Ioc Project

8/8/2019 Ioc Project

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A COMPARATIVE STUDY OF DOWNSREAM

REFINERIES(IOC, HPCL, BPCL) THROUGH

FINANCIAL RATIO ANALYSIS WITH SPECIALREFERENCE TO INDIAN OIL CORPORATION.


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CHAPTER- 1

INTRODUCTION


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INTRODUCTION

Financial Management is the specific area of finance dealing with

the financial decision corporations make, and the tools and analysis used to make

the decisions. The discipline as a whole may be divided between long-term and

short-term decisions and techniques. Both share the same goal of enhancing firm

value by ensuring that return on capital exceeds cost of capital, without taking

excessive financial risks.

Capital investment decisions comprise the long-term choices about

which projects receive investment, whether to finance that investment with equity

or debt, and when or whether to pay dividends to shareholders. Short-term

corporate finance decisions are called working capital managementand deal with

balance of current assets and current liabilities by managing cash, inventories, and

short-term borrowings and lending (e.g., the credit terms extended to customers).

Corporate finance is closely related to managerial finance, which is

slightly broader in scope, describing the financial techniques available to all forms

of business enterprise, corporate or not.


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NEED FOR THE STUDY

1. The study has great significance and provides benefits to various parties

whom directly or indirectly interact with the company.

2. It is beneficial to management of the company by providing crystal clear

picture regarding important aspects like liquidity, leverage, activity and

profitability.

3. The study is also beneficial to employees and offers motivation by showing

how actively they are contributing for companys growth.

4. The investors who are interested in investing in the companys shares will

also get benefited by going through the study and can easily take a decision

whether to invest or not to invest in the companys shares.


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OBJECTIVES OF THE PROJECT

The major objectives of the resent study are to know about financial

strengths and weakness of IOC, HPCL and BPCL through FINANCIAL RATIO

ANALYSIS.

The main objectives of resent study aimed as:

To evaluate and compare the performance of the companies by using

ratios as a yardstick to measure the efficiency of the companies. To understand the

liquidity, profitability and efficiency positions of the companies during the study

period. To evaluate and analyze various facts of the financial performance of the

company.To make comparisons between the ratios during different periods.

OBJECTIVES

1. To study the present financial system at these three downstream companies.

2. To determine the Profitability, Liquidity Ratios.

3. To analyze the capital structure of the companies with the help

of Leverage ratio.

4. To offer appropriate suggestions for the better performance of the

organizations.


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RESEARCH METHODOLOGY.

Research is a systematic method of finding solutions to problems. It is

essentially an investigation, a recording and an analysis of evidence for the

purpose of gaining knowledge.

According to Clifford woody, research comprises of defining and

redefining problem, formulating hypothesis or suggested solutions, collecting,

organizing and evaluating data, reaching conclusions, testing conclusions to

determine whether they fit the formulated hypothesis

Methods of Data Collection: The information is collected through secondary

sources during the project. That information was utilized for calculating

performance evaluation and based on that, interpretations were made.

Sources of secondary data:

1. Most of the calculations are made on the financial statements of thecompany provided statements.

2. Referring standard texts and referred books collected some of the

information regarding theoretical aspects.

3. Method- to assess the performance of he company method of observation of

the work in finance department in followed.

Nature of Research: Descriptive research, also known as statistical research,

describes data and characteristics about the population or phenomenon being

studied. Descriptive research answers the questions who, what, where, when


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and how. Although the data description is factual, accurate and

systematic, the research cannot describe what caused a situation. Thus,

descriptive research cannot be used to create a causal relationship, where one

variable affects another. In other words, descriptive research can be said to have a

low requirement for internal validity.

Variables of the Study: The direct variable of the study is the employee

motivation.Indirect variables are the incentives, interpersonal relations,

career development opportunities and performance appraisal system.

Presentation of Data: The data are presented through charts and tables.

Tools and Techniques for Analysis: Correlation is used to test the hypothesis and

draw inferences.


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LIMITATIONS

1. The study provides an insight into the financial, personnel, marketing andother aspects of LANCO. Every study will be bound with certain limitations.

2. The below mentioned are the constraints under which the study is carried

out.

3. One of the factors of the study was lack of availability of ample information.

Most of the information has been kept confidential and as such as not

assed as art of policy of company.

