Shell Pakistan _________________________________________________________________________________________________

INSTITUTE OF BUSINESS AND TECHNOLOGY

REPORT ON SHELL PAKISTAN

BM-1020 BM/993 BEM/1050 BEM/1043

S.M.Mairaj Ubaid Saeed Malik Qamarar Hayat Faiza Zahid

Course Code: Teacher:

FIN-601 Usman Ali

CITY CAMUS- SHAHRAH-E-FAISAL FALL 2010

Institute of Business & Technology

1

Shell Pakistan _________________________________________________________________________________________________

Institute of Business & Technology

2

Shell Pakistan _________________________________________________________________________________________________

Letter of Transmittal
Group Members Financial Management BIZTEK City Campus November 8, 2009 Mr Adeel Abdullah Durvesh Course Teacher Financial Management BIZTEK City Campus Sir, We have prepared a report for “Financial Management” as course requirement. We found it a very interesting subject to work on. We have tried our level best to understand how to formulate and document a professional report based on our learning from the course. We research on the financial statements of company namely “Shell Pakistan”. We tried to find out the entire problem faced by the organization with suitable suggestions and the upcoming global challenges. We are pleased to inform you that due to your cooperation we are able to complete and submit this report on time. We request you to please go through this report and feel free to give us a feedback. We will be honored to answer all your queries.

Regards,

BME/726 BME/739 BME/719 BEM/1050 BEM/1043

Khalid Bashir Ejaz Ahmed Malik Muhammad Imran Malik Qamarar Hayat Faiza Zahid

_____________ _____________ _____________ _____________ _____________

Institute of Business & Technology

3

courage to accomplish all tasks big and small. To develop this research report was a laborious task for all of us group members and we couldn’t have accomplished this without the help and support of a lot of people. we could never have been completed it without their co-operation. the will power and patience in making this report possible. which we were asked to adhere to. We would also like to thank all the people for the information they provided us for our project. Institute of Business & Technology 4 . In the end we hope and pray that this report meets the criteria. We would like to thank our Teacher Mr.Shell Pakistan _________________________________________________________________________________________________ Acknowledgement First of all we would like to thank Almighty God for giving us the strength. who gave us all the guidance and advice in making this report possible. We are grateful for his help and co-operation. Adeel Durvesh.

responsibly and profitably in oil. conducts its affairs. They believe that oil and gas will be integral to the global energy needs for economic development for many decades to come. Institute of Business & Technology 5 . chemicals and other selected businesses and to participate in the search for and development of other sources of energy to meet evolving customer needs and the world’s growing demand for energy. partners and policy-makers to advance more efficient and sustainable use of energy and natural resources.Shell Pakistan _________________________________________________________________________________________________ Executive Summary Shell Pakistan Limited General Business Principles govern how Shell Pakistan Ltd. are to engage efficiently. gas. The objectives of Shell Pakistan Ltd. maintaining a strong long-term and growing position in the competitive environments in which they choose to operate. Their role is to ensure that they extract and deliver them profitably and in environmentally and socially responsible ways. They seek a high standard of performance. They aim to work closely with their customers.

2.4 Trend Analysis of Current Ratios 4.2 1.1.3 Total Capitalization Ratio 4.2 2.5 Trend Analysis of Acid Test Ratios 4.3 3.1.4 3.5 RESPONSIBILITIES OF SHELL PAKISTAN Share Holders Customers Employees Those With Whom They Do Business Society CHAPTER NO.2.3 Summary of Liquidity Ratios 4.3.6 3. 2 2.5 Trend Analysis of Debt to Equity Ratios 4.1 3.1.1. Safety. 3 3.2.7 Trend Analysis of Debt to Total Capitalization Ratio 4.8 3.1.3 2. 1 2 3 4 8 8 8 8 10 10 10 10 10 12 12 12 12 13 13 13 13 13 16 16 16 16 17 17 17 18 18 18 18 18 19 19 19 20 20 20 20 CHAPTER NO.2 Acid Test Ratio 4.2.3 1.2 Debt to Total Assets Ratio 4.2. 4 4.3.1 Current Ratios 4.3 Institute of Business & Technology 6 .2 3.4 INTRODUCTION Introduction Mission Statement Vision Statement Objectives CHAPTER NO.6 Summary of the Current and Acid Test Ratios Trend Analysis Financial Leverage Ratios 4.6 Trend Analysis of Debt to Total assets Ratios 4.1 Interest Coverage Ratio 4.Shell Pakistan _________________________________________________________________________________________________ CONTENTS COVER PAGE LETTER OF TRANSMITTAL ACKNOWLEDGEMENT EXECUTIVE SUMMARY Page No.1 1.5 3.2. 1 1.1 FINANCIAL HEALTH OF SHELL PAKISTAN Liquidity Ratios 4.9 PRINCIPLES OF SHELL PAKISTAN Economic Competition Business Integrity Political Activities Health.2.4 2.7 3.8 Summary of Financial Leverage Ratios Trend Analysis Coverage Ratios 4.2. Security and The Environment Local Communities Communication and Engagement Compliance Living By Their Principles CHAPTER NO.4 Summary of Financial Leverage Ratios 4.2 Summary of Interest Coverage Ratio 4.1 2.2 4.1.1 Debt to Equity Ratio 4.

