 21. 78% depreciation 11. 02% 11. 90% 13. 96% 12. 51% 12. 08% flash-frozen Assets (Net) 10. 97% 12. 21% 15. 05% 12. 89% 9. 70% Capital work in get along with 2. 28% 2. 72% 3. 53% 2. 76% 2. 39% Long Term Investment & Deposits 5. 32% 10. 23% 12. 01% 9. 75% 9. 69% entirety Assets ascorbic acid. 00% ascorbic acid. 00% hundred. 00% carbon. 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% match Liabilities 67. 45% 65. 69% 59. 60% 63. 58% 66. 76% ante up Capital 4. 74% 4. 36% 5. 30% 4. 04% 3. 29% Reserves & Surplus 27. 80% 29. 96% 35. 09% 32. 38% 29. 95% jibe 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.The 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 sales which has resulted in a significant improver in the gross profit while the operating profit has also shown an subjoin 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.There 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% Capita l work in get along with 100% 30. 150% 66. 47% 70. 52% 81. 58% Long Term Investment & Deposits 100% 109. 346% 142. 40% 158. 6% 214. 84% entirety 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 new projects that have been undertaken and this shows that the company is expanding. The increase in current liabilit ies 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 performance 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 reduced 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. 13 203 32. 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 Depreciation 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% Ana lysis 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