Time is an important limitation. The whole study was conducted in a

period of 60 days, which is not sufficient to carry out proper interpretation and

analysis.


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CHAPTER-2

COMPANYPROFILE


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INDIANOIL CORPORATION

COMPANY OVERVIEW

Indias Flagship National Oil Company, Incorporated as Indian Oil CompanyLtd. on 30th June 1959, it was renamed as Indian Oil Corporation Ltd. on 1stSeptember 1964 following the merger of Indian Refineries Ltd. (established1958) with it. Indian Oil and its subsidiaries account for approximately 48%

petroleum products market share, 34% national refining capacity and 71%downstream sector pipelines capacity in India.

The Indian Oil Group of companies owns and operates 10 of India's 20refineries with a combined refining capacity of 60.2 million metric tones perannum. These include two refineries of subsidiary Chennai PetroleumCorporation Ltd.

The Corporation's cross-country network of crude oil and product pipelines,spanning over 10,550 km and the largest in the country, meets the vital energyneeds of the consumers in an efficient, economical and environment-friendlymanner.

IndianOil is currently investing Rs. 47000 crore in augmentation of refining andpipeline capacities, expansion of marketing infrastructure and product quality

upgradation.


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VISION OF IOC


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AWARDS AND RECOGNITION

y IndianOil yet again clinched the top slot among the seven Indian companiesfeatured in the Fortune 'Global 500' listing of the world's largest companies for2008, improving its ranking to 105.

y IndianOil was the only petroleum company among 100 other industrial giants toemerge as 'The Most Trusted Fuel Pump Brand' in ET's Brand Equity annualsurvey for the year 2008. Among the 'Top 50 Service Brands' of the country, itbagged the 7th position.

y IndianOil received the coveted World Petroleum Congress Excellence Award2008 at Madrid, Spain, in the technical development category for its pathbreakingR&D work in hydro-processing technology for Green Fuels.

y IndianOil won the SCOPE Gold Trophy for Environmental Excellence &

Sustainable Development and Commendation Certificate for Good CorporateGovernance for the year 2007-08.

KEY CHALLENGES OF IOC

Ensure accounting of correct quantities in business transactionsEnsure on-time update of end-product ratesPrevent delays in signing of joint certificates (JCs) Prevent mismatch between JC and system quantities to prevent disputes intransactionsUse correct valuation for transactions.


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HINDUSTAN PETROLEUM CO. LIMITED

HPCL is a Fortune 500 company, with an annual turnover of Rs. 1,08,599Crores and sales/income from operations of Rs 1,14,889 Crores (US$ 25,306Millions) during FY 2009-10, having about 20% Marketing share in India and astrong market infrastructure.

HPCL operates 2 major refineries producing a wide variety of petroleum fuels &specialties, one in Mumbai (West Coast) of 6.5Million Metric Tonnes Per

Annum(MMTPA) capacity and the other in Vishakapatnam, (East Coast) with acapacity of7.5 MMTPA. HPCL holds an equity stake of 16.95% in MangaloreRefinery & Petrochemicals Limited, a state-of-the-art refinery at Mangalore with acapacity of 9 MMTPA. In addition, HPCL is constructing a refinery at Bhatinda, inthe state of Punjab, as a Joint venture with Mittal Energy Investments Pte. Ltd.

HPCL also owns and operates the largest Lube Refinery in the country producingLube Base Oils of international standards, with a capacity of 335 TMT. This LubeRefinery accounts for over 40% of the India's total Lube Base Oil production.

HPCL's vast marketing network consists of 13 Zonal offices in major citiesand 101 Regional Offices facilitated by a Supply & Distribution infrastructurecomprising Terminals, Aviation Service Stations, LPG Bottling Plants, and InlandRelay Depots & Retail Outlets, Lube and LPG Distributorships. HPCL, over theyears, has moved from strength to strength on all fronts. The refining capacitysteadily increased from 5.5 MMTPA in 1984/85 to 13 MMTPA presently. On thefinancial front, the turnover grew from Rs. 2687 Crores in 1984-85 to animpressive Rs 1,16,428Crores in FY 2008-09.


