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Pakistan State Oil

Acknowledgement

In the name of Allah, the most Gracious and the most Merciful. We thank to Allah
Almighty who enables us to accomplish our project “Analysis of Financial Statement of
PSO”. We are also very thankful to our parents whose prayers and efforts support us to
complete our project successfully. We pay regards and gratitude to our most respectable
and hardworking instructor Mr. M. Taimoor Hassan Abbasi who gave us his precious
time and knowledge along with proficient skills to help us in learning how to handle
difficulties in real situations and how to meet with challenges in the actual business
environments. By giving us difficult tasks in this project he actually indulge us in the
practice of our Quaid’s sayings “work, work and work”. Working on this project with such
a sincere instructor is great honor and pleasure for us. We are also very thankful to our
Department of Management Sciences and The Islamia University of Bahawalpur which
provides us great opportunity to work on such an informative project in a small period of
time and the faculty of management sciences who provides us with all possible
intellectual human and economic resources to fulfill the requirements of this project. By
the combination of all these blessings prayers and mental and physical aids we
ultimately completed our project in a period of four months.

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Pakistan State Oil

Introduction
PSO is the market leader in Pakistan’s energy sector. The company has the largest
network of retail outlets to serve the automotive sector and is the major fuel supplier to
aviation, railways, power projects, armed forces and agriculture sector. PSO also
provides Jet Fuel to Refueling Facilities at 9 airports in Pakistan and ship fuel at 3 ports.
The company takes pride in continuing the tradition of excellence and is fully committed
to meet the energy needs of today and rising challenges of tomorrow.

Pakistan State Oil, the largest oil marketing company in the country, is currently
engaged in storage, distribution and marketing of various POL products. The company’s
current market share of 82.3% in the black oil market and 59.4% share in the white oil
market.

The creation of Pakistan State Oil (PSO) can be traced back to the year 1974, when on
January 1st; the government took over and merged Pakistan National Oil (PNO) and
Dawood Petroleum Limited (DPL) as Premiere Oil Company Limited (POCL).

Soon after that, on 3rd June 1974, Petroleum Storage Development Corporation (PSDC)
came into existence. PSDC was then renamed as State Oil Company Limited (SOCL) on
August 23rd 1976. Following that, the ESSO undertakings were purchased on 15th
September 1976 and control was vested in SOCL. The end of that year (30th December
1976) saw the merger of the Premier Oil Company Limited and State Oil Company
Limited, giving way to Pakistan state Oil (PSO).

After PSO’s inception, the corporate culture underwent a comprehensive renewal


program which was fully implemented in 2004. This program over the years included 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 structural change, related check and balances have
been established by incorporating monitoring and control systems. Human Resource
Development became one of the main priorities on the company’s agenda under this
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.

January 1, 1974

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Pakistan State Oil

MERGEFORMAT The federal government took over the management


of PNO (Pakistan National Oil) and DPL (Dawood Petroleum Limited), renamed into
POCL (Premier Oil Company Limited) under marketing of Petroleum Products (Federal
Control Act, 1974).

June 6, 1974

The government incorporates “Petroleum Storage Development


Corporation’ PSDC.

August 23, 1976

PSCDC renamed to State Oil Company Limited (SOCL).

September 15, 1976

The Government purchases ESSO undertakings, vests their control in


SOCL.

December 30, 1976

The Government merges PNO and POCL into SOCL (State Oil Company
Limited) and renames it Pakistan State Oil Company Limited (PSO).

1999

The new vision program is launched with the new logo of PSO.

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Pakistan State Oil

Vision and Mission of PSO

Vision

To excel in delivering value to customers as an innovative and dynamic energy company


that gets to the future first.

Mission

We are committed to leadership in energy market through competitive advantage in


providing the highest quality petroleum products and services to our customers.

 Professionally trained, high quality, motivated workforce, working as a team in an


environment, which recognizes and rewards performance, innovation and
creativity, and provides for personal growth and development.
 Lowest cost operations and assured access to long-term and cost effective
supply sources.

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Pakistan State Oil

 Sustained growth in earnings in real terms.


 Highly ethical, safe environment friendly and socially responsible business
practices.

Table of Content
Introduction..........................................................................................................................2
Table of Content..................................................................................................................5
Income Statement.................................................................................................................6
Balance Sheet.......................................................................................................................8
Cash Flow Statement...........................................................................................................9
Vertical Analysis of Income Statement.............................................................................10
Horizontal Analysis of Income Statement.........................................................................16
Vertical Analysis of Balance Sheet....................................................................................24
Horizontal Analysis of Balance Sheet...............................................................................33
Vertical Analysis of Cash Flow Statement........................................................................42
Horizontal Analysis of Cash Flow Statement....................................................................49
Ratio Analysis....................................................................................................................56
Short-term Solvency Ratios...............................................................................................57
Activity Ratios...................................................................................................................59
Long-term Solvency Ratios...............................................................................................63
Profitability Ratios.............................................................................................................65
Bankruptcy Analysis..........................................................................................................70
Income Statement 1
Balance Sheet 3
Cash Flow Statement 4
Vertical Analysis of Income Statement 5
Interpretation 5
Horizontal Analysis of Income Statement 11
Interpretation 12
Vertical Analysis of Balance Sheet 18
Interpretation 19
Horizontal Analysis of Balance Sheet 27
Interpretation 28
Vertical Analysis of Cash Flow Statement 36
Interpretation 36
Horizontal Analysis of Cash Flow Statement 43
Interpretation 43
Ratio Analysis 50
Interpretation 51
1. Short-term Solvency Ratios 51
2. Activity Ratios 53
3. Long-term Solvency Ratios 57

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4. Profitability Ratios 59
Bankruptcy Analysis 65
Interpretation 65
Conclusion & Recommendations 66

Income Statement
For The Period of 5 Years ended on June 31st, 2009
Particulars 2005 (Rs. In '000) 2006 (Rs. In '000) 2007 (Rs. In '000) 2008 (Rs. In '000) 2009 (Rs. In '000)
Sales Revenue 254,362,981 353,833,345 411,989,979 583,298,190 719,412,244
Less:
Trade Discount & Allowances (586,061) (1,318,472) (932,387) (84,231) (130,068)
Sales Tax (32,673,120) (44,539,632) (52,418,310) (74,249,472) (97,386,723)
Inland Freight Equalization Margin (8,600,150) (9,725,202) (8,932,956) (13,685,954) (9,199,864)
Net Sales 212,503,650 298,250,039 349,706,326 495,278,533 612,695,589
Less Cost of Goods Sold:
Opening Stock 14,992,097 20,604,757 28,190,089 29,583,511 62,381,523
Purchases 204,369,979 288,628,145 338,840,318 498,052,919 588,023,620
Cost of Product Available for Sale 219,362,076 309,232,902 367,030,407 527,636,430 650,405,143
Closing Stock (20,604,757) (28,190,089) (29,583,510) (62,381,522) (40,719,664)
Cost of Sales 198,757,319 281,042,813 337,446,897 465,254,908 609,685,479
Gross Profit / Loss 13,746,331 17,207,226 12,259,429 30,023,625 3,010,110
Less Operating Expenses:
Transportation Cost:
Cost Incured During The Year 6,766,429 6,409,299 6,860,622 8,219,929 9,482,779
Realized Against IFEM (8,600,150) (9,725,202) (8,932,956) (13,685,954) (9,199,864)
Refinery Share 2,774,028 3,382,251 3,042,484 5,998,784 835,398
Adjustments from Other Oil
(627,038) 299,447 (600,822) (194,873) (604,640)
Companies
313,269 365,795 369,328 337,886 513,673
Distribution & Marketing Expenses:
Salaries, Wages & Benefits 1,251,558 1,225,467 1,332,317 1,672,477 2,070,788
Rent, Rates & Taxes 221,354 185,600 232,589 274,614 381,626

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Pakistan State Oil

Repair & Maintenance 330,379 468,563 493,732 548,540 596,548


Insurance 35,945 51,808 65,321 73,907 127,893
Travelling & Office Transport 48,761 58,432 82,632 89,824 105,234
Utilities 107,539 95,108 96,733 104,029 123,989
Sales Promotion & Advertisement 209,065 236,364 241,522 285,152 310,861
Others 153,508 171,291 200,443 229,660 244,014
2,358,109 2,492,633 2,745,289 3,278,203 3,960,953
Administrative Expenses:
Salaries, Wages & Benefits 618,451 631,721 673,542 765,027 801,145
Repairs & Maintenance 26,658 35,831 65,790 68,055 58,988
Insurance 44,957 62,751 66,013 63,485 67,479
Donations 22,122 38,838 30,741 98,162 49,826
Others 148,587 166,448 166,626 152,408 174,355
860,775 935,589 1,002,712 1,147,137 1,151,793
Depreciation & Amortization 984,017 1,082,394 1,140,065 1,166,826 1,194,313
Other Operating Expenses:
Workers' Profits Participation Fund 485,600 573,472 364,816 1,132,598 -
Workers' Welfare Fund - 235,790 139,834 436,276 -
Exchange Loss - Net - 110,834 6,498 1,558,947 3,508,030
Provision Against: -
Doubtful Trade Debts 325,000 1,045,600 150,748 158,680 477,345
Disputed Demands for Custom Duty 161,219 215,492 - 37,604 -
Others 84,433 217,453 44,537 25,614 2,385
Miscellaneous 19,620 62,290 48,987 3,250 6,629
1,075,872 2,460,931 755,420 3,352,969 3,994,389
Operating Expenses 5,592,042 7,337,342 6,012,814 9,283,021 10,815,121
8,154,289 9,869,884 6,246,615 20,740,604 (7,805,011)
Add Other Operating Income:
Commission & Handling Services 206,924 138,565 290,963 281,898 384,751
Income from CNG Operations 121,616 203,798 354,709 345,738 385,863
Handling, Services & Other Recoveries 593,028 565,793 602,075 707,824 609,952
Others 264,483 42,694 31,185 61,067 71,100
Other Operating Income 1,186,051 950,850 1,278,932 1,396,527 1,451,666
Operating Profit / Loss 9,340,340 10,820,734 7,525,547 22,137,131 (6,353,345)
Less Finance Cost:
Mark-up on Borrowings 256,990 622,346 891,590 745,502 2,953,427
Banks & Other Charges 113,709 261,807 266,522 622,396 3,278,629
Finance Cost 370,699 884,153 1,158,112 1,367,898 6,232,056
8,969,641 9,936,581 6,367,435 20,769,233 (12,585,401)
Add Other Income:
Share of Profit of Associates 221,808 1,038,939 330,306 294,318 451,850
Dividends - 10,331 13,200 60,906 65,821
Markup & Delayed Payment Charges - 3,745 - - 445,065
Liabilities Written Back - 305,450 184,793 113,129 31,026
Penalties & Other Recoveries - 84,611 100,094 84,231 57,637
Others - 38,654 126,151 55,594 177,137
Other Income 221,808 1,481,730 754,544 608,178 1,228,536
Profit / Loss before Tax 9,191,449 11,418,311 7,121,979 21,377,411 (11,356,865)
Less Taxation:
Current - for The Year 3,236,857 4,099,930 2,483,725 7,392,666 201,536

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Pakistan State Oil

- for Prior Year 250,534 77,236 (58,802) (62,749) (233,929)


Deferred - for The Year 48,185 (283,556) 7,259 (6,300) (4,625,936)
Taxation 3,535,576 3,893,610 2,432,182 7,323,617 (4,658,329)
Net Profit / Loss 5,655,873 7,524,701 4,689,797 14,053,794 (6,698,536)

Balance Sheet
For The Period of 5 Years ended on June 31st, 2009
Particulars 2005 (Rs. In '000) 2006 (Rs. In '000) 2007 (Rs. In '000) 2008 (Rs. In '000) 2009 (Rs. In '000)
Assets
Current Assets:
Cash & Bank Balances 1,921,936 1,898,894 1,522,276 3,018,640 2,883,118
Short-term Investments 10,081 - - - -
Taxation - Net - - - - 709,627
Other Receivables 10,358,006 14,562,628 15,751,198 15,681,790 12,806,779
Deposits & Short-term Prepayments 726,157 1,287,893 1,583,913 401,433 551,803
Loans & Advances 213,248 275,729 365,974 396,220 418,015
Trade Debts 6,791,078 11,715,868 13,599,966 33,904,728 80,509,830
Stock in Trade 20,583,301 28,168,633 29,562,055 62,360,067 40,698,209
Stores, Spare Parts & Loose Tools 130,559 125,030 127,891 115,814 112,143
Total Current Assets 40,734,366 58,034,675 62,513,273 115,878,692 138,689,524
Non-Current Assets:
Deferred Tax 124,740 408,296 401,037 407,337 5,033,273
Long-term Deposits & Prepayments 105,163 74,662 65,913 79,098 83,655
Long-term Loans, Advances &
769,674 698,146 627,972 477,745 405,780
Receivables
Long-term Investments 2,317,810 3,278,970 2,990,591 2,701,097 2,153,514
Intangibles 144,647 154,819 126,212 105,502 68,872
Property, Plant & Equipment 8,111,482 7,518,956 8,012,317 7,460,549 6,987,025
Total Non-Current Assets 11,573,516 12,133,849 12,224,042 11,231,328 14,732,119
Total Assets 52,307,882 70,168,524 74,737,315 127,110,020 153,421,643
Liabilities & Equity
Liabilities:
Current Liabilities:
Taxation - Net 1,344,268 1,695,250 69,398 726,703 -
Short-term Borrowings 4,811,605 7,648,919 9,064,781 10,997,908 18,654,526

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Pakistan State Oil

Accrued Interest / Mark-up 63,924 120,731 131,961 217,928 556,380


Provisions 754,227 777,276 688,512 726,116 688,512
Trade & Other Payables 25,790,181 36,814,402 41,431,075 81,067,565 110,123,702
Total Current Liabilities 32,764,205 47,056,578 51,385,727 93,736,220 130,023,120
Non-Current Liabilities:
Retirement & Other Service Benefits 1,323,688 1,554,893 1,644,063 1,574,148 1,673,020
Long-term Deposits & Prepayments 675,170 743,994 768,308 834,598 854,718
Total Non-Current Liabilities 1,998,858 2,298,887 2,412,371 2,408,746 2,527,738
Equity:
Share Capital 1,715,190 1,715,190 1,715,190 1,715,190 1,715,190
Reserves 15,829,629 19,097,869 19,224,027 29,249,864 19,155,595
Total Equity 17,544,819 20,813,059 20,939,217 30,965,054 20,870,785
Total Liabilities & Equity 52,307,882 70,168,524 74,737,315 127,110,020 153,421,643

Cash Flow Statement


For The Period of 5 Years ended on June 31st, 2009
Particulars 2005 (Rs. In '000) 2006 (Rs. In '000) 2007 (Rs. In '000) 2008 (Rs. In '000) 2009 (Rs. In '000)
Cash Generated from Operating Activities:
Cash Generated from Operations 7,350,990 6,553,775 9,103,698 12,479,055 2,905,661
Long-term Loans, Advances & Receivables 142,921 71,528 74,511 149,747 71,965
Long-term Deposits & Prepayments (33,970) 30,501 8,749 (13,185) (4,557)
Long-term Deposits - - - 66,290 20,120
Taxes Paid (1,636,104) (3,826,184) (4,050,775) (6,672,612) (1,403,937)
Finance Costs Paid (337,220) (827,346) (1,146,882) (1,281,931) (5,893,604)
Payment against Provisions (80,258) (184,050) (10,126) - (37,604)
Retirement Benefits Paid (160,700) (184,450) (287,721) (610,949) (486,598)
Net Cash Generated / Used In 5,245,659 1,633,774 3,691,454 4,116,415 (4,828,554)
Cash Flows from Investing Activities:
Purchases of Fixed Assets (1,506,408) (751,350) (1,609,467) (620,293) (694,157)
Proceeds from Disposal of Operating Assets 12,087 261,863 30,740 57,189 20,167
Dividends Received 274,753 291,143 870,774 390,178 671,101
Proceeds from Liquidation of Subsidiaries - 24,657 -
Net Cash Generated / Used In (1,219,568) (173,687) (707,953) (172,926) (2,889)
Cash Flows from Financing Activities:
Repayment of Long-term Loan (4,753) - - - -
Proceeds from / Repayment of Long-term Deposits 62,162 68,824 24,314 - -
Proceeds from / Repayment of Short-term
534,000 216,000 3,210,474 (5,335,878) 3,472,487
Finances
Dividends Paid (3,616,669) (4,389,267) (4,800,295) (4,380,252) (2,960,697)
Net Cash Generated / Used In (3,025,260) (4,104,443) (1,565,507) (9,716,130) 511,790
Total Net Cash Generated / Used In for The Year 1,000,831 (2,644,356) 1,417,994 (5,772,641) (4,319,653)
Cash at Beginning of The Year (1,192,500) (191,669) (2,836,025) (1,418,031) (7,190,672)

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Pakistan State Oil

Cash at End of The Year (191,669) (2,836,025) (1,418,031) (7,190,672) (11,510,325)

Vertical Analysis of Income Statement


For The Period of 5 Years ended on June 31st, 2009
Particulars 2005 2006 2007 2008 2009
Sales Revenue 100% 100% 100% 100% 100%
Trade Discount & Allowances (0.23%) (0.37%) (0.23%) (0.01%) (0.02%)
Sales Tax (12.85%) (12.59%) (12.72%) (12.73%) (13.54%)
Inland Freight Equalization Margin (3.38%) (2.75%) (2.17%) (2.35%) (1.28%)
Net Sales 83.54% 84.29% 84.88% 84.91% 85.17%
Opening Stock 5.89% 5.82% 6.84% 5.07% 8.67%
Purchases 80.35% 81.57% 82.24% 85.39% 81.74%
Cost of Product Available for Sale 86.24% 87.40% 89.09% 90.46% 90.41%
Closing Stock (8.10%) (7.97%) (7.18%) (10.69%) (5.66%)
Cost of Sales 78.14% 79.43% 81.91% 79.76% 84.75%
Gross Profit / Loss 5.40% 4.86% 2.98% 5.15% 0.42%
Transportation Cost 0.12% 0.10% 0.09% 0.06% 0.07%
Distribution & Marketing Expenses 0.93% 0.70% 0.67% 0.56% 0.55%
Administrative Expenses 0.34% 0.26% 0.24% 0.20% 0.16%
Depreciation & Amortization 0.39% 0.31% 0.28% 0.20% 0.17%
Other Operating Expenses 0.42% 0.70% 0.18% 0.57% 0.56%
Other Operating Income 0.47% 0.27% 0.31% 0.24% 0.20%
Operating Profit / Loss 0.15% 0.25% 0.28% 0.23% 0.87%
Finance Cost 0.15% 0.25% 0.28% 0.23% 0.87%
Other Income 0.09% 0.42% 0.18% 0.10% 0.17%
Profit before Tax / Loss 3.61% 3.23% 1.73% 3.66% (1.58%)
Taxation 1.39% 1.10% 0.59% 1.26% (0.65%)
Net Profit / Loss 2.22% 2.13% 1.14% 2.41% (0.93%)

Interpretation

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Pakistan State Oil

1. Sales

Years 2005 2006 2007 2008 2009


Percentage 100% 100% 100% 100% 100%

Interpretation

In vertical analysis we took sales as base so sales of all the years will 100%.

2. Trade Discount

Years 2005 2006 2007 2008 2009


Percentage 0.23% 0.37% 0.23% 0.01% 0.02%

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 0.23%, 0.37%, 0.23%, 0.01%, and 0.02% of respective sales in the last
five consecutive years. The overall tendency of the cost of sales is increasing.

3. Sales Tax

Years 2005 2006 2007 2008 2009


Percentage 12.85% 12.59% 12.72% 12.73% 13.54%

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 12.85%,12.59 %, 12.72%, 12.73%, and 13.54% of respective sales in
the last five consecutive years. The overall tendency of the cost of sales is increasing.

4. Inland Freight equalization margin

Years 2005 2006 2007 2008 2009


Percentage 3.38% 2.75% 2.17% 2.35% 1.28%
.
Interpretation

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Pakistan State Oil

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 3.38%, 2.75%, 2.17%, 2.35%, and 1.28% of respective sales in the last
five consecutive years. The overall tendency of the cost of sales is increasing.

5. Net Sales

Years 2005 2006 2007 2008 2009


Percentage 83.54% 84.29% 84.88% 84.91% 85.17%

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 83.54%, 84.29%, 84.88%, 84.91%, and 85.17% of respective sales in
the last five consecutive years. The overall tendency of the cost of sales is increasing.

6. Opening Stock

Years 2005 2006 2007 2008 2009


Percentage 5.89% 5.82% 6.84% 5.07% 8.67%

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 5.89, 5.82%, 6.84%, 5.07%, and 8.67% of respective sales in the last
five consecutive years. The overall tendency of the cost of sales is increasing.

7. Purchases

Years 2005 2006 2007 2008 2009


Percentage 80.35% 81.57% 82.24% 85.39% 81.74%

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 80.35%, 81.57%, 82.24%, 85.39%, and 81.74% of respective sales in
the last five consecutive years. The overall tendency of the cost of sales is increasing.

8. Cost of Products available for Sale

Years 2005 2006 2007 2008 2009


Percentage 86.24% 87.40% 89.09% 90.46% 90.41%

Interpretation

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Pakistan State Oil

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 86.24%, 87.40%, 89.09%, 90.46%, and 90.41% of respective sales in
the last five consecutive years. The overall tendency of the cost of sales is increasing.

9. Closing Stock

Years 2005 2006 2007 2008 2009


Percentage (8.10%) (7.97%) (7.18%) (10.69%) (5.66%)

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 8.10%, 7.97%, 7.18%, 10.69%, and 5.66% of respective sales in the
last five consecutive years. The overall tendency of the cost of sales is increasing.

10. Gross profit / Loss

Years 2005 2006 2007 2008 2009


Percentage 5.40% 4.86% 2.98% 5.15% 0.42%

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 5.40%, 4.86%, 2.98%, 5.15%, and 0.42% of respective sales in the last
five consecutive years. The overall tendency of the cost of sales is increasing.

11. Transportation Cost

Years 2005 2006 2007 2008 2009


Percentage 0.12% 0.10% 0.09% 0.06% 0.07%

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 0.12%, 0.10%, 0.09%,0.06%, and 0.07% of respective sales in the last
five consecutive years. The overall tendency of the cost of sales is increasing.

12. Distribution and marketing expenses

Years 2005 2006 2007 2008 2009


Percentage 0.93% 0.70% 0.67% 0.56% 0.55%

Interpretation

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Pakistan State Oil

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 0.93%, 0.70%, 0.67%,0.56%, and 0.55% of respective sales in the last
five consecutive years. The overall tendency of the cost of sales is increasing.

13. Administrative Expenses

Years 2005 2006 2007 2008 2009


Percentage 0.34% 0.26% 0.24% 0.20% 0.16%

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 0.34%, 0.26%, 0.24%, 0.20%, and 0.16% of respective sales in the last
five consecutive years. The overall tendency of the cost of sales is increasing.

14. Depreciation & Amortization

Years 2005 2006 2007 2008 2009


Percentage 0.39% 0.31% 0.28% 0.20% 0.17%

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 0.39%, 0.31%, 0.28%, 0.20%, and 0.17% of respective sales in the last
five consecutive years. The overall tendency of the cost of sales is increasing.

15. Other Operating Expenses

Years 2005 2006 2007 2008 2009


Percentage 0.42% 0.70% 0.18% 0.57% 0.56%

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 0.42%, 0.70%, 0.18%, 0.57%, and 0.56% of respective sales in the last
five consecutive years. The overall tendency of the cost of sales is increasing.

16. Other Operating Income

Years 2005 2006 2007 2008 2009


Percentage 0.47% 0.27% 0.31% 0.24% 0.20%

Interpretation

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Pakistan State Oil

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 0.47%, 0.27%, 0.31%, 0.24%, and 0.20% of respective sales in the last
five consecutive years. The overall tendency of the cost of sales is increasing.

17. Other Operating Profit/ Loss

Years 2005 2006 2007 2008 2009


Percentage 0.15% 0.25% 0.28% 0.23% 0.87%

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 0.15%, 0.25%, 0.28%, 0.23%, and 0.87% of respective sales in the last
five consecutive years. The overall tendency of the cost of sales is increasing.

18. Finance Cost

Years 2005 2006 2007 2008 2009


Percentage 0.15% 0.25% 0.28% 0.23% 0.87%

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 0.15%, 0.25%, 0.28%, 0.23%, and 0.87% of respective sales in the last
five consecutive years. The overall tendency of the cost of sales is increasing.

19. Other Income

Years 2005 2006 2007 2008 2009


Percentage 0.09% 0.42% 0.18% 0.10% 0.17%

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 0.09%, 0.42%, 0.18%, 0.10%, and 0.17% of respective sales in the last
five consecutive years. The overall tendency of the cost of sales is increasing.

20. Profit before Tax

Years 2005 2006 2007 2008 2009


Percentage 3.61% 3.23% 1.73% 3.66% (1.58%)

Interpretation

Department of Management Sciences Page 15


Pakistan State Oil

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 3.61%, 3.23%, 1.73%, 3.66%, and (1.58%) of respective sales in the
last five consecutive years. The overall tendency of the cost of sales is increasing.

21. Taxation

Years 2005 2006 2007 2008 2009


Percentage 1.39% 1.10% 0.59% 1.26% (0.65%)

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 1.39%, 1.10%, 0.59%, 1.26%, and (0.65%) of respective sales in the
last five consecutive years. The overall tendency of the cost of sales is increasing.

22. Net Profit / Loss

Years 2005 2006 2007 2008 2009


Percentage 2.22% 2.13% 1.14% 2.41% (0.93%)

Interpretation

Since the computed value of cost of sales under vertical analysis taking sales as base is
covering almost 2.22%, 2.13%, 1.14%, 2.41%, and (0.93%) of respective sales in the
last five consecutive years. The overall tendency of the cost of sales is increasing.