4 Return on Equity in % 4.5.5 Summary of Activity Ratio in % 4.1 Inventory Turnover Ratio 4.1 5.4.5.6 Summary of Activity Ratios Trend Analysis Profitability Ratios 4.12 Actions Executed by the Company to Overcome Problems 4.13 Our Suggestions that the Company Should Imitate 4.3.8 Trend Analysis of Return on Investment % 4.4.4.5.5.5.5.14 Upcoming Global Challenges that Company Has to Face 20 21 21 21 21 21 22 22 22 23 23 23 23 23 24 24 25 25 25 26 26 26 27 28 30 30 32 CHAPTER NO.9 Trend Analysis of Return on Equity % 4.2 Net Profit Margin in % 4.1 Gross Profit Margin in % 4.5.4 4.5 4.6 Trend Analysis of Gross Profit Margin in % 4.5.5. 5 5.7 Trend Analysis of Net Profit Margin in % 4.Shell Pakistan _________________________________________________________________________________________________ 4.5. CONCLUSION AND RECOMMENDATIONS Conclusion Recommendations BIBLIOGRAPHY Institute of Business & Technology 7 .5.4.4.2.3 Trend Analysis of Interest Coverage Ratio 4.5.3.4.5.4 Trend Analysis of Inventory Turnover Ratio 4.10 Summary of profitability Ratios Trend Analysis 4.4 Summary of Interest Coverage Ratios Trend Analysis Activity Ratios 4.11Problems in Shell Pakistan 4.3 Return on Investment in % 4.5.5 Trend Analysis of Total Assets Turnover Ratio 4.2 Total Assets Turnover Ratio 4.3 Summary of Activity Ratio 4.

3 1.4 INTRODUCTION Introduction Mission Statement Vision Statement Objectives 8 8 8 8 Institute of Business & Technology 8 .2 1.Shell Pakistan _________________________________________________________________________________________________ CHAPTER NO.2 1. 1 1.

the legacy of the past is visible in a storage tank carrying the date . In 1970. Even today. integrity and respect for people. provide quality customer service and actively pursue consistent safety improvements. 1.an expression of confidence. are to engage efficiently. The Shell and the Burmah Groups retained the remaining 49% in equal propositions. began importing kerosene oil from Azerbaijan into the subcontinent. In an unsettled world. 1.1898. responsibly and profitably in oil. to enhance their distribution capabilities. After the independence of Pakistan in 1947. 1. the name was changed to the Burmah Shell Oil Distribution Company of Pakistan. the marketing interest of Royal Dutch Shell and the Burmah Oil Company Limited in India were merged and Burmah Shell Oil Storage & Distribution Company of India was born. Institute of Business & Technology 9 . we strive to deliver results. Their role is to ensure that they extract and deliver them profitably and in environmentally and socially responsible ways.Shell Pakistan _________________________________________________________________________________________________ 1. We also firmly believe in the fundamental importance of trust. the name of changed to Pakistan Burmah Shell (PBS) Limited. A firm foundation based on performance enables us to deliver strong returns and values growth for our shareholders. gas. openness.4 Objectives of Shell Pakistan: The objectives of Shell Pakistan Ltd.2 Mission of Shell Pakistan: Shell Pakistan Ltd. employees share a set of core values – honesty. In February of 1993. They believe that oil and gas will be integral to the global energy needs for economic development for many decades to come. our commitment to performance at every level continues to be both the challenges and the aspiration. when 51% of the shareholding was transferred to Pakistani investors. as economic liberalization began to take root and the Burmah divested from PBS. Shell Petroleum stepped into raise its stake to 51%. chemicals and other selected businesses and to participate in the search for and development of other sources of energy to meet evolving customer needs and the world’s growing demand for energy. develop our people. with the Group now having a 76% stake in Shell Pakistan Ltd (SPL). teamwork and professionalism.1 Introduction to Shell Pakistan: Introduction The Shell brand name enjoys a 100-year history in this part of the world.3 Vision Statement: As Shell Pakistan Limited. The documented history of Royal Dutch Shell in Indo Pakistan subcontinent dates back to 1903 when partnership was struck between The Shell Transport & Trading Company and the Royal Dutch Petroleum Company to supply petroleum to Asia. dating back to 1899 when Asiatic Petroleum. In 1928. 1. and pride in what we do. the far eastern marketing arm of two companies Shell Transport Company and Royal Dutch Petroleum Company. perform to the highest standards. greater and better choices for our customers and opportunities and improvements in the quality of life of our communities. The years 2001-2 have seen the Shell Petroleum Company successively increasing its share.