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MISSIONAND VISSIONOF HPCL

HPCL, along with its joint ventures, will be a fully integrated company in thehydrocarbons sector of exploration and production, refining and marketing;

focusing on enhancement of productivity, quality and profitability; caring forcustomers and employees; caring for environment protection and cultural

heritage.

It will also attain scale dimensions by diversifying into other energy related fieldsand by taking up transnational operations."

Our Vision

To be a World Class Energy Company known for caring and delighting thecustomers with high quality products and innovative services across domestic andinternational markets with aggressive growth and delivering superior financial

performance. The Company will be a model of excellence in meeting socialcommitment, environment, health and safety norms and in employee welfare andrelations.

AWARDSAND RECOGNITION

y HPCL Wins CIO 100 Award for the fourth Time in a Row

y

Enterprise Connect Award 2009y SAIL HR Excellence Award

y Readers Digest Trusted Brand Gold Award 2009

y Golden Peacock Corporate Governance Award 2008

y National Award For Excellence In Cost Management


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BHARATPETROLEUMCORPORATIONLIMITED

Bharat Petroleum Corporation Limited (BPCL) is engaged in the petroleum

industry in India. During the fiscal year ended March 31, 2009 (fiscal 2009), the

aggregate refinery throughput at BPCLs Refineries at Mumbai and Kochi, along

with that of BPCLs subsidiary company, Numaligarh Refinery Limited (NRL),

was 22.20 million metric tons (MMT). The Company is engaged in downstream

petroleum sector, which consists of refining and marketing activities. BPCL holds

61.65% interest in NRL as on March 31, 2009. Bharat PetroResources Limited

(BPRL), a 100% subsidiary of the Corporation, holds 50% equity in VB (Brazil)

Petroleo Private Ltda., a joint venture company. BPRL has participating interests

in nine exploration blocks. BPRL also has participating interests in five blocks in

the United Kingdom, Australia and Oman. Its subsidiaries include Bharat

PetroResources JPDA Limited, BPRL International BV, BPRL Ventures BV and

BPRL Ventures Mozambique BV.

VISION OF THE COMPANY

y We are a leading energy company with global presence through sustainedaggressive growth and high profitability

y We are the first choice of customers, alwaysy We exploit profitability growth opportunity outside energy

y We are the most environment friendly companyy We are a great organisation to work fory We are a learning organisationy We are a model corporate entity with social responsibility.


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AWARDS AND RECOGNITIONS

y BPCL IN THE FORTUNE 2009 GLOBAL 500 LIST

y BPCL recognized as Business Superbrand 2008!

y

BPCL Wins Asian CSR Award 2008

y BPC Lifts Marketing Company of the Year Award


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RATIO ANALYSIS

FINANCIAL ANALYSIS

Financial analysis is the process of identifying the financial strengths

and weaknesses of the firm and establishing relationship between the items of the

balance sheet and profit & loss account.

Financial ratio analysis is the calculation and comparison of ratios,

which are derived from the information in a companys financial statements. Thelevel and historical trends of these ratios can be used to make inferences about a

companys financial condition, its operations and attractiveness as an investment.

The information in the statements is used by

y Trade creditors, to identify the firms ability to meet their claims i.e.

liquidity position of the company.

y Investors, to know about the present and future profitability of the company

and its financial structure.

y Management, in every aspect of the financial analysis. It is the responsibility

of the management to maintain sound financial condition in the company.


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RATIO ANALYSIS

The term Ratio refers to the numerical and quantitative relationship

between two items or variables. This relationship can be exposed as

y Percentages

y Fractions

y Proportion of numbers

Ratio analysis is defined as the systematic use of the ratio to interpret

the financial statements. So that the strengths and weaknesses of a firm, as well as

its historical performance and current financial condition can be determined. Ratio

reflects a quantitative relationship helps to form a quantitative judgment.

STEPSINRATIO ANALYSIS

y The first task of the financial analysis is to select the information relevant to

the decision under consideration from the statements and calculates

appropriate ratios.

y To compare the calculated ratios with the ratios of the same firm relating to

the pas6t or with the industry ratios. It facilitates in assessing success or

failure of the firm.

y

Third step is to interpretation, drawing of inferences and report writingconclusions are drawn after comparison in the shape of report or

recommended courses of action.


