FINANCIAL STATEMENT ANALYSIS

Financial Statement Analysis of PSO

From: (2005 to2009)

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 FINANCIAL STATEMENT ANALYSIS

SUBMITED TO: SIR BURHAN SHAH

SUBMITED BUY: ASAD ALI RIND MBA-3(B)

Acknowledgement:
First of all I am thanks full to Almighty Allah who give me courageous and potential to
complete this project well manner after that I am thanks full to my Respected Teacher Sir
Burhan Shah who has given me such a brilliant opportunity and proper guidance to practically

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 FINANCIAL STATEMENT ANALYSIS

work on the Financial analysis of Pakistan State oil limited. And I am also thanks full to my
senior fellows who has also support me in completion of this project.

PSO PAKISTAN
INTRODUCTION

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 FINANCIAL STATEMENT ANALYSIS

Pakistan state oil is the largest oil marketing company in the country. Currently engaged in the
marketing and distribution of various POL products including motor gasoline, high speed diesel,
furnace oil, jet fuel, kerosene, LPG CNG, petrochemical and lubricants. In addition to this also
import different product according to their demand pattern and posses biggest storage facilities
representing 80% of country total storage capacity. PSO also win the “award of Karachi stock
Exchange” Tope Company Award.

HISTORY OF PSO
Soon after the 3rd June 1976 petroleum storage development corporation (PSDC) came into
existence. On august 23rd 1976 PSDC was renamed as state oil company limited (SOCL). On the
30th December 1976 the merger of premier oil company and state oil company give way to
Pakistan state oil (PSO) company. After commencement of PSO corporate culture went to
comprehensive renewal program which was fully implemented in 2004. This program over the
years includes the revamping of the organizational architecture, rationalization of staff, employee
empowerment and transparency in decision making through cross functional teams. This new
corporate renewal program has divided the company’s major operations into independent
activities supported by legal, financial, informative and other services.

In order to reinforce and monitor this cultural change related check and balance have been
established by incorporating monitoring and control system. Human resource becomes the
company’s one of the main priorities on the companies agenda under corporate reform.

It is due to this effective implementation of corporate reform and consistent application of the
best industrial practices and business development strategies, that PSO has been able to maintain
its market leadership in a highly competitive business environment.

VISSION STATEMENT

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 FINANCIAL STATEMENT ANALYSIS

To excel in delivering value to customer as an innovative and dynamic energy company that get
to the future first.

MISSION STATEMENT
We are committed to leaderships in energy market through competitive advantages in providing
the highest quality petroleum products and services to our customers based on.

 Professionally trained high quality motivated work force working as a team in an

environment which recognizes and rewards performance innovation and creativity and
provide for personal growth and development.

 Lowest cost operation and assured access to long term and cost effective supply sources.

 Sustain growth in earning in real terms.

 High ethical and safety environment and socially responsible business practices.

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 FINANCIAL STATEMENT ANALYSIS

VALUE
Our values are the fundamental principles that define our culture and are brought to life in our
attitudes and behavior it is our values that t make us unique and unmistakable. Our values are
defining bellow.

 Excellence: We believe that excellence in our core activities emerges from

a passion for satisfying our customers' needs in terms of total quality management. Our
foremost goal is to retain our corporate leadership.

 Cohesiveness: We endeavor to achieve higher collective and individual goals through

team. This is inculcated in the organization through effective communication.

 Respect: We are an Equal Opportunity Employer attracting and recruiting the finest
people from around the country. We individual contribution of individuals and teams.
Individual contributions are recognized through our
reward and recognition program.

 Integrity: We uphold our values and Business Ethics principles in every action and
decision. Professional and personal honesty, dedication and
and commitment are the landmarks of our success. Open and transparent
business practices are based on ethical values and respect for employees, communities and
the environment.

 Innovation: We are committed to continuous improvement, both in New Product and

Processes as well as those existing already. We encourage
Creative Ideas from all stakeholders.

 Corporate responsibility: We promote Health, Safety and Environment culture both

internally and externally. We emphasize on Community
Development and aspire to make society a better place to live in.