2 2.3 2.2 2.4 2.1 2.5 RESPONSIBILITIES OF SHELL PAKISTAN Share Holders Customers Employees Those With Whom They Do Business Society 10 10 10 10 10 Institute of Business & Technology 10 .Shell Pakistan _________________________________________________________________________________________________ CHAPTER NO.

To encourage the involvement of employees in the planning and direction of their work. 2. recognizes five areas of responsibility. The ability to promote these principles effectively will be an important factor in the decision to enter into or remain in such relationship. It is the duty of management continuously to assess the priorities and discharge these inseparable responsibilities on the basis of that assessment. safety. 2.2 Customers: To win and maintain customers by developing and providing products and services which offer value in terms of price. to comply with applicable laws and regulations. and provide a long-term return competitive with those of other leading companies in the industry.Shell Pakistan _________________________________________________________________________________________________ 2. Responsibilities Of Shell Pakistan Shell Pakistan Ltd. 2. to support fundamental human rights in line with the legitimate role of business. to create an inclusive work environment where every employee has an equal opportunity to develop his or her skills and talents. security and the environment.1 Shareholders: To protect shareholders’ investment. quality.5 Society: To conduct business as responsible corporate members of society. They recognize that commercial success depends on the full commitment of all employees. General Business Principles or equivalent principles in such relationships.4 Those With Whom They Do Business: To seek mutually beneficial relationships with contractors. 2. Institute of Business & Technology 11 . to provide them with channels to report concerns. suppliers and in joint ventures and to promote the application of these Shell Pakistan Ltd. and to give proper regard to health. environmental and commercial expertise. 2.3 Employees: To respect the human rights of their employees and to provide them with good and safe working conditions and competitive terms and conditions of employment. safety and environmental impact. which are supported by the requisite technological. To promote the development and best use of the talents of their employees.

9 PRINCIPLES OF SHELL PAKISTAN Economic Competition Business Integrity Political Activities Health.4 3. 3 3.1 3.3 3.8 3.7 3.2 3. Security and The Environment Local Communities Communication and Engagement Compliance Living By Their Principles 12 12 12 12 13 13 13 13 13 Institute of Business & Technology 12 .5 3. Safety.6 3.Shell Pakistan _________________________________________________________________________________________________ CHAPTER NO.

Principles of Shell Pakistan There are the following principles of Shell Pakistan which are elaborated below: 3. Of companies Shell Pakistan Ltd. does not take part in party politics. Shell Pakistan Ltd. 3. Employees must avoid conflicts of interest between their private activities and their part in the conduct of company business.Shell Pakistan _________________________________________________________________________________________________ 3. does not make payments to political parties. All business transactions on behalf of Shell Pakistan Ltd. They seek to compete fairly and ethically and within the framework of applicable competition laws. 3. social and environmental) and an appraisal of the risks of the investment. Shell Pakistan Ltd. soliciting or acceptance of bribes in any form is unacceptable. integrity and fairness in all aspects of their business and expects the same in their relationships with all those with whom they do business. Shell Pakistan Ltd. it would not be possible to fulfill responsibilities. organizations or their representatives.3 Principle 3: Business Integrity: Shell Pakistan Ltd. acts in a socially responsible manner within the laws of the countries in which they operate in pursuit of their legitimate commercial objectives. Criteria for investment and divestment decisions include sustainable development considerations (economic. Employees must also declare to their employing company potential conflicts of interest. However. must be reflected accurately and fairly in the accounts of the company in accordance with established procedures and are subject to audit and disclosure. their employees. their customers.2 Principle 2: Competition: Shell Pakistan Ltd. Facilitation payments are also bribes and should not be made. 3. products and services.1 Principle 1: Economic: Long-term profitability is essential to achieving our business goals and to our continued growth. It is a measure both of efficiency and of the value that customers place on Shell Pakistan Ltd. The direct or indirect offer. insists on honesty. b. Institute of Business & Technology 13 . their shareholders or local communities in a manner which is in accordance with their value and the Business Principles. including standing for election to public office. they will not prevent others from competing freely with them. they will be given the opportunity to do so where this is appropriate in the light of local circumstances. Of employees Where individuals wish to engage in activities in the community. payment. when dealing with the government.4 Principle 4: Political Activities: a. has the right and the responsibility to make their position known on any matters which affect them. It supplies the necessary corporate resources for the continuing investment that is required to develop and produce future energy supplies to meet customer needs. Without profits and a strong financial foundation. supports free enterprise.

