ALEEM MANSOOR

FA18-BAF-019
Submitted to:
Sir. Waheed Akhtar
Subject/course:
Business Finance

ASSIGNMENT NO.2
DATA:
Following figures are stated in thousands(000):
1. Current assets= 509,785,826
2. Non-current assets= 256,811,364
3. Current liabilities= 72,643,471
4. Non-current liabilities= 68,588,471
5. Sales= 261,811,364
6. Gross profit= 167,061,563
7. Cost of goods sold= 94,419,625
8. Inventory= 19,442,347
9. Earnings available for common stock= 118,385,788
10. Common stock equity=635,365,348
11. Purchases= 94,519,441
12. Interest= 1,692,538
13. Earning before Interest and Tax= 141,138,284
14. Earnings available for common stock= 118,385,788
15. No. of shares of common stock outstanding= 4,300,928
16. Common stock equity= 625,365,248
17. Total assets= 766,597,190
Financial analysis:
Financial analysis on Oil and Gas Development Company(OGDCL) annual
financial report 2019.

Ratios Year 2019

Liquidity

Current Ratio 7.01 Times

Quick ratio(acid test) 6.75 Times

Activity

Inventory turnover 211 Days

Average collection period 338 Days

Average Payment period 191 Days

Total asset turnover 34%

Debt
 Debt ratio 18.42%

Times Interest Ratio 83.3 Times

Fixed payment coverage Not Available

Profitability

Gross Profit Margin 63.89%

Operating Profit Margin Not Available

Net Profit Margin 45%

Earning per share(EPS) 27.53

Return on total assets 15.4

Return on Equity 19%

Market ratios

Price/earnings ratio 4.78 Times

Market/Book ratio Not available

Liquidity Ratios:
● Current Ratios- Current ratio = Current assets/Current liabilities,
= 509,785,826/72,643,471
= 7.01 Times
The company has a higher current ratio which indicates a greater degree of liquidity. As
the Company is manufacturing/working on a large scale so its degree of liquidity should
be higher. OGDCL whose revenues are relatively unpredictable may need a much higher
liquidity because as a manufacturing firm it faces a sudden shift in demand.

● Quick ratio-test- Quick Ratio= Current assets-Inventory/Current Liability

= 509,785,826-19,442,397/72,643,471
= 6.75 Times
The ratio is good as assets are greater than the liability. It indicates a greater degree of
liquidity.

Activity Ratio-
● Inventory turnover- Inventory turnover = Cost of goods sold/Inventory
 = 94,419,625/19,442,397
= 4.85 Times
The ratio is high and effective as this shows that inventory management is working
efficiently.
● Average collection period- =Account receivable /Average sale per day
=242,731,940/716,387
= 338 Days
The collection period of the OGDCL is 338 days which shows the company collection
time period is long and collects after a long time.
● Average payment period- =Account payable/Average purchases per day
= 49,477,743/258,957
= 191 Days
The payment period of the company is quite longer. It means the company is quicker in
paying its debt to the creditor.
● Total asset turnover- = Sales/ Total assets
= 261,481,188/766,597,190
= .30 =30%
The total sales are 30% of total assets which shows that the company is not using its
assets efficiently. This measure shows the interest of management.

Debt ratio-
● Debt ratio- =Total Liabilities/Total Assets
= 115,920,775/666,477,197
= 0.1739x100
= 17.4%
This value indicates that the company has financed close to 17.4% of its assets with debt.
The ratio is low which explains that the lower the firm degree of indebtedness and the
more financial leverage it has.
● Times interest earned ratio- =Earnings before interest and taxes/Interest
= 141,138,284/1,692,538
= 83.3 Times
The high interest earned ratio indicates that the company is able to fulfill its interest
obligations. This means there is less risk for investors to invest in this company.
● Fixed-payment coverage ratio- = NO LEASE PAYMENT

Profitability-
● Gross profit margin- = Gross profit/Sales
= 167,061,563/261,481,188
 = .638 x 100
= 64%
The ratio is high which means the percentage of each sale ( in rupees ) remaining after
the company has paid for its goods, services, overhead is high. The company has a high
percentage of earnings.
● Operating profit- NO OPERATING PROFITS MENTIONED
● Net profit margin-= Earnings available for common stock/sales
= 118,385,788/261,481,188
= .45x100
= 45%
The net profit margin is high which indicates high profits for shareholders(common
stockholders) and investors. This also increases EPS which attracts investors.
● Earnings per share(EPS)- = Earning available for common stockholders/No. Of shares
common stock outstanding
= 118,385,788/4,300,928
= 27.53
The greater the Earning per Unit is, the better the share price. Strong Income per Share
means a company's shareholders get more benefit. The company has a relatively strong
ratio of 27.53 per share.
● Return on total assets-= Earnings available for common stockholders/Total assets
= 118,385,788/766,597,190
= .154x100
= 15.4%
The organization earns 15.4 percent return on its investments, suggesting the business's
financial performance as a strong ratio is perceived to be over 5%.
● Return on equity- = Earning available for common stockholders/Common stock equity
= 118,385,788/625,365,248
= .19x100
= 19%
It's the return that is created on equity, it's called decent if its valuation is higher than 18,
and here it's 19 percent that's secretly strong relative to other companies.

Market Ratios-
● Price/earnings (P/E) ratio- = Market price per share of common stock/ EPS
= 131.49/27.53
= 4.78 Times
It is the ratio of the price per share and the earning per share an investor gets. Where
normal value lies between 13-15 here it is 4.78 which means investors are not earning
more then they have investment, they are earning but not at a high rate.
 ● Market/book (M/B) ratio- No Book value per share of common stock available.

Conclusion:
Generally, it is inferred that, according to the financial results of the year ended 30 June 2019,
the Oil and Gas Development Company Limited (OGDCL), the business is quietly strong and
performs well while producing quiet decent income for its shareholders and has a successful
accumulation and payout duration in which the firm still has an upper hand in terms of debt ratio
and an efficient account result according to the Profitability Ratio study the business earns strong
income. According to the Market Ratio report, it is not so good.

Reference-
Oil and Gas Development Company Limited (OGDCL) Annual financial statement
2019 taken from:
https://ogdcl.com/all-financial-reports

Plagiarism report: