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The Financial Performance of Padma Oil Company Limited and Meghna Petroleum Limited: A Comparative Study
(Submitted as a partial requirement for MBA program)
Prof. Sowkatul Meher Dean Business Administration Southern University Chittagong
Mohammed Khairul Bashar ID 777-G10-15
Date of Submission: December 30, 2010
Letter of transmittal
To Prof. Sowkatul Meher Dean Business Administration Southern University Bangladesh. Subject: Submission of Report Sir, With great pleasure & humble submission, I am submitting my report about the comparative Financial Performance of Padma Oil Company Limited and Meghna Petroleum Limited. While making this report I came across many obstacles and difficulties but at the same time it was my great pleasure to experience many interesting and important things about the oil sector. I take great pleasure in informing you that I have completed my report on the topic “The Financial Performance of Padma Oil Company Limited and Meghna Petroleum Limited: A Comparative Study” that was assigned to me as an essential requirement for the completion of Masters in Business administration degree.
I hope you will accept this report and oblige me thereby. Sincerely yours.
Mohammed Khairul Bashar Id: 777-G10-15
First of all I would like to thank Allah, the supreme authority of the universe. In the process of preparing this report I came across many obstacles. However I was very fortunate to get the help of some individuals to overcome them. I would like to thank my colleagues and seniors of Padma Oil Co. Ltd. for their selfless support and help. I would specially acknowledge the help of Mr. Mohammed Hashem, Deputy Manager of Padma Oil Company Ltd. Moreover, I would like to thank Mr. Mohammed Sadek, Deputy Manager of Meghna Petroleum Ltd. for providing me with specific information which was necessary for the report. Last but not least, I sincerely offer my gratitude to my supervisor Mr. Prof. Sowkatul Meher, Dean, Business Administration, Southern University, for his generous supervision and guidance without which it would not be possible for me to prepare this report.
1 Padma Oil Company Limited 2.2 Meghna Petroleum Limited 2.1 Financial statements 4.1.2 Company History 2.4.0 Financial Statement Analysis 4.1.1 Balance sheet 4.3 Scope of the study 1.1.1 Padma Oil Company Limited 4.2 Meghna Petroleum Limited 02 03 04 04 04 04 05 05 07 09 09 09 10 11 11 12 14 16 16 17 17 18 .1.2 Objective of the study 1.1 Company Profile 2.4.5 Limitation 2.Table of Contents Executive Summary 1.2 History 3.2.1 Research design 188.8.131.52.2 Data collection 1.0 Literature Review 4.4.3 Data analysis and interpretation 1.0 Introduction 1.1 Company Profile 2.1.4 Methodology 1.0 Company overview 2.1 Origin of the report 1.
2 Profitability Ratios 4.1 Padma Oil Company Limited 184.108.40.206 Capital Structure & Solvency 220.127.116.11 Cash flow Analysis 18.104.22.168.1.1 Padma Oil Company Limited 4.1.2 Findings and Analysis 22.214.171.124 Market Measures 4.3 Cash Flow Statement 126.96.36.199.1 Liquidity Ratios 188.8.131.52.2 Meghna Petroleum Limited 4.1.2 Income Statement 4.2 Meghna Petroleum Limited 4.1.0 Conclusion Bibliography 19 19 20 21 21 22 23 23 23 26 30 33 34 38 39 .1 Comparative Trend and Ratio Analysis 4.2.3.
List of Figures Figure 01: Current Ratio Figure 02: Quick Ratio Figure 03: Net working Capital Figure 04: Gross Earnings of POCL and MPL (in 000s) Figure 05: Net Profit Margin Figure 06: Return on Assets Figure 07: Net Profit Amount (in 000s) Figure 08: Total assets (in 000s) Figure 09: ROE Figure 10: EPS Figure 11: P/E ratio Figure 12: Dividend Yield Figure 13: Debt to Equity Ratio Figure 14: Closing Balance (in 000s) Figure 15: Net cash Flow (in 000s) Figure 16: Net cash outflow in investing activities Figure 17: Operating expense payment without income tax 24 25 26 27 27 28 29 29 30 31 32 32 33 34 34 35 36 .
Current and quick ratios for both the companies are poor. MPL is newbie as it was listed in 2007. liquidity and other financial aspects. Profitability condition analysis surely speaks in favor of MPL as it has higher average net profit. Both the companies have no considerable long term debt which makes them less prone to financial risk and dependant on equity. So MPL is more profitable. POCL on the other hand. net profit margin. in spite of having comparatively higher total assets performs lower. Though MPL has a higher current ratio. Higher debt-to-equity risk suggests POCL has more dependency on debt. This report offers a comparative analysis of the financial performance between these two companies. On the other hand POCL. whereas MPL shows good performance over its short life on stock market. POCL has a higher average quick ratio suggesting its better liquidity condition. which makes it difficult to compare it with more established listed company POCL in terms of market measures. In terms of market presence. However POCL has a healthy and increasing EPS but declining P\E ratio. However a more deep analysis on the cash flow statements suggests that MPL has a more stable but lower liquidity position. Comparison is done on matters like profitability.Executive Summary Padma Oil Company Limited (POCL) and Meghna Petroleum Limited (MPL) are two big oil marketing companies of Bangladesh. viii . Financial statement analysis was done through ratio and trend analysis which present some fine scope for comparison. is having some cash crisis recently. Overall MPL is performing better than POCL financially. ROA and ROE for last few years.
Chapter 01 .
00 100% BPC 30% Others 100% BPC Page 2 .bd 300.40 50. Ministry of Power. At present it has 3 (three) oil marketing companies. export and marketing of petroleum products including by-products and lubricants.0 Introduction Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral Resources Division. in crore ) Name of subsidiaries Authorized Refinery 1.35% BPC 49.gov. 1 (one) LPG bottling company and a refinery as its subsidiaries.gov. 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants.00 50.bd 5.65% Other 70% BPC 30% Others jamunaoil.00 10.bd 3.00 33.bd Oil Marketing Companies 2. (a) Eastern Refinery Limited (ERL) 500. 2 (two) blending plants. Energy and Mineral Resources. blending of lubricants.00 29. 1 (one) Refinery.00 45.00 4. Meghna Petroleum Limited (MPL) mpl. Company-wise share of BPC are as under: Capital (Tk.00 100% BPC Paid-up Ownership erl. The position of the corporation in relation to these companies is similar to that of a holding company.00 40. Jamuna Oil Company Limited (JOCL) 100. Padma Oil Company Limited(POCL) pocl.1. refining and processing of crude petroleum.gov.gov. This corporation was established in the year 1977 for the purposes of import. BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies. Government of People's Republic of Bangladesh. LP Gas Limited (LPG) 400.
Sowkatul Meher.00 0. Oil sector in Bangladesh is a very unique industry. 1978.50 0.50 59. As part of its operation is government regulated (ex. Page 3 .Lube Blending Plants 6. Meghna petroleum Limited has been serving the nation for the last four decades through marketing of petroleum products.com 1. Its ancestral enterprise “ Rangooon Oil Company “ established petroleum business in this part of the world by the middle of nineteenth century. A comparative study of the companies’ financial performance can reveal a lot about this unique sector. Prof.1 Origin of the report: The report is tilted “The Financial Performance of Padma Oil Company Limited and Meghna Petroleum Limited: A Comparative Study”. 1977 as a private limited company with the objectives of taking over all the physical possession of fixed assets of the erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on March 31.Standard Asiatic Oil Company Limited (SAOCL) 1.68% Others 50% BPC 50% Private saocl.99 0. Eastern Lubricants Blenders Limited (ELBL) 7. Selling price) the companies’ operation is a bit different than other companies. Bangladesh. and Meghna Petroleum Ltd are two oil marketing companies under Bangladesh Petroleum Corporation. Padma Oil Company Ltd. It has been prepared under the supervision of honorable teacher Mr. Padma Oil Company Limited is not only the biggest but also the oldest with its antecedents stretching well back to the colonial period of British-India. It was set up on December 27.32% BPC 40. The research is done as a part of the MBA internship program of Southern University.
debt.3 Scope of the study: The research provided me a clear idea about implication of financial terms. The scope of the study is limited within the company and its financial data and performance.2 Objective of the study: It is mandatory to have few objectives to make a work successful. As the data has been collected from secondary sources like company financial report for that the research is based on observation of the financial data from the annual report. Trend analysis b. Compare the financial performance of two companies based on the analysis.) Page 4 . The research is quantitative research as the analyzed data are absolute data (net income.4. I tried to conduct the research with a view to achieve some specific objectives. etc.1. equity.1 Research design The research done is descriptive research because this research describing the information which is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna Petroleum Limited. To analyze the financial statements of the companies through the a. The objectives of the report are given below: 1. 1. 1. earnings per share. Ratio analysis 2. The methods I selected for my research are given below: 1. From the very beginning of the study.4 Methodology The chronological selection of methods for a particular research is called research methodology.
references and personal judgment. Negative working capital means that a company currently is unable to meet its shortterm liabilities with its current assets (cash.4. it is the most stringent and excessive test of return to shareholders. Quick ratio: An indicator of a company's short-term liquidity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. Return on Assets: Return on assets measures a company’s earnings in relation to all of the resources it had at its disposal (the shareholders’ capital plus short and long-term borrowed funds). Thus. Page 5 . The higher the quick ratio betters the position of the company. Net working capital ratio: A measure of both a company's efficiency and its short-term financial health. the return on assets and return on equity figures will be the same. The secondary sources information is taken mainly from the last three years’ annual reports of Padma Oil Company Limited and Meghna Petroleum Limited. financial ratios. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. To complete this research paper however the selected indicators are given below: Current ratio: The current ratio is a popular financial ratio used to test a company's liquidity (also referred to as its current or working capital position) by deriving the proportion of current assets available to cover current liabilities.3 Data analysis and interpretation Data has been analyzed and interpreted using the financial indicators. I also used some graph to analyze my findings. accounts receivable and inventory). If a company has no debt. Positive working capital means that the company is able to pay off its short-term liabilities. describing the reason behind the problem and fulfilling the objectives data has been collected from the secondary sources.4.2 Data collection For completing my research.1. 1. Return on Equity: The amount of net income returned as a percentage of shareholders equity.
to the market in general or against the company's own historical P/E. P/E ratio: a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. exchange-traded. By itself. Dividends provide an incentive to own stock in stable companies even if they are not experiencing much growth. Dividend: A taxable payment declared by a company's board of directors and given to its shareholders out of the company's current or retained earnings. Dividends are usually given as cash (cash dividend). Net asset per share: An expression for net asset value that represents a fund's (mutual. and closed-end) or a company's value per share. It is calculated by dividing the total net asset value of the fund or company by the number of shares outstanding. usually quarterly. the P/E ratio doesn't tell us the whole story by itself. EPS doesn't really tell you a whole lot. Page 6 . But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a company’s earnings are growing (on a per share basis). The Return on Shareholders’ Funds ratio is therefore a measure of profitability. Return on shareholders’ fund: The Return on Shareholders’ Funds (ROSF) ratio has historically been used by industry investors as a measure of the profit for the period which is available to the owner’s stake in a business. Dividend yield: The dividend yield ratio allows investors to compare the latest dividend they received with the current market value of the share as an indicator of the return they are earning on their shares. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects. but they can also take the form of stock (stock dividend) or other property. Most companies will quote the earnings per share in their financial statements saving you from having to calculate it yourself. However.Earnings per share: The earnings per share ratio are mainly useful for companies with publicly traded shares.
Page 7 . They are stated below: It was impossible for me to collect some data because of the confidential issue. was listed as a public company in 2007.5 Limitation: I came across certain limitation while preparing this internship report. I had to depend on the data of the head office.Report Methodology Diagram: Collecting Financial Statements Balance Sheet P&L Statement Cash Flow Statement Ratio & Trend Analysis Cash Flow Analysis Comparing the financial performance 1. I had only two years’ data on this company on market measures. As I am a full time working employee. it was not possible for me to prepare the report as I intended due to time shortness. As Meghna Petroleum Ltd. Poor online presence of both the companies.
Chapter 02 .
Bangladesh Guptahal. Storage and marketing of petroleum products.000 2.2. Bangladesh. which will help anyone to introduce about the company in a short time. It distributes petroleum products to whole Bangladesh from its main installation. Patenga.0 Company overview 2. Manufacturing and Marketing of Agro chemicals. Chittagong. which situated in Chittagong at Guptahal. 27 April 1965 Procuring. Dhaka Stock Exchange. Strand road Chittagong . Stock Exchange Listing Authorized capital Paid up capital Number of shares Number of shareholders Number of employee Chittagong stock Exchange. 6 Paribagh Dhaka.900. lubricants and greases.188 949 Page 9 .1 Padma Oil Company Limited 2. 100 million taka 49 million taka 4. Here is the company summary. Corporate Headquarter Resident Office Main Installation Year of Incorporation Business Line Padma Bhaban. Bangladesh. Patenga.1 Company Profile The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong city of Bangladesh. bitumen and LPG.1.4000.
In 1985 BOC transfer their share to BPC and the company name was changed as “Padma Oil Company limited”. this company also has a glorious history to establish itself as a leading oil company. The rest portion of ht e share was issued to public & private individual of Pakistan. Bangladesh. In 1947. Chittagong and established it as their head office. M/S Bullock brothers (A major distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong. Burma Oil Company established their “ Moheshkhali Oil Installation” at Chittagong in the year 1903. In 1977. The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares are listed with both the Chittagong and Dhaka stock exchange. it became a subsidiary of Bangladesh Petroleum Corporation. Burma shell transferred their share to BOC and “Burma Eastern Limited” was formed with 49% share of BOC. In the 1929. Burma Oil Company & Burma Shell oil storage & Distribution Company were operating Petroleum business in the area what now comprise Bangladesh. In 1871. Page 10 . the name was changed to Burma Oil Company. Padma oil company Limited is not only the biggest but also the oldest company from the colonial period of British-India. In 1881. In 1965. Burma shell established Aviation depot was at Tejgaon Airport in 1948. Here is the history of Padma Oil Company limited.1. “Rangoon Oil Company” was registered as joint stock Company in Scotland having its main business activities in Burma.2. Burma Oil Company took over the office of Bullock Brothers at Sadargat.2 Company History Like every successful company.
2 crore shares under direct listing procedure. Dhaka. 2007 the paid-up capital of the company was increased to Tk. 131. 27 December 1977 Procuring. On 14 January 2008 the shares of the company were off-loaded in the two capital market.2. Bangladesh. 400 Crore taka 44 Crore taka 411 Page 11 . Patenga. 100 million and Tk. Dhaka Stock Exchange.2. Bitumen. LPG & Battery Water.1 Company Profile Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of Tk. Stock Exchange Listing Authorized capital Paid up capital Number of employee Chittagong stock Exchange. 50 million respectively. Chittagong. 2007 and its authorized capital was increased to Tk. Storage and marketing of petroleum products. Bangladesh Guptahal. Agrabad C/A. Motijheel C/A. 4000 million.2 Meghna Petroleum Limited 2. Bangladesh Meghna Bhaban. The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007 respectively with a view of off-load of 1. The overall activities of the company are performed with the approval of the Board of Directors. 400 million by issuing Bonus Share. Corporate Headquarter Resident Office Main Installation Year of Incorporation Business Line 58-59. Chittagong-4100. lubricants. At present there is a Board of Directors comprising of 9 members to run the company. The company was converted to Public limited company from private limited company on 29 May. On 27 August.
Meghna Petroleum Marketing Company Limited was created after acquiring the operation of the then ESSO Eastern Inc. Since then Meghna Petroleum Limited has been functioning as a subsidiary of BPC. (1962) of America in 1975 and Padma Petroleum Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited (1968). 1977 as a private limited company with the objectives of taking over all the physical possession of fixed assets of the erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on March 31.2. It was set up on December 27. In the year 1976 the assets and liability of the company were transferred and handed over to Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no.2. 1978. LXXXVIII. Page 12 .2 History Meghna petroleum Limited has been serving the nation for the last four decades through marketing of petroleum products.
Chapter 03 .
` Page 14 . 2008 in his article “Financial Ratio Analysis for Performance Check” emphasis that financial analysis using ratios between key values help investors cope with the massive amount of numbers in company financial statements. on January 23. N. We have to show the calculation but we have to avoid anything that is too mathematical. All other things remaining the same. 2006 in his article “successful business analysis” tries to define that. many new investors would rather leave their decisions to fate than try to deal with the intimidation of financial ratios.0 Literature Review Peeler J. a sound business analysis tells others a lot about good sense and understanding of the difficulties that a company will face. For example. Susan Ward on May 1. 2006 in his article “An overview on financial statements and ratio analysis” argue that Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry.3. A business performance analysis indicates the further growth and the expansion. they can compute the percentage of net profit a company is generating on the funds it has deployed. Ratio analysis may provide the all-important early warning indications that allow you to solve your business problems before your business is destroyed by them. Even so. We have to make sure that people know exactly how we arrived to the final financial positions. Using ratios to make informed decisions about an investment makes a lot of sense. Anbumani on February 2. once you know how use them. Chidambaram Rameshkumar. watching especially for any unfavorable trends that may be starting. even if you don't have a degree in business or finance. Patsula. Jonas Elmerraji on April 2005 in his article “Analyze Investments Quickly With Ratios” tries to say that ratios can be an invaluable tool for making an investment decision. The truth is that ratios aren't that intimidating. To do this compare your ratios with the average of businesses similar to yours and compare your own ratios for several successive years. Dr. It gives a physiological advantage to the employees and also a planning advantage. a company that earns a higher percentage of profit compared to other companies is a better investment option.
Chapter 04 .
The balance sheet or financial position of the company at particular date is like a snapshot of the company’s financial position.0 Financial Statement Analysis As both the companies are oil marketing companies their operations and activities are quite similar. let us have a quick peep at the statements. Cash flow statement as its name suggests stands as a tool to show the liquidity condition of the company. Page 16 . A mix of trends and ratios can be brought up from these statements which are essential for the report. Financial statements are always great or sometimes the only tools to analyze or measure the performance of an organization.4. First. profit & loss account or income statement and cash flow statements of last 3 years. 4. The income statement is the financial statement of significant importance to the shareholders or owners because it shows the profitability condition of the company. In my report I tried to analyze the performance of these two companies through the analysis of their balance sheet.1 Financial statements For our convenience at first we have to have a look at the statements. It is a very important tool as it holds a lot of important information about the company. All the three financial statements offer different significance. These statements were used to do some trend and ratio analysis which revealed the comparative performance of the two.
902 19.740 25.300 49.826 26.217 6.360.795 2.064 137.547.958.342.821 102.1.653 13.084 26.394 5.769.193.459 12.630 1.917 1.957 42.000 1.108 23.220 .746 48.248 5.293.122 1.646 21.539.006 110.059.001.618 326.671.983 748.873.221 3.861 1.108.605.574 709.149.873 710.640 3.611 154.799.807 89.263 1.584.124 329.462 3.817.811 651.944 956.091.892.577 21.385.207 5.646.494.380 24.784.472 25.220 49.264 16.212 154.300 1.106 50.1.730 1.574 2.At cost Less accumulated depreciation Capital work in progress Current Asset Inventories Debtors Due from affiliated companies Advance deposit and pre-payments Income tax receivable Cash and Bank Balance Less: Current Liabilities Liabilities for trading supplies and services Liabilities for supplies and expenses Due from affiliated companies Liabilities for other finance Other Liabilities Liabilities for dividend Provision for income tax Net current assets 30-Jun-07 98.931 47.972.689 889.817 29.245.821 1.474 112.957 1.498.4.793.691.694 3.092 3184.108.40.206 563.170 30.777 957.1 Padma Oil Company Limited Taka in 000 30-Jun-08 30-Jun-09 Sources of Fund Shareholders’ Funds Share capital Reserves and surplus Deferred Tax Total Funds Uses of Fund Fixed Asset.460.772 1.817.000 1.931 1.425.493 419.000 1.558 8.466.689 Page 17 1.339.385.676 674.723 6.222.369 1.181.693 5.1 Balance sheets 4.772 40.849.211 428.157 28.640 3.369 99.957 461.