Horizontal Analysis of Income Statement


For The Period of 5 Years ended on June 31st, 2009
Particulars 2005 2006 2007 2008 2009
Sales Revenue 100% 139.11% 161.97% 229.32% 282.83%
Trade Discount & Allowances 100% 224.97% 159.09% 14.37% 22.19%
Sales Tax 100% 136.32% 160.43% 227.25% 298.06%
Inland Freight Equalization Margin 100% 113.08% 103.87% 159.14% 106.97%
Net Sales 100% 140.35% 164.56% 233.07% 288.32%
Opening Stock 100% 137.44% 188.03% 197.33% 416.10%
Purchases 100% 141.23% 165.80% 243.70% 287.73%
Cost of Product Available for Sale 100% 140.97% 167.32% 240.53% 296.50%
Closing Stock 100% 136.81% 143.58% 302.75% 197.62%
Cost of Sales 100% 141.40% 169.78% 234.08% 306.75%
Gross Profit / Loss 100% 125.18% 89.18% 218.41% 21.90%
Transportation Cost 100% 116.77% 117.89% 107.86% 163.97%
Distribution & Marketing Expenses 100% 105.70% 116.42% 139.02% 167.97%
Administrative Expenses 100% 108.69% 116.49% 133.27% 133.81%
Depreciation & Amortization 100% 110.00% 115.86% 118.58% 121.37%

Department of Management Sciences Page 16


Pakistan State Oil

Other Operating Expenses 100% 228.74% 70.21% 311.65% 371.27%


Other Operating Income 100% 80.17% 107.83% 117.75% 122.39%
Operating Profit / Loss 100% 115.85% 80.57% 237.01% (68.02%)
Finance Cost 100% 238.51% 312.41% 369.01% 1681.16%
Other Income 100% 668.02% 340.18% 274.19% 553.87%
Profit before Tax / Loss 100% 124.23% 77.48% 232.58% (123.56%)
Taxation 100% 110.13% 68.79% 207.14% (131.76%)
Net Profit / Loss 100% 133.04% 82.92% 248.48% (118.44%)

Department of Management Sciences Page 17


Pakistan State Oil

Interpretation

1. Sales

Years 2005 2006 2007 2008 2009


Percentage 100% 139.11% 161.97% 229.32% 282.83%

Interpretation

Since the sales of Pakistan State Oil Limited have increased as compared to base Year
(2005) significantly we conclude that PSO has improved its sale to more than 182% in 5
years.

2. Trade Discount

Years 2005 2006 2007 2008 2009


Percentage 100% 224.97% 159.09% 14.37% 22.19%

Interpretation

The trade discount of PSO shows an increase in year 2006. Also in 2007 its value is
showing increase as compared to base year. After 2007 decreased significantly and
same is for the year 2009. Hence this trend showed that PSO has decreased its trade
discounts.

3. Sales Tax

Years 2005 2006 2007 2008 2009


Percentage 100% 136.33% 160.43% 227.25% 298.06%

Interpretation

From the above values it is obvious that sales tax is continuously increasing from 2006
to 2009 as compared to base year. It also shows that the sales volume is increasing
each year as compared to base ear.

4. Inland Freight equalization margin

Years 2005 2006 2007 2008 2009


Percentage 100% 113.08% 103.87% 159.14% 106.978%

Interpretation

From the above values we can see an increasing and decreasing trend of freight margin
when compared to the base year. It shows a significant increase in year 2008 as
compared to base year.

Department of Management Sciences Page 18


Pakistan State Oil

5. Net Sales

Years 2005 2006 2007 2008 2009


Percentage 100% 140.35% 164.56% 233.07% 288.32%

Interpretation

Since the computed value of net sales are showing a continuous increase from 2006 to
2009 as compared to base year we can conclude that the net sales of PSO has been
increasing continuously.

6. Opening Stock

Years 2005 2006 2007 2008 2009


Percentage 100% 137.44% 188.03% 197.33% 416.10%

Interpretation

The above values show an increasing trend in the opening stock of the PSO as
compared to the base year, even in the year 2009 it shows a significant increase i.e.
416%.

7. Purchases

Years 2005 2006 2007 2008 2009


Percentage 100% 141.23% 165.80% 243.70% 287.73%

Interpretation

Since the above values show an increasing trend as compared to the base year so we
can say that the Purchases of the company have increased more than double from the
base year till 2009.

8. Cost of Products Sold

Years 2005 2006 2007 2008 2009


Percentage 100% 140.97% 167.32% 240.53% 296.50%

Interpretation

The above calculated values are showing an increase in comparison to the base year
but this increase is not negative as the volume of production is also increasing that
caused increase in cost of production hence we conclude that it is a positive sign as
sales are also increasing.

Department of Management Sciences Page 19


Pakistan State Oil

9. Closing Stock

Years 2005 2006 2007 2008 2009


Percentage 100% 136.81% 143.58% 302.75% 197.62%

Interpretation

The values of closing stock are increasing as compared to the base year from 2006 to
2009.

10. Gross profit / Loss

Years 2005 2006 2007 2008 2009


Percentage 100% 125.18% 89.18% 218.41% 21.90%

Interpretation

The calculated values of the gross profit show a see-saw model. It increased in next
year i.e. 2006 when compared to base year then decreased in 2007. Again it increased
sufficiently in 2008 and then decreased again in 2009.

11. Transportation Cost

Years 2005 2006 2007 2008 2009


Percentage 100% 116.77% 117.89% 107.86% 163.97%

Interpretation

From the above calculated values the transportation cost is showing a mixed stream of
increasing and decreasing behavior. In first two subsequent years it increased up to 17%
and then it decreased in 2008. Again it shows a significant increase in 2009.

12. Distribution and Marketing Expenses

Years 2005 2006 2007 2008 2009


Percentage 100% 105.70% 116.42% 139.02% 167.97%

Interpretation

The above values shows a continuously increase in distribution and marketing expenses
in years 2006 to 2009 as compared to base year 2005.

Department of Management Sciences Page 20


Pakistan State Oil

13. Administrative Expenses

Years 2005 2006 2007 2008 2009


Percentage 100% 108.69% 116.49% 133.27% 133.81%

Interpretation

The calculated values of administrative expenses are continuously increasing from years
2006 to 2009 as compared to base year 2005.

14. Depreciation & Amortization

Years 2005 2006 2007 2008 2009


Percentage 100% 110.00% 115.86% 118.58% 121.37%

Interpretation

Depreciation and amortization expenses are continuously increasing as compared to the


base year but this is not a significant increase.

15. Other Operating Expenses

Years 2005 2006 2007 2008 2009


Percentage 100% 228.74% 70.21% 311.65% 371.27%

Interpretation

Since the calculated value shows a continuous increase in the operating expenses of
PSO limited as compared to the base year yet there is a significant decrease in the year
2007 but again in subsequent years this value increased significantly.

16. Other Operating Income

Years 2005 2006 2007 2008 2009


Percentage 100% 80.17% 107.83% 117.75% 122.39%

Interpretation

The above values of operating income when compared with the base year decreased in
first year but it increased continuously in the subsequent years.

Department of Management Sciences Page 21


Pakistan State Oil

17. Other Operating Profit/ Loss

Years 2005 2006 2007 2008 2009


Percentage 100% 115.85% 80.57% 237.01% (68.02%)

Interpretation

Since the computed values of operating profit are does not show a continuous trend so
we can say that the profit increased in two non-subsequent year i.e. 2006 and 2008 but
it decreased in 2007 as compared to base year. In 2009 it shows a significant loss.

18. Finance Cost

Years 2005 2006 2007 2008 2009


Percentage 100% 238.51% 312.41% 369.01% 1681.16%

Interpretation

The finance cost of the PSO limited shows a significant increase over the years when
compared to the base year. It means that the finance cost of the company in increasing
continuously.

19. Other Income

Years 2005 2006 2007 2008 2009


Percentage 100% 668.02% 340.18% 274.19% 553.87%

Interpretation

From the above computed values we can see that the other income of the company
increased in 2006 very significantly but in next subsequent years it increased with a
decreased rate.

20. Profit before Tax

Years 2005 2006 2007 2008 2009


Percentage 100% 124.23% 77.48% 232.58% (123.56%)

Interpretation

The calculated values of profit before tax show an increase as compared to base year in
the first year and then a decrease in the next year. However it shows significant positive
change in the next year as compared to the base year. Yet in the year 2009 it showed a
very significant decrease that is signifies a tax bracket.

Department of Management Sciences Page 22


Pakistan State Oil

21. Taxation

Years 2005 2006 2007 2008 2009


Percentage 100% 110.13% 68.79% 207.14% (131.76%)

Interpretation

The above computed values of taxation are showing increase in 2006 as compared to
base year and decrease in the next year 2007. Again the value of tax increases in 2008.
However the firm got tax bracket due to operating loss in the year 2009.

22. Net Profit / Loss

Years 2005 2006 2007 2008 2009


Percentage 100% 133.04% 82.92% 248.48% (118.44%)

Interpretation

The computed values of net profits here also show the above zigzag pattern as
compared to the base year. However in the last year i.e. 2009 the company shows a
significant loss.

Department of Management Sciences Page 23


Pakistan State Oil

Vertical Analysis of Balance Sheet


For The Period of 5 Years ended on June 31st, 2009
Particulars 2005 2006 2007 2008 2009
Assets
Current Assets:
Cash & Bank Balances 3.67% 2.71% 2.04% 2.37% 1.88%
Short-term Investments 0.02% - - - -
Taxation - Net - - - - 0.46%
Other Receivables 19.80% 20.75% 21.08% 12.34% 8.35%
Deposits & Short-term Prepayments 1.39% 1.84% 2.12% 0.32% 0.36%
Loans & Advances 0.41% 0.39% 0.49% 0.31% 0.27%
Trade Debts 12.98% 16.70% 18.20% 26.67% 52.48%
Stock in Trade 39.35% 40.14% 39.55% 49.06% 26.53%
Stores, Spare Parts & Loose Tools 0.25% 0.18% 0.17% 0.09% 0.07%
Total Current Assets 77.87% 82.71% 83.64% 91.16% 90.40%
Non-Current Assets:
Deferred Tax 0.24% 0.58% 0.54% 0.32% 3.28%
Long-term Deposits & Prepayments 0.20% 0.11% 0.09% 0.06% 0.05%
Long-term Loans, Advances & Receivables 1.47% 0.99% 0.84% 0.38% 0.26%
Long-term Investments 4.43% 4.67% 4.00% 2.13% 1.40%
Intangibles 0.28% 0.22% 0.17% 0.08% 0.04%
Property, Plant & Equipment 15.51% 10.72% 10.72% 5.87% 4.55%
Total Non-Current Assets 22.13% 17.29% 16.36% 8.84% 9.60%
Total Assets 100% 100% 100% 100% 100%
Liabilities & Equity
Liabilities:
Current Liabilities:
Taxation - Net 2.57% 2.42% 0.09% 0.57% -
Short-term Borrowings 9.20% 10.90% 12.13% 8.65% 12.16%
Accrued Interest / Mark-up 0.12% 0.17% 0.18% 0.17% 0.36%
Provisions 1.44% 1.11% 0.92% 0.57% 0.45%
Trade & Other Payables 49.30% 52.47% 55.44% 63.78% 71.78%
Total Current Liabilities 62.64% 67.06% 68.76% 73.74% 84.75%
Non-Current Liabilities:
Retirement & Other Service Benefits 2.53% 2.22% 2.20% 1.24% 1.09%
Long-term Deposits & Prepayments 1.29% 1.06% 1.03% 0.66% 0.56%
Total Non-Current Liabilities 3.82% 3.28% 3.23% 1.90% 1.65%
Equity:
Share Capital 3.28% 2.44% 2.29% 1.35% 1.12%
Reserves 30.26% 27.22% 25.72% 23.01% 12.49%
Total Equity 33.54% 29.66% 28.02% 24.36% 13.60%
Total Liabilities & Equity 100% 100% 100% 100% 100%

Department of Management Sciences Page 24


Pakistan State Oil

Interpretation

1. Cash & Bank Balances

Years 2005 2006 2007 2008 2009


Percentage 3.67% 2.71% 2.04% 2.37% 1.88%

Interpretation

Since the computed value of cash & bank balances under vertical analysis taking total
assets as base is covering almost 3.67%, 2.71%, 2.04%, 2.37%, and 1.88% of total
volume of balance sheet in the consecutive last five years. The overall tendency of the
cash & bank balances is decreasing.

2. Short-term Investments

Years 2005 2006 2007 2008 2009


Percentage 0.02% - - - -

Interpretation

Since the computed value of Short-term Investments under vertical analysis taking total
assets as base is covering almost 0.02% of total volume of balance sheet in the year
2005. In the coming years till 2009 company did not invest in short-term assets.

3. Taxation - Net

Years 2005 2006 2007 2008 2009


Percentage - - - - 0.46%

Interpretation

Since the computed value of Taxation - Net under vertical analysis taking total assets as
base is covering almost 0.46% of total volume of balance sheet in the last five
consecutive years.

4. Other Receivables

Years 2005 2006 2007 2008 2009


Percentage 19.80% 20.75% 21.08% 12.34% 8.35%

Interpretation

Since the computed value of Other Receivables under vertical analysis taking total
assets as base is covering almost 19.80%, 20.75%, 21.08%, 12.34%, and 8.35% of total
volume of balance sheet in the last five consecutive years. The overall tendency of the
Other Receivables is increasing in first three years than decreasing in last two years.

Department of Management Sciences Page 25


Pakistan State Oil

5. Deposits & Short-term Prepayments

Years 2005 2006 2007 2008 2009


Percentage 1.39% 1.84% 2.12% 0.32% 0.36%

Interpretation

Since the computed value of Deposits & Short-term Prepayments under vertical analysis
taking total assets as base is covering almost 1.39%, 1.84%, 2.12%, 0.32%, and 0.36%
of total volume of balance sheet in the last five consecutive years. The overall tendency
of the Deposits & Short-term Prepayments is increasing in first three years than
decreasing in last two years.

6. Loans & Advances

Years 2005 2006 2007 2008 2009


Percentage 0.41% 0.39% 0.49% 0.31% 0.27%

Interpretation

Since the computed value of Loans & Advances under vertical analysis taking total
assets as base is covering almost 0.41%, 0.39%, 0.49%, 0.31%, and 0.27% of total
volume of balance sheet in the last five consecutive years. The overall tendency of the
Loans & Advances is decreasing.

7. Trade Debts

Years 2005 2006 2007 2008 2009


Percentage 12.98% 16.70% 18.20% 26.67% 52.48%

Interpretation

Since the computed value of Trade Debts under vertical analysis taking total assets as
base is covering almost 12.98%, 16.70%, 18.20%, 26.67%, and 52.48% of total volume
of balance sheet in the last five consecutive years. The overall tendency of the Trade
Debts is increasing.