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BASISOR STANDARDSOF COMPARISON

Ratios are relative figures reflecting the relation between variables.

They enable analyst to draw conclusions regarding financial operations. They use

of ratios as a tool of financial analysis involves the comparison with related facts.

This is the basis of ratio analysis. The basis of ratio analysis is of four types.

y Past ratios, calculated from past financial statements of the firm.

y Competitors ratio, of the some most progressive and successful competitor

firm at the same point of time.

y

Industry ratio, the industry ratios to which the firm belongs to

y Projected ratios, ratios of the future developed from the projected or pro

forma financial statements

NATURE OF RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial

statements. It is the process of establishing and interpreting various ratios for

helping in making certain decisions. It is only a means of understanding of

financial strengths and weaknesses of a firm. There are a number of ratios which

can be calculated from the information given in the financial statements, but the

analyst has to select the appropriate data and calculate only a few appropriate

ratios. The following are the four steps involved in the ratio analysis.

y Selection of relevant data from the financial statements depending upon the

objective of the analysis.

y Calculation of appropriate ratios from the above data.


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y Comparison of the calculated ratios with the ratios of the same firm in the

past, or the ratios developed from projected financial statements or the ratios

of some other firms or the comparison with ratios of the industry to which

the firm belongs.

INTERPRETATIONOFTHE RATIOS

The interpretation of ratios is an important factor. The inherent

limitations of ratio analysis should be kept in mind while interpreting them. The

impact of factors such as price level changes, change in accounting policies,

window dressing etc., should also be kept in mind when attempting to interpret

ratios. The interpretation of ratios can be made in the following ways.

y Single absolute ratio

y Group of ratios

y Historical comparison

y Projected ratios

y Inter-firm comparison

GUIDELINESOR PRECAUTIONSFOR USE OF RATIOS

The calculation of ratios may not be a difficult task but their use is not

easy. Following guidelines or factors may be kept in mind while interpretingvarious ratios are

y Accuracy of financial statements

y Objective or purpose of analysis


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y Selection of ratios

y Use of standards

y Caliber of the analysis

IMPORTANCE OF RATIO ANALYSIS

Aid to measure general efficiency

Aid to measure financial solvency

Aid in forecasting and planning

Facilitate decision making

Aid in corrective action

Aid in intra-firm comparison

Act as a good communication

Evaluation of efficiency

Effective tool

LIMITATIONSOF RATIO ANALYSIS

y Differences in definitions

y Limitations of accounting records

y

Lack of proper standards

y No allowances for price level changes

y Changes in accounting procedures

y Quantitative factors are ignored


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y Limited use of single ratio

y Background is over looked

y Limited use

y Personal bias

CLASSIFICATIONSOF RATIOS

The use of ratio analysis is not confined to financial manager only.

There are different parties interested in the ratio analysis for knowing the financial

position of a firm for different purposes. Various accounting ratios can be

classified as follows:

1. Traditional Classification

2. Functional Classification

3. Significance ratios

1.Traditional Classification

It includes the following.

y Balance sheet (or) position statement ratio: They deal with the relationship

between two balance sheet items, e.g. the ratio of current assets to current

liabilities etc., both the items must, however, pertain to the same balance

sheet.

y Profit & loss account (or) revenue statement ratios: These ratios deal with

the relationship between two profit & loss account items, e.g. the ratio of

gross profit to sales etc.,


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y Composite (or) inter statement ratios: These ratios exhibit the relation

between a profit & loss account or income statement item and a balance

sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales.

2. Functional Classification

These include liquidity ratios, long term solvency and leverage ratios,

activity ratios and profitability ratios.

3. Significance ratios

Some ratios are important than others and the firm may classify them

as primary and secondary ratios. The primary ratio is one, which is of the prime

importance to a concern. The other ratios that support the primary ratio are called

secondary ratios.

INTHE VIEWOF FUNCTIONAL CLASSIFICATIONTHE RATIOSARE

1.Liquidity ratio

2. Leverage ratio

3. Activity ratio

4. Profitability ratio

1. LIQUIDITY RATIOS

Liquidity refers to the ability of a concern to meet its current

obligations as & when there becomes due. The short term obligations of a firm can

be met only when there are sufficient liquid assets. The short term obligations are

met by realizing amounts from current, floating (or) circulating assets The current

assets should either be calculated liquid (or) near liquidity. They should be


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convertible into cash for paying obligations of short term nature. The sufficiency

(or) insufficiency of current assets should be assessed by comparing them with

short-term current liabilities. If current assets can pay off current liabilities, then

liquidity position will be satisfactory.