730.225.913 145.At cost Less accumulated depreciation Capital work in progress Investment Current Asset Inventories Debtors Advance deposit and pre-payments Cash and Bank Balance Less: Current Liabilities Creditors workers' profit participation fund & WF Liabilities for dividend Provision for income tax Net current assets 30-Jun-07 440.000 580.578.356 372.935 814.1.052 789.268 299.581 Page 18 .367 884.896 10.762.832 348.531 739.123 231.995 151.000 763.000 22.448.198.569 160.934 4.071.4.267.046 5.302 10.316 4.718 17.690.527 1.198.504 11.050 10.932 1.442.618 2.638 10.974 4.833 531.938 276.828 31.268 104.462 1.102 49.032.935 35.000 40.000 -42.903 723.490 400.992 180.706 1.367 1.042.505.800 12.413.2 Meghna Petroleum Limited Taka in 000 30-Jun-08 30-Jun-09 Sources of Fund Shareholders’ Funds Share capital Proposed issue of bonus share Reserves and surplus Employees' gratuity Deferred Tax Total Funds Uses of Fund Fixed Asset.333.893 27.173 7.500 40.637 11.954 11.500 339.560 1.000 34.585 3.343.684 27.020.737 4.199.047.307.995 1.342 13.1.329 176.500 295.686 10.272 26.974 379.491 365.977 108.413.035.585 5.585 5.531 117.062 884.913 1.581 370.
196) 705.172) (5. selling and distribution expanse Interest-through BPC Trading Profit on Petroleum Add: Other operating income Operating Profit on petroleum trading Add: Operating profit on Agro-chemical trading Total Operating Profit Add: Other Non-operating Income Net profit Less: Contribution to workers Profit Participation and welfare fund @5% on net profit Net profit before income tax Less: Provision for income tax Current tax Deferred tax Net profit after tax transferred to Reserve and surplus Earnings per Share (EPS) 32.1 Padma Oil Company Limited Taka in 000 30-Jun-09 30-Jun-08 977.580 165.418) 936.315) (5.089) (6.866 820.897) (75.907 51.327) 788.238) (32.98 451.522 67.126 705.186 345.679 3.074) 352.893 (66.038 363.219) 170.474 234.440 253.113) 179.360) (676.034) (630.825 222.106 42 265.739 73.717 30-Jun-07 729.940 558.185 46.448 46.0687755 47.627) (83.573 205.4.326 35.592) (534.531 110.7928571 Page 19 .2.106 170.010 285 654.647 (550.295 (26.346 (13.246) (41.513 95.1.2 Income Statement 4.715 621.567) 176.374 265.148 Earning on petroleum products Cost on Petroleum Products Packing Charges Handling Charges Net Operational gain Net earnings on petroleum products Overheads Administrative.126 (450.500 360.346 111.849 (36.732 42.497 654.199 982.852 (590.322 (18.000 1.881) (24.106 18.179 107.670) (8.040) (80.255) 251.330 855.753) (85.000 5.1.
562 (102.800 359.403) (44.754 (26.472) (71.984 110.690 (334.046) (81.1.300) (4.751) 43.938) 511.4.782 289.460) 381.750) (85.833 (27.53 30-Jun-07 566.972 538.469) (27.376) 37.849 559.496) (41.160) (150.835 (246.158) 230.539 (17.897 (239.992) 531.571) 23.2 Meghna Petroleum Limited Taka in 000 30-Jun-09 30-Jun-08 583.207) (34.413 (336.927) (372.977) 341. Distribution and Administration Interest / Financing Charges Depriciation / Amortization Net Operational gain Total Operational expenses Trading Profit / (Loss) Other Income Net profit Less: Contribution to workers Profit Participation and welfare fund Net profit before income tax Less: Provision for income tax Current Tax Deferred Tax Net profit after tax transferred to Reserve and surplus Earnings per Share (EPS) Page 20 .033) (130.851) 448.2.816 (126.686) 248.739 128.700) (4.367) (129.836) 211.26 Earning on petroleum products Expenses Selling.468 775.841 (146.733) 381.381 9.66 (257.783) (370.083 8.614) (359.726 20.900 (326.
091.651) (48.097) 361.091.845) 1.053.739 (48.009 30-Jun-07 1.434.528) 7.651) (28.037.322.595) (106.017) (23.310) (30.466.1 Padma Oil Company Limited Taka in 000 30-Jun-09 A. Cash Flow From Operating Activities Collection from Gross Earnings and Other Income Payment for cost and Other Expenses Income tax paid Net cash inflow from operating activities B.817 284.1.375.695) (143.360.870 (91.817) (28.175 1.136 (30.595) (23.231) (75.099 2.817 3.017) (91.4.817) 1.1.826 3.3.375.826 1.093 (75.742) 30-Jun-08 2. Cash flow from investing activities Capital Expenditure Net cash used in Investing activities C. Cash Flow From Financing Activities Dividend Paid Net cash used in Financing Activities Total (A+B+C) Opening cash and bank balances closing cash and bank balances 76.749 (761.642 2.807.913) (28.466.768) (126.310) (28.175 Page 21 .084 (106.901.742) 3.913) 284.067 (600.3 Cash Flow Statement 4.