8. Stock in Trade

Years 2005 2006 2007 2008 2009


Percentage 39.35% 40.14% 39.55% 49.06% 26.53%

Interpretation

Since the computed value of Stock in Trade under vertical analysis taking total assets as
base is covering almost 39.35%, 40.14%, 39.55%, 49.06%, and 26.53% of total volume
of balance sheet in the last five consecutive years. The overall tendency of the Stock in
Trade is increasing.

Department of Management Sciences Page 26


Pakistan State Oil

9. Stores, Spare Parts & Loose Tools

Years 2005 2006 2007 2008 2009


Percentage 0.25% 0.18% 0.17% 0.09% 0.07%

Interpretation

Since the computed value of Stores, Spare Parts & Loose Tools under vertical analysis
taking total assets as base is covering almost 0.25%, 0.18%, 0.17%, 0.09%, and 0.07%
of total volume of balance sheet in the last five consecutive years. The overall tendency
of the Stores, Spare Parts & Loose Tools is decreasing.

10. Total Current Assets

Years 2005 2006 2007 2008 2009


Percentage 77.87% 82.71% 83.64% 91.16% 90.40%

Interpretation

Since the computed value of Total Current Assets under vertical analysis taking total
assets as base is covering almost 77.87%, 82.71%, 83.64%, 91.16%, and 90.40% of
total volume of balance sheet in the last five consecutive years. The overall tendency of
the Total Current Assets is increasing.

11. Deferred Tax

Years 2005 2006 2007 2008 2009


Percentage 0.24% 0.58% 0.54% 0.32% 3.28%

Interpretation

Since the computed value of Deferred Tax under vertical analysis taking total assets as
base is covering almost 0.24%, 0.58%, 0.54%, 0.32%, and 3.28% of total volume of
balance sheet in the last five consecutive years. The overall tendency of the Deferred
Tax is increasing.

12. Long-term Deposits & Prepayments

Years 2005 2006 2007 2008 2009


Percentage 0.20% 0.11% 0.09% 0.06% 0.05%

Interpretation

Since the computed value of Long-term Deposits & Prepayments under vertical analysis
taking total assets as base is covering almost 0.20%, 0.11%, 0.09%, 0.06%, and 0.05%
of total volume of balance sheet in the last five consecutive years. The overall tendency
of the Long-term Deposits & Prepayments is decreasing.

Department of Management Sciences Page 27


Pakistan State Oil

13. Long-term Loans, Advances & Receivables

Years 2005 2006 2007 2008 2009


Percentage 1.47% 0.99% 0.84% 0.38% 0.26%

Interpretation

Since the computed value of Long-term Loans, Advances & Receivables under vertical
analysis taking total assets as base is covering almost 0.23%, 0.37%, 0.23%, 0.01%,
and 0.02% of total volume of balance sheet in the last five consecutive years. The
overall tendency of the Long-term Loans, Advances & Receivables is increasing.

14. Long-term Investments

Years 2005 2006 2007 2008 2009


Percentage 4.43% 4.67% 4.00% 2.13% 1.40%

Interpretation

Since the computed value of Long-term Investments under vertical analysis taking total
assets as base is covering almost 4.43%, 4.67%, 4.00%, 2.13%, and 1.40% of total
volume of balance sheet in the last five consecutive years. The overall tendency of the
Long-term Investments is decreasing.

15. Intangibles

Years 2005 2006 2007 2008 2009


Percentage 0.28% 0.22% 0.17% 0.08% 0.04%

Interpretation

Since the computed value of Intangibles under vertical analysis taking total assets as
base is covering almost 0.28%, 0.22%, 0.17%, 0.08%, and 0.04% of total volume of
balance sheet in the last five consecutive years. The overall tendency of the Intangibles
is decreasing.

16. Property, Plant & Equipment

Years 2005 2006 2007 2008 2009


Percentage 15.51% 10.72% 10.72% 5.87% 4.55%

Interpretation

Since the computed value of Property, Plant & Equipment under vertical analysis taking
total assets as base is covering almost 15.51%, 10.72%, 10.72%, 5.87%, and 4.55% of
total volume of balance sheet in the last five consecutive years. The overall tendency of
the Property, Plant & Equipment is decreasing.

Department of Management Sciences Page 28


Pakistan State Oil

17. Total Non-Current Assets

Years 2005 2006 2007 2008 2009


Percentage 22.13% 17.29% 16.36% 8.84% 9.60%

Interpretation

Since the computed value of Total Non-Current Assets under vertical analysis taking
total assets as base is covering almost 22.13%, 17.29%, 16.36%, 8.84%, and 9.60% of
total volume of balance sheet in the last five consecutive years. The overall tendency of
the Total Non-Current Assets is decreasing.

18. Total Assets

Years 2005 2006 2007 2008 2009


Percentage 100% 100% 100% 100% 100%

Interpretation

We take total assets as base in this vertical analysis so total assets are 100% in every
year.

19. Taxation - Net

Years 2005 2006 2007 2008 2009


Percentage 2.57% 2.42% 0.09% 0.57% -

Interpretation

Since the computed value of Taxation - Net under vertical analysis taking total assets as
base is covering almost 2.57%, 2.42%, 0.09% and 0.57% of total volume of balance
sheet in the last five consecutive years. The overall tendency of the Taxation - Net is
decreasing.

20. Short-term Borrowings

Years 2005 2006 2007 2008 2009


Percentage 9.20% 10.90% 12.13% 8.65% 12.16%

Interpretation

Since the computed value of Short-term Borrowings under vertical analysis taking total
assets as base is covering almost 9.20%, 10.90%, 12.13%, 8.65%, and 12.16% of total
volume of balance sheet in the last five consecutive years. The overall tendency of the
Short-term Borrowings is increasing.

Department of Management Sciences Page 29


Pakistan State Oil

21. Accrued Interest / Mark-up

Years 2005 2006 2007 2008 2009


Percentage 0.12% 0.17% 0.18% 0.17% 0.36%

Interpretation

Since the computed value of accrued Interest / Mark-up under vertical analysis taking
total assets as base is covering almost 0.12%, 0.17%, 0.18%, 0.17%, and 0.36% of total
volume of balance sheet in the last five consecutive years. The overall tendency of the
accrued Interest / Mark-up is increasing.

22. Provisions

Years 2005 2006 2007 2008 2009


Percentage 1.44% 1.11% 0.92% 0.57% 0.45%

Interpretation

Since the computed value of Provisions under vertical analysis taking total assets as
base is covering almost 1.44%, 1.11%, 0.92%, 0.57%, and 0.45% of total volume of
balance sheet in the last five consecutive years. The overall tendency of the Provisions
is decreasing.

23. Trade & Other Payables


Years 2005 2006 2007 2008 2009
Percentage 49.30% 52.47% 55.44% 63.78% 71.78%

Interpretation

Since the computed value of Trade & Other Payables under vertical analysis taking total
assets as base is covering almost 49.30%, 52.47%, 55.44%, 63.78% and 71.78% of
total volume of balance sheet in the last five consecutive years. The overall tendency of
the Trade & Other Payables is increasing.

24. Total Current Liabilities


Years 2005 2006 2007 2008 2009
Percentage 62.64% 67.06% 68.76% 73.74% 84.75%

Interpretation

Since the computed value of Total Current Liabilities under vertical analysis taking total
assets as base is covering almost 62.64%, 67.06%, 68.76%, 73.74%, and 84.75% of
total volume of balance sheet in the last five consecutive years. The overall tendency of
the Total Current Liabilities is increasing.

Department of Management Sciences Page 30


Pakistan State Oil

25. Retirement & Other Service Benefits


Years 2005 2006 2007 2008 2009
Percentage 2.53% 2.22% 2.20% 1.24% 1.09%

Interpretation

Since the computed value of Retirement & Other Service Benefits under vertical analysis
taking total assets as base is covering almost 2.53%, 2.22%, 2.20%, 1.24%, and 1.09%
of total volume of balance sheet in the last five consecutive years. The overall tendency
of the Retirement & Other Service Benefits is decreasing.

26. Long-term Deposits & Prepayments


Years 2005 2006 2007 2008 2009
Percentage 1.29% 1.06% 1.03% 0.66% 0.56%

Interpretation

Since the computed value of Long-term Deposits & Prepayments under vertical analysis
taking total assets as base is covering almost 1.29%, 1.06%, 1.03%, 0.66%, and 0.56%
of total volume of balance sheet in the last five consecutive years. The overall tendency
of the Long-term Deposits & Prepayments is decreasing.

27. Total Non-Current Liabilities


Years 2005 2006 2007 2008 2009
Percentage 3.82% 3.28% 3.23% 1.90% 1.65%

Interpretation

Since the computed value of Total Non-Current Liabilities under vertical analysis taking
total assets as base is covering almost 3.82%, 3.28%, 3.23%, 1.90%, and 1.65% of total
volume of balance sheet in the last five consecutive years. The overall tendency of the
Total Non-Current Liabilities is decreasing.

28. Share Capital


Years 2005 2006 2007 2008 2009
Percentage 3.28% 2.44% 2.29% 1.35% 1.12%

Interpretation

Since the computed value of Share Capital under vertical analysis taking total assets as
base is covering almost 3.28%, 2.44%, 2.29%, 1.35%, and 1.12% of total volume of
balance sheet in the last five consecutive years. The overall tendency of the Share
Capital is decreasing.

Department of Management Sciences Page 31


Pakistan State Oil

29. Reserves
Years 2005 2006 2007 2008 2009
Percentage 30.26% 27.22% 25.72% 23.01% 12.49%

Interpretation

Since the computed value of Reserves under vertical analysis taking total assets as
base is covering almost 30.26%, 27.22%, 25.72%, 23.01%, and 12.49% of total volume
of balance sheet in the last five consecutive years. The overall tendency of the Reserves
is decreasing.

30. Total Equity


Years 2005 2006 2007 2008 2009
Percentage 33.54% 29.66% 28.02% 24.36% 13.60%

Interpretation

Since the computed value of Total Equity under vertical analysis taking total assets as
base is covering almost 33.54%, 29.66%, 28.02%, 24.36%, and 13.60% of total volume
of balance sheet in the last five consecutive years. The overall tendency of the Total
Equity is decreasing.

31. Total Liabilities & Equity


Years 2005 2006 2007 2008 2009
Percentage 100% 100% 100% 100% 100%

Interpretation

As we take total assets as base for this analysis so total liabilities & equity is also 100%
in every year.

Department of Management Sciences Page 32


Pakistan State Oil

Horizontal Analysis of Balance Sheet


For The Period of 5 Years ended on June 31st, 2009
Particulars 2005 2006 2007 2008 2009
Assets
Current Assets:
Cash & Bank Balances 100% 98.80% 79.21% 157.06% 150.01%
Short-term Investments 100% - - - -
Taxation - Net - - - - 100%
Other Receivables 100% 140.59% 152.07% 151.40% 123.64%
Deposits & Short-term Prepayments 100% 177.36% 218.12% 55.28% 75.99%
Loans & Advances 100% 129.30% 171.62% 185.80% 196.02%
Trade Debts 100% 172.52% 200.26% 499.25% 1185.52%
Stock in Trade 100% 136.85% 143.62% 302.96% 197.72%
Stores, Spare Parts & Loose Tools 100% 95.77% 97.96% 88.71% 85.89%
Total Current Assets 100% 142.47% 153.47% 284.47% 340.47%
Non-Current Assets:
Deferred Tax 100% 327.32% 321.50% 326.55% 4035.01%
Long-term Deposits & Prepayments 100% 71.00% 62.68% 75.21% 79.55%
Long-term Loans, Advances & Receivables 100% 90.71% 81.59% 62.07% 52.72%
Long-term Investments 100% 141.47% 129.03% 116.54% 92.91%
Intangibles 100% 107.03% 87.26% 72.94% 47.61%
Property, Plant & Equipment 100% 92.70% 98.78% 91.98% 86.14%
Total Non-Current Assets 100% 104.84% 105.62% 97.04% 127.29%
Total Assets 100% 134.15% 142.88% 243.00% 293.31%
Liabilities & Equity
Liabilities:
Current Liabilities:
Taxation - Net 100% 126.11% 5.16% 54.06% 0.00%
Short-term Borrowings 100% 158.97% 188.39% 228.57% 387.70%
Accrued Interest / Mark-up 100% 188.87% 206.43% 340.92% 870.38%
Provisions 100% 103.06% 91.29% 96.27% 91.29%
Trade & Other Payables 100% 142.75% 160.65% 314.33% 427.00%
Total Current Liabilities 100% 143.62% 156.83% 286.09% 396.85%
Non-Current Liabilities:
Retirement & Other Service Benefits 100% 117.47% 124.20% 118.92% 126.39%
Long-term Deposits & Prepayments 100% 110.19% 113.79% 123.61% 126.59%
Total Non-Current Liabilities 100% 115.01% 120.69% 120.51% 126.46%
Equity:
Share Capital 100% 100.00% 100.00% 100.00% 100.00%
Reserves 100% 120.65% 121.44% 184.78% 121.01%
Total Equity 100% 118.63% 119.35% 176.49% 118.96%
Total Liabilities & Equity 100% 134.15% 142.88% 243.00% 293.31%

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Interpretation

1. Cash & Bank Balances

Years 2005 2006 2007 2008 2009


Percentage 100.00% 98.80% 79.21% 157.06% 150.01%

Interpretation

Since the computed values of Cash & Bank Balances are showing a significant increase
from 2006 to 2009 as compared to base year we can conclude that the Cash & Bank
Balances of PSO has been increasing continuously.

2. Short-term Investments

Years 2005 2006 2007 2008 2009


Percentage 100.00% - - - -

Interpretation

Since the computed value of Short-term Investments is showing that company made
short term investment only in 2005 from last five years.

3. Taxation - Net

Years 2005 2006 2007 2008 2009


Percentage - - - - 100.00%

Interpretation

Since the computed values of Taxation – Net is showing that the company has only
earned the benefit of taxation in 2009.

4. Other Receivables

Years 2005 2006 2007 2008 2009


Percentage 100.00% 140.59% 152.07% 151.40% 123.64%

Interpretation

Since the computed values of Other Receivables are showing a significant increase from
2006 to 2009 as compared to base year we can conclude that the Other Receivables of
PSO has been increasing continuously.

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Pakistan State Oil

5. Deposits & Short-term Prepayments

Years 2005 2006 2007 2008 2009


Percentage 100.00% 177.36% 218.12% 55.28% 75.99%

Interpretation

Since the computed values of Deposits & Short-term Prepayments are showing a
significant increase from 2006 to 2009 as compared to base year we can conclude that
the Deposits & Short-term Prepayments of PSO has been increasing continuously.

6. Loans & Advances

Years 2005 2006 2007 2008 2009


Percentage 100.00% 129.30% 171.62% 185.80% 196.02%

Interpretation

Since the computed values of Loans & Advances are showing a significant increase
from 2006 to 2009 as compared to base year we can conclude that the Loans &
Advances of PSO has been increasing continuously.

7. Trade Debts

Years 2005 2006 2007 2008 2009


Percentage 100.00% 172.52% 200.26% 499.25% 1185.52%

Interpretation

Since the computed values of Trade Debts are showing a significant increase from 2006
to 2009 as compared to base year we can conclude that the Trade Debts of PSO has
been increasing continuously.

8. Stock in Trade

Years 2005 2006 2007 2008 2009


Percentage 100.00% 136.85% 143.62% 302.96% 197.72%

Interpretation

Since the computed values of Stock in Trade are showing a significant increase from
2006 to 2009 as compared to base year we can conclude that the Stock in Trade of PSO
has been increasing continuously.

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Pakistan State Oil

9. Stores, Spare Parts & Loose Tools

Years 2005 2006 2007 2008 2009


Percentage 100.00% 95.77% 97.96% 88.71% 85.89%

Interpretation

Since the computed values of Stores, Spare Parts & Loose Tools are showing a
decrease from 2006 to 2009 as compared to base year we can conclude that the Stores;
Spare Parts & Loose Tools of PSO has been decreasing continuously.

10. Total Current Assets

Years 2005 2006 2007 2008 2009


Percentage 100.00% 142.47% 153.47% 284.47% 340.47%

Interpretation

Since the computed values of Total Current Assets are showing a significant increase
from 2006 to 2009 as compared to base year we can conclude that the Total Current
Assets of PSO has been increasing continuously.

11. Deferred Tax

Years 2005 2006 2007 2008 2009


Percentage 100.00% 327.32% 321.50% 326.55% 4035.01%

Interpretation

Since the computed values of Deferred Tax are showing a significant increase from
2006 to 2009 as compared to base year we can conclude that the Deferred Tax of PSO
has been increasing continuously.

12. Long-term Deposits & Prepayments

Years 2005 2006 2007 2008 2009


Percentage 100.00% 71.00% 62.68% 75.21% 79.55%

Interpretation

Since the computed values of Long-term Deposits & Prepayments are showing a
significant decrease from 2006 to 2009 as compared to base year we can conclude that
the Long-term Deposits & Prepayments of PSO has been decreasing continuously.

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Pakistan State Oil

13. Long-term Loans, Advances & Receivables

Years 2005 2006 2007 2008 2009


Percentage 100.00% 90.71% 81.59% 62.07% 52.72%

Interpretation

Since the computed values of Long-term Loans, Advances & Receivables are showing a
significant decrease from 2006 to 2009 as compared to base year we can conclude that
the Long-term Loans, Advances & Receivables of PSO has been decreasing
continuously.

14. Long-term Investments

Years 2005 2006 2007 2008 2009


Percentage 100.00% 141.47% 129.03% 116.54% 92.91%

Interpretation

Since the computed values of Long-term Investments are showing a significant increase
from 2006 to 2008 and decrease in 2009 as compared to base year we can conclude
that the Long-term Investments of PSO has been increasing continuously. However
Long-term Investments decreased in 2009.

15. Intangibles

Years 2005 2006 2007 2008 2009


Percentage 100.00% 107.03% 87.26% 72.94% 47.61%

Interpretation

Since the computed values of Intangibles are showing a significant decrease from 2007
to 2009 as compared to base year we can conclude that the Intangibles of PSO has
been decreasing continuously.

16. Property, Plant & Equipment

Years 2005 2006 2007 2008 2009


Percentage 100.00% 92.70% 98.78% 91.98% 86.14%

Interpretation

Since the computed values of Property, Plant & Equipment are showing a significant
decrease from 2006 to 2009 as compared to base year we can conclude that the
Property, Plant & Equipment of PSO has been decreasing continuously.

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Pakistan State Oil

17. Total Non-Current Assets

Years 2005 2006 2007 2008 2009


Percentage 100.00% 104.84% 105.62% 97.04% 127.29%

Interpretation

Since the computed values of Total Non-Current Assets are showing a significant
increase from 2006 to 2009 as compared to base year we can conclude that the Total
Non-Current Assets of PSO has been increasing continuously except in 2008.

18. Total Assets

Years 2005 2006 2007 2008 2009


Percentage 100.00% 134.15% 142.88% 243.00% 293.31%

Interpretation

Since the computed values of Total Assets are showing a significant increase from 2006
to 2009 as compared to base year we can conclude that the Total Assets of PSO has
been increasing continuously.

19. Taxation - Net

Years 2005 2006 2007 2008 2009


Percentage 100.00% 126.11% 5.16% 54.06% 0.00%

Interpretation

Since the computed values of Taxation - Net are showing a significant decrease from
2007 to 2009 as compared to base year we can conclude that the Taxation - Net of PSO
has been decreasing continuously.

20. Short-term Borrowings

Years 2005 2006 2007 2008 2009


Percentage 100.00% 158.97% 188.39% 228.57% 387.70%

Interpretation

Since the computed values of Short-term Borrowings are showing a significant increase
from 2006 to 2009 as compared to base year we can conclude that the Short-term
Borrowings of PSO has been increasing continuously.

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Pakistan State Oil

21. Accrued Interest / Mark-up

Years 2005 2006 2007 2008 2009


Percentage 100.00% 188.87% 206.43% 340.92% 870.38%

Interpretation

Since the computed values of Accrued Interest / Mark-up are showing a significant
increase from 2006 to 2009 as compared to base year we can conclude that the
Accrued Interest / Mark-up of PSO has been increasing continuously.

22. Provisions

Years 2005 2006 2007 2008 2009


Percentage 100.00% 103.06% 91.29% 96.27% 91.29%

Interpretation

Since the computed values of Provisions are showing a significant decrease from 2007
to 2009 as compared to base year we can conclude that the Provisions of PSO has
been decreasing continuously.

23. Trade & Other Payables


Years 2005 2006 2007 2008 2009
Percentage 100.00% 142.75% 160.65% 314.33% 427.00%

Interpretation

Since the computed values of Trade & Other Payables are showing a significant
increase from 2006 to 2009 as compared to base year we can conclude that the Trade &
Other Payables of PSO has been increasing continuously.

24. Total Current Liabilities


Years 2005 2006 2007 2008 2009
Percentage 100.00% 143.62% 156.83% 286.09% 396.85%

Interpretation

Since the computed values of Total Current Liabilities are showing a significant increase
from 2006 to 2009 as compared to base year we can conclude that the Total Current
Liabilities of PSO has been increasing continuously.

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Pakistan State Oil

25. Retirement & Other Service Benefits


Years 2005 2006 2007 2008 2009
Percentage 100.00% 117.47% 124.20% 118.92% 126.39%

Interpretation

Since the computed values of Retirement & Other Service Benefits are showing a
significant increase from 2006 to 2009 as compared to base year we can conclude that
the Retirement & Other Service Benefits of PSO has been increasing continuously.

26. Long-term Deposits & Prepayments


Years 2005 2006 2007 2008 2009
Percentage 100.00% 110.19% 113.79% 123.61% 126.59%

Interpretation

Since the computed values of Long-term Deposits & Prepayments are showing a
significant increase from 2006 to 2009 as compared to base year we can conclude that
the Long-term Deposits & Prepayments of PSO has been increasing continuously.

27. Total Non-Current Liabilities


Years 2005 2006 2007 2008 2009
Percentage 100.00% 115.01% 120.69% 120.51% 126.46%

Interpretation

Since the computed values of Total Non-Current Liabilities are showing a significant
increase from 2006 to 2009 as compared to base year we can conclude that the Total
Non-Current Liabilities of PSO has been increasing continuously.

28. Share Capital


Years 2005 2006 2007 2008 2009
Percentage 100.00% 100.00% 100.00% 100.00% 100.00%

Interpretation

The computed values of Share Capital are showing that the capital of the company is
remained same over the years.

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Pakistan State Oil

29. Reserves
Years 2005 2006 2007 2008 2009
Percentage 100.00% 120.65% 121.44% 184.78% 121.01%

Interpretation

Since the computed values of Reserves are showing a significant increase from 2006 to
2009 as compared to base year we can conclude that the Reserves of PSO has been
increasing continuously.

30. Total Equity


Years 2005 2006 2007 2008 2009
Percentage 100.00% 118.63% 119.35% 176.49% 118.96%

Interpretation

Since the computed values of Total Equity are showing a significant increase from 2006
to 2009 as compared to base year we can conclude that the Total Equity of PSO has
been increasing continuously.

31. Total Liabilities & Equity


Years 2005 2006 2007 2008 2009
Percentage 100.00% 134.15% 142.88% 243.00% 293.31%

Interpretation

Since the computed values of Total Liabilities & Equity are showing a significant
increase from 2006 to 2009 as compared to base year we can conclude that the Total
Liabilities & Equity of PSO has been increasing continuously.

Department of Management Sciences Page 41


Pakistan State Oil

Vertical Analysis of Cash Flow Statement


For The Period of 5 Years ended on June 31st, 2009
Particulars 2005 2006 2007 2008 2009
Cash Generated from Operating Activities:
(3,835.3%
(231.09%) (642%) (173.55%) (25.24%)
Cash Generated from Operations )
Long-term Loans, Advances & Receivables (74.57%) (2.52%) (5.25%) (2.08%) (0.63%)
Long-term Deposits & Prepayments 17.72% (1.08%) (0.62%) - -
Long-term Deposits - - - (0.92%) (0.17%)
Taxes Paid 853.61% 134.91% 285.66% 92.80% 12.20%
Finance Costs Paid 175.94% 29.17% 80.88% 17.83% 51.20%
Payment against Provisions 41.87% 6.49% 0.71% 0.00% 0.33%
Retirement Benefits Paid 83.84% 6.50% 20.29% 8.50% 4.23%
(2,736.8%
(57.61%) (260.3%) (57.25%) 41.95%
Net Cash Generated / Used In Operations )
Cash Flows from Investing Activities:
Purchases of Fixed Assets 785.94% 26.49% 113.50% 8.63% 6.03%
Proceeds from Disposal of Operating Assets (6.31%) (9.23%) (2.17%) (0.80%) (0.18%)
Dividends Received (143.35%) (10.27%) (61.41%) (5.43%) (5.83%)
Proceeds from Liquidation of Subsidiaries - (0.87%) - - -
Net Cash Generated / Used In Investments 636.29% 6.12% 49.93% 2.40% 0.03%
Cash Flows from Financing Activities:
Repayment of Long-term Loan 2.48% - - - -
Proceeds from / Repayment of Long-term Deposits (32.43%) (2.43%) (1.71%) - -
Proceeds from / Repayment of Short-term
(278.61%) (7.62%) (226.40%) 74.21% (30.17%)
Finances
Dividends Paid 1886.93% 154.77% 338.52% 60.92% 25.72%
Net Cash Generated / Used In Financing 1578.38% 144.73% 110.40% 135.12% (4.45%)
Total Net Cash Generated / Used In for The Year (522.17%) 93.24% (100%) 80.28% 37.53%
Cash at Beginning of The Year 622.17% 6.76% 200% 19.72% 62.47%
Cash at End of The Year 100% 100% 100% 100% 100%

Interpretation

1. Cash Generated from Operations

Years 2005 2006 2007 2008 2009


Percentage (3,835.25%) (231.09%) (642.00%) (173.55%) (25.24%)

Interpretation

Since the computed value of Cash Generated from Operations under vertical analysis
taking Cash at End of The Year as base is covering almost 3,835.25%, 231.09%,
642.00%, 173.55%, and 25.24% of respective Cash at End of The Year in the last five
consecutive years. It is showing that Company using more cash than it generated from
operations.

Department of Management Sciences Page 42


Pakistan State Oil

2. Long-term Loans, Advances & Receivables

Years 2005 2006 2007 2008 2009


Percentage (74.57%) (2.52%) (5.25%) (2.08%) (0.63%)

Interpretation

Since the computed value of Long-term Loans, Advances & Receivables under vertical
analysis taking Cash at End of The Year as base is covering almost 74.57%, 2.52%,
5.25%, 2.08%, and 0.63% of respective Cash at End of The Year in the last five
consecutive years. The overall tendency of the Long-term Loans, Advances &
Receivables is decreasing.

