ASSIGNMENT

OF BUSINESS FINANCE

Submitted to:
Sir Rehan Aslam

Submitted By:
Ali Tariq

Roll No. 19

M - COM
1st Semester

DEPARTMENT OF COMMERCE
BZU
 Ratio’s Analysis
Pakistan Petroleum Limited PPL
2009-2010

Pakistan Petroleum Limited (PPL) is the oldest

and largest exploration and production
company in the country. PPL was incorporated
on June 5, 1950.

This corporate mainly discover petroleum’s and

earn revenue from the sale of petroleum’s in
Pakistan and other countries.

Pakistan Petroleum Limited (PPL) has been a

frontline player in the energy sector since the
mid-1950s. As a major supplier of natural gas,
PPL today contributes some 25 percent of the
country’s total natural gas supplies besides
producing crude oil, Natural Gas Liquid and
Liquefied Petroleum Gas.
Now we will discuss the ratios of this company
and take a deep analysis of this corporate from
2009-2010.
We will discuss its ratios in five types, which
are given below:
1.Liquidity
2.Profitability
3.Debt
4.Coverage
5.Market value

1.Liquidity Ratios:

1.Current Ratio:
Current Ratio = Current Asset/current liability
2009
45438653/14648084=3.10
2010
63057116/19623088=3.21
Current Ratio shows the company liquidity,
shows how much company has to pay
obligation’s. So the current ratio of the
company has become better. Now company
has 3.21 assets to pay the obligations of 1. Its
Current ratio has increased from 3.10-3.21.

2.Quick Ratio:
Quick Ratio=current assets-inventory/current
liability
2009
45438653-1871644/14648084=2.91

2010
63057116-2069408/19623088=3.07
Quick ratio is more refine ratio than current
ratio. As current ratio become well the quick
ratio also become well. It increases 1.6.

3. Average collection Period:

=Account receivables/credit sales×365
2009
27779864/15456984×365=121.53 days
2009-2010
30811189/22585447×365=178.33 days
That’s mean that company is doing more sales
on credit. And the receivables are being
received after a long time, this is not good. In
2009 the company was receiving A/R in 121.53
days but in 2010 in received in 178.33 days.

4.Receivables Turn Over:

=365/Average collection period
2008-2009
365/121.53=3 times
2009-2010
365/178.33=2.05 times
This shows that company is not receiving A/R
in time. Company bears decreasing trend.

5. Average Payable Period:

This ratio is not applicable in the view of nature
of organization.

6. Inventory Turn Over:

This ratio is not applicable in the view of nature
of organization. Because business don’t
purchase and sell the products. The business
sell petroleum’s directly to agencies. In this
way business doesn’t keep inventories.

2.Profitability Ratios:
1. Operating Margin:
=Operating income /sales
2008-2009
40955586/61580072=67%
2009-2010
34612499/59961616=58%
It shows that in 2009-2010 the company
earned less income than 2008-2009 income.
Due to the increase in operating expense the
operating income of 2009-2010 is decreased.

2. Net Profit to Sales:

=Net income/sales
2008-2009
27702791/61580072=45%
2009-2010
23320518/59961616=39%
This shows that the expenses are increased
due to which 2009-2010 net income is less
than 2008-2009.

3. Return On Equity:
=Net income-preferred stock/Share holder
equity
2008-2009
44%
2009-2010
29%
This shows that the company is going in down
fall, because its return on equity is becoming
low in 2009-2010. The shareholders of PPL are
getting less return on there capital.

4. Return on Assets:
=Net income/assets
2008-2009
27702791/82916131=33%
2009-2010
23320518/107579583=22%
This shows that the ROA has decreased. The
company ROA is decreased.

5. Asset Turn Over:

=Sales/assets
2008-2009
61580072/82916131=0.75 times
2009-2010
59961616/107579583=0.58 times

The above comparison shows that the Asset

Turn Over is decreased. The company is not
utilizing its assets properly.

6. Fixed Asset Turn Over:

=Sales/Fixed Assets
2008-2009
61580072/34763453=1.77 times
2009-2010
59961616/41695388=1.43 times
The Above trend shows that Fixed Asset Turn
Over is decreasing. So PPl has fewer assets
now then in2009.

4.Debt Ratios:
1. Debt Ratio:
=Total Debt/Share Holder Equity
Not Applicable because company don’t have
debt besides lease financing of vehicles and
computer equipments which form very small
part of capital structure.

2. Capital Structure:
Not Applicable because company don’t have
debt besides lease financing of vehicles and
computer equipments which form very small
part of capital structure.
3. Cash Flows to Liability:
EBITDA/Total Liability
2008-2009
41814792/19857574=2.10

2009-2010
34373375/27673352=1.242
The above ratios show that the company
earnings are decreasing in compare with
liabilities.

4. Coverage Ratios:
1. Cash Flow Coverage:
=EBITDA/Total Interest
2008-2009
41814792/15483200=2.70
2009-2010
34373375/15593215=2.20

2. Business Worth:
=Total Asset-Total Liability
2009-2010
82916131-15169024=Rs67747107
2009-2010
107579583-27673352= Rs79906231
The business worth is increased to 12%. The
company has hired more assets. Company is
relaying more on current assets.
Market Ratios:
1. Earning Per Share:
=Profit-Preferred Dividend/No of shares
2008-2009
27702791-43/995815958= Rs27.81
2009-2010
23320518-42/995815958=Rs23.42
The above calculation shows that the company
EPS has decreased due to decrease in profit in
the period of 2009-2010.

2.Price Earning Ratio:

=Share Price/Earning Per Share
2008-2009
189/27.82=6.81
2009-2010
184/23.42=7.86
The Above ratio shows that the earning
capacity of PPL share has increased so far.

3.Dividend Yield:
=Dividend Per Share/Share Price
2008-2009
1296/189=6.86%
2009-2010
900/184=4.89
The above calculation shows that the company
share is providing less dividend then previous
year 2009.

4.Dividend Pay Off:

=Dividend/EPS
2008-2009
1296/27.89=46.46%
2009-2010
900/23.42=38.42%
Dividend pay off means that how much
dividend the company giving from earnings. So
the ratio shows that the company is retaining
more money than previous year.

Summery:
The Pakistan Petroleum Company (PPL) is
going in down fall, but its not bad situation due
to economical, weather and political condition a
company has faced a lot of problems. The
horrible flood in Pakistan also affected a
company badly. Some other problems are
fluctuations in petroleum price through out the
world in the period of 2009-2010.

If the political and economical condition

become stabilize then company has more
bright scope to perform more better.