954 66.164) (72.949) (152.744) (203.191) 769.954 1.324 66.071.4.254) 253.586) (80.3.686 (46.889) 135.2 Meghna Petroleum Limited Taka in 000 30-Jun-09 A.000) 146.686 789.800 281.846 30-Jun-08 676.268 30-Jun-07 340.824 3.816 281.065) (64.586) (38.616 (38. Cash Flow From Financing Activities Dividend Paid Interest Received Net cash used in Financing Activities Total (A+B+C) Opening cash and bank balances closing cash and bank balances 751.108 (72.946 (388.285) (76. Cash flow from investing activities Capital Expenditure Net cash used in Investing activities C. Cash Flow From Operating Activities Collection from Gross Earnings and Other Income Payment for cost and Other Expenses Income tax paid Net cash inflow from operating activities B.164) (28.495) (1.846 789.500) 31.268 723.285) 31.191) Page 22 .530) (76.816 66.877 723.1.030 (277.624 31.624 (46.614 (294.
08 1. Current liabilities consist of accounts payable. accrued income taxes and other accrued expenses (wages).09 The Current Ratio expresses the relationship between the firm’s current assets and its current liabilities.08 1.2 Findings and Analysis Now that we have the financial statements we can start analyzing them for our purpose. We should not discuss any trend or ratio in isolation rather their effects on the other aspects of the organizations.02 1 0.02 1. 1.053 MPL 1. current maturities of long term debt.08 1.2.1 Liquidity Ratios Current Ratio: Current Ratio = Current Assets Current Liabilities POCL 2006 2007 2008 2009 1. short term notes payable. As I have been instructed I will only discuss the financial aspect of their performance and ignore the non-financial indicators.4.1 Comparative Trend and Ratio Analysis 4.98 2006 2007 2008 2009 POCL MPL Figure 01: Current Ratio Page 23 . 4.04 1. Current assets normally include cash. accounts receivable and inventories. marketable securities.1.04 1.06 1.1 1.05 1. short-term loans.03 1.2.
e. The quick ratio.57 0.2 0. Quick Ratio: Quick Ratio = Quick Assets Current Liabilities POCL 2006 2007 2008 2009 0. This ratio realizes that some of current assets are not easily convertible to cash e. it ignores stock). Current ratio of both the companies shows a slightly increasing trend. 1 0.4 0.00 suggests an alarming liquidity condition for any organization.88 0.8 0.9 0.83 0. Both the companies have a current ratio just over one. However we can clearly notice from the figure that POCL has Page 24 .58 Measures assets that are quickly converted into cash and they are compared with current liabilities. In our Figure 01 we see that MPL has a better condition than POCL in terms of current ratio. But low current and quick ratio for both the companies led me to think that the industry suits low liquidity ratios. also referred to as acid test ratio.1 0 2006 2007 2008 2009 POCL MPL Figure 02: Quick Ratio Generally a quick ratio less than 1.9 0.g. inventories.85 MPL 0.The rule says that the current ratio should be at least 2 that mean the current assets should meet current liabilities at least twice though this rule can change according to industry.6 0.7 0.54 0.3 0.5 0.75 0. examines the ability of the business to cover its short-term obligations from its “quick” assets only (i. From my research I can assume that it is the industry average.
which are current assets less current liabilities.04 0.048 0.01 0 2006 2007 2008 2009 POCL MPL Figure 03: Net working Capital Many believe that increasing sales can solve any business problem.035 0. In comparison MPL Page 25 .a far better quick ratio than MPL which means POCL can repay its current debts better.02 0. It also suggests that POCL has more liquid assets than MPL. Net Working Capital: Net working capital ratio = Net Working Capital Total Assets POCL 2006 2007 2008 2009 0. sales must be built upon sound policies concerning other current assets and should be supported by sufficient working capital. The net working capital ratio is increased at healthy rate for both the companies.024 0. However.08 0.049 MPL 0. I personally believe that as both the companies are well established reducing sales should not be considered rather increasing assets is a solution to low net working capital. and net working capital. Often.066 0. they are correct. There are two types of working capital: gross working capital.03 0. which is all current assets.037 0.07 0.069 0.06 0.081 0.09 0.05 0.
000 400.clearly shows a better position in net working capital as it has higher current asset.000 1.000 600.322 566. However from the quick ratio analysis (figure 02) we know that most of them are not liquid enough.849 775.000 200. On the other hand though MPL had an increasing trend of gross earnings till 2008 but it had a significant fall last year.468 1.1.2 Profitability Ratios Gross Earnings Trend: POCL MPL 2006 668. From my research I got to know that POCL is one of the biggest companies of Bangladesh in terms of gross revenue. 4.866 583. Page 26 . It shows a very healthy and growing trend in case of POCL.000 2006 2007 2008 2009 POCL MPL Figure 04: Gross Earnings of POCL and MPL (in 000s) The first indicator is the gross earnings before any expenses every year.382 2007 729.029 525.000 800.2.835 2009 977.200.000.897 2008 820.
Net profit margins of both the companies are pretty good.10% Income is earned by using the assets of a business productively.60% 3.72% 0. they will instruct the managers to sell the assets and they will invest elsewhere.70% MPL 2. Return on Assets: Return on Assets (ROA) = Net Income Average Total Assets 2007 2008 2009 POCL 0. However MPL’s net profit margin is increasing at a great rate. This is an important ratio for all readers of financial statements. Net profit margin shows how the company is controlling its costs. Page 27 .Net Profit Margin: 70% 60% 50% 40% 30% 20% 10% 0% 2006 2007 2008 2009 POCL MPL POCL 2006 2007 2008 2009 21% 24% 29% 46% MPL 27% 37% 49% 65% Figure 05: Net Profit Margin Gross earning is not an indicator of the actual performance of a company. If the return is not better than the investors can achieve elsewhere. The managers used the funds to purchase assets which will be used to generate returns. The rate of return on total assets indicates the degree of efficiency with which management has used the assets of the enterprise during an accounting period.83% 1. Investors have placed funds with the managers of the business.32% 3. The managers lose their jobs and the business liquidates.
