IQRA UNIVERSITY

INTRODUCTION TO BUSINESS FINANCE /

FINANCE FOR MANAGERS

FINAL PROJECT
Submitted To: Dr. Shehryar Malik

Name Registration No.

Ali Raza (Group 38066
leader)
Angelo Wilson 39569

35082
Divya Khatri
34980
Sandhya
38478
Uzma Khan
 Pakistan State Oil Ltd

Introduction
Pakistan State Oil (Urdu: ‫ ;پاکستان تیل قومی‬reporting name: PSO) is a Karachi-based Pakistani state-owned
multinational petroleum corporation involved in marketing and distribution of petroleum products. It
has a network of 3,689 petroleum filling stations, out of which 3,500 outlets serve the public retail
sector and 189 outlets serve wholesale bulk customers. Pakistan State Oil is Pakistan's largest fuel
marketing company

Company overview
It controls a market share of over 60% of the total oil market with customer portfolio including dealers,
government agencies, autonomous bodies, independent power projects and other corporate customers.
It is involved in import, storage, distribution and marketing of a range of petroleum products including
gasoline, diesel, fuel oil, jet fuel, LPG, CNG and petrochemicals.

It was founded on December 30, 1976, after Pakistan's government took over the management of
Pakistan National Oil (PNO) and Dawood Petroleum Limited and renamed into POCL (Premier Oil
Company Limited) for marketing of Petroleum Products. PSO is the first public company in Pakistan to
pass the PKR 1 trillion revenue mark.

Its primary listing is on the Karachi Stock Exchange and it is a constituent of the KSE-30 Index. PSO has
been named among the Forbes Global 2000 companies continuously over the years. Its revenues in 2014
stood at PKR 1,410 billion ($ 14 billion) and after-tax profit stood at PKR 21.8 billion ($210 million). The
company's market capitalization is greater than Pakistani Rupees 100 billion (US$1.1 Billion as of May
2014).
History:
The creation of Pakistan State Oil (PSO) can be traced back to the year 1974, when on January 1; the
government took over and merged National Oil (PNO) and Dawood Petroleum Limited (DPL) as Premiere
Oil Company Limited (POCL).

Soon after that, on 3 June 1974, Petroleum Storage Development Corporation (PSDC) came into
existence. PSDC was then renamed as State Oil Company Limited (SOCL) on August 23, 1976. Following
that, the ESSO undertakings were purchased on 15 September 1976 and control was vested in SOCL. The
end of that year (30 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. Due to this effective implementation of corporate
reform and consistent application of the best industrial practices and business development strategies,
PSO has been able to maintain its market leadership in competitive business environment.

Pakistan State Oil (Applied

Concepts)
 Pakistan State Oil
Liquidity ratios
Years 2016 2015 2014 2013 2012
Current assets 274,255,094 275,748,711 313,514,125 224,356,128 337,795,984
Current liabilities 244,503,273 250,676,173 288,346,263 217,035,497 294,949,184
Inventories 50,834,033 58,49,301 86,297,218 106,089,048 88,523,794
Asset Management
Sales 677,966,877 913,094,377 1,409,574,453 1,294,503,247 1,199,927,907
Receivables 206,785,633 202,565,957 198,745,453 105,418,432 239,144,458
Fixed Assets 68,063,636 65,558,522 58,636,904 57,593,380 10,469,075
Total Assets 342,318,730 341,307,233 372,151,029 218,949,508 348,265,059
Profitability Ratios
Net Income for 10,273,130 6,936,364 21,818,135 12,637,779 9,056,055
share holders
Common Equity 91,581,325 82,310,296 78,621,157 60,642,789 48,334,243
Net Profit 10,273,130 6,936,364 21,818,135 12,637,779 9,056,055
Gross Profit 22,863,125 22,920,958 36,824,088 34,160,938 34,322,522
Market Ratios
Market 375.46. 385.79 388.85 320.38 235.84
Value/Share
Earnings Per 37.81 25.53 80.31 50.84 52.8
Share
Book Value/Share 337.09 302.96 289.38 250.57 291.28
 Ratio Analysis (PSO)
2016 2015 2014 2013 2012
Current Ratio 1.12 1.10 1.09 1.03 1.15
Quick Ratio 0.91 0.87 0.79 0.54 0.85
Inventory Turnover 13.34 15.61 16.33 12.20 13.55
Fixed Asset Turnover 9.96 13.93 24.04 22.48 114.62
Total Asset Turnover 1.98 2.68 3.79 4.59 3.45
Profit Margin on Sales 0.02 0.01 0.02 0.01 0.01
Return on Total Assets 0.03 0.02 0.06 4.59 0.03
Common Equity 0.11 0.08 0.28 0.21 0.19
 BYCO
LIQUIDITY RATIOS
Years 2016 2015 2014 2013 2012
Current Ratio 0.53 0.51 1.02 0.70 0.39
Quick/Acid Test Ratio 0.34 0.38 0.78 0.50 0.31
Profitability Ratio