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 FINANCIAL STATEMENT ANALYSIS

Market Share despite Economic Slowdown

Karachi, August 12, 2009: The Board of Management of Pakistan State Oil Company Limited
(PSO) reviewed the performance of the company for the financial year ended June 30, 2009 on
Wednesday, August 12, 2009 at the company’s head office and approved the audited financial
statements for the year.

Sardar Muhammad Yasin Malik, Chairman, BoM, presided over the meeting. He said that during
financial year 2009, the Company’s sales revenue touched Rs. 719 billion compared to Rs. 583
billion in the corresponding period last year mainly due to the reliance of power sector on PSO
for supply of Furnace Oil as other suppliers in the market shied away due to circular debt
problem. During financial year2009, PSO sold 13.2 million tons of POL products as compared to
13 million tons during the preceding year. The Company was able to sustain its sales volumes
and market share despite the overall economic slowdown and decline in petroleum products
consumption in the white oil segment.  PSO ended financial year2009 at an overall market share
of 71.3% as compared to 70.5% during financial yeare2008.   

Black Oil

In Black Oil, PSO sales volume grew by over 10.2% which enabled the Company to enhance its
market share appreciably from 82.3 % in financial year2008 to 85.8% in financial year2009. This
actually demonstrates Company’s ability to meet the rising Furnace Oil demand from the power
sector.

White Oil

In White Oil, despite a negative growth of 9.1% in sales volumes, PSO continued its market
leadership with 59.4% market share. The decrease in white oil volumes was mainly due to the
overall economic downturn in the country which resulted in a 5.3% decline in industrial volumes
as well.

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 FINANCIAL STATEMENT ANALYSIS

Quick overview of the company’s financial statements

An overview of the company’s financial statements has shown that the management
is following the GAAPs for the preparation of its financial statements.

Some of the generally accepted accounting principles that are being followed are:

 Principle of regularity: conformity to enforced rules and laws.

 Principle of consistency: when a business has once fixed a method for the
accounting treatment of an item, it will enter all similar items that follow in
exactly the same way.

 Principle of sincerity: the accounting unit is reflecting in good faith the

reality of the company's financial status.

 Principle of the permanence of methods: This principle aims at allowing

the coherence and comparison of the financial information published by the
company.

 Principle of non-compensation: Management is showing the full details of

the financial information and not seeks to compensate a debt with an asset,
revenue with an expense, etc.

 Principle of prudence: This principle aims at showing the reality "as is" and
it is also being followed. Etc.

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 FINANCIAL STATEMENT ANALYSIS

Auditor’s Opinion

In the past five years auditor has approved the financial statements as un-qualified.

Auditors in 2009

A.F. Fergussion & co KPMG Tasser Hadi & co

Auditors in 2008

Ford Rhodds Sidat Hyder & co A.F. Fergussion & co

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 FINANCIAL STATEMENT ANALYSIS

Pakistan State Oil Limited

Horizontal Analysis
Current Assets: 2005 2006 2007 2008 2009
Stores, spares and loose tools 100 95.77 97.95648 88.70626 85.8945
Stock-in-trade 100 136.85 143.6215 302.9644 197.7244
Trade debts 100 174.34 200.2623 499.254 1185.524
Loans and advances 100 127.88 171.619 185.8024 196.0229
Trade deposits and short term prepayments
100 191.97 218.1227 55.28185 75.98949
Other receivables 100 139.22 152.0679 151.3978 123.6414
Short term investments 100 0.00 0 0 0
Taxation
Cash and bank balances 100 98.80 79.20534 157.0625 150.0111
Total Current Assets 100 142.68 153.4657 284.474 340.473
Fixed Assets
Property, plant and equip: 100 92.27 98.77747 91.97517 86.13747
Intangibles 100 107.03 87.25518 72.93757 47.61385
Long term investments 100 141.47 129.0266 116.5366 92.91158
Long term loans, advances and receivables 100 81.90 81.58935 62.07108 52.72102
Long term deposits and prepayments 100 88.17 62.67699 75.21467 79.54794
Deferred tax 100 327.32 321.4983 326.5488 4035.011
Total Fixed Assets 100 104.11 105.6208 97.04335 127.2916
Total Assets 100 134.15 142.8796 243.0036 293.305
Liabilities & Stockholders’ Equity
Current Liabilities
Trade and other payables 100 141.83 160.6467 314.335 426.9986
Provisions 100 103.06 91.28711 96.27287 91.28711
Accrued interest / mark-up 100 188.87 206.4342 340.9173 870.3773
Short term borrowings 100 158.97 188.3941 228.5705 387.6986
Taxation-net 100 143.65 5.162512 54.05938 0
Total Current Liabilities 100 143.62 156.835 286.0934 396.845
Longe Term Liabilities
Long-term deposits 100 110.19 113.7947 123.613 126.593
Retirement & other Benefits 100 117.47 124.2032 118.9214 126.3908
Total Longe Term Liabilities 100 115.01 120.6875 120.5061 126.4591
Stockholders' Equity
SHARE CAPITAL 100 100.00 100 100 100
RESERVES 100 120.65 121.4433 184.7792 121.011
Total Stockholders' Equity 100 118.63 119.347 176.4912 118.957
Total liabilities & Shareholder's equity 100 134.15 142.8796 243.0036 293.305
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 FINANCIAL STATEMENT ANALYSIS

Pakistan State Oil Limited

Horizontal
Analysis
PROFIT AND LOSS ACCOUNT
INCOME STATEMENT 2005 2006 2007 2008 2009

Net sales /revenue 100 140.3505 164.5649 233.0682 288.3224

Less: Cost of Goods Sold 100 141.4 169.7783 234.0819 306.7487

Gross Profits 100 125.1769 89.18329 218.4119 21.89756

other operating income 100 73.46221 98.80966 107.895 112.155

Less: Operating Expenses:

Transportation costs 100 116.7671 117.8948 107.8581 163.9719

Distribution and marketing expenses 100 106.6963 118.4004 140.3224 169.5473

Administrative expenses 100 105.9929 111.2437 129.9592 130.4867

Depreciation 100 107.5517 112.824 114.9795 117.2974

Amortisation 100 332.8808 392.3603 446.4844 492.6037

Other operating expenses 100 265.3561 81.45507 361.5423 430.7051

Total Operating Expenses 100 134.789 110.457 170.5316 198.6767

Add: Other income

(58.1078
profit/Loss from operation 100 117.3639 82.83535 233.9353 )

Less: Interest Expense 100 238.5097 312.413 369.005 1681.163

(127.988
100 112.4965 73.61136 228.5085 )

Share of profit of associates

(123.091
Net Profits Before Taxes 100 123.757 77.19137 231.6985 )

Less: Taxes 100 110.0722 68.7577 207.0384 129.1465

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 FINANCIAL STATEMENT ANALYSIS

(119.326
Net Profit/Loss After Taxes 100 132.2659 82.43522 247.0315 )