00% 0.00% 2007 2008 2009 POCL MPL Figure 06: Return on Assets The ratio indicates that POCL has a very poor ROA in comparison to MPL.00% 1.00% 2.000 200.000 450.50% 1.000 250.50% 2.3. 500.000 50.000 400.000 150.50% 3. A low ROA can be the result of low net profit or high average total assets or both.000 300.50% 0. It can be described from two perspectives.000 100.000 2006 2007 2008 2009 POCL MPL Figure 07: Net Profit Amount (in 000s) Page 28 .000 350.
000. Return on Equity: Return on Equity (ROE) = Net Income Average Stockholders’ Equity POCL 2007 2008 2009 17% 19% 29% MPL 31% 43. 35.000 15. To be specific POCL has very high current assets compared to MPL. distributable and non-distributable reserves.000 30. The stockholders’ equity includes share capital. So MPL is clearly performing better with a lot less assets than POCL.000.000 5.30% 33.000 25. Page 29 .000.000. As their net profit amounts do not differ by a huge amount the answer to such low ROA of POCL lies within the total assets of the company.000 10.000.000 2006 2007 2008 2009 POCL MPL Figure 08: Total assets (in 000s) From the chart it is proven that POCL has a very high total assets contributing to its low ROA.We can clearly notice that except last year MPL had a better net profit amount where in 2008-09 POCL showed better performance.000. It also shows potential investors into the business what they might hope to receive as a return.000.90% This ratio shows the profit attributable to the amount invested by the owners of the business. share premium.000 20.
analysts are constantly issuing estimates on what future EPS may be. So important.7 Earning Per Share = This number represents the profit of the company equally split among each share of the stock.5 8.7 36 47.1. EPS is also growing assuring investors’ positive outlook for POCL. Here EPS of two companies shows a very differing trend. For that the net profit is divided in twice than the previous period. It can be the result of last year’s stock dividend of 1:2. EPS of the POCL in this year is low than the previous period. However MPL was listed as a public limited company just a few years ago. Which means it still has a long way to go to achieve longterm investor confidence.3 Market Measures EPS: Net Income Number of common Share Outstanding POCL 2006 2007 2008 2009 17. Page 30 .3 9.60% 40% 20% 0% 2007 2008 2009 MPL POCL POCL MPL Figure 09: ROE Again MPL shows a higher ROE over the last few years. 4. Right now MPL surely has better position in terms of ROE. EPS is one of the most popular variables when valuing a company.1 MPL 14. The earning is nearly twice from the previous period and the company given stock dividend which means that the company is in good position than the past.8 46.4 20.2. in fact.
60 50 40 30 20 10 0 2006 2007 2008 2009 POCL MPL Figure 10: EPS However MPL’s EPS is declining for last few years.94 25. As MPL was listed just a few years back it is too early to perceive something based on this.32 40 35 30 25 20 15 10 5 0 2007 2008 2009 POCL MPL Figure 11: P/E ratio Page 31 .23 MPL 22.68 13. Again there is an explanation. P/E: Price Earning (PE) Ratio = Market Price of Common Stock Per Share Earning Per share POCL 2007 2008 2009 38.38 30.
This yield is usually fairly low as the investors are also receiving capital growth on their investment in the form of an increased share price. this ratio tells us how much investor is willing to pay for every one dollar of earnings the company pulls in.42% 0.6% 1. I could only have the P/E ratio of last two years as I stated before it became listed in 2007 and it shows an increase.0% 2006 2007 2008 MPL POCL 2009 POCL MPL Figure 12: Dividend Yield The dividend yield ratio indicates the return that investors are obtaining on their investment in the form of dividends. the higher the dividend.82% MPL Dividend Yield = 1.29% 1. As we can see POCL has a declining P/E ratio over the last few years.41% 0. Last year POCL stock price reached its lowest ever.4% 1.52% 1.2% 0. It is interesting to note that there is strong correlation between dividend yields and market prices. Page 32 . the higher the market value of the share.6% 0.Essentially. Dividend Yield: Annual Dividends Per Common Share Market Price of Common Stock Per Share POCL 2006 2007 2008 2009 0. Again MPL P/E ratio suggests us literally nothing.9% 0. Invariably.2% 1. The low P/E ratio is the result of this.4% 0.0% 0.8% 0.
99 10.65 9. The lower the ratio. So better credit control measures should be introduced. However it is noticeable that most of their debts are current debts. Both the companies show a decreasing trend but POCL’s ratio is a lot higher than MPL. 4. It is a great means to know if the company is dependent on debt or shareholders funds.83 26. the better. Page 33 .We can notice from the data that POCL has a U-shape pattern to their dividend yield because of its fluctuating share price.08 19.38 30 25 20 15 10 5 0 2006 2007 2008 2009 POCL MPL Figure 13: Debt to Equity Ratio Debt to equity ratio measures a company’s capital structure.1.5 13. However MPL has higher and increasing pattern.4 Capital Structure & Solvency Debt to Equity Ratio: Debt to Equity Ratio= Total Debt Total Debt plus Total Equity POCL 2006 2007 2008 2009 19.2.31 14.41 MPL 7.
000 200.000.000 500.000 3.400.000 3.000.000) 2006 2007 2008 2009 POCL MPL Figure 15: Net cash Flow (in 000s) Page 34 .000 1.000 1.000 400.000. It provides insights into how a company is obtaining its financing and deploying its resources.600.000. It is also used as a part of liquidity analysis.2. The first things to look are the closing balance and the net cash flow.000 2006 2007 2008 2009 POCL MPL Figure 14: Closing Balance (in 000s) 1.000 800.4.000.000 1.500.2 Cash flow Analysis Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds.000 600.500.000 2. 4.000 1.000 (200.000 1.500.000 2.200.
The operating cash flows should be analyzed. POCL has an alarmingly fluctuating net cash flow and last year it had a significant fall. MPL shows an inverted U-shape. Net cash flow of MPL shows a lower and more stable trend than POCL.It is clearly evident that POCL has not only more cash in hand than MPL but also it has a growing trend. A closer look at the different cash flows can be helpful to the research. Though it suggests a good liquidity position. It is to note that high cash balance does not necessarily mean a good sign. It unveils the reason for the negative net cash flow of POCL last year resulting from a very high investment. However only ‘investing cash flows’ do not depict a good picture of the real situation.000 100. On the other hand MPL is maintaining a pretty stable but healthy cash in hand.000 60. We can see from the figure 18 that POCL made an extraordinary amount of payment last year to its creditors which clearly resulted their fall in net cash flows. Page 35 . Whereas POCL shows a U-shape pattern. failure to invest surplus fund may affect future profitability.000 80. POCL is expanding its business in exchange of its liquidity.000 40.000 2006 2007 2008 2009 POCL MPL Figure 16: Net cash outflow in investing activities Net cash flows in investing activities show an interesting pattern for the companies. This means MPL and POCL are on very different situations. Whereas MPL is settling down after a high investment previously undertaken and focusing on its liquidity.000 20. 120.
000 60.000.000 40.000 70.000. However it is highly unlikely that this will happen again in very near future. Page 36 .000 MPL POCL Figure 17: Operating expense payment without income tax The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity because of its investment and huge amount of payment to its creditors. Dividend payments are more or less similar which hardly affects the net cash flow. It is a little surprising for big companies like these. On the other hand MPL shows a stable position in every aspect of their cash flows which is a positive sign.000 80. Other than last year’s huge payment to the creditors.000 30. However it led me to think that it’s a norm for this oil marketing industry.2009 2008 2007 - 10. So POCL’s future liquidity position is expected to be better.000.000.000.000.000. POCL has a high but somewhat unstable policy.000 20. Cash flows from financing activities are rather insignificant in case of both the companies as they do not have any notable interest bearing long-term debt. Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and liquidity.000 50.000.
Chapter 05 .
Though POCL has better quick ratio. MPL has a better current ratio and net working capital ratio. ROE and net profit amount. MPL is performing better.0 Conclusion Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies. It is a very impressive performance. ROA. The comparative study unveils some important facts about the companies. Not to mention POCL has total assets equals to 2-3 times of what MPL has but MPL beats POCL in net profit amount every year except last year. In terms of liquidity. From this point of view both the companies are performing well enough. Ratio. Though there are a lot of government regulations exist. the companies’ managing ability is vital to companies’ success. my analysis brought out some important points. it is too early to comment on its trend on market measures. MPL has a more favorable profitability condition than POCL with higher average net profit margin. market capitalization. the cash flow analysis surely favors MPL.5. investment etc. POCL has a more favorable debt-to-equity ratio than MPL. As MPL was listed as a public company on 2007. They play a great role in the proper marketing of the very important and petroleum products throughout the country. trend and cash flow analysis suggest that MPL perform marginally better than POCL financially. Page 38 . Though it is somewhat unfair to compare the two companies because of their different history. POCL has a better EPS but declining P/E ratio whereas MPL had a rise in last year in P/E.
7th edition. 2008-2009: Padma Oil Company Ltd.Tools and Techniques .A Guide for Managers. 42. McGraw-Hill.org/ Padma Oil Company website: http://www. John J et al. 2007-08.dsebd. Susan Ward on May 1.about.investopedia. Dhaka Stock Exchange website: http://www. Erich A. McGraw-Hill Helfert. Wild. (2001) Financial Statement Analysis. Jonas Elmerraji on April 2005 in his article “Analyze Investments Quickly with Ratios” http://www. Annual Reports 2006-07. "The Nature of Financial Statements: The Cash Flow Statement".com/articles/stocks/06/ratios.asp. Financial Analysis .gov. p.htm.bd/ . 2008-2009: Meghna Petroleum Ltd.com/od/management/a/3ratios. 2007-08. (2001).1036/0071395415. 2008 “Financial Ratio Analysis for Performance Check” http://sbinfocanada.Bibliography Annual Reports 2006-07.pocl. doi:10.
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