To measure the liquidity of a firm the following ratios can be

calculated

y Current ratio

y Quick (or) Acid-test (or) Liquid ratio

y

Absolute liquid ratio (or) Cash position ratio

(a) CURRENT RATIO:

Current ratio may be defined as the relationship between

current assets and current liabilities. This ratio also known as Working capital ratio

is a measure of general liquidity and is most widely used to make the analysis of a

short-term financial position (or) liquidity of a firm.

Current assets

Current ratio =

Current liabilities


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Components of current ratio

CURRENT ASSETS CURRENT LIABILITIES

Cash in hand Out standing or accrued expenses

Cash at bank Bank over draft

Bills receivable Bills payable

Inventories Short-term advances

Work-in-progress Sundry creditors

Marketable securities Dividend payable

Short-term investments Income-tax payable

Sundry debtors

Prepaid expenses

(b) QUICKRATIO

Quick ratio is a test of liquidity than the current ratio. The term

liquidity refers to the ability of a firm to pay its short-term obligations as & when

they become due. Quick ratio may be defined as the relationship between quick or

liquid assets and current liabilities. An asset is said to be liquid if it is converted

into cash with in a short period without loss of value.

Quick or liquid assets

Quick ratio =

Current liabilities


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Components of quick or liquid ratio

QUICKASSETS CURRENT LIABILITIES




Sundry debtors Short-term advances

Marketable securities Sundry creditors

Temporary investments Dividend payable

Income tax payable

(c) ABSOLUTE LIQUID RATIO

Although receivable, debtors and bills receivable are generally more

liquid than inventories, yet there may be doubts regarding their realization into

cash immediately or in time. Hence, absolute liquid ratio should also be calculated

together with current ratio and quick ratio so as to exclude even receivables from

the current assets and find out the absolute liquid assets.

Absolute liquid assets

Absolute liquid ratio =

Current liabilities

Absolute liquid assets include cash in hand etc. The acceptable forms

for this ratio is 50% (or) 0.5:1 (or) 1:2 i.e., Rs.1 worth absolute liquid assets are

considered to pay Rs.2 worth current liabilities in time as all the creditors are nor


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accepted to demand cash at the same time and then cash may also be realized from

debtors and inventories.


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Components of Absolute Liquid Ratio

ABSOLUTE LIQUID ASSETS CURRENT LIABILITIES



Interest on Fixed Deposit Bills payable

Short-term advances

Sundry creditors

Dividend payable

Income tax payable

2. LEVERAGE RATIOS

The leverage or solvency ratio refers to the ability of a concern to

meet its long term obligations. Accordingly, long term solvency ratios indicate

firms ability to meet the fixed interest and costs and repayment schedules

associated with its long term borrowings.

The following ratio serves the purpose of determining the solvency of

the concern.

y Proprietory ratio

(a) PROPRIETORY RATIO

A variant to the debt-equity ratio is the proprietory ratio which is also

known as equity ratio. This ratio establishes relationship between share holders

funds to total assets of the firm.


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Shareholders funds

Proprietory ratio =

Total assets

SHARE HOLDERS FUND TOTAL ASSETS

Share Capital Fixed Assets

Reserves & Surplus Current Assets

Cash in hand & at bank

Bills receivable

Inventories

Marketable securities

Short-term investments

Sundry debtors

Prepaid Expenses


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2. DEBT- EQUITY RATIO

The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion

of shareholders' equity and debt used to finance a company's assets.Closely related

to leveraging, the ratio is also known as Risk, Gearing or Leverage. The two

components are often taken from the firm's balance sheet or statement of financial

position (so-called book value), but the ratio may also be calculated using market

values for both, if the company's debt and equity are publicly traded, or using a

combination of book value for debt and market value for equity financially.