Gross Profit 7.57 5.13 0.45 0.12 8.82

Profit before Tax 0.90 0.16 6.83 3.15 16.44
Net Profit 1.72 0.08 6.42 3.41 15.82
EBITDA Margin to Sales 5.60 4.44 1.83 2.67 4.76
Return on Equity 20.86 1.39 117.52 66.23 270.00
Market Ratio
Earnings Per Share 1.40 0.07 (6.07) (2.31) (3.15)

Byco liquidity Ratios

years 2016 2015 2014 2013 2012
Inventory 30.31 27.67 28.69 23.90 43.20
Fixed Asset 1.42 1.71 1.56 1.51 1.51
Turn over
Total Asset 6.31 6.91 6.20 3.76 1.06
turn over

Current ratios: Measures a firm's ability to pay its debts over the next 12 months.
The ratio for 2012 indicates that company had 1.15 times ability to pay its Rs.1short term
obligation, in year 2013 this ratio was 1.03: 1, and in year 2014 it maintained quite good level of
1.09: 1. These ratios indicates that company has

strong liquidity as the current ratio is for each year is above the averages of the
industry 1.91, 3.50, and 4.07. This is a good sign for the short term creditors and suppliers.
Quick or acid test ratio: The Quick ratio measure of short term debt paying ability, differ from the
current ratio in a manner that, the quick ratio excludes inventories and prepaid expenses. The quick
ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
(Needles, 2012).
As we saw the current ratio suggest good liquidity of firm in each year, same as the company has
also maintained good enough acid test ratio. In the year 2013 this ratio was as 1.66: 1, in 2014 show
increase 2.62: 1, and in 2015 it maintained its level to 2.75: 1. If we compare these with industry
averages we see that in 2013 average is 1.59 LCL ratio is little above the industry. In 2014 average is
2.80 ratio for LCL slightly declined, and in 2015 it is almost equal to industry average 2.93.

Inventory turnover: ratio tells that how many times the inventory is turned over into receivable
throughout sales during year (Van Horne). For LCL the ratios for the respective years is 3.17,
3.40, and 3.44. Which show that company is being out of stock less frequently than the industry
(9.44, 12.00, and 11.61). This indicates that company has not captured more of the market share
or either it is maintaining too much stock so it do not turns out more frequently.

Total assets turnover: Total asset turnovers measure the activity of the assets and the ability of the
firm to generate sales through use of the assets. (Gibson, Financial Statement Analysis, 2011). The
ratio for LCL indicates that it generates Rs.0.75 per each Rs.1 invested in assets in 2013, and Rs.0.72
in 2014 and Rs.0.61 per Rs.1 invested in assets in 2015. Hence it indicates that LCL generates less
revenue per rupees invested each year so, LCL need to improve its turnover rate to be more efficient,
for this it should either increase its sales volume or should employ sufficient assets to generate only
required level of production. However, if we have look at industry averages (0.60, 0.70 and 0.67) we
see LCL is same as the industry is doing.
Return on asset/investment: It measures a company’s overall earning power, or profitability
over its investment (Needles, 2012). The ratios for LCL were 25.97%, 24.94%, and 22.70% in
the respective year, which show that LCL has higher profitability per rupees invested as
compared to industry averages (14%, 17%, and 19%).

Return on equity: This ratio tells us the earning power on the shareholder’s book value
investment (Van Horne). For LCL the return on the book value investment were 23.67% in 2013,
22.78% in 2014 and 20.89% in 2015. Industry averages (12.72%, 25.56%, and 25.57%) for
respective year indicates that LCL is generating less return on book value equity as compared to
industry.

Net profit/income ratio: Calculates the amount of profit after taxes and all expenses have been
deducted from net sales (Warren, 2011). For LCL it was 25.78% in 2013, 26.33% in 2014, and
27.77% in 2015. Which indicates that LCL 30 is decreasing its selling and administrative expenses
each year by almost 1%, or the tax rate or the interest expenses are decreased, It earns at net income
of Rs.0.28 almost each years it makes a sale of Rs.1. Industry averages (19.45%, 22.21% & 26.15%)
shows that LCL has high level of sales profitability as compared to industries.