appraises and reports performance externally. 3. products and services. safety. recognizes that regular dialogue and engagement with their stakeholders is essential. takes a constructive interest in societal matters. In their interactions with employees. has a systematic approach to health.5 Principle 5: Health. Shell Pakistan Ltd. The Business Principles apply to all transactions. They continually look for ways to reduce the environmental impact of their operations. they seek to listen and respond to them honestly and responsibly. Safety. Manages these matters as critical business activities. They manage the social impacts of their business activities carefully and work with others to enhance the benefits to local communities. directly or indirectly related to their business. 3.9 Living by Their Principles: Their shared core values of honesty. integrity and respect for people. Shell Pakistan Ltd. security and environmental management in order to achieve continuous performance improvement. aims to be good neighbors by continuously improving the ways in which they contribute directly or indirectly to the general well-being of the communities within which they work. underpin all the work they do and are the foundation of their Business Principles. sets standards and targets for improvement.Shell Pakistan _________________________________________________________________________________________________ 3. subject to any overriding considerations of business confidentiality. and drive the behavior expected of every employee in Shell Pakistan Ltd. Security And The Environment: Shell Pakistan Ltd. large or small. They are committed to reporting of their performance by providing full relevant information to legitimately interested parties. and measures. To this end. in the conduct of its business at all times.8 Principle 8: Compliance: They comply with all applicable laws and regulations of the counties in which they operate.6 Principle 6: Local Communities: Shell Pakistan Ltd. business partners and local communities. Institute of Business & Technology 14 .7 Principle 7: Communication and Engagement: Shell Pakistan Ltd. In addition. and to mitigate any negative impacts from their activities. 3. 3.

They encourage their employees to demonstrate leadership. As part of the assurance system. to ensure that all employees are aware of these principles. Institute of Business & Technology 15 . accountability and teamwork. Their reputation will be upheld if they act in accordance with the law and the Business Principles. employees to report suspected breaches of the Business Principles to Shell Pakistan Ltd. to contribute to the overall success of Shell Pakistan Ltd. it is also the responsibility of management to provide employees with safe and confidential channels to raise concerns and report instances of non-compliance. and through these behaviors. It is the responsibility of management to lead by example.Shell Pakistan _________________________________________________________________________________________________ They are judged by how they act. The Business Principles have for many years been fundamental to how they conduct their business and living by them is crucial to their continued success. The application of these principles is underpinned by a comprehensive set of assurance procedures which are designed to make sure that their employees understand the principles and confirm that they act in accordance with them. They encourage their business partners to live by them or by equivalent principles. it is the responsibility of Shell Pakistan Ltd. In turn. and behave in accordance with the spirit as well as with the letter of this statement.

5.5 Trend Analysis of Total Assets Turnover Ratio 4.4.8 Summary of Financial Leverage Ratios Trend Analysis Coverage Ratios 4.6 Summary of the Current and Acid Test Ratios Trend Analysis Financial Leverage Ratios 4.1 Gross Profit Margin in % 4.10 Summary of profitability Ratios Trend Analysis 4.4 Summary of Financial Leverage Ratios 4.3 4. 4 4.5.1 Interest Coverage Ratio 4.1 Debt to Equity Ratio 4.1.3 Trend Analysis of Interest Coverage Ratio 4.4 Summary of Interest Coverage Ratios Trend Analysis Activity Ratios 4.5.2.12 Actions Executed by the Company to Overcome Problems 4.1 Current Ratios 4.4.9 Trend Analysis of Return on Equity % 4.3.5.2 4.5 Institute of Business & Technology 16 .4 4.8 Trend Analysis of Return on Investment % 4.1.4 Trend Analysis of Inventory Turnover Ratio 4.2.3 Return on Investment in % 4.4.3.2.14 Upcoming Global Challenges that Company Has to Face 16 16 16 16 17 17 17 18 18 18 18 18 19 19 19 20 20 20 20 20 21 21 21 21 21 22 22 22 23 23 23 23 23 24 24 25 25 25 26 26 26 27 28 4.5.1.1.3.2 Debt to Total Assets Ratio 4.4 Return on Equity in % 4.1.5 Summary of Activity Ratio in % 4.1 FINANCIAL HEALTH OF SHELL PAKISTAN Liquidity Ratios 4.3 Summary of Activity Ratio 4.2.5.2 Total Assets Turnover Ratio 4.2.5.2.7 Trend Analysis of Net Profit Margin in % 4.11Problems in Shell Pakistan 4.5.13 Our Suggestions that the Company Should Imitate 4.1 Inventory Turnover Ratio 4.Shell Pakistan _________________________________________________________________________________________________ CHAPTER NO.2 Summary of Interest Coverage Ratio 4.5.4.4.5 Trend Analysis of Debt to Equity Ratios 4.3 Total Capitalization Ratio 4.6 Trend Analysis of Gross Profit Margin in % 4.5.2 Net Profit Margin in % 4.5.5.3 Summary of Liquidity Ratios 4.3.6 Trend Analysis of Debt to Total assets Ratios 4.6 Summary of Activity Ratios Trend Analysis Profitability Ratios 4.5.5 Trend Analysis of Acid Test Ratios 4.2.7 Trend Analysis of Debt to Total Capitalization Ratio 4.5.2.4 Trend Analysis of Current Ratios 4.1.4.2 Acid Test Ratio 4.

There is inventory management problem with Shell Pakistan.65 2007 0.29 1. 4.13 1.1.1.52 0.52 0.06 1.08 0.1 Year Financial Health of Shell Pakistan Comparisons of Liquidity Ratios: Current Ratios: Shell Industry (PSO+ARL/2) 2008 1. May be the inventory of Shell Pakistan is too high as compared with the industry ratios. it is not a problem for the Shell Pakistan as compared to the industry ratios.Shell Pakistan _________________________________________________________________________________________________ 4.58 0.52 0.06 2007 1.2 Year Acid Test Ratio: Shell Industry (PSO+ARL/2) 20. There is inventory management problem with Shell Pakistan. it is not a problem for the Shell Pakistan as compared to the industry ratios.65  Current ratios of Shell Pakistan are improving.1 4.1. May be the inventory of Shell Pakistan is too high as compared with the industry ratios.3 Year Summary of Liquidity Ratios: Shell Industry (PSO+ARL/2) Current 1.17  Current ratios of Shell Pakistan are improving.17 2005 1.76  The Shell Pakistan has weaker the acid test ratios.71 2005 0.06 Acid Test 0. 4. Institute of Business & Technology 17 .72 2006 0.005 1.57 0.11 2006 1. 4.29 1.  The Shell Pakistan has weaker the acid test ratios.

1.  The Shell Pakistan has weaker the acid test ratios.65  Shell Pakistan is using the equity financing. 4.2 1.3 1.0 2005 2006 2007 Analysis Year 2008 Shell Industry 4.32 167. 4. while the industry is using the debt financing.2 4.82 2005 0.6 Summary of the Current and Acid Test Ratios Trend Analysis:  Current ratios of Shell Pakistan are improving.1 1.80 0.2 Debt to Total Assets Ratio: Institute of Business & Technology 18 .28 2007 0.72 179. it is not a problem for the Shell Pakistan as compared to the industry ratios.1 Year Financial Leverage Ratios: Debt to Equity Ratio: Shell Industry (PSO+ARL/2) 2008 0.1. There is inventory management problem with Shell Pakistan.29 205.1.4 Trend Analysis of Current Ratios: Ratio Values 1.70 0.60 0.5 Trend Analysis of Acid Test Ratios: Ratio Values 0.50 2005 2006 2007 Analysis Year 2008 Shell Industry 4.2.Shell Pakistan _________________________________________________________________________________________________ 4.71 2006 0. May be the Shell Pakistan has the excessive funds that is why it is using equity financing rather than the debt financing as compared to the industry.2. May be the inventory of Shell Pakistan is too high as compared with the industry ratios.006 147.

10 2007 0. 4.006 12.4 Year Summary of Financial Leverage Ratios: Shell Industry (PSO+ARL/2) Debt to Equity 0.28 Debt to Total Assets 0.07 2005 0.01 2006 0.64 53.64 51.  Shell Pakistan is financing the assets by using the equity financing. Institute of Business & Technology 19 . while the industry is using the debt financing.29 205.25 8.25  Shell Pakistan is using the equity financing.25 8.12 2005 0. while the industry is using the debt financing.72 9. 4. while the industry is using the debt financing. May be the Shell Pakistan has the excessive funds that is why it is using equity financing rather than the debt financing as compared to the industry. May be the Shell Pakistan has the excessive funds that is why it is using equity financing rather than the debt financing as compared to the industry.3 Year Total Capitalization Ratio: Shell Industry (PSO+ARL/2) 2008 0.0024  Shell Pakistan is financing the assets by using the equity financing.97 54.10 55.2. is using the debt financing.32 9.03 while the industry 2008 0.Shell Pakistan _________________________________________________________________________________________________ Year Shell Industry (PSO+ARL/2) 55.25 2007 0.07  Shell Pakistan is using the equity financing.2.23 2006 0.97 Total Capitalization 0.