DE RATIO = LONG TERMS DEBTS/SHAREHOLDERS FUNDS


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3. ACTIVITY RATIOS

Funds are invested in various assets in business to make sales and earn

profits. The efficiency with which assets are managed directly effect the volume of

sales. Activity ratios measure the efficiency (or) effectiveness with which a firm

manages its resources (or) assets. These ratios are also called Turn over ratios

because they indicate the speed with which assets are converted or turned over into

sales.

y Working capital turnover ratio

y Fixed assets turnover ratio

y Capital turnover ratio

y Current assets to fixed assets ratio

(a) WORKING CAPITAL TURNOVER RATIO

Working capital of a concern is directly related to sales.

Working capital = Current assets - Current liabilities

It indicates the velocity of the utilization of net working capital. This

indicates the no. of times the working capital is turned over in the course of a year.

A higher ratio indicates efficient utilization of working capital and a lower ratio

indicates inefficient utilization.

Working capital turnover ratio=cost of goods sold/working capital.


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Components of Working Capital

CURRENT ASSETS CURRENT LIABILITIES




Inventories Short-term advances

Work-in-progress Sundry creditors

Marketable securities Dividend payable

Short-term investments Income-tax payable

Sundry debtors

Prepaid expenses

(b) FIXED ASSETS TURNOVER RATIO

It is also known as sales to fixed assets ratio. This ratio measures the

efficiency and profit earning capacity of the firm. Higher the ratio, greater is the

intensive utilization of fixed assets. Lower ratio means under-utilization of fixed

assets.

Cost of Sales

Fixed assets turnover ratio =

Net fixed assets

Cost of Sales = Income from Services

Net Fixed Assets = Fixed Assets - Depreciation


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(c) CAPITAL TURNOVER RATIOS

Sometimes the efficiency and effectiveness of the operations are

judged by comparing the cost of sales or sales with amount of capital invested in

the business and not with assets held in the business, though in both cases the same

result is expected. Capital invested in the business may be classified as long-term

and short-term capital or as fixed capital and working capital or Owned Capital and

Loaned Capital. All Capital Turnovers are calculated to study the uses of various

types of capital.

Cost of goods sold

Capital turnover ratio =

Capital employed

Cost of Goods Sold = Income from Services

Capital Employed = Capital + Reserves & Surplus


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(d) CURRENT ASSETS TO FIXED ASSETS RATIO

This ratio differs from industry to industry. The increase in the ratio

means that trading is slack or mechanization has been used. A decline in the ratio

means that debtors and stocks are increased too much or fixed assets are more

intensively used. If current assets increase with the corresponding increase in

profit, it will show that the business is expanding.

Current Assets

Current Assets to Fixed Assets Ratio =

Fixed Assets

Component of Current Assets to Fixed Assets Ratio

CURRENT ASSETS FIXED ASSETS

Cash in hand Machinery

Cash at bank Buildings

Bills receivable Plant

Inventories Vehicles

Work-in-progress

Marketable securities

Short-term investments

Sundry debtors

Prepaid expenses


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4. PROFITABILITY RATIOS

The primary objectives of business undertaking are to earn profits.

Because profit is the engine, that drives the business enterprise.

y Net profit ratio

y Return on total assets

y Reserves and surplus to capital ratio

y Earnings per share

y Operating profit ratio

y Price earning ratio

y Return on investments

(a) NET PROFIT RATIO

Net profit ratio establishes a relationship between net profit (after tax)

and sales and indicates the efficiency of the management in manufacturing, selling

administrative and other activities of the firm.

Net profit after tax

Net profit ratio=

Net sales

Net Profit after Tax = Net Profit () Depreciation () Interest () Income Tax


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Net Sales = Income from Services

It also indicates the firms capacity to face adverse economic

conditions such as price competitors, low demand etc. Obviously higher the ratio,

the better is the profitability.

(b) RETURN ON TOTAL ASSETS

Profitability can be measured in terms of relationship between net

profit and assets. This ratio is also known as profit-to-assets ratio. It measures the

profitability of investments. The overall profitability can be known.

Net profit

Return on assets =

Total assets

Net Profit = Earnings before Interest and Tax

Total Assets = Fixed Assets + Current Assets


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(c) RESERVES AND SURPLUS TO CAPITAL RATIO

It reveals the policy pursued by the company with regard to growth

shares. A very high ratio indicates a conservative dividend policy and increased

ploughing back to profit. Higher the ratio better will be the position.