Pakistan State Oil Limited

Vertical ANALYSIS
Current Assets: 2005 2006 2007 2008 2009
Stores, spares and loose tools 0.249597 0.178185 0.171121 0.091113 0.073095
Stock-in-trade 39.35029 40.14426 39.55461 49.05991 26.52703
Trade debts 12.9829 16.87298 18.19702 26.67353 52.47619
Loans and advances 0.407679 0.388626 0.48968 0.311714 0.272462
Trade deposits and short term
prepayments 1.3882363 1.9866899 2.1193068 0.3158154 0.3596644
Other receivables 19.802 20.55065 21.07541 12.33718 8.34744
Short term investments 0.019272 0 0 0 0
Taxation 0 0 0 0 0.462534
Cash and bank balances 3.674276 2.706191 2.036835 2.374825 1.879212
Total Current Assets 77.87424 82.82758 83.64399 91.16409 90.39763
Fixed Assets
Property, plant and equip: 15.50719 10.66636 10.72064 5.869363 4.554133
Intangibles 0.27653 0.220639 0.168874 0.083001 0.044891
Long term investments 4.431091 4.672993 4.00147 2.125007 1.403657
Long term loans, advances and
receivables 1.4714303 0.8984099 0.8402389 0.3758516 0.2644868
Long term deposits and prepayments 0.201046 0.13214 0.088193 0.062228 0.054526
Deferred tax 0.238473 0.581879 0.536595 0.32046 3.28068
Total Fixed Assets 22.12576 17.17242 16.35601 8.835911 9.602373
Total Assets 100 100 100 100 100
Liabilities & Stockholder’s Equity
Current Liabilities
Trade and other payables 49.30458 52.12966 55.43559 63.77748 71.77847
Provisions 1.441899 1.107727 0.921243 0.57125 0.448771
Accrued interest / mark-up 0.122207 0.172059 0.176566 0.171448 0.362648
Short term borrowings 9.198623 10.90078 12.12886 8.652275 12.15899
Taxation-net 2.569915 2.752003 0.092856 0.571712 0
Total Current Liabilities 62.63722 67.06223 68.75512 73.74416 84.74888
Long Term Liabilities
Long-term deposits 1.290761 1.060296 1.028011 0.656595 0.557104
Retirement & other Benefits 2.530571 2.215941 2.199789 1.238414 1.090472
Total Long Term Liabilities 3.821332 3.276237 3.2278 1.895009 1.647576
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 FINANCIAL STATEMENT ANALYSIS

Stockholders' Equity
SHARE CAPITAL 3.279028 2.444387 2.294958 1.349374 1.117958
RESERVES 30.26242 27.21715 25.72213 23.01145 12.48559
Total Stockholders' Equity 33.5414 29.6615 28.0171 24.3608 13.6035
Total liabilities & Shareholder's
equity 100 100 100 100 100

Pakistan State Oil Limited

Vertical Analysis
PROFIT AND LOSS ACCOUNT

INCOME STATEMENT 2005 2006 2007 2008 2009

Net sales /revenue 100 100 100 100 100

Less: Cost of Goods Sold 93.53125 94.2306 96.49436 93.93803 99.50871

Gross Profits 6.468751 5.769396 3.505636 6.061968 0.49129

other operating income 0.60909 0.31881 0.365716 0.281968 0.236931

Less: Operating Expenses:

Transportation costs 0.147418 0.122647 0.105611 0.068221 0.083838

Distribution and marketing expenses 1.099367 0.835753 0.790968 0.661891 0.64648

Administrative expenses 0.415376 0.313693 0.280789 0.231615 0.187988

Depreciation 0.458033 0.350994 0.314023 0.225961 0.18634

Amortization 0.005026 0.011921 0.011984 0.009629 0.008587

Other operating expenses 0.436419 0.825123 0.216016 0.676987 0.651937

Total Operating Expenses 2.561639 2.460131 1.71939 1.874303 1.76517

Add: Other income 0 0.148463 0.121313 0.06337 0.126765

profit/Loss from operation 4.516201 3.776538 2.273275 4.533003 (0.91018)

Less: Interest Expense 0.174444 0.296447 0.331167 0.276188 1.017154

4.341758 3.480091 1.942108 4.256816 (1.92734)

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 FINANCIAL STATEMENT ANALYSIS

Share of profit of associates 0 0.003483 0.000945 0.000594 0.000737

Net Profits Before Taxes 4.341758 3.828436 2.03656 4.31624 (1.85359)

Less: Taxes 1.664594 1.305485 0.695493 1.478687 0.745612

Net Profit/Loss After Taxes 2.677164 2.522951 1.341068 2.837554 (1.10798)

Pakistan State Oil Limited

Overview of Ratio Analysis

Ratios 2005 2006 2007 2008 2009

Liquidity Ratio

Current Ratio 1.243258 1.235085 1.216549 1.236221 1.066653

Quick Ratio 0.615033 0.636473 0.641252 0.570949 0.753645

Day's sales in receivable ratio 35.35424 34.47292 30.85489 45.95682 24.24507

Day's sales in inventory ratio 37.79939 36.58358 31.97585 48.92248 24.36477

Operating cycle 73.15363 71.0565 62.83074 94.8793 48.60984

Leverage Ratio

Time Interest Earned 25.88918 12.73934 6.864436 16.41277 (0.89483)