 Shell Pakistan is financing the assets by using the equity financing.6 Trend Analysis of Debt to Total assets Ratios: Ratio Values 60 50 40 .3.55 55.74 48.2.15 2005 12.08 2006 12.00 59.7 Trend Analysis of Debt to Total Capitalization Ratio Ratio Values 13 09 08 0.Shell Pakistan _________________________________________________________________________________________________ Ratio Values 4.29 28. 4.006 2005 2006 2007 Analysis Year 2008 Shell Industry 4. while the industry is using the debt financing. 4.3.2.2 Summary of Interest Coverage Ratio: Institute of Business & Technology 20 .2 2007 1.0003 2005 2006 2007 Analysis Year 2008 Shell Industry 4. May be the Shell Pakistan has the excessive funds that is why it is using equity financing rather than the debt financing as compared to the industry.8 Summary of Financial Leverage Ratios Trend Analysis:  Shell Pakistan is using the equity financing.2.73  Shell Pakistan has less EBIT to cover interest charges that is why is using very minute long term debt as compared to industry ratios.006 2005 2006 2007 Analysis Year 2008 Shell Industry 4.6 Trend Analysis of Debt to Equity Ratios: 210 150 100 0.1 Year Coverage Ratios: Interest Coverage Ratio: Shell Industry (PSO+ARL/2) 2008 8.2.3 4. while the industry is using the debt financing.

The Shell Pakistan is utilizing its assets efficiently. 4.57 11.3.05 2006 10.2 Year Total Assets Turnover Ratio: Shell Industry (PSO+ARL/2) 2008 3.2  Shell Pakistan has less EBIT to cover interest charges that is why is using very minute long term debt as compared to industry ratios.4 Summary of Interest Coverage Ratios Trend Analysis:  Shell Pakistan has less EBIT to cover interest charges that is why is using very minute long term debt as compared to industry ratios. The Shell Pakistan has the good assets management system as compared to the industry.1 2005 13.16 3.2 2006 4.4.65 2007 13.75 11. 4. May be the inventory of Shell Pakistan is too high as compared with the industry ratios.74 Industry (PSO+ARL/2) 48. Institute of Business & Technology 21 .18 11.4 4.3 Trend Analysis of Interest Coverage Ratio: Ratio Values 60 30 15 01 2005 2006 2007 Analysis Year 2008 Shell Industry 4.08  The assets turnover ratios of Shell Pakistan are healthy as compared to the industry ratios.4  The inventory turnover ratios of Shell Pakistan are best in year 2005. 4. 2006 and 2007 but it is being worse in year 2008 as compared to the industry ratios.93 3.52 3.89 16.23 2005 4. There is inventory management problem with Shell Pakistan.Shell Pakistan _________________________________________________________________________________________________ Year Interest Coverage Shell 8.3.24 2007 3.78 3.4.1 Year Activity Ratios: Inventory Turnover Ratio: Shell Industry (PSO+ARL/2) 2008 6.

There is inventory management problem with Shell Pakistan. The Shell Pakistan is utilizing its assets efficiently. There is inventory management problem with Shell Pakistan. May be the inventory of Shell Pakistan is too high as compared with the industry ratios.4. 2006 and 2007 but it is being worse in year 2008 as compared to the industry ratios.  The assets turnover ratios of Shell Pakistan are healthy as compared to the industry ratios.5 Trend Analysis of Total Assets Turnover Ratio: Ratio Values 05 04 03 02 2005 2006 2007 Analysis Year 2008 Shell Industry 4.6 Summary of Activity Ratios Trend Analysis:  The inventory turnover ratios of Shell Pakistan are best in year 2005. 4.4.Shell Pakistan _________________________________________________________________________________________________ 4. Institute of Business & Technology 22 . 2006 and 2007 but it is being worse in year 2008 as compared to the industry ratios.4.3 Year Summary of Activity Ratio: Shell Industry (PSO+ARL/2) Inventory Turnover 6.52 3. The Shell Pakistan has the good assets management system as compared to the industry.89 16.4 Trend Analysis of Inventory Turnover Ratio: Ratio Values 17 12 09 06 2005 2006 2007 Analysis Year 2008 Shell Industry 4.65 Total Assets Turnover 3.24  The inventory turnover ratios of Shell Pakistan are best in year 2005. May be the inventory of Shell Pakistan is too high as compared with the industry ratios.4.