Reserves& surplus

Reserves & surplus to capital =

Capital

(d) EARNINGS PER SHARE

Earnings per share is a small verification of return of equity and is

calculated by dividing the net profits earned by the company and those profits after

taxes and preference dividend by total no. of equity shares.

Net profit after tax

Earnings per share =

Number of Equity shares

The Earnings per share is a good measure of profitability when

compared with EPS of similar other components (or) companies, it gives a view of

the comparative earnings of a firm.


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e) OPERATING PROFIT RATIO

Operating ratio establishes the relationship between cost of goods sold

and other operating expenses on the one hand and the sales on the other.

Operating cost

Operation ratio =

Net sales

However 75 to 85% may be considered to be a good ratio in case of a

manufacturing under taking.

Operating profit ratio is calculated by dividing operating profit by

sales.

Operating profit = Net sales - Operating cost

Operating profit

Operating profit ratio =

Sales


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(f) PRICE - EARNING RATIO

Price earning ratio is the ratio between market price per equity share

and earnings per share. The ratio is calculated to make an estimate of appreciation

in the value of a share of a company and is widely used by investors to decide

whether (or) not to buy shares in a particular company.

Generally, higher the price-earning ratio, the better it is. If the price

earning ratio falls, the management should look into the causes that have resulted

into the fall of the ratio.

Market Price per Share

Price Earning Ratio =

Earnings per Share

Capital + Reserves & Surplus

Market Price per Share =

Number of Equity Shares

Earnings before Interest and Tax

Earnings per Share =

Number of Equity Shares


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(g) RETURN ON INVESTMENTS

Return on share holders investment, popularly known as Return on

investments (or) return on share holders or proprietors funds is the relationship

between net profit (after interest and tax) and the proprietors funds.

Net profit (after interest and tax)

Return on shareholders investment =

Shareholders funds

The ratio is generally calculated as percentages by multiplying the

above with 100.


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CHAPTER-3

DATAANALYSISANDINTERPRETATION


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I. LIQUIDITY RATIOS

1. Current Ratio = Current Assets/ Current Liabilities.

For IOC

FOR HPCL

Current Ratio of IOC

Year CurrentAssets CurrentLiabilities Ratio

2006 38423.26 27890.47 1.37

2007 39060.38 29709.08 1.31

2008 52931.30 34580.98 1.53

2009 44535.19 35358.04 1.25

2010 59,388.80 44,751.73 1.32

Current Ratio of HPCL


2006 11,009.98 7,954.89 1.38

2007 11464.70 10119.49 1.13

2008 19297.37 12433.69 1.55

2009 15992.69 11755.81 1.36

2010 20,641.94 16,555.11 1.24


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Current ratio of BPCL

Current Ratio of BPCL


2006 13,528.98 10,978.85 1.23

2007 14841.40 12957.44 1.14

2008 20971.33 16365.51 1.28

2009 17275.18 14694.12 1.17

2010 24,883.94 17,990.45 1.38


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GRAPHICAL PRESENTATION

INTERPRETATION

The current ratio with 2:1 (or) more is considered as satisfactory position of the firm.When

compared, IOC and HPCL have almost similar ratio although the five years with small changes.

But the current ratio of all three companies is not seemed satisfactory.

In IOC, Inventories and Loans & Advances are higher in 2008 than that in 2007 & 2009. The

sundry debtors have increased due to the increase to corporate taxes. And provisions is also very

less in 2008 which makes its liabilities lesser than 2007&09. In 2010, the current assets increase

due to increase in inventories and loans & advances, which again increases current ratio.

