Assignment On Financial Analysis of PSO Analysis of Financial Statement (AFS)

Financial analysis of PSO

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Assignment on Financial analysis of PSO
Analysis of Financial Statement (AFS)

Submitted by:
Muhammad Hassan Tunio (hassan_tunio@yahoo.com)
MBA (103502)
18 / 01 / 2011
Syed Taimoor Zahid. (taimoor_z@yahoo.com)
MBA (103501)
15 / 01 / 2011
Submitted to:
Prof. Ali wahab

The financial analysis is a partial fulfilment of the requirement
for the course Analysis of Financial statement (AFS).
Shaheed Zulfiqar Ali Bhutto Institute of Science and Technology
Dubai Campus


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Introduction of PSO
PSO is the market leader in Pakistans 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 companys current market share of 82.3% in the black oil market
and 59.4% share in the white oil market, alone speak volumes about its success.As the largest
oil company of Pakistan, PSO is engaged in the storage, import, distribution and marketing of
petroleum products, petrochemicals, Aviation & Bunker fuels, LPG and CNG dominates the
countrys fuel and energy need. Since its inception in 1976 the company has been meeting
more than 70% of the countrys fuel needs. PSOs 3805 outlets all across the country markets
more than 12 million tons of fuel products annually. This network is supported by PSOs 28
storage facilities with a capacity of more than 800,000 tons. PSO took a major step in
improving its distribution facilities by acquiring 12% equity in the 800km long Karachi-
Mehmoodkot White Oil Pipeline.
As part of PSOs policy of providing better customer service it has embarked upon its New
Vision retail development program. Equipped with the most modern facilities like electronic
dispensing units, auto car wash, convenience stores, internet facilities and business centres
these stae of the art designed stations provide greater customer confidence and a friendlier
environment. As a manifestation of PSOs greater customer focus a PSO 24hr PSO Customer

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Service has been launched where customers can lodge their queries and suggestions about
various PSO products and services.
Along side its retail network PSO is playing an equally important role in the industrial sector.
From the locomotives of Pakistan Railways to the giant turbines of power projects, all are
fuelled by PSO. Being fully alive to its responsibilities towards the agriculture sector PSOs
700 strong agency network helps keep the farm machinery running. Further, its kerosene
sales are a major source of energy for the rural and lacking gas facilities.
PSO remains equally strong in Aviation and Bunker Sales. PSO has been constantly
upgrading its facilities to serve a wide range of commercial aircrafts. Through a chain of
eight Aviation Service Stations scattered all across the country PSO fuels the aircrafts of
many local and international airlines. Acquisition of new Lahore Terminal Complex at the
Lahore International Airport has enabled PSO to serve the busiest corridor of East/West
bound flights benefiting the airlines in shape of time saving and lesser fuel burn off. while its
bunkering facilities at all the major ports of country fill up the ocean liners of many
nationalities facilitating the nations international trade.
In its endeavor to provide quality lubricants, PSO has formed an alliance with world-
renowned company Castrol whose products are manufactured at PSOs own ISO 9000
certified facilities ensuring the highest quality standards for both retail and industrial sales.
More cordial relationship with its dealers is one of the important objectives of PSOs New
Vision programme. To give them a sense of participation PSO has instituted Top Dealer
Awards and Million Liter Awards whereby efforts of the high performing dealers are
recognized.

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Emergence of Health Safety & Environment (HSE) as the corner stone of PSOs corporate
governance testifies to its commitment to environmental protection. Complete HSE
certification of all its facilities and installations is one of its major goals for the coming
months which are being vigorously pursued.


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History of PSO
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 PSOs 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 companys major operations into independent activities supported by
legal, financial, informative and other services. Inorder 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 companys 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.

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6

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Vision
To excel in delivering value to customers as an innovative anddynamic energy company that
gets to the future first.

MISSION
We are committed to leadership in the energy market through a competitive advantage in
providing the highest quality petroleum products and services to our customers based on:
A professionally trained, high-quality, motivated workforce that works as a team in an
environment which recognizes and rewards performance, innovation and creativity
and provides for personal growth and development.
The lowest-cost operations and assured access to long-term and cost-effective supply
sources.
Sustained growth in earnings in real terms.
Highly ethical, safe, environment-friendly and socially responsible business practices.

Core Values
Excellence
We believe that excellence in our core activities emerges from a passion for satisfying our
customers' needs in terms of total quality management. Our foremost goal is to retain our
corporate leadership.
Cohesiveness
We endeavour to achieve higher collective and individual goals through teamwork. This is
inculcated in the organization through effective communication.

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Respect
We are an Equal Opportunity Employer, attracting and recruiting the finest people from
around the country. We value contribution of individuals and teams. Individual contributions
are recognized through our reward and recognition programme.
Integrity
We uphold our values and Business Ethics principles in every action and decision.
Professional and personal honesty, dedication and commitment are the landmarks of our
success. Open and transparent business practices are based on ethical values and respect for
employees, communities and the environment.
Innovation
We are committed to continuous improvement, both in new products and processes as well as
those existing already. We encourage creative ideas from all stakeholders. Corporate
Responsibility We promote Health, Safety and Environment culture both internally and
externally. We emphasize on Community Development and aspire to make society a better
place to live in.


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Code of Conduct
In line with managements effort to maintain the decorum and ensure an environment that is
cohesive to the development and success of our people, a Code of Conduct has been put in
place where the following activities can result in disciplinary action:
Unsatisfactory and negligent job performance.
Excessive and unauthorized absence from duty.
Unsatisfactory safety performance.
Reporting on duty under the influence of drug or intoxicants.
Absence from duty without notice or permission from the supervisor unless the cause
of absence prevents giving notice.
Using influence for promotion, transfer or posting.
Conduct that violates common decency and morality.
Engaging in a fight or in activity that could provoke fighting on site property.
Insubordination or deliberate refusal to comply with reasonable requests or
instructions.
Use or possession of weapons, ammunition, explosives, intoxicants, illicit drugs or
narcotics on site.
Acts of horse playon site property.
Gambling on site property or bringing illegal gambling paraphernalia on to the site.
Theft or unauthorized removal of site property or property belonging to site
employee, contractor and vendor.
Intentional damage to site, employee, contractor or vendor property.
Dishonest act or fortification of records, including the giving of false information
when required.