The Shell Pakistan has the good assets management system as compared to the industry.1 Year Profitability Ratios: Gross Profit Margin in %: Shell Industry (PSO+ARL/2) 2008 0.3 Year Return on Investment in %: Shell Industry (PSO+ARL/2) 2008 0.036 4.10 12.02 2006 0.11 8  The net profit of Shell Pakistan is not satisfactorily and they have huge investment in assets as compared to the industry.81  The cost of goods sold may be the too high of Shell Pakistan or they have huge investment in the assets.55 2006 0.006.02 4.5.1 2005 0.024 5.05 11.4 Year Return on Equity in %: Shell Industry (PSO+ARL/2) 2008 0.9  The net profit after taxes of Shell Pakistan are not satisfactorily and they have huge investment in equity financing as compared to the industry.2 Year Net Profit Margin in %: Shell Industry (PSO+ARL/2) 2008 0.12 8.08 12. The Shell Pakistan is utilizing its assets efficiently. 4. Institute of Business & Technology 23 .75 2007 0.37 29.02 4.5. 4. as compared to the industry.Shell Pakistan _________________________________________________________________________________________________  The assets turnover ratios of Shell Pakistan are healthy as compared to the industry ratios.30 25.29 22.96 2005 0.31 2005 0. 4. 4. 4.45 2007 0. The concerned of Shell Pakistan is toward the equity financing as compared to the industry.15 2007 0.5.5.35 2006 0.45 2007 0.11 7.09 12.9 2006 0.26  The cost of goods sold may be the too high of Shell Pakistan or they have huge operating cost ie taxes etc.5 4.19 2005 0.07 18.

45 Return Investment 0.45 Net Profit Margin 0.7 Trend Analysis of Net Profit Margin in %: 05 03 02 Shell Institute of Business & Technology 24 .6 Trend Analysis of Gross Profit Margin in %: Ratio Values 13 08 04 . as compared to the industry.5. 4. The concerned of Shell Pakistan is toward the equity financing as compared to the industry.10 12.5.12 8.5.  The net profit of Shell Pakistan is not satisfactorily and they have huge investment in assets as compared to the industry.01 2005 2006 2007 Analysis Year 2008 Shell Industry 4.  The cost of goods sold may be the too high of Shell Pakistan or they have huge operating cost ie taxes etc.15 Return on Equity 0.036 4.Shell Pakistan _________________________________________________________________________________________________ 4.75  The cost of goods sold may be the too high of Shell Pakistan or they have huge investment in the assets.37 29.5 Year Summary of Activity Ratio in %: Shell Industry (PSO+ARL/2) Gross Profit Margin 0.  The net profit after taxes of Shell Pakistan are not satisfactorily and they have huge investment in equity financing as compared to the industry.

The concerned of Shell Pakistan is toward the equity financing as compared to the industry. as compared to the industry.5.  May be the inventory of Shell Pakistan is too high as compared with the industry ratios. Institute of Business & Technology 25 .5.9 Trend Analysis of Return on Equity %: 30 15 07 .8 Trend Analysis of Return on Investment %: Ratio Values 09 05 04 .5.01 Industry 2005 2006 2007 Analysis Year 2008 4.  The cost of goods sold may be the too high of Shell Pakistan or they have huge operating cost ie taxes etc.10 Summary of profitability Ratios Trend Analysis:  The cost of goods sold may be the too high of Shell Pakistan or they have huge investment in the assets.Shell Pakistan _________________________________________________________________________________________________ Ratio Values .07 2005 2006 2007 Analysis Year 2008 Shell Industry 4.  The net profit of Shell Pakistan is not satisfactorily and they have huge investment in assets as compared to the industry.5.01 2005 2006 2007 Analysis Year 2008 Shell Industry Ratio Values 4.  The net profit after taxes of Shell Pakistan are not satisfactorily and they have huge investment in equity financing as compared to the industry. 4.11 Problems in Shell Pakistan: 1. The Shell Pakistan has weaker the acid test ratios due to the following:  There is inventory management problem with Shell Pakistan.

So it is improving its net profit margin.Shell Pakistan _________________________________________________________________________________________________ 2.  It is improving the too high inventory of Shell Pakistan.12 Actions Executed by the Company so far to Overcome Problems: 1. Shell Pakistan has less EBIT to cover interest charges that is why is using very minute long term debt as compared to industry ratios. There are some other problems with the profitability ratios of Shell Pakistan and is trying to improve:  It is improving the cost of goods sold which is too high of Shell Pakistan or they have huge investment in the assets. There are some other problems with the profitability ratios which are mentioned below:  The cost of goods sold may be the too high of Shell Pakistan or they have huge investment in the assets. The concerned of Shell Pakistan is toward the equity financing as compared to the industry.  The cost of goods sold may be the too high of Shell Pakistan or they have huge operating cost ie taxes etc. So the gross profit margin is less. 2. as compared to the industry. Shell Pakistan has the excessive funding so there is no need to Shell Pakistan to improve the EBIT to cover interest charges that is why is using very minute long term debt as compared to industry ratios. as compared to the industry. So the net profit margin is less.  The net profit of Shell Pakistan is improving with less risk factor and they have huge investment in assets as compared to the industry.  The net profit after taxes of Shell Pakistan is going satisfactorily with less risk factor and they have huge investment in equity financing as compared to the industry. 4.5.  The net profit after taxes of Shell Pakistan are not satisfactorily and they have huge investment in equity financing as compared to the industry. 4.  The net profit of Shell Pakistan is not satisfactorily and they have huge investment in assets as compared to the industry.5. The Shell Pakistan is improving the weaker acid test ratios as mentioned below:  It is improving the inventory management problem with Shell Pakistan. The concerned of Shell Pakistan is toward the equity financing as compared to the industry. So it is improving its gross profit margin.13 Our Suggestions that the Company Should Imitate: Institute of Business & Technology 26 . 3. 3.  It is improving the too high cost of goods sold of Shell Pakistan or they have huge operating cost ie taxes etc.