3. Long-term Deposits & Prepayments


Years 2005 2006 2007 2008 2009
Percentage 17.72% (1.08%) (0.62%) - -

Interpretation

Since the computed value of Long-term Deposits & Prepayments under vertical analysis
taking Cash at End of The Year as base is covering almost 17.72%, 1.08%, and 0.62%
of respective Cash at End of The Year in the last five consecutive years. The overall
tendency of the Long-term Deposits & Prepayments is decreasing.

4. Long-term Deposits

Years 2005 2006 2007 2008 2009


Percentage - - - (0.92%) (0.17%)

Interpretation

Since the computed value of Long-term Deposits under vertical analysis taking Cash at
End of The Year as base company made long term deposits at 0.92% and 0.17% of
respective Cash at End of The Year only in 2008 and 2009.

5. Taxes Paid

Years 2005 2006 2007 2008 2009


Percentage 853.61% 134.91% 285.66% 92.80% 12.20%

Interpretation

Since the computed value of Taxes Paid under vertical analysis taking Cash at End of
The Year as base is covering almost 853.61%, 134.91%, 285.66%, 92.80%, and 12.20%
of respective Cash at End of The Year in the last five consecutive years. The overall
tendency of the Taxes Paid is decreasing.

Department of Management Sciences Page 43


Pakistan State Oil

6. Finance Costs Paid

Years 2005 2006 2007 2008 2009


Percentage 175.94% 29.17% 80.88% 17.83% 51.20%

Interpretation

Since the computed value of Finance Costs Paid under vertical analysis taking Cash at
End of The Year as base almost 175.94%, 29.17%, 80.88%, 17.83%, and 51.20% of
respective Cash at End of The Year in the last five consecutive years. The overall
tendency of the Finance Costs Paid is decreasing.

7. Payment against Provisions

Years 2005 2006 2007 2008 2009


Percentage 41.87% 6.49% 0.71% 0.00% 0.33%

Interpretation

Since the computed value of Payment against Provisions under vertical analysis taking
Cash at End of The Year as base is covering almost 41.87%, 6.49%, 0.71%, 0.00%, and
0.33% of respective Cash at End of The Year in the last five consecutive years. The
overall tendency of the Payment against Provisions is decreasing.

8. Retirement Benefits Paid

Years 2005 2006 2007 2008 2009


Percentage 83.84% 6.50% 20.29% 8.50% 4.23%

Interpretation

Since the computed value of Retirement Benefits Paid under vertical analysis taking
Cash at End of The Year as base is covering almost 83.84%, 6.50%, 20.29%, 8.50%,
and 4.23% of respective Cash at End of The Year in the last five consecutive years. The
overall tendency of the Retirement Benefits Paid is decreasing.

9. Net Cash Generated / Used In

Years 2005 2006 2007 2008 2009


Percentage (2,736.83%) (57.61%) (260.32%) (57.25%) 41.95%

Interpretation

Since the computed value of Net Cash Generated / Used In under vertical analysis
taking Cash at End of The Year as base is covering almost 2,736.83%, 57.61%,
260.32%, 57.25%, and 41.95% of respective Cash at End of The Year in the last five

Department of Management Sciences Page 44


Pakistan State Oil

consecutive years. The overall tendency of the Net Cash Generated / Used In is
decreasing.
10. Purchases of Fixed Assets

Years 2005 2006 2007 2008 2009


Percentage 785.94% 26.49% 113.50% 8.63% 6.03%

Interpretation

Since the computed value of Purchases of Fixed Assets under vertical analysis taking
Cash at End of The Year as base is covering almost 785.94%, 26.49%, 113.50%,
8.63%, and 6.03% of respective Cash at End of The Year in the last five consecutive
years. The overall tendency of the Purchases of Fixed Assets is decreasing.

11. Proceeds from Disposal of Operating Assets

Years 2005 2006 2007 2008 2009


Percentage (6.31%) (9.23%) (2.17%) (0.80%) (0.18%)

Interpretation

Since the computed value of Proceeds from Disposal of Operating Assets under vertical
analysis taking Cash at End of The Year as base is covering almost 6.31%, 9.23%,
2.17%, 0.80%, and 0.18% of respective Cash at End of The Year in the last five
consecutive years. The overall tendency of the Proceeds from Disposal of Operating
Assets is decreasing.

12. Dividends Received

Years 2005 2006 2007 2008 2009


Percentage (143.35%) (10.27%) (61.41%) (5.43%) (5.83%)

Interpretation

Since the computed value of Dividends Received under vertical analysis taking Cash at
the End of The Year as base is covering almost 143.35%, 10.27%, 61.41%, 5.43%, and
5.83% of respective Cash at End of The Year in the last five consecutive years. The
overall tendency of the Dividends Received is decreasing.

13. Proceeds from Liquidation of Subsidiaries

Years 2005 2006 2007 2008 2009


Percentage - (0.87%) - - -

Interpretation

Since the computed value of Proceeds from Liquidation of Subsidiaries under vertical
analysis taking Cash at End of The Year as base is covering 0.87% of respective Cash
at End of The Year only in 2006.

Department of Management Sciences Page 45


Pakistan State Oil

14. Net Cash Generated / Used In

Years 2005 2006 2007 2008 2009


Percentage 636.29% 6.12% 49.93% 2.40% 0.03%

Interpretation

Since the computed value of Net Cash Generated / Used In under vertical analysis
taking Cash at End of The Year as base is covering almost 636.29%, 6.12%, 49.93%,
2.40%, and 0.03% of respective Cash at End of The Year in the last five consecutive
years. The overall tendency of the Net Cash Generated / Used In is decreasing.

15. Repayment of Long-term Loan

Years 2005 2006 2007 2008 2009


Percentage 2.48% - - - -

Interpretation

Since the computed value of Repayment of Long-term Loan under vertical analysis
taking Cash at End of The Year as base is repay 0.02% of respective Cash at End of
The Year only in 2005.

16. Proceeds from / Repayment of Long-term Deposits

Years 2005 2006 2007 2008 2009


Percentage (32.43%) (2.43%) (1.71%) - -

Interpretation

Since the computed value of Proceeds from / Repayment of Long-term Deposits under
vertical analysis taking Cash at End of The Year as base is covering almost 32.43%,
2.43% and 1.71% of respective Cash at End of The Year in the years from 2005 to 2007.
The overall tendency of the Proceeds from / Repayment of Long-term Deposits is
decreasing.

17. Proceeds from / Repayment of Short-term Finances

Years 2005 2006 2007 2008 2009


Percentage (278.61%) (7.62%) (226.40%) 74.21% (30.17%)

Interpretation

Since the computed value of Proceeds from / Repayment of Short-term Finances under
vertical analysis taking Cash at End of The Year as base is covering almost 278.61%,
7.62%, 226.40%, 74.21%, and 30.17% of respective Cash at End of The Year in the last

Department of Management Sciences Page 46


Pakistan State Oil

five consecutive years. The overall tendency of the Proceeds from / Repayment of
Short-term Finances is decreasing.
18. Dividends Paid

Years 2005 2006 2007 2008 2009


Percentage 1886.93% 154.77% 338.52% 60.92% 25.72%

Interpretation

Since the computed value of Dividends Paid under vertical analysis taking Cash at End
of The Year as base is covering almost 1886.93%, 154.77%, 338.52%, 60.92%, and
25.72% of respective Cash at End of The Year in the last five consecutive years. The
overall tendency of the Dividends Paid is decreasing.

19. Net Cash Generated / Used In

Years 2005 2006 2007 2008 2009


Percentage 1578.38% 144.73% 110.40% 135.12% (4.45%)

Interpretation

Since the computed value of Net Cash Generated / Used In under vertical analysis
taking Cash at End of The Year as base is covering almost 1578.38%, 144.73%,
110.40%, 135.12%, and 4.45% of respective Cash at End of The Year in the last five
consecutive years. The overall tendency of the Net Cash Generated / Used In is
decreasing.

20. Total Net Cash Generated / Used In for the Year

Years 2005 2006 2007 2008 2009


Percentage (522.17%) 93.24% (100%) 80.28% 37.53%

Interpretation

Since the computed value of Total Net Cash Generated / Used In for the Year under
vertical analysis taking Cash at End of The Year as base is covering almost 522.17%,
93.24%, 100%, 80.28%, and 37.53% of respective Cash at End of The Year in the last
five consecutive years. The overall tendency of the Total Net Cash Generated / Used In
for the Year is decreasing.

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Pakistan State Oil

21. Cash at Beginning of the Year

Years 2005 2006 2007 2008 2009


Percentage 622.17% 6.76% 200% 19.72% 62.47%

Interpretation

Since the computed value of Cash at Beginning of the Year under vertical analysis
taking Cash at End of The Year as base is covering almost 622.17%, 6.76%, 200%,
19.72%, and 62.47% of respective Cash at End of The Year in the last five consecutive
years. The overall tendency of the Cash at Beginning of the Year is decreasing.

22. Cash at End of the Year

Years 2005 2006 2007 2008 2009


Percentage 100% 100% 100% 100% 100%

Interpretation

Since the computed value of Cash at End of the Year under vertical analysis is taking as
base year.

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Pakistan State Oil

Horizontal Analysis of Cash Flow Statement


For The Period of 5 Years ended on June 31st, 2009
Particulars 2005 2006 2007 2008 2009
Cash Generated from Operating Activities:
Cash Generated from Operations 100% 89.15% 123.84% 169.76% 39.53%
Long-term Loans, Advances & Receivables 100% 50.05% 52.13% 104.78% 50.35%
Long-term Deposits & Prepayments 100% (89.79%) (25.76%) 38.81% 13.41%
Long-term Deposits - - - 100% 30%
Taxes Paid 100% 233.86% 247.59% 407.84% 85.81%
Finance Costs Paid 100% 245.34% 340.10% 380.15% 1747.70%
Payment against Provisions 100% 229.32% 12.62% - 46.85%
Retirement Benefits Paid 100% 114.78% 179.04% 380.18% 302.80%
Net Cash Generated / Used In 100% 31.15% 70.37% 78.47% (92.05%)
Cash Flows from Investing Activities:
Purchases of Fixed Assets 100% 49.88% 106.84% 41.18% 46.08%
Proceeds from Disposal of Operating Assets 100% 2166.48% 254.32% 473.14% 166.85%
Dividends Received 100% 105.97% 316.93% 142.01% 244.26%
Proceeds from Liquidation of Subsidiaries - 100% - - -
Net Cash Generated / Used In 100% 14.24% 58.05% 14.18% 0.24%
Cash Flows from Financing Activities:
Repayment of Long-term Loan 100% - - - -
Proceeds from / Repayment of Long-term Deposits 100% 110.72% 39.11% - -
Proceeds from / Repayment of Short-term
100% 40.45% 601.21% (999.23%) 650.28%
Finances
Dividends Paid 100% 121.36% 132.73% 121.11% 81.86%
Net Cash Generated / Used In 100% 135.67% 51.75% 321.17% (16.92%)
Total Net Cash Generated / Used In for The Year 100% (264.22%) 141.68% (576.78%) (431.61%)
Cash at Beginning of The Year 100% 16.07% 237.82% 118.91% 602.99%
Cash at End of The Year 100% 1479.65% 739.83% 3751.61% 6005.31%

Interpretation

1. Cash Generated from Operations

Years 2005 2006 2007 2008 2009


Percentage 100% 89.15% 123.84% 169.76% 39.53%

Interpretation

Since the computed values of are Cash Generated from Operations showing a
significant increase in 2007 and 2008 as compared to base year we can conclude that
the Cash Generated from Operations of PSO has been increasing continuously.
However there is a significant decrease in 2009.

Department of Management Sciences Page 49


Pakistan State Oil

2. Long-term Loans, Advances & Receivables

Years 2005 2006 2007 2008 2009


Percentage 100% 50.05% 52.13% 104.78% 50.35%

Interpretation

Since the computed values of Long-term Loans, Advances & Receivables showing a
significant decrease from 2006 to 2009 as compared to base year we can conclude that
the Long-term Loans, Advances & Receivables of PSO has been decreasing
continuously.

3. Long-term Deposits & Prepayments


Years 2005 2006 2007 2008 2009
Percentage 100% (89.79%) (25.76%) 38.81% 13.41%

Interpretation

Since the computed values of Long-term Deposits & Prepayments showing a significant
decrease from 2006 to 2009 as compared to base year we can conclude that the Long-
term Deposits & Prepayments of PSO has been decreasing continuously.

4. Long-term Deposits

Years 2005 2006 2007 2008 2009


Percentage - - - 100% 30%

Interpretation

Since the computed values of Long-term Deposits are showing that company has made
investment in long term deposits only in last two years from last consecutive five years.

5. Taxes Paid

Years 2005 2006 2007 2008 2009


Percentage 100% 233.86% 247.59% 407.84% 85.81%

Interpretation

Since the computed values of Taxes Paid showing a significant increase from 2006 to
2008 as compared to base year we can conclude that the Taxes Paid of PSO has been
increasing continuously. However there is a significant decrease in 2009.

Department of Management Sciences Page 50


Pakistan State Oil

6. Finance Costs Paid

Years 2005 2006 2007 2008 2009


Percentage 100% 245.34% 340.10% 380.15% 1747.70%

Interpretation

Since the computed values of Finance Costs Paid showing a significant increase from
2006 to 2009 as compared to base year we can conclude that the Finance Costs Paid of
PSO has been increasing continuously.

7. Payment against Provisions

Years 2005 2006 2007 2008 2009


Percentage 100% 229.32% 12.62% - 46.85%

Interpretation

Since the computed values of Payment against Provisions showing a significant


decrease from 2007 to 2009 as compared to base year we can conclude that the
Payment against Provisions of PSO has been decreasing continuously.