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Bringing combustible material on site or having any type of match sticks, cigarette
lighter or flame-producing device in restricted areas.
Smoking except in designated areas.
Using or divulging without permission, any confidential information gained through
employment at the site.
Physical, mental or sexual harassment of fellow employee including threat to do
bodily harm.
Crime involving fraud, indecency, breach of dignity or public morals and other
serious offences.
Any other commission or omission that, in the opinion of the company,
requires/justifies dismissal/termination of employment.


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COMPANY OVERVIEW
Pakistan state oil is the market leader in Pakistans energy sector. The company has the
largest network of retail outlets to serve the automotive. PSO 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.

Major stakeholder Government of Pakistan: 51% shares
CURRENT Assets Rs. 29.33 billion,
MARKET SHARE
In Black oil: 82.3%
In white oil: 59.4%
Upgraded as per as new vision
Distribution outlets 3612
STORAGE DEPOT 29

TOTAL STORAGE 81% of National storage
TANK LORRIES 6000
PER DAY CUSTOMERS
PSO serves 2.8 million retail customers on daily basis
Serve 2000 industrial units

PROVISIOON OF FEUL AT PORT
Air ports: 9
Ship fuel: 3 ports
New Vision Retail Program,
With most modern facilities like
Electronic dispensing units
Convenience stores
Business centers
Easy Payment Centers

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Customer friendly staff to provide unmatched and diverse services to its customers,
all of which are comparable to international practices.


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Company Information
COMPANY SECRETARY
Mir Shahzad Talpur
AUDITORS
KPMG Taseer Hadi & Co.
M.Yousuf Adil Saleem & Co.
BANKERS
Allied Bank Limited
Askari Bank Limited
Bank Al-Falah Limited
Bank Al-Habib Limited
Bank Islami Pakistan Limited
Citibank N.A
Deutsche Bank AG
Faysal Bank Limited
Habib Metropolitan Bank Limited
Habib Bank Limited
JS Bank Limited
Meezan Bank Limited
MCB Bank Limited
National Bank of Pakistan
NIB Bank Limited
Samba Bank Limited
Standard Chartered Bank (Pakistan) Limited
The HSBC Bank Middle East Limited
The Royal Bank of Scotland Limited
United Bank Limited


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REGISTRAR OFFICE
THK Associates (Pvt.) Ltd. Ground Floor, State Life Building No.3. Dr. Ziauddin Ahmed Road
Karachi
Phone: 021-35689021 Fax: 021-35655595
REGISTERED OFFICE
Pakistan State Oil Co. Ltd. PSO House Khayaban-e-Iqbal, Clifton, Karachi 75600, Pakistan
UAN: (92-21) 111-111-PSO (776) Fax: (92-21) 9920-3721 Toll free: 0800-03000
Website: www.psopk.com
Area of Business
Business PSO are in
The provision of the highest quality petroleum products and services to customers.
Specific Region
3,800 retail outlets (stations) scattered all over Pakistans geography
Lubricants manufacturing plants in Korangi and Kemari
Who are we serving?
Automobile owners
High-Street distributors
What are we offering?
High quality grades of lubricants
The worlds leading brand of motor oils: Castrol


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How are we achieving our goals?
1. Integrated value chain
2. Strong marketing capabilities
3. Largest retail network

Major Products, Customers and Suppliers:

PRODCUTS MAJOR CUSTOMERS MAJOR SUPPLIERS
Motor Gasoline, KESC PAK KUWAIT
High Speed Diesel WAPDA PAK REFINERY
Furnace Oil DEFENCE NRL
Jet Fuel PAKISTAN STEEL MILL PARCO
Kerosene IPPs ATTOCK REFINERY LIMITED
LPG ARMED FORCES
CNG RAILWAY
Petrochemicals
Lubricants


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BOARD OF DIRECTOR
INSIDERS ON BOARD MEMBERS AT PAKISTAN STATE OIL CO LTD (PSO)

Name
(Connections)
Board Relationships Title Age
Mehmood Akhtar

14 Relationships
Member of the Management Board, Director,
Member of Audit Committee and Member of
Finance & Operation Committee
--
Osman Khan

15 Relationships
Member of Audit Committee and Member of
Finance & Operation Committee
--
Sabar Hussain

18 Relationships
Member of Finance & Operation Committee and
Member of Human Resources Committee
--
Hamayoun
Jogezai

8 Relationships
Member of the Management Board, Director and
--
Malik Hussain

8 Relationships
Chairman of Human Resources Committee
--
Pervaiz Khan

8 Relationships
Chairman of Finance & Operation Committee
--
Nazim Haji

14 Relationships
Chairman of Board of Management, Director and
--

OTHER BOARD MEMBERS ON BOARD MEMBERS

Name
(Connections)

Board
Relationships

Primary Company
Age
Asad Saeed

8 Relationships Pakistan State Oil Company Ltd. --
Tariq Khamisani

8 Relationships

BP Pakistan Exploration & Production Inc.


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Board of Management

Managing Director
Mr. Irfan K. Qureshi

Chairman Member
Mr. Sabar Hussain Mr. Nazim F.Haji

Member Member
Mr.Malik Naseem Hussain Lawbar Mr.Mahmood Akhtar

Member Member
Mr.Osman Saifullah Khan Mr.Pervaiz A. Khan

Member Member
Mr.Hammayun Jogezai Dr.Abid Qaiyum Suleri


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FINANCIAL ANALYSIS
Liquidity Ratios
Focuses on the ability of a firm to convert its assets into liquid form (cash) in the quickest manner
These ratios measure your ability to pay debts coming due in the very near future (i.e., your ability to
survive the short-run)
Some STL ratios include:
Current Ratio
Quick Ratio
Working Capital

Liquidity Ratios of PSO from 2006 to 2010
LIQUIDITY
RATIOS
2006 2007 2008 2009 2010

Current ratio 1.23 1.22 1.24 1.07 1.14
Quick ratio 0.79 0.75 0.57 0.64 0.63
W . C 10.97 bn 11.12 bn 22.14 bn 8.6 bn 23.29 bn


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Current ratio:
An indication of a company's ability to meet short-term debt obligations; the higher the ratio,
the more liquid the company is. Current ratio is equal to current assets divided by current
liabilities. If the current assets of a company are more than twice the current liabilities, then
that company is generally considered to have good short-term financial strength. If current
liabilities exceed current assets, then the company may have problems meeting its short-term
obligations.
Current ratio = C.A / C.L

The value is still more than 1 Although it is less as compare to previous years but still assets
are more than its liabilities. So this ratio shows favourable trend.
Quick Ratio:
the Acid-test or quick ratio or liquid ratio measures the ability of a company to use its near
cash or quick assets to extinguish or retire its current liabilities immediately.

1.06
1.08
1.1
1.12
1.14
1.16
1.18
1.2
1.22
1.24
1.26
2005 2006 2007 2008 2009 2010 2011
Current Ratio
Current Ratio

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Quick assets include those current assets that presumably can be quickly converted to cash at
close to their book values. A company with a Quick Ratio of less than 1 can not currently pay
back its current liabilities.
Quick ratio = (C.A Inventories or stock) / C.L
A measure of a company's liquidity and ability to meet itsobligations. Quick ratio,
often referred to as acid-test ratio, is obtained by subtracting inventories
from current assets and then dividing by current liabilities. Quick ratio is viewed
as a sign of company's financial strength or weakness.
Higher number means stronger, lower number means weaker.

The value of quick ratio is increased as compare to the previous year so this show that might
be company will show better performance in coming years. Although it is less than 1 but the
value of ratio is increasing from previous two years. So favourable trend is there.

0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
2005 2006 2007 2008 2009 2010 2011
Quick ratio
Quick ratio

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Working Capital:
Current assets minus current liabilities. Working capital measures how much in liquid
assets a company has available to build its business. The number can be positive or negative,
depending on how much debt the company is carrying. In general, companies that have
a lot of working capital will be more successful since they can expand and
improve their operations. Companies with negative working capital may lack the funds
necessary for growth. It is also called net current assets or current capital. Your working
capital is used to pay short-term obligations such as your accounts payable and buying
inventory. If your working capital dips too low, you risk running out of cash. Even very
profitable businesses can run into trouble if they lose the ability to meet their short-term
obligations. The calculator assists you in determining working capital needs for the next year.
Working Capital = C.A - C.L

The value of working capital is good enough to say that this is favourable because PSO have
enough capital to deal with the daily operation so i must say that this figure definitely favours
the company. And it is also its high value during past 5 years. In other words, the working
0
5000000
10000000
15000000
20000000
25000000
2005 2006 2007 2008 2009 2010 2011
Working Capital
Working Capital

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capital is enough available to pay off your short term expenses such as salaries, equipment
rental, inventory, and so on.

Solvency Ratio
One of many ratios used to measure a company's ability to meet long-term obligations. The
solvency ratio measures the size of a company's after-tax income, excluding non-cash
depreciation expenses, as compared to the firm's total debt obligations. It provides a
measurement of how likely a company will be to continue meeting its debt obligations. A
measure of a company's ability to service debts, expressed as a percentage. It is calculating by
adding the company's post-tax net profit and depreciation, and dividing the sum by the
quantity of long-term and short-term liabilities; the resulting amount is expressed as a
percentage. A high solvency ratio indicates a healthy company, while a low ratio indicates the
opposite. A low solvency ratio further indicates likelihood of default. One of many ratios used
to measure a company's ability to meet long-term obligations. The solvency ratio measures the size
of a company's after-tax income, excluding non-cash depreciation expenses, as compared to
the firm's total debt obligations. It provides a measurement of how likely a company will be
to continue meeting its debt obligations. Some of the ratio are as follows.
Debt ratio
Debt to equity ratio
TIE


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Solvency Ratios of PSO from 2006 to 2010
Solvency
Ratios
2006 2007 2008 2009 2010

Debt ratio 0.70 0.72 0.76 0.86 0.85
Debt / Equity 2.26 2.45 3.03 6.23 5.80
LTD / Eqity 0.57 0.58 0.58 0.60 0.62
TIE -12.74 -6.86 -16.41 0.89 -2.77

Debt ratio:
A ratio that indicates what proportion of debt a company has relative to its assets. The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load. Debt Ratio is also financial ratio that indicates the
percentage of a company's assets that are provided via debt. It is the ratio of total debt (the
sum of current liabilities and long-term liabilities) and total assets (the sum of current
assets, fixed assets, and other assets such as 'goodwill')
Debt ratio = Total liabilities / Total assets

0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2005 2006 2007 2008 2009 2010 2011
Debt Ratio
Debt Ratio

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The value of ratio for the past 5 years is less than 1 so its shows that assets are more than its
liabilities. And it is favourable for the company the company. And the company can easily
payoff its debt.

Debt to equity ratio:
A measure of a company's financial leverage calculated by dividing its total
liabilities by stockholders' equity. It indicates what proportion of equity and debt the
company is using to finance its assets. A high debt/equity ratio generally means that a
company has been aggressive in financing its growth with debt. This can result in volatile
earnings as a result of the additional interest expense. If a lot of debt is used to finance
increased operations (high debt to equity), the company could potentially generate more
earnings than it would have without this outside financing. If this were to increase earnings
by a greater amount than the debt cost (interest), then the shareholders benefit
as more earnings are being spread among the same amount of shareholders. However, the
cost of this debt financing may outweigh the return that the company generates on the debt
through investment and business activities and become too much for the company to handle.
This can lead to bankruptcy, which would leave shareholders with nothing.
Debt to equity ratio = Total liabilities / Equity

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This ratio indicates that almost the company take 5.8% of financing for assets by taking debt
in 2010. It is good up to some extent but more higher ratio can lead any company to the
bankruptcy. So company has to bring this ratio further more.
TIE Ratio:

0
1
2
3
4
5
6
7
2005 2006 2007 2008 2009 2010 2011
Debt to euity
Debt to euity

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Operating performance Ratios
Measure of profitability to sales to determine the return earned on the revenue generated.
Some operating performance ratios are the profit margin (net income to sales), gross margin
ratio (gross margin to sales), and operating profit margin (operating income to sales). The
higher these ratios, the better the profitability earned on the company's sales. Each of these
ratios have differing inputs and measure different segments of a company's overall
operational performance, but the ratios do give users insight into the company's
performance and management during the period being measured.
These ratios look at how well a company turns its assets into revenue as well as how
efficiently a company converts its sales into cash. Basically, these ratios look at how
efficiently and effectively a company is using its resources to generate sales and increase
shareholder value. In general, the better these ratios are, the better it is for shareholders.
Ratios are as follow.
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Earnings Per Share
Book Value Per Share


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b) Operating Profit Ratios of PSO from 2006 to 2010
Operating
Performance
2006 2007 2008 2009 2010

GPM 0.06 0.04 0.06 0.01 0.04
OPM 0.04 0.02 0.04 -0.02 0.02
NPM 0.03 0.01 0.03 -0.01 0.01
EPS 43.87 27.34 81.94 -39.05 52.76
BVS 121.35 122.08 180.53 121.68 171.04

Gross Profit Margin:
Your gross income is how much you make before taxes. It is the figure people are looking for
when they ask how much you gross a month. This is an important number when analyzing a
company, it indicates how efficiently management uses labour and supplies in the production
process. Keep in mind that gross income varies significantly from industry to industry. It is
financial metric used to assess a firm's financial health by revealing the proportion of money
left over from revenues after accounting for the cost of goods sold. Gross profit margin serves
as the source for paying additional expenses and future savings.
GPM = (Sales CGS) / Sales

0
1
2
3
4
5
6
7
2005 2006 2007 2008 2009 2010 2011
Gross Profit Marjin %
Gross Profit Marjin %

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A high gross profit margin indicates that a business can make a reasonable profit on sales, as
long as it keeps overhead costs in control. But in this case the on the average the GPM ratio
decrease in past 5 years but if we compare it from previous one year we can say the company
improve its performance but there is still need to improve that.
Operating profit ratio:
Operating income, or operating profit as it is sometimes called, is the total pre-tax profit a
business generated from its operations. It is what is available to the owners before a few other
items need to be paid such as preferred stock dividends and income taxes (don't worry - we'll
cover all of those other things later in this lesson).
If a company is experiencing declining operating income, there will be less money for
owners, expansion, debt reduction, or anything else management hopes to achieve. This is
one of the reasons that it is so closely watched by lenders and shareholders.
Operating profit
ratio =
Operating Profit
/ Sales

-3
-2
-1
0
1
2
3
4
5
2005 2006 2007 2008 2009 2010 2011
Operating profit ratio %
Operating profit ratio
%

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Here company operating profit is 2 % of the total net sales so it is not good enough higher the
value more it will be useful for the company.
Net profit margin:
The profit margin is mostly used for internal comparison. It is difficult to accurately compare
the net profit ratio for different entities. Individual businesses' operating and financing
arrangements vary so much that different entities are bound to have different levels of
expenditure, so that comparison of one with another can have little meaning. A low profit
margin indicates a low margin of safety: higher risk that a decline in sales will erase profits
and result in a net loss.
Profit margin is an indicator of a company's pricing strategies and how well it controls costs.
Differences in competitive strategy and product mix cause the profit margin to vary among
different companies.
NPM = Net Profit / Sales

NPM is a measurement of the proportion of net profits to the revenues here it is low but
in this year the value came to positive from negative. So up to some extent it is good and
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
2005 2006 2007 2008 2009 2010 2011
Net profit ratio %
Net profit ratio %

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favorable. But should be more than that if the company wants to show good result to the
investors.

Earnings per Share:
Earnings per share (EPS) is the amount of earnings per each outstanding share of a company's
stock.
In the United States, the Financial Accounting Standards Board (FASB) requires companies'
income statements to report EPS for each of the major categories of the income statement:
continuing operations, discontinued operations, extraordinary items, and net income.
The EPS formula does not include preferred dividends for categories outside of continued
operations and net income. Earnings per share for continuing operations and net income are
more complicated in that any preferred dividends are removed from net income before
calculating EPS. This is because preferred stock rights have precedence over common stock.
Total earnings divided by the number of shares outstanding. Companies often use a weighted
average of shares outstanding over the reporting term. EPS can be calculated for
the previous year ("trailing EPS"), for the current year ("current EPS"), or for the coming
year ("forward EPS"). Note that last year's EPS would be actual, while current year
and forward year EPS would be estimates.
EPS = Net profit / No of shares outstanding

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EPS of previous 5 years is good on the average except one of the year because in that Net
profit is in loss. But on the whole we can say that company is earning good EPS. Which is
favourable for the owners of the company and for the investors as well.
Price to book value:
A ratio used to compare a stock's market value to its book value. It is calculated by dividing
the current closing price of the stock by the latest quarter's book value per share. A lower P/B
ratio could mean that the stock is undervalued. However, it could also mean that something is
fundamentally wrong with the company. As with most ratios, be aware that this varies by
industry. This ratio also gives some idea of whether you're paying too much for what would
be left if the company went bankrupt immediately.
The price-to-book value is a ratio that tells you the relationship between the price that a stock
is currently trading for and the actual book value of a company. By comparing these two
values, you will be able to determine if the stock is currently trading at a bargain or if it is
overpriced.
-60
-40
-20
0
20
40
60
80
100
2005 2006 2007 2008 2009 2010 2011
EPS
EPS

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BVS is a financial measure that represents a per share assessment of the minimum value of a
company's equity. And the BVS is good and its is favorable for the company because if
company is going to be liquidate it can pay to its claim holder money.

0
20
40
60
80
100
120
140
160
180
200
2005 2006 2007 2008 2009 2010 2011
BVS
BVS

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Return on Investment
The focus of this analysis is to find out what the investors in a company or the shareholders
are earning on their investment
Whether the company is able to provide financial rewards sufficient to attract & retain
suppliers of finance
Key ROI ratios are:
o Return on Equity
o Return on Assets
o DuPont Analysis

Investment Ratios of PSO from 2006 to 2010
Investment
Ratio
2006 2007 2008 2009 2010

ROE 0.36 0.18 0.54 -0.27 0.62
ROA 0.11 0.06 0.11 -0.04 0.04
DuPont 0.36 0.22 0.45 -0.32 0.31

Return on Equity
The amount of net income returned as a percentage of shareholders equity. Return on
equity measures a corporation's profitability by revealing how much profit a company
generates with the money shareholders have invested.
ROE is expressed as a percentage and calculated as:
Return on Equity = Net Income/Shareholder's Equity

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Net income is for the full fiscal year (before dividends paid to common stock holders but
after dividends to preferred stock.) Shareholder's equity does not include preferred shares.
Also known as "return on net worth" (RONW).
The ROE is useful for comparing the profitability of a company to that of other firms in the
same industry.