as compared to the industry.  Too high inventory of Shell Pakistan as compared with the industry ratios.  The net profit after taxes of Shell Pakistan is not satisfactorily and they have huge investment in equity financing as compared to the industry.Shell Pakistan _________________________________________________________________________________________________ 1. The Shell Pakistan should improve the weaker acid test ratios due to the following:  Inventory management problem with Shell Pakistan. Institute of Business & Technology 27 . 2. The concerned of Shell Pakistan is toward the equity financing as compared to the industry.  The cost of goods sold may be the too high of Shell Pakistan or they have huge operating cost ie taxes etc.  The net profit of Shell Pakistan is not satisfactorily and they have huge investment in assets as compared to the industry. 3. Shell Pakistan should improve EBIT to cover interest charges that is why is using very minute long term debt as compared to industry ratios. There are some other mentioned below problems with the profitability ratios which Shell Pakistan should improve:  The cost of goods sold may be the too high of Shell Pakistan or they have huge investment in the assets.

they commit to contribute to sustainable development.5.Shell Pakistan _________________________________________________________________________________________________ 4.14 Upcoming Global Challenges that the Company Has to Face: As part of the Business Principles.  Shortage of raw material.  Other global economic issues.  Taxes rate.  Trade policies of different countries  Unemployment issues.  Integrating economic.  Shortage of sources.  Foreign exchange Institute of Business & Technology 28 .  Trade and tariff problems.  Global financial crisis.  Environmental problems.  Demand and supply issues.  ISO certification.  Currency volatility.  Over staffing problem.  Energy crisis.  Globally growing fuel requirements.  Globally competition  Freight and subsidies. This requires:  Balancing short and long term interests. environmental and social considerations.

CONCLUSION AND RECOMMENDATIONS Conclusion Recommendations 30 30 Institute of Business & Technology 29 . 5 5.2.Shell Pakistan _________________________________________________________________________________________________ CHAPTER NO.1 5.

 Too high inventory of Shell Pakistan as compared with the industry ratios. 3.  The net profit after taxes of Shell Pakistan are not satisfactorily and they have huge investment in equity financing as compared to the industry. So the gross profit margin is less. So the net profit margin is less. There are some other mentioned below problems with the profitability ratios which Shell Pakistan should improve: Institute of Business & Technology 30 .1 Conclusion: Conclusion and Recommendations After compiling the report following is concluded: 1. 2. The Shell Pakistan should improve the weaker acid test ratios due to the following:  Inventory management problem with Shell Pakistan. 2.2 Recommendations: Following is strongly recommended to improve the financial health of Shell Pakistan: 1.  The net profit of Shell Pakistan is not satisfactorily and they have huge investment in assets as compared to the industry. Shell Pakistan should improve EBIT to cover interest charges that is why is using very minute long term debt as compared to industry ratios. 5.Shell Pakistan _________________________________________________________________________________________________ 5. Shell Pakistan has less EBIT to cover interest charges that is why is using very minute long term debt as compared to industry ratios. as compared to the industry.  May be the inventory of Shell Pakistan is too high as compared with the industry ratios. There are some other problems with the profitability ratios which are mentioned below:  The cost of goods sold may be the too high of Shell Pakistan or they have huge investment in the assets. The concerned of Shell Pakistan is toward the equity financing as compared to the industry. The Shell Pakistan has weaker the acid test ratios due to the following:  There is inventory management problem with Shell Pakistan. 3.  The cost of goods sold may be the too high of Shell Pakistan or they have huge operating cost ie taxes etc. 5.

 The cost of goods sold may be the too high of Shell Pakistan or they have huge operating cost ie taxes etc. Institute of Business & Technology 31 .  The net profit after taxes of Shell Pakistan is not satisfactorily and they have huge investment in equity financing as compared to the industry. as compared to the industry.  The net profit of Shell Pakistan is not satisfactorily and they have huge investment in assets as compared to the industry. The concerned of Shell Pakistan is toward the equity financing as compared to the industry.Shell Pakistan _________________________________________________________________________________________________  The cost of goods sold may be the too high of Shell Pakistan or they have huge investment in the assets.

shell.com. www. www.Shell Pakistan _________________________________________________________________________________________________ Bibliography:    www.pk dated 10 October 2009.pk dated 5 October 2009.psopk.arl.com..com dated 7 October 2009. Institute of Business & Technology 32 .

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