Debt Ratio 0.664586 0.703385 0.719829 0.756392 0.863965

Debt-to-Equity 1.981386 2.37137 2.569251 3.104951 6.351024

Profitability Ratio

Net profit Margin 0.026772 0.02523 0.013411 0.028376 (0.01108)

Total Asset Turnover 4.062555 4.250482 4.67914 3.896455 3.993541

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 FINANCIAL STATEMENT ANALYSIS

Return on Assets 0.108761 0.107238 0.06275 0.110564 (0.04425)

Operating Incom Margin 0.045162 0.037765 0.022733 0.04533 (0.0091)

Return on Total Equity 0.324259 0.361537 0.223972 0.45386 (0.32526)

Gross Profit Margin 0.064688 0.057694 0.035056 0.06062 0.004913

INTERPRETATIONS OF RATIO’S

CURRENT RATIO:

CURRENT RATIO= Current Assets

Current Liabilities

Current Ratio shows a firm’s ability to cover its current liabilities with its current
assets. Current ratio is more than one in the following year 2005,2006,2007,2008 &2009 which
is good sign for the company but it is gradually decreases from year 2005 to 2009 which is not
good sign. The main reason of this large Decrease in the current ratio is because of large amount
of increase in current liabilities from year 2005 to 2009. Although there is increase in the current
asset but less than the current liabilities. only the figure of short term borrowing is increase
to442% greater than the previous years, in spite of that the current ratio is decreases from year
2005to 2009 company has potentials to pay its current liabilities because current ratio is greater
than one and company can easily pay its current liabilities from it current assets.

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 FINANCIAL STATEMENT ANALYSIS

QUICK RATIO:

QUICK RATIO = current assets-Inventory

Current Liabilities

Quick ratio of Pakistan State Oil company has continuously increasing because the inventory
cost is continuously decreasing from year 2005 to2009except for the year 2008 because in the
year 2008 the inventory cost was increased up to the 49% result of that Quick Ratio was
decreased . In the year 2009 the quick ratio is on top which is 0.75 because in this year the
inventory was decreased up to 26%. Over the entire firm Quick ratio is good which positive sign
is to pay its current obligation.

DAY'S SALES IN RECEIVABLE RATIO:

DAY'S SALES IN RECEIVABLE RATIO = Gross Receivable

Net Sale / 365

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 FINANCIAL STATEMENT ANALYSIS

This is the general relationship between the gross receivables and the net sales of the year. This
ratio states that how efficiently the company is managing its receivables. As this ratio is less it is
a positive indicator for the firm is. When we compare Day’s Account Receivable Ratio from
years 2005to2009 the average days sales account receivable is decreases which are good sign
but when we look at the figure of 2008 this ratio were increases from 30days to 45 days but
again decrease to 24 days in2009. It means that firm is working efficiently monitoring its credit
sale properly due to which this ratio is constantly decreases and there are less chance of bad
debt.

DAY'S SALES IN INVENTORY RATIO:

DAY'S SALES IN INVENTORY RATIO = Ending Inventory

Cost of Goods Sold / 365

This ratio shows a relationship between the inventory and the cost of goods sold. Inventory is
taken from the balance sheet of the firm while the cost of goods sold is obtained from the
income statement of the organization. It tells us that how often the company places an order
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 FINANCIAL STATEMENT ANALYSIS

for the inventory. When we compare it with the previous years we have found that this year
company is placing fewer orders than the previous years. It means there is decreasing trends is
shown from 2005 to 2009 this ratio was decreased except for the 2008 because in this year the
inventor was increased more than double but in the recent year 2009 this ratio is again
decreased dramatically and this is the positive sign.