This ratio shows that company is generating good amount of the money on the owners equity
except one yea of the previous 5 because in that year company goes into loss.
Return on Assets
An indicator of how profitable a company is relative to its total assets. ROA gives an idea as
to how efficient management is at using its assets to generate earnings. Calculated by
dividing a company's annual earnings by its total assets, ROA is displayed as a percentage.
Sometimes this is referred to as "return on investment".
The formula for return on assets is:
-40
-30
-20
-10
0
10
20
30
40
50
60
70
2005 2006 2007 2008 2009 2010 2011
Return on Equity %
Return on Equity %

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35

Note: Some investors add interest expense back into net income when performing this
calculation because they'd like to use operating returns before cost of borrowing.
ROA tells you what earnings were generated from invested capital (assets). ROA for public
companies can vary substantially and will be highly dependent on the industry. This is why
when using ROA as a comparative measure, it is best to compare it against a
company's previous ROA numbers or the ROA of a similar company.

Percentage shows company profitable a company's assets are in generating revenue but it is
not much consistent and vary from year to year. And it is also declining as compare to
previous years. So improvement needs in this part.
DuPont analysis
A method of performance measurement that was started by the DuPont Corporation in the
1920s. With this method, assets are measured at their gross book value rather than at net book
value in order to produce a higher return on equity (ROE). It is also known as "DuPont
-6
-4
-2
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 2010 2011
Return on Assets %
Return on Assets %

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identity".

DuPont analysis tells us that ROE is affected by three things:
- Operating efficiency, which is measured by profit margin
- Asset use efficiency, which is measured by total asset turnover
- Financial leverage, which is measured by the equity multiplier
ROE = Profit Margin (Profit/Sales) * Total Asset Turnover (Sales/Assets) * Equity Multiplier
(Assets/Equity)
It is believed that measuring assets at gross book value removes the incentive to avoid
investing in new assets. New asset avoidance can occur as financial accounting depreciation
methods artificially produce lower ROEs in the initial years that an asset is placed into
service. If ROE is unsatisfactory, the DuPont analysis helps locate the part of the business
that is underperforming.

-40
-30
-20
-10
0
10
20
30
40
50
2005 2006 2007 2008 2009 2010 2011
Dupont Analysis %
Dupont Analysis %

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From dupont analysis it is clear that on the average company is not under performing except
one year. So we can say that company is performing well on the average.
Asset utilization ratios
Asset utilization ratios provide measures of management effectiveness. These ratios serve as
a guide to critical factors concerning the use of the firm's assets, inventory, and accounts
receivable collections in day-to-day operations. Asset utilization ratios are especially
important for internal monitoring concerning performance over multiple periods, serving as
warning signals or benchmarks from which meaningful conclusions may be reached on
operational issues. An example is the total asset turnover (TAT) ratio.
o Sales to Cash
o Sales to receivables
o Sales to Inventories
o Sales to Fixed Assets
Asset Utilization Ratios of PSO from 2006 to 2010
Assets
Utilization
2006 2007 2008 2009 2010

Sales to Cash 157.07 229.73 164.07 212.51 417.74
Sales to R/a 25.46 25.71 14.61 7.61 6.32
Sales to Inv 10.59 11.83 7.94 15.05 12.68
Sales to F.A 24.58 28.61 44.10 41.59 83.69

Sales to cash:
Comparison of cash balance at the end of a period (usually expressed in number
of weeks or months) to the sales revenue in that period. It indicates the effectiveness of the

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firm's credit and collection policies, and the amount of cash required as buffer for
unexpected delays in cash collection. It is the inverse of cash turnover
ratio. Formula: Average cash balance (at the end of a period) Sales revenue (in that period).
Sales to cash = Net Sales / Average Cash

This ratio shows increasing trend so we can say that the firms credit and collection policies
are good. So this ratio show the favourable trend for the company.
Sales to receivable:
An accounting measure used to quantify a firm's effectiveness in extending credit as well as
collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently
a firm uses its assets. By maintaining accounts receivable, firms are indirectly extending
interest-free loans to their clients. A high ratio implies either that a company operates on a
cash basis or that its extension of credit and collection of accounts receivable is efficient.
A low ratio implies the company should re-assess its credit policies in order to ensure the
timely collection of imparted credit that is not earning interest for the firm.
Sales to cash = Sales / Receivable
0
50
100
150
200
250
300
350
400
450
2005 2006 2007 2008 2009 2010 2011
Sales to cash
Sales to cash

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Sales to receivable ratio is decreasing which means that the company is not collecting its
receivables in efficient way which is unfavourable for the firm the company should change its
policies to cure that. And the major major which pso have is only the collection of the
receivables.
Sales to Inventories:
A ratio showing how many times a company's inventory is sold and replaced over a period.
Sales to Inventory = Sales / Cash

0
5
10
15
20
25
30
2005 2006 2007 2008 2009 2010 2011
Sales to Recievable
Sales to Recievable
0
2
4
6
8
10
12
14
16
2005 2006 2007 2008 2009 2010 2011
Sales to Inventories
Sales to Inventories

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This ratio result is good because company is selling its inventory at a good rate. Which is
good and also a favourable trend for the company.
Sales to fixed Assets:
The sales to fixed assets ratio is often called the asset turnover ratio. A low sales to fixed
assets ratio means inefficient utilization or obsolescence of fixed assets, which may be caused
by excess capacity or interruptions in the supply of raw materials.

The ratio is increasing year by year which means that company is utilizing its assets
efficiently. So we can say that this ratio is favourable for the company.

0
10
20
30
40
50
60
70
80
90
2005 2006 2007 2008 2009 2010 2011
Sales to Fixed assets
Sales to Fixed assets

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Market Measures
These market measures are the crux of the analysis. They measure investor response to
owning a company's stock and also the cost of issuing stock
An important variable of the ratios is something uncontrollable by a company i.e. Share
Price.
Can be trailing and forward looking
The movement of these ratios can assist an investor to consider investing or divesting shares
of a company

o Price to Earnings (PE)
o Price to Book Value (PBV)
o Earnings Yield

Market Measure Ratio of PSO from 2006 to 2010
Market
Measures
2006 2007 2008 2009 2010

P E 4.47 7.17 2.39 -5.02 5.61
P B V 1.62 1.61 1.09 1.61 1.15
Earning Yield 0.22 0.14 0.42 -0.20 0.18

Price to Earnings (PE):
A valuation ratio of a company's current share price compared to its per-share earnings. In
general, a high P/E suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole
story by itself. It's usually more useful to compare the P/E ratios of one company to other

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companies in the same industry, to the market in general or against the company's own
historical P/E. 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.
The P/E is sometimes referred to as the "multiple", because it shows how much investors are
willing to pay per dollar of earnings. It is important that investors note an important problem
that arises with the P/E measure, and to avoid basing a decision on this measure alone. The
denominator (earnings) is based on an accounting measure of earnings that is susceptible to
forms of manipulation, making the quality of the P/E only as good as the quality of the
underlying earnings number.
P/E = Market value per share / EPS

The price to earnings is good because the value is not to much high so that it is less expensive
and the investors can invest in it.