8. Retirement Benefits Paid

Years 2005 2006 2007 2008 2009


Percentage 100% 114.78% 179.04% 380.18% 302.80%

Interpretation

Since the computed values of Retirement Benefits Paid showing a significant increase
from 2006 to 2009 as compared to base year we can conclude that the Retirement
Benefits Paid of PSO has been increasing continuously.

9. Net Cash Generated / Used In

Years 2005 2006 2007 2008 2009


Percentage 100% 31.15% 70.37% 78.47% (92.05%)

Interpretation

Since the computed values of Net Cash Generated / Used In showing a significant
decrease from 2006 to 2009 as compared to base year we can conclude that the Net
Cash Generated / Used In of PSO has been decreasing continuously.

Department of Management Sciences Page 51


Pakistan State Oil

10. Purchases of Fixed Assets

Years 2005 2006 2007 2008 2009


Percentage 100% 49.88% 106.84% 41.18% 46.08%

Interpretation

Since the computed values of Purchases of Fixed Assets showing a significant decrease
from 2006 to 2009 as compared to base year we can conclude that the Purchases of
Fixed Assets of PSO has been decreasing continuously.

11. Proceeds from Disposal of Operating Assets

Years 2005 2006 2007 2008 2009


Percentage 100% 2166.48% 254.32% 473.14% 166.85%

Interpretation

Since the computed values of Proceeds from Disposal of Operating Assets showing a
significant increase from 2006 to 2009 as compared to base year we can conclude that
the Proceeds from Disposal of Operating Assets of PSO has been increasing
continuously.

12. Dividends Received

Years 2005 2006 2007 2008 2009


Percentage 100% 105.97% 316.93% 142.01% 244.26%

Interpretation

Since the computed values of Dividends Received showing a significant increase from
2006 to 2009 as compared to base year we can conclude that the Dividends Received of
PSO has been increasing continuously.

13. Proceeds from Liquidation of Subsidiaries

Years 2005 2006 2007 2008 2009


Percentage - 100% - - -

Interpretation

Since the computed values of Proceeds from Liquidation is showing that company made
investment in Proceeds from Liquidation only in 2006, from 2005-09.

Department of Management Sciences Page 52


Pakistan State Oil

14. Net Cash Generated / Used In

Years 2005 2006 2007 2008 2009


Percentage 100% 14.24% 58.05% 14.18% 0.24%

Interpretation

Since the computed values of Net Cash Generated / Used In showing a significant
decrease from 2006 to 2009 as compared to base year we can conclude that the Net
Cash Generated / Used in of PSO has been decreasing continuously.

15. Repayment of Long-term Loan

Years 2005 2006 2007 2008 2009


Percentage 100% - - - -

Interpretation

Since the computed values of Repayment of Long-term Loan showing that company
made repayment of long term loan only in base year.

16. Proceeds from / Repayment of Long-term Deposits

Years 2005 2006 2007 2008 2009


Percentage 100% 110.72% 39.11% - -

Interpretation

Since the computed values of Proceeds from / Repayment of Long-term Deposits


showing a significant increase 2006 as compared to base year. However there is a
significant decrease in 2007.

17. Proceeds from / Repayment of Short-term Finances

Years 2005 2006 2007 2008 2009


Percentage 100% 40.45% 601.21% (999.23%) 650.28%

Interpretation

Since the computed values of Proceeds from / Repayment of Short-term Finances


showing a significant increase in 2007 and 2009 as compared to base year. However
there is a significant decrease in 2006.

Department of Management Sciences Page 53


Pakistan State Oil

18. Dividends Paid

Years 2005 2006 2007 2008 2009


Percentage 100% 121.36% 132.73% 121.11% 81.86%

Interpretation

Since the computed values of Dividends Paid showing a significant increase from 2006
to 2009 as compared to base year we can conclude that the Dividends Paid from
Operations of PSO has been increasing continuously. However there is a decrease in
2009.

19. Net Cash Generated / Used In

Years 2005 2006 2007 2008 2009


Percentage 100% 135.67% 51.75% 321.17% (16.92%)

Interpretation

Since the computed values of Net Cash Generated / Used In showing a significant
increase from 2006 to 2008 as compared to base year we can conclude that the Net
Cash Generated / Used in of PSO has been increasing.

20. Total Net Cash Generated / Used In for the Year

Years 2005 2006 2007 2008 2009


Percentage 100% (264.22%) 141.68% (576.78%) (431.61%)

Interpretation

Since the computed values of Total Net Cash Generated / Used In for the Year showing
a significant increase from 2006 to 2009 as compared to base year we can conclude that
the Total Net Cash Generated / Used In for the Year of PSO has been increasing
continuously.

21. Cash at Beginning of the Year

Years 2005 2006 2007 2008 2009


Percentage 100% 16.07% 237.82% 118.91% 602.99%

Interpretation

Since the computed values of Cash at Beginning of the Year showing a significant
increase from 2006 to 2009 as compared to base year we can conclude that the Cash at
Beginning of the Year of PSO has been increasing continuously.

Department of Management Sciences Page 54


Pakistan State Oil

22. Cash at End of the Year

Years 2005 2006 2007 2008 2009


Percentage 100% 1479.65% 739.83% 3751.61% 6005.31%

Interpretation

Since the computed values of Cash at End of the Year showing a significant increase
from 2006 to 2009 as compared to base year we can conclude that the Cash at End of
the Year of PSO has been increasing continuously.

Department of Management Sciences Page 55


Pakistan State Oil

Ratio Analysis
For The Period of 5 Years ended on June 31st, 2009
Particulars 2005 2006 2007 2008 2009
Short-term Solvency Ratios
Current Ratio 1.24 1.23 1.22 1.24 1.07
Acid Test Ratio 0.59 0.60 0.61 0.57 0.75
7,970,16 10,978,09 11,127,54 22,142,47
8,666,404
Net Working Capital 1 7 6 2
Activity Ratios
Accounts Receivable Turnover Ratio 31.29 25.46 25.71 14.61 7.61
Average Collection Period 11.50 14.14 14.00 24.64 47.30
Accounts Payable Turnover Ratio 7.71 7.63 8.14 5.74 5.54
Average Payment Period 46.71 47.16 44.20 62.73 65.02
Inventory Turnover Ratio 9.66 9.98 11.41 7.46 14.98
Average Conversion Period 37.28 36.08 31.54 48.25 24.03
Total Asset Turnover Ratio 406.26% 425.05% 467.91% 389.65% 399.35%
Gross Fixed Assets 63.68% 91.57% 54.28% 177.04% (90.61%)
Long-term Solvency Ratios
Long-term Debt Equity Ratio 0.11 0.11 0.12 0.08 0.12
Debt Equity Ratio 1.98 2.37 2.57 3.10 6.35
Time Interest Earned Ratio 25.20 12.24 6.50 16.18 (1.02)
Total Capitalization Ratio 0.10 0.10 0.10 0.07 0.11
Debt Ratio 0.66 0.70 0.72 0.76 0.86
Profitability Ratios
Gross Profit Ratio 6.47% 5.77% 3.51% 6.06% 0.49%
Net Profit Ratio 2.66% 2.52% 1.34% 2.84% (1.09%)
Earning Per Share 32.98 43.87 27.34 81.94 (39.05)
Price Earning Ratio 310.21% 276.60% 446.48% 220.33% (311.57%)
Earning Yield Ratio 32.24% 36.15% 22.40% 45.39% (32.10%)
Dividend Per Share 26.00 34.00 21.00 23.50 5.00
Dividend Payout Ratio 78.85% 77.50% 76.80% 28.68% 12.80%
Dividend Yield Ratio 25.42% 28.02% 17.20% 13.02% 4.11%
ROE (Return On Equity) 32.24% 36.15% 22.40% 45.39% (32.10%)
ROI (Return On Investment) 105.17% 131.69% 87.10% 278.87% (85.94%)

Department of Management Sciences Page 56


Pakistan State Oil

Interpretation

Short-term Solvency Ratios


Current Ratio

Years 2005 2006 2007 2008 2009


Current Assets 1.24:
Current Liabilities 1 1.23 :1 1.22:1 1.24 :1 1.07 :1

Interpretation

The computed values of Current Ratio shows decreasing trend from year 2005-
09. It is decreasing because the current liabilities of firm increasing but the
current assets are not increasing. It is therefore suggested that the company
should lower its current liabilities; increase the value of current assets thus by
maintaining an optimum Capital Structure.
Current Ratio

1.3
1.25
1.2
1.15
Current Ratio
1.1
1.05
1
0.95
2005 2006 2007 2008 2009
Years

Department of Management Sciences Page 57


Pakistan State Oil

Acid Test Ratio

Years 2005 2006 2007 2008 2009


Current Assets - (Prepaid Expenses + Inventory)
0.59:1 0.60:1 0.61:1 0.57:1 0.75:1
Current Liabilities

Interpretation

The computed value of Acid Test Ratio is showing an increasing trend from year
2005-09. It is increasing because increase in the inventory of the. It is therefore
suggested that the company should increase its level of inventory thus by
maintaining an optimum Capital Structure.
Acid Test Ratio

0.5 QuickRatio

0
2005 2006 2007 2008 2009
Years

Net Working Capital

Years 2005 2006 2007 2008 2009


Current Assets -
(Rs.) 7,970,161 10,978,097 11,127,546 22,142,472 8,666,404
Current Liabilities

Interpretation

The Net Working Capital of the company has remained positive throughout the
last five years. It happens due to increase in the current assets of the firm. So it
is therefore suggested that the company should maintain this level of current
assets & liabilities, or it can be improved.
NetworkingCapital

25000000
20000000
15000000
Rs.

Networking Capital
10000000
5000000
0
2005 2006 2007 2008 2009
Years

Department of Management Sciences Page 58


Pakistan State Oil

Activity Ratios
Accounts Receivable Turnover Ratio

Years 2005 2006 2007 2008 2009


Net Credit Sales
X (Times) 31.29 25.46 25.71 14.61 7.61
Average Accounts Receivable

Interpretation

The computed values of Account Receivables Turnover Ratio shows decreasing


trend from year 2005-09. It is decreasing because the receivables of the firm
increased and company make sales on credit basis of firm. It is therefore
suggested that the company should lower its receivables thus by maintaining an
optimum Capital Structure.
AccountsReceiablesRatio

40
Times

20 AccountsReceiablesRatio

0
2005 2006 2007 2008 2009
Years

Average Collection Period

Years 2005 2006 2007 2008 2009


360
Days 11.50 14.14 14.00 24.64 47.30
Accounts Receivable Turnover Ratio

Interpretation

The computed values of Average collection period shows increasing trend from
year 2005-09. The value of the average collection period increases because the
firm mostly has relaxed its credit terms due to which it takes more time to collect
its debt from its creditors. It is therefore suggested that the company should
lower its credit sales and tight its credit terms thus by maintaining an optimum
Capital Structure.
Average Collection Period

50
Days

AverageCollectionPeriod
0
2005 2006 2007 2008 2009
Years

Department of Management Sciences Page 59


Pakistan State Oil

Accounts Payable Turnover Ratio

Years 2005 2006 2007 2008 2009


Net Credit Purchases / C.G.S.
X (Times) 7.71 7.63 8.14 5.74 5.54
Average Accounts Payable

Interpretation

The computed value of Accounts Payable Turnover Ratio shows decreasing


trend from year 2005-09, which is a positive sign for the company. The reason for
this decrease is that the proportion increase in accounts payable is greater than
the proportion increase in cost of sales.

Accounts PayableTurnover Ratio

10
8
Times

6 AccountsPayable Trunover
4 Ratio
2
0
2005 2006 2007 2008 2009
Years

Average Payment Period

Years 2005 2006 2007 2008 2009


360
Days 46.71 47.16 44.20 62.73 65.02
Accounts Payable Turnover Ratio

Interpretation

The computed value of Average Payment Period shows increasing trend from
year 2005-09. This increase in the value is due to the lower value of the Account
Payable Turnover Ratio. It is a positive sign for the company.
Average Payment Period

80
60
Days

40 Average Payment Period


20
0
2005 2006 2007 2008 2009
Years

Department of Management Sciences Page 60


Pakistan State Oil

Inventory Turnover Ratio

Years 2005 2006 2007 2008 2009


C.G.S.
X (Times) 9.66 9.98 11.41 7.46 14.98
Average Inventory

Interpretation

The computed value of Inventory Turnover Ratio shows increasing trend from
year 2005-09. The increase in the value is due the cost of goods sold of the firm
is increasing consistently as compare to the cost of inventory. It is therefore
suggested that the company should maintain this level or it can be improved to
gain optimum Capital Structure.
InventoryTurnover Ratio

20
15
Times

10 InventoryTurnover Ratio
5
0
2005 2006 2007 2008 2009
Years

Average Conversion Period

Years 2005 2006 2007 2008 2009


360
Days 37.28 36.08 31.54 48.25 24.03
Inventory Turnover Ratio

Interpretation

The computed value of Average Conversion Period is showing decreasing trend


from year 2005-09. The decrease in the value of conversion period shows the
firm becomes efficient in selling of inventory and converts its inventory into cash
in fewer time frames. It is therefore suggested that the company should keeps its
conversion period low thus by maintaining an optimum Capital Structure.
Average Conversion Period

60
40
Days

Average Conversion Period


20
0
2005 2006 2007 2008 2009
Years

Department of Management Sciences Page 61


Pakistan State Oil

Total Assets Turnover Ratio

Years 2005 2006 2007 2008 2009


Annual Sales
X 100 406.26% 425.05% 467.91% 389.65% 399.35%
Total Gross Assets

Interpretation

The computed value of Total Assets Turnover Ratio shows a mix trend from year
2005-09, but mainly decreasing. This happens due to decrease in the sales
volume as compare to the total assets of the company, which have not increased
with the same proportion. It is therefore suggested that the company should
maintain its sales and total assets level. Thus it can maintain an optimum Capital
Structure.
Total Assets Turnover Ratio

600
Percentage

400
Total AssetsTurnover Ratio
200
0
2005 2006 2007 2008 2009
Years

Gross Fixed Assets Turnover Ratio

Years 2005 2006 2007 2008 2009


Annual Sales
X 100 63.68% 91.57% 54.28% 177.04% (90.61%)
Gross Fixed Assets

Interpretation

The computed value of Gross Fixed Assets Turnover Ratio shows increasing
trend for the years 2005-08, but a loss in 2009. This increase is due to the low
increase in the values of both tangible and intangible assets of the firm. So it is
suggested that the company should increase its non-current assets.
GrossFixed AssetsTurnover Ratio

150
100
Percentage

50
GrossFixedAssetsTurnover
0
Ratio
-50 2005 2006 2007 2008 2009
-100
-150
years

Department of Management Sciences Page 62


Pakistan State Oil

Long-term Solvency Ratios


Long-term Debt Equity Ratio

Years 2005 2006 2007 2008 2009


Long-term Debt
X (Times) 0.11 0.11 0.12 0.08 0.12
Equity

Interpretation

The computed value of Long-term Debt Equity Ratio shows a consistent trend
from year 2005-09. This is because the company has not obtained any long-term
loan & equity. It is therefore suggested that the company should increase its
long-term debt; thus by maintaining an optimum Capital Structure.
Long-termDebt EquityRatio

0.15
Times

0.1
Long-termDebt EquityRatio
0.05
0
2005 2006 2007 2008 2009
Years

Debt Equity Ratio

Years 2005 2006 2007 2008 2009


Total Debt
X (Times) 1.98 2.37 2.57 3.10 6.35
Equity

Interpretation

The computed value of Debt Equity Ratio shows increasing trend from year
2005-09. It means the ratio of debt in the business structure is not an
appropriate, which is not a healthy sign for the business. It is therefore suggested
that the company should lower the value of debt or increase the value of equity to
maintain the ratio of 60:40 as per the rules of State Bank of Pakistan, thus by
maintaining an optimum Capital Structure.
Debt Equity Ratio

8
6
Times

4 Debt EquityRatio
2
0
2005 2006 2007 2008 2009
Years

Department of Management Sciences Page 63


Pakistan State Oil

Time Interest Earned Ratio

Years 2005 2006 2007 2008 2009


EBIT 25.20:
12.24:1 6.50:1 16.18:1 (1.02):1
Interest Expense 1

Interpretation

The computed value of Time Interest Earned Ratio shows decreasing trend from
year 2005-09. The decrease in the value is due to the slight increase in the
interest charges on short term borrowings of the company in comparison to the
earning for the same year. It is therefore suggested that the company should
improve its interest payment on borrowings, thus by maintaining an optimum
Capital Structure.
Time Interest Earned Ratio

30
20
Times

10 Time Interest EarnedRatio


0
-10 2005 2006 2007 2008 2009

Years

Total Capitalization Ratio

Years 2005 2006 2007 2008 2009


Long-term Debt
X (Times) 0.10 0.10 0.10 0.07 0.11
Long-term Debt + Equity

Interpretation

The computed value of Total Capitalization Ratio shows a consistent trend from
year 2005-09. This shows that company is maintain this ratio of debt and equity
for the last five years. It is therefore suggested that the company should improve
this ratio so that it can be able to capture a bigger portion of market.
Total Capitalization Ratio

0.15

0.1
Times

Total CapitalizationRatio
0.05
0
2005 2006 2007 2008 2009
Years

Department of Management Sciences Page 64


Pakistan State Oil

Debt Ratio

Years 2005 2006 2007 2008 2009


Total Liabilities 0.66:
0.70:1 0.72:1 0.76:1 0.86:1
Total Assets 1

Interpretation

The computed value of Debt Ratio shows increasing trend from year 2005-09.
The increase in the Debt Ratio shows that the debt paying ability of the company
has increased because the company is increasing its total assets and company
is moving towards growth.
Debt Ratio

1
Times

0.5 Debt Ratio

0
2005 2006 2007 2008 2009
Years

Profitability Ratios
Gross Profit Ratio

Years 2005 2006 2007 2008 2009


Gross Profit
X 100 6.47% 5.77% 3.51% 6.06% 0.49%
Net Sales

Interpretation

The computed value of Gross Profit Ratio shows decreasing trend from year
2005-09.The decrease in the value shows that the company’s sales are
decreasing and the cost of goods sold of the firm is also increasing which
ultimately decreases the gross profit of the company. It is therefore suggested
that the company should increase its sales and decrease its cost of goods sold,
thus by maintaining an optimum Capital Structure.
GrossProfit Ratio

10
Precentage

5 GrossProfit Ratio

0
2005 2006 2007 2008 2009
Years

Net Profit Ratio

Years 2005 2006 2007 2008 2009

Department of Management Sciences Page 65


Pakistan State Oil

Net Profit
X 100 2.66% 2.52% 1.34% 2.84% (1.09%)
Net Sales

Interpretation

The computed value of Net Profit Ratio shows decreasing trend from year 2005-
09. The decrease in the value is due to the decrease in the profit of the firm due
to increase in the operating expenses largely and finance cost of the firm also
increased. It is therefore suggested that the company should reduce its operating
expenses and also finance cost, thus by maintaining an optimum Capital
Structure.
Net Profit Ratio

4
Percentage

2
Net Profit Ratio
0
2005 2006 2007 2008 2009
-2
Years

Earning Per Share

Years 2005 2006 2007 2008 2009


EACS
Rs. 32.98 43.87 27.34 81.94 (39.05)
Number of Share Outstanding

Interpretation

The computed value of Earning per Share Ratio shows increasing trend from
year 2005-08, but in 2009 the company did not earn any profit so it became
negative. The increase in the value shows that the earning per share of the
company increased up to Rs 81.94. In year 2008 it is maximum after that
company experience the loss. It is therefore suggested that the company should
increase its profits, thus by maintaining an optimum Capital Structure.
EaringPer Share

100
50
Rs.

EarningPer Share
0
-50 2005 2006 2007 2008 2009

Years

Price Earning Ratio

Department of Management Sciences Page 66


Pakistan State Oil

Years 2005 2006 2007 2008 2009


Market Price Per Share
X 100 310.21% 276.60% 446.48% 220.33% (311.57%)
Earning Per Share

Interpretation

The computed value of Price Earning Ratio shows fluctuating trend from year
2005-08, but in 2009 company incurred loss. The fluctuation is due to increase or
decrease in the market price of the shares of the company. It is therefore
suggested that the company should maintain the level of its shares in the market,
thus by maintaining an optimum Capital Structure.
Price EarningRatio

600
400
Percentage

200
Price EarningRatio
0
-200 2005 2006 2007 2008 2009
-400
Years

Earning Yield Ratio

Years 2005 2006 2007 2008 2009


Earning Per Share
X 100 32.24% 36.15% 22.40% 45.39% (32.10%)
Market Price Per Share

Interpretation

The computed value of Earning Yield Ratio shows increasing trend from year
2005-08, but in 2009 company incurred loss. The increase in the value is due to
the consistent value of market price. It is therefore suggested that the company
should increase its market price so it can attain the optimum Capital Structure.
EarningYield Ratio

60
40
Percentage

20
EarningYieldRatio
0
-20 2005 2006 2007 2008 2009
-40
Years

Department of Management Sciences Page 67


Pakistan State Oil

Dividend Per Share

Years 2005 2006 2007 2008 2009


Dividend Paid
Rs. 26.00 34.00 21.00 23.50 5.00
Number of Shares Outstanding

Interpretation

Since the computed value of Dividend Per Share Ratio shows decreasing trend
from year 2005-09. The decrease in the value is due to the less amounts of
dividend paid. It is therefore suggested that the company should lower its number
of shares outstanding or increase the value of dividend paid thus by maintaining
an optimum Capital Structure.
DividendPer Share

40
Rs.

20 DivdendPer Share
0
2005 2006 2007 2008 2009
Years

Dividend Payout Ratio

Years 2005 2006 2007 2008 2009


Dividend Per Share
X 100 78.85% 77.50% 76.80% 28.68% 12.80%
Earning Per Share

Interpretation

The computed value of Dividend Payout Ratio shows decreasing trend from year
2005-09. There is a continuous decrease in the ratio which is due to distributing
lower portion of earning as dividend by the company. It also clarifies that
company is retaining the maximum portion of profit to capture high market share.
It is therefore suggested that the company should maintains proper policy for the
distribution of its dividend, thus by maintaining an optimum Capital Structure.
Dividend Payout Ratio

100
Percentage

80
60
Dividend Payout Ratio
40
20
0
2005 2006 2007 2008 2009
Years

Department of Management Sciences Page 68


Pakistan State Oil

Dividend Yield Ratio

Years 2005 2006 2007 2008 2009


Dividend Per Share
X 100 25.42% 28.02% 17.20% 13.02% 4.11%
Market Price Per Share

Interpretation

The computed value of Dividend Yield Ratio shows decreasing trend from year
2005-09. The decrease in the value is due to the larger amounts of market price
& Lower levels of dividend per share. It is therefore suggested that the company
should increase the value of dividend per share and decrease the market price
per share so that it can achieve an optimum Capital Structure.
Dividend Yield Ratio

30
Percentage

20
DividendYieldRatio
10
0
2005 2006 2007 2008 2009
Years

ROE (Return On Equity)


Years 2005 2006 2007 2008 2009
EACS
X 100 32.24% 36.15% 22.40% 45.39% (32.10%)
Equity

Interpretation

The computed value of ROE shows a mix trend from year 2005-09. This ratio
increase in first two years but in 2007 it decreases than again in 2008 it
increases, but in 2009 company incurred a loss. So it is therefore suggested that
the company should increase the value of net profit, thus by maintaining an
optimum Capital Structure.
Return On Equity

50
40
Percentage

30
ROE
20
10
0
2005 2006 2007 2008 2009
Years

ROI (Return On Investment)

Years 2005 2006 2007 2008 2009

Department of Management Sciences Page 69


Pakistan State Oil

Operating Profit
X 100 105.17% 131.69% 87.10% 278.87% (85.94%)
Average Operating Assets

Interpretation

The computed value of the ratio shows mix trend. The ROI has increased in year
2005 and 2008 which is a positive sign for both investors and company. The
reason for increase in the return on investment is an increase in the operating
profit of the company. In year 2009 the ratio is showing weak position of the
company because it is negative in this year which is alarming sign for the
company. It is therefore suggested that the company should increase the value
of return on investment thus by maintaining an optimum Capital Structure.

Return OnInvestment

300

200
Percentage

100
ROI
0
-100 2005 2006 2007 2008 2009

-200
Years

Bankruptcy Analysis
For The Period of 5 Years ended on June 31st, 2009

Department of Management Sciences Page 70


Pakistan State Oil

Univariate Model

Years
Particulars 2005 2006 2007 2008 2009
(0.551 (5.746 (2.636 (7.479
(Cash Flow / Total Debt)*100 (8.684)
) ) ) )
(Net Income / Total Assets)*100 10.813 10.724 6.2750 11.056 (4.366)
(Total Debt / Total Assets)*100 66.459 70.339 71.983 75.639 86.397

Multivariate Model / Z - Score

Particulars 2005 2006 2007 2008 2009


.012 * ((X1 = Networking Capital / Total Assets)*100) 0.1828 0.1877 0.1787 0.2090 0.0678
.014 * ((X2 = Retained Earnings / Total Assets)*100) 0.4237 0.3810 0.3601 0.3222 0.1748
.033 * ((X3 = Earnings Before Interest & Taxes / Total Assets)*100) 0.6033 0.5786 0.3656 0.5905 0.1102
.006 * ((X4 = Market Value of Equity / Book Value of Total Debt)*100) 1.1427 0.8049 0.7384 0.4132 0.2997
.010 * ((X5 = Sales / Total Assets)*100) 4.0626 4.2505 4.6791 3.8965 3.9935
Z – Score 6.4150 6.2027 6.3219 5.4313 4.4256

Interpretation
Univariate

Since the computed values of first two ratios are showing decreasing trend and the last
one is showing increasing trend so we can conclude that the company is moving
towards bankruptcy.

Multivariate

Since the computed values of Z-score in each year is above then our bench mark i.e.
more than 2.675 so we can conclude that the company is far away from bankruptcy but
actually the trend of Z-score is showing a decreasing rate which may be alarming in the
future if it continues.

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Pakistan State Oil

Conclusion & Recommendations


As the financial position of the company shows that the overall profitability of the company is
decreasing. The volume of profit is decreasing from year 2004 to year 2009 continuously. This
continuous decrease in profit is not a good sign for the PSO because due to this the firm may
suffers a lot and the price of the shares can be decreases. So company should improve its
operations so that it can earn more profits.

In bankruptcy analysis, the company shows weak financial position in univariate model. On the
basis of this we can conclude that the company is not working efficiently and not provides any
opportunity of dividend or capital gain to its investors. Due to this weak position the chances of
bankruptcy increase rapidly. But in multivariate the company is showing good results. But the
trend analysis of the last five years is showing decreasing trend. So we can say that the company
may become bankrupt in the future. So company should mange its assets efficiently so that this
situation can be solved.

However the sale of the company increases over the period of last five years it shows that the
company is moving towards progress and try to improve its operations by this the profit of the
company increases. So it is recommended that the company needs a lot of efforts so it is
necessary that the company should have to improve its operations to compete with others and
capture the market share.

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