OPERATING CYCLE:

OPERATING CYCLE= Account Receivable in Days + Inventory Turnover Turnover in days

It shows how many days are required to sale the inventory and receive cash from customers. If
this is low then it is good signal. When we compare operating cycle with the previous years we
found that there is decreasing trend was shown in the
operating cycle from 2005 to 2009 except for year 2008 in which operating cycle ratio was
increased from 73% to 98% because in this year the Days in inventory turnover ratio and days
sales account receivable was increased dramatically and ultimately increase in the operating
cycle ratio . Again this ratio was decreased in the year 2009 which is negative sign

TIME INTEREST EARNED:

Recurring Earnings, Excluding Interest Expense, Tax

Expense, Equity Earnings, and Minority Earning

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 FINANCIAL STATEMENT ANALYSIS

TIME INTEREST EARNED= Interest Expense, Including Capitalized Interest

This ratio shows how many times we are able to pay the amount of interest of loan which we
borrowed for the annual earning. If it is increases then it is satisfactory for business. The
investors show more confidence. When we look at the Time Interest Earned Ratio of PSO
from 2005 to 2009 there is decreasing trends were shown because the cost of goods sold was
increased due to increased in price of petroleum price in international market result of that the
EBIT was decreased an ultimate effect this ratio in the year 2009 this ratio was negative which is
not good sign for the company from investor point of view.

DEBT RATIO:

DEBT RATIO = Total Liabilities / Total Assets

This ratio indicates the firm long term debt paying ability .also indicates how many assets are
financed by creditors; it helps to tell how much creditors are protected in case of solvency. The
creditors are not well protected the company is not position to issue new long term debt from the
perspective of long term debt paying ability. This ratio lowers is better. if we look at the trends of
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 FINANCIAL STATEMENT ANALYSIS

this ratio from 2005 to2009 there is increasing trend it means company has acquired more and
more debt and more assets are financed by debt result in this ratio was increased.

DEBT-TO-EQUITY:

DEBT-TO-EQUITY = Debt / Equity

This ratio determines the long term debt paying ability of firm this compare total debt with
share holder’s equity. This also tells how well creditors are protected in case of solvency, from
long term debt paying ability point of view the lower this ratio is better, the company debt
position. When we look at the Debt to Equity ratio of PSO there is increasing trend was shown
from 2005 to 2009 it means the long term debt paying ability of PSO is decreasing from 2005
to2009 and creditors are less protected in case of solvency.

NET PROFIT MARGIN:

NET PROFIT MARGIN = Net Income

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 FINANCIAL STATEMENT ANALYSIS

Net Sales

This ratio shows a general relationship between net profit and the sales of the year. If this ratio is
high it shows that the firm is earning more profit and this is beneficial for the organization. This
ratio is mainly concern with the income statement of the business. When we compare this ratio
with the previous year’s 2005 to2009 ratios. we have found that the net profit margin is declining
so this is not a good news for the organization. This cause due to high cost of goods sold and
increased in prices of crude oil in the international market from last few years so it is very
difficult to control the cost of goods sold.

Total Asset Turnover:

Total Asset Turnover = Net Sales

Average Total Assets

This ratio shows the relationship between the net sales and the average total assets. This shows
that how much the company is generating sales by the utilizing the assets of the firm. One item
like sale is related to the income statement of the company while the average total assets are
related to the balance sheet of the firm. When we compare this ratio with the previous years
from 2005to 2009 we have found that this ratio is going to increase from 2005to 2007 but in
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 FINANCIAL STATEMENT ANALYSIS

2008 it is decreases and again in 2009 it is increases which is a positive sign for the organization.
This is due to the efficient use of the assets. So when sales increases then this ratio are also
increases. It is necessary to increase sale the nominator for the high taken results

RETURN ON ASSETS:

Return on Assets = Net Income

Total Assets

This ratio gives a general relationship between net income and the average total assets of the
company. Net income is relates to the income statement of the firm while the average total
assets are relates to the balance sheet of the firm. As this ratio decreases from 2005 to 2009
except for 2008 so this is a negative indicator for the firm. When we compare this ratio with the
previous year ratio we found that the company is going to decline because this ratio is less. This
cause due to net income because we have found that the operating expenses are high for this
reasons the net income decline and this ratio is also decreases.

OPERATING INCOM MARGIN:

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 FINANCIAL STATEMENT ANALYSIS

Operating Income Margin= Operating Profit

Net Sale

This ratio shows the relationship between operating profit and net sales. Both are concerned
with income statement. If operating profit increases this ratio also increases. In general higher
this ratio is beneficial for the organization. As compared this ratio from 2005 to 2009 this ratio
is decreases except for the 2008 in which this ratio is increased. Overall decreased in this ratio is
not because in these years the operating cost was increase because of the increase in
petroleum prices in the international market. As the negative trend was shown in the past few
years this decreasing trend is not good sign for company.

RETURN ON TOTAL EQUITY:

Return on Total Equity= Net income

Total Equity

This ratio shows the relationship between net income and total equity. The net income is
concerned with the income statement while the equity is equity is concerned with balance
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 FINANCIAL STATEMENT ANALYSIS

sheet. It shows the percentage earned on equity. If this ratio increases it is good signal for
organization. When we see this there is decreasing tend were shown from 2005 to 2009 which
is not good sign for the growth of PSO. This ratio was decreased because net income was also
decreases in these years.

GROSS PROFIT MARGIN:

Gross Profit Margin= Gross Profit

Net Sale

This ratio shows a relationship between the gross profit and the net sales of the organization.
Gross profit is concern with the income statement while the net sales are also concern with the
income statement. In general higher this ratio is higher is the benefit for the organization.
When we compare it with the previous year’s margin we have found that there is very slight
difference between these ratios is. So we can say that the gross profit of the company is stable
as there is a slight difference in it. But one thing is here that this profit margin is very low so
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 FINANCIAL STATEMENT ANALYSIS

company is inefficient in generating profit so it is recommended that the company should have
to increase this margin to earn high profit

EARNINGS PER SHARE:

Earnings per Share= Net income

No of shares

This ratio shows a relationship between the net incomes less preferred dividends to weighted
average number of common shares outstanding. It shows that how many shareholders earn on
their investments. If it is increases it is a better for shareholders and they consider the
organization as a healthy company. As we analyze this ratio from 205 to 2009 we find that there
is big ups and down in this ratio it increases from 2005 to 2006 and decrease in 2007 and again
increases in 2008 an we look at the 2009 figure this figure is negative because in this year PSO
was in the loss so this figure is negative which is not healthy sign for PSO

CURRENT ASSETS:

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 FINANCIAL STATEMENT ANALYSIS

The current assets of PSO comprises of cash and cash equivalent, account receivable,
spareparts, inventory and short term investment in the money market securities . When we
analyze the current assets of PSO we see there is increasing trends it means there is growth in
the PSO in the balance sheet point of view because its current assets are increasing each year
which is positive sign for the company and its short term debt paying ability is also going to
increased

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 FINANCIAL STATEMENT ANALYSIS

TOTAL ASSETS:

The total assets of the PSO comprises of both current assets and fixed assets which are financed
by both debt and owners equity. We analyze the total assets of PSO from 2005 to 2009 there is
increasing trend were shown which is positive sign it means that the companies total wealth is
going to increases. Which good for future earnings.

NET SALES:

The net sale is the total sales generated by the company through its core business activities.
When we analyzed the net sales from 2005 to2009 the is increasing trends were shown because
the consumption is going to be increase day by day.

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 FINANCIAL STATEMENT ANALYSIS

NET INCOME:

The net income comprises of sales minus all expenses including cost of goods sold, selling and
administrative expenses and interest expense and income tax. when we analysis the net income
trend from 2005 to 2009 there is ups and down were shown it means there is no stability in the
profit in the last five year due to different which were already explained above in the ratios.

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 FINANCIAL STATEMENT ANALYSIS

Conclusion:
In the above analysis of Pakistan State Oil (PSO) for the year 2005 to 2009, we found that the
earning per share is decreases and even in the year 2009 it is negative. It is not a good signal for
Pakistan State Oil Company Limited (PSO). The net sales are increases but cost of goods sold
with a higher rate that’s why the Gross profit, profit from operation decreases. This year
finance cost is very much increased. Its mean company borrows more loans. The overall
performance of PSO is not good But market Share increased which is positive sign for the future
long term growth.

Reference
www.pso.com

www.wickypedia.com

www.kse.com.pk

www.business.recorder

Analysis of Financial statement by Charles H Gibson

Financial Management by Vein Hon

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