-6
-4
-2
0
2
4
6
8
2005 2006 2007 2008 2009 2010 2011
P/E
P/E

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Price to book value
A ratio used to compare a stock's market value to its book value. It is calculated by dividing
the current closing price of the stock by the latest quarter's book value per share.
Also known as the "price-equity ratio".
Calculated as:
P / B = stock price / (tangible assets- intangible assets and liabilities)
A lower P/B ratio could mean that the stock is undervalued. However, it could also mean that
something is fundamentally wrong with the company. As with most ratios, be aware that this
varies by industry. This ratio also gives some idea of whether you're paying too much for
what would be left if the company went bankrupt immediately.

the values of the PBV is more than 1 so we can say that the company stock is not
undervalued. And it is favourable for the company.

0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2005 2006 2007 2008 2009 2010 2011
PBV
PBV

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Earning yeaild:
Earnings yield is the quotient of earnings per share divided by the share price. It is
the reciprocal of the P/E ratio. The earnings yield is quoted as a percentage, allowing an easy
comparison to going bond rates.
Earning yield = EPS / Market price of share

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-20
-10
0
10
20
30
40
50
2005 2006 2007 2008 2009 2010 2011
Earning Yeild %
Earning Yeild %

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Balance sheet of PSO from 2006 to 2010

Balance sheet
2006 2007 2008 2009 2010

ASSETS
Non current assets
Plant, prperty and equipment 7,518,956 8,012,317 7,460,549 6,987,025 6,375,233
Intangibles 154,819 126,212 105,502 68,872 36,250
long term investment 3,278,970 2,990,591 2,701,097 2,153,514 2,019,270
long term loans, advances and recieveables 698,146 627,972 477,745 405,780 317,889
long term deposit and prepayments 74,662 65,913 79,098 83,655 125,951
deffered tax 408,296 401,037 407,337 5,033,273

Total non current assets 12,133,849 12,224,042 11,231,328 14,732,119 8,874,593

Current assets

stores spares and loose tools 125,030 127,891 115,814 112,143 113,863
stock in trade 28,168,633 29,562,055 62,360,067 40,698,209 58,598,668
trade debt 11,715,868 13,599,966 33,904,728 80,509,830 117,501,074
loans and advances 275,729 365,974 396,220 418,015 409,987
deposits and short term prepayments 1,287,893 1,583,913 401,433 551,803 367,378
other recievables 14,562,628 15,751,198 15,681,790 12,806,779 14,557,542
cash and bank balances 1,898,894 1,522,276 3,018,640 2,883,118 1,778,056
taxation-net 709,627 46,580

Total current assets 58,034,675 62,513,273 115,878,692 138,689,524 193,373,148

Net assets 70,168,524 74,737,315 127,110,020 153,421,643 202,247,741

EUITY AND LIABILITIES

share capital 1,715,190 1,715,190 1,715,190 1,715,190 1,715,190
Reserves 19,097,869 19,224,027 29,249,864 19,155,595 27,620,868

20,813,059 20,939,217 30,965,054 20,870,785 29,336,058

Non currnt liabilities

long term deposits 743,994 768,308 834,598 854,718 948,476
retirement and other service benefits 1,554,893 1,644,063 1,574,148 1,673,020 1,887,751


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2,298,887 2,412,371 2,408,746 2,527,738 2,836,227

current liabilities

trade and other payables 36,814,402 41,431,075 81,067,565 110,123,702 156,035,716
Provision 777,276 688,512 726,116 688,512 688,512
accrued interest 120,731 131,961 217,928 556,380 330,213
short term borrowing 7,648,919 9,064,781 10,997,908 18,654,526 13,021,015
taxes payables 1,695,250 69,398 726,703

47,056,578 51,385,727 93,736,220 130,023,120 170,075,456
total liabilities 49,355,465 53,798,098 96,144,966 132,550,858 172,911,683

contingencies and commitments 70,168,524 74,737,315 127,110,020 153,421,643 202,247,741


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Profit & loss account of PSO from 2006 to 2010

Profit and loss account. 2006 2007 2008 2009 2010

Sales 352,514,873 411,057,592 583,213,959 719,282,176 877,173,254
Less:
Sales tax -44,539,632 -52,418,310 -74,249,472 -97,386,723
-
118,563,577
inland fright equilization marjin -9,725,202 -8,932,956 -13,685,954 -9,199,864 -15,851,726
-54,264,834 -61,351,266 -87,935,426
-
106,586,587
-
134,415,303

Net sales 298,250,039 349,706,326 495,278,533 612,695,589 742,757,951

Cost of good sold
-
281,042,813
-
337,446,896
-
465,254,907
-
609,685,478
-
713,591,707

Gross profit 17,207,226 12,259,430 30,023,626 3,010,111 29,166,244

other operating income 950,850 1,278,932 1,396,527 1,451,666 1,479,054

operating cost:
transpotation cost -365,795 -369,328 -337,886 -513,673 -631,849
distribution and marketing
expenses -2,492,633 -2,766,064 -3,264,599 -3,960,953 -4,055,238
administrative expenses -935,589 -981,937 -1,160,741 -1,151,793 -1,125,891
depriciation and amortization -1,082,394 -1,140,065 -1,166,826 -1,194,313 -1,182,389
other operating expenses -2,460,931 -755,420 -3,352,969 -3,994,389 -2,416,518
-7,337,342 -6,012,814 -9,283,021 -10,815,121 -9,411,885

other income 442,791 424,238 313,860 776,686 6,095,348

profit from operations 11,263,525 7,949,786 22,450,992 -5,576,658 27,328,761

finance cost -884,153 -1,158,112 -1,367,898 -6,232,056 -9,882,010
10,379,372 6,791,674 21,083,094 -11,808,714 17,446,751

share of profit of associates 1,038,939 330,306 294,318 451,850 516,401

profit before taxation 11,418,311 7,121,980 21,377,412 -11,356,864 17,963,152

Taxation -3,893,610 -2,432,182 -7,323,617 4,658,329 -8,913,556


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Profit for the year 7,524,701 4,689,798 14,053,795 -6,698,535 9,049,596

Earning per share- basic and diluted 43.87094724 27.34273171 81.93724893
-
39.0541864 52.76147832


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Cash flow Statement of PSO from 2006 to 2010

cash generated from operating activities 2006 2007 2008 2009 2010

cash generated from operations 6553775 9,103,698 12,479,055 -162,072 10,978,588
decrease in long term loans, advances 71528 74,511 149,747 71,965 87,891
decrease in long term deposits and prepayments 30501 8,749 -13,185 15,563 51,462
taxes paid
-
3,826,184
-
4,050,775 -6,672,612 -1,403,937 -3,217,236
finance cost paid -827,346
-
1,146,882 -1,281,931 -2,825,871 -2,464,238
payment against provision -184,050 -10,126 -37,604
retirement benefits paid -184,450 -287,721 -610,949 -486,598 -478,765

Net cash inflow from operating activities 1,633,774 3,691,454 4,050,125 -4,828,554 4,957,702

cash flow from investing activities

purchase of property and plant and equipment -751,350
-
1,609,467 -593,314 -678,172 -546,802
proceeds from disposal of operating assets 261,863 30,740 -26,979 -15,985 -12,130
dividend received 291,143 870,774 57,189 20,167 5,567
proceeds from liquidation of subsidiaries 24,657 - 390,178 671,101 640,869

Net cash outflow from investing activities -173,687 -707,953 -172,926 -2,889 87,504

cash flow from financing activities

proceed from:
long term deposits 68,824 23,314 66,290
short term deposits 216,000 3,210,295 -5,335,878 3,472,487 -1,427,452
dividend paid
-
4,389,267
-
4,800,295 -4,380,252 -2,960,697 -516,757

Net cash outflow from financing activities
-
4,104,443
-
1,566,686 -9,649,840 511,790 -1,944,209

Net increase/(decrease) in cash and cash euivalents
-
2,644,356 1,416,815 -5,772,641 -4,319,653 3,100,997

cash and cash equivalent at the begining of the year -191,669
-
2,836,025 -1,418,031 -7,190,672
-
11,510,325

cash and cash equivalent at the end of the year
-
2,836,025
-
1,419,210 -7,190,672
-
11,510,325 -8,409,328

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Common Size Balance Sheet of PSO from 2006 to 2010

Balance Sheet 2006 2007 2008 2009 2010

ASSETS
Noncurrent assets
Plant, property and equipment 10.72 10.72 5.87 4.55 3.15
Intangibles 0.22 0.17 0.08 0.04 0.02
long term investment 4.67 4.00 2.13 1.40 1.00
long term loans, advances and receivables 0.99 0.84 0.38 0.26 0.16
long term deposit and prepayments 0.11 0.09 0.06 0.05 0.06
deferred tax 0.58 0.54 0.32 3.28

Total non current assets 17.29 16.36 8.84 9.60 4.39

Current assets

stores spares and loose tools 0.18 0.17 0.09 0.07 0.06
stock in trade 40.14 39.55 49.06 26.53 28.97
trade debt 16.70 18.20 26.67 52.48 58.10
loans and advances 0.39 0.49 0.31 0.27 0.20
deposits and short term prepayments 1.84 2.12 0.32 0.36 0.18
other receivables 20.75 21.08 12.34 8.35 7.20
cash and bank balances 2.71 2.04 2.37 1.88 0.88
taxation-net 0.46 0.02

Total current assets 82.71 83.64 91.16 90.40 95.61

Net assets 100.00 100.00 100.00 100.00 100.00


share capital 2.44 2.29 1.35 1.12 0.85
Reserves 27.22 25.72 23.01 12.49 13.66

29.66 28.02 24.36 13.60 14.51

Noncurrent liabilities

long term deposits 1.06 1.03 0.66 0.56 0.47
retirement and other service benefits 2.22 2.20 1.24 1.09 0.93

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3.28 3.23 1.90 1.65 1.40

current liabilities

trade and other payables 52.47 55.44 63.78 71.78 77.15
Provision 1.11 0.92 0.57 0.45 0.34
accrued interest 0.17 0.18 0.17 0.36 0.16
short term borrowing 10.90 12.13 8.65 12.16 6.44
taxes payables 2.42 0.09 0.57

67.06 68.76 73.74 84.75 84.09
total liabilities 70.34 71.98 75.64 86.40 85.49

contingencies and commitments 100.00 100.00 100.00 100.00 100.00


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Index Analysis of Balance Sheet of PSO from 2006 to 2010
Balance sheet 2006 2007 2008 2009 2010

ASSETS
Non current asseets
Plant, prperty and equipment 100.00 106.56 99.22 92.93 84.79
Intangibles 100.00 81.52 68.15 44.49 23.41
long term investment 100.00 91.21 82.38 65.68 61.58
long term loans, advances and recieveables 100.00 89.95 68.43 58.12 45.53
long term deposit and prepayments 100.00 88.28 105.94 112.04 168.69
deffered tax 100.00 98.22 99.77 1232.75 0.00

Total non current assets 100.00 100.74 92.56 121.41 73.14

Current assets

stores spares and loose tools 100.00 102.29 92.63 89.69 91.07
stock in trade 100.00 104.95 221.38 144.48 208.03
trade debt 100.00 116.08 289.39 687.19 1002.92
loans and advances 100.00 132.73 143.70 151.60 148.69
deposits and short term prepayments 100.00 122.98 31.17 42.85 28.53
other recievables 100.00 108.16 107.69 87.94 99.97
cash and bank balances 100.00 80.17 158.97 151.83 93.64
taxation-net

Total current assets 100.00 107.72 199.67 238.98 333.20

Net assets 100.00 106.51 181.15 218.65 288.23


share capital 100.00 100.00 100.00 100.00 100.00
Reserves 100.00 100.66 153.16 100.30 144.63

100.00 100.61 148.78 100.28 140.95


long term deposits 100.00 103.27 112.18 114.88 127.48
retirement and other service benefits 100.00 105.73 101.24 107.60 121.41

100.00 104.94 104.78 109.95 123.37

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current liabilities

trade and other payables 100.00 112.54 220.21 299.13 423.84
Provision 100.00 88.58 93.42 88.58 88.58
accrued interest 100.00 109.30 180.51 460.84 273.51
short term borrowing 100.00 118.51 143.78 243.88 170.23
taxes payables 100.00 4.09 42.87 0.00 0.00

100.00 109.20 199.20 276.31 361.43
total liabilities 100.00 109.00 194.80 268.56 350.34

contingencies and commitments 100.00 106.51 181.15 218.65 288.23


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54
Common size Income Statement of PSO from 2006 to 2010
Common size. 2006 2007 2008 2009 2010

Sales 100.00 100.00 100.00 100.00 100.00
Less:
Sales tax -12.63 -12.75 -12.73 -13.54 -13.52
inland fright equilization marjin -2.76 -2.17 -2.35 -1.28 -1.81
-15.39 -14.93 -15.08 -14.82 -15.32

Net sales 84.61 85.07 84.92 85.18 84.68

Cost of good sold -79.73 -82.09 -79.77 -84.76 -81.35

Gross profit 4.88 2.98 5.15 0.42 3.33

other operating income 0.27 0.31 0.24 0.20 0.17

operating cost:
transpotation cost -0.10 -0.09 -0.06 -0.07 -0.07
expenses -0.71 -0.67 -0.56 -0.55 -0.46
administrative expenses -0.27 -0.24 -0.20 -0.16 -0.13
depriciation and amortization -0.31 -0.28 -0.20 -0.17 -0.13
other operating expenses -0.70 -0.18 -0.57 -0.56 -0.28
-2.08 -1.46 -1.59 -1.50 -1.07

other income 0.13 0.10 0.05 0.11 0.69

profit from operations 3.20 1.93 3.85 -0.78 3.12

finance cost -0.25 -0.28 -0.23 -0.87 -1.13
2.94 1.65 3.61 -1.64 1.99

share of profit of associates 0.29 0.08 0.05 0.06 0.06

profit before taxation 3.24 1.73 3.67 -1.58 2.05

Taxation -1.10 -0.59 -1.26 0.65 -1.02

Profit for the year 2.13 1.14 2.41 -0.93 1.03


[Pick the
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Index Analysis of Income Statement of PSO from 2006 to 2010

index analysis 2006 2007 2008 2009 2010

Sales 17% 65% 104% 149%
Less:
Sales tax 18% 67% 119% 166%
inland fright equilization marjin -8% 41% -5% 63%
13% 62% 96% 148%

Net sales 17% 66% 105% 149%

Cost of good sold 20% 66% 117% 154%

Gross profit -29% 74% -83% 69%

other operating income 35% 47% 53% 56%

operating cost:
transpotation cost 1% -8% 40% 73%
expenses 11% 31% 59% 63%
administrative expenses 5% 24% 23% 20%
depriciation and amortization 5% 8% 10% 9%
other operating expenses -69% 36% 62% -2%
-18% 27% 47% 28%

other income -4% -29% 75% 1277%

profit from operations -29% 99% -150% 143%

finance cost 31% 55% 605% 1018%
-35% 103% -214% 68%

share of profit of associates -68% -72% -57% -50%

profit before taxation
-
0.37626677 87% -199% 57%

Taxation
-
0.37534011 88% -220% 129%

Profit for the year
-
0.37674627 87% -189% 20%

[Pick the
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56

Growth rate income statement

Sales 20%
Less:
Sales tax 22%
inland fright equilization marjin 10%
20%

Net sales 20%

Cost of good sold 20%

Gross profit 11%

other operating income 9%

operating cost:
transpotation cost 12%
expenses 10%
administrative expenses 4%
depriciation and amortization 2%
other operating expenses 0%
5%

other income 69%

profit from operations 19%

finance cost 62%
11%

share of profit of associates -13%

profit before taxation 9%

Taxation 18%

Profit for the year 4%

[Pick the
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57

Growth rate Balance sheet

ASSETS
Non current assets
Plant, prperty and equipment -3%
Intangibles -25%
long term investment -9%
long term loans, advances and recieveables -15%
long term deposit and prepayments 11%
deffered tax -100%

Total non current assets -6%

Current assets

stores spares and loose tools -2%
stock in trade 16%
trade debt 59%
loans and advances 8%
deposits and short term prepayments -22%
other recievables 0%
cash and bank balances -1%
taxation-net

Total current assets 27%

Net assets 24%


share capital 0%
Reserves 8%

7%


long term deposits 5%
retirement and other service benefits 4%

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58

4%

current liabilities

trade and other payables 33%
Provision -2%
accrued interest 22%
short term borrowing 11%
taxes payables -100%

29%

contingencies and commitments 24%

Growth in
PAT and Sales
2006 2007 2008 2009 2010

Sales 100 16.60 % 41.88% 23.33% 21.9%
PAT 100 -37.7% 199.67% -53.5% 35.5%


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Recommendation
Financial ratio analysis can be an invaluable resource to investors and external users
who must determine the financial stability of an organization.
So here i am giving u some recommendation on PSO and on behalf of that i suggest
you to invest in PSO.
Liquidity ratios measure the organizations ability to meet short-term obligations. So
after analyzing the liquidity ratio i recommend that company has enough liquidity to
meet its short term obligation. As the values also suggest that assets are more than its
liabilities.
Company has enough working capital to deal with the operating financial expenses.
Debt ratios measure the amount of debt an organization is using and the ability of the
organization to pay off the debt. So these ratios also showing favourable trend for the
investor. As the company has less debt compare to assets so its good from both
company and investors point of view.
Company is also generating enough amount of cash as it is depicted from its EPS
which is more than 40 and its BVS is also very good so these values also important
for investor. So according to our analysis you go for investment in PSO.
Now if we look at the assets utilization ratios they are also suggests that company is
utilizing its assets in a efficient way. There is a problem in collecting receivables but
company is trying its best to cure that problem. So on the whole these ratios also go in
favour of the company and for investor to invest.
P/E also that the company is good for investment. P/E is a good criteria for investors
to select a company for investment. And dividend ration is also very good because is
giving 23.69% dividend out of its profit. Which is good?

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The company stock price is growing continuously since last 1 half year and company
dividend ratio is also good as 23.5% of total earnings. So here double benefits are for
the investor. Because investors can get benefit from capital gain and from dividend as
well.

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Financial analysis of PSO

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