In HPCL and BPCL ,the current ratio follows the same pattern as of IOC. It increased in 2008

and then decrease again in 2009. It is due to rise in inventories and loans & advances in 2008 in

both companies. In case of BPCL, the current assets are increasing more than liabilities and

hence, the current ratio increases.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

IOC HPCL BPCL

2006

2007

2008

2009

2010


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2. QUICK RATIO = QUICK ASSETS/CURRENT LIABILITIES

FOR IOC

FOR HPCL

Quick Ratio of IOC

Year Quick Assets CurrentLiabilities Ratio

2006 14286.17 27890.47 .51

2007 14357.69 29709.08 .48

2008 21989.82 34580.98 .63

2009 19385.59 35358.04 .54

2010 22984.72 44,751.73 .51

Quick Ratio of HPCL


2006 3199.69 7,954.89 .40

2007 3366.3 10119.49 .33

2008 7277.09 12433.69 .58

2009 7199.45 11755.81 .61

2010 8062.72 16,555.11 .49


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FOR BPCL

Quick Ratio of BPCL


2006 6904.58 10,978.85 .62

2007 8872.32 12957.44 .68

2008 9001.03 16365.51 .55

2009 7200.11 14694.12 .49

2010 10265.73 17,990.45 .57


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INTERPRETATION

Quickassets are those assets which can be converted into cash with in a short period of

time, say to sixmonths. So, here the inventories which are with the long period does not

include in the quickassets.

In IOC, the ratio is increasing in 2008 and then again decreasing in nextconsequent years.

Itis due to increase of the sundry debtors and loans and advances in year 2008 and these

are decreasing in 2009 & 2010. Because of this ratio is showing such pattern.

In HPCL, the ratio is less in 2007, itkeeps on increasing till 2009 and decreases in 2010,

but very less incrementis there in year 2009. There is decrease in the liabilities, but the

quickassets increase very little thatkeeps the ratio high in 2009.

In BPCL, due to increase ofcurrent liabilities in 2007, the ratio decreases in that year. It

firstincreases and then decreases due to the fluctuation in the quickassets which are

effected by sundry debtors.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

IOC HPCL BPCL

2006

2007

2008

2009

2010


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3. ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID

ASSETS/CURRENT LIABILITIES

FOR IOC

FOR HPCL

Absolute Liquid Ratio of IOC

Year Absolute Liquid Assets CurrentLiabilities Ratio

2006 962.23 27890.47 .03

2007 925.97 29709.08 .03

2008 824.43 34580.98 .02

2009 798.02 35358.04 .02

2010 1,315.11 44,751.73 .03

Absolute Liquid Ratio of HPCL


2006 85.66 7,954.89 .02

2007 86.79 10119.49 .008

2008 294.01 12433.69 .02

2009 608.31 11755.81 .05

2010 243.17 16,555.11 .01


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FOR BPCL

Absolute Liquid Ratio of BPCL


2006 244.87 10,978.85 .02

2007 259.15 12957.44 .02

2008 490.96 16365.51 .03

2009 293.88 14694.12 .02

2010 424.65 17,990.45 .02


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INTERPRETATION

The current assets which are ready in the form of cash are considered as absolute liquid assets.

Here, the cash and bank balance and the interest on fixed assets are absolute liquid assets.

In IOC, the absolute liquid ratio in the year 2008 & 2009, the cash and bank balance is decreased

due to decrease in the deposits. This decreases the ratio. In 2010, again the liquidity increases

due to availability of cash in hand.

In HPCL, there is continuous increase in the ratio and there is a huge increase in the cash and

bank balances and also the current liabilities decrease which shoots up its absolute liquid ratio in

2009. This increases its current liquidity. In 2010 the liability increases and the cash decreases.

And in BPCL, the ratio increases in year 2008 and then decreases due to the fluctuation in the

absolute assets i.e, cash and bank balance.

0

0.005

0.01

0.015

0.02

0.025

0.03

0.035

0.04

0.045

0.05

IOC HPCL BPCL

2006

2007

2008

2009

2010


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II. LEVERAGE RATIOS

1. PROPRIETORY RATIO = Shareholders fund/Total Assets

FOR IOC

FOR HPCL

Proprietory Ratio of IOC

Year Shareholders fund TotalAssets Ratio

2006 29302.67 467474.79 .62

2007 34857.29 52996.41 ..65

2008 43619.52 72577.32 .60

2009 43998.18 67329.51 .65

2010 50,552.93 122238.5 .41

Proprietory Ratio of HPCL


2006 8735.74 18427.18 .47

2007 9598.65 22919.7 .42

2008 10563.29 29319.64 .36

2009 10730.63 28479.43 .65

2010 11,557.97 36029.167 .32


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FOR BPCL

Proprietory Ratio of BPCL


2006 9077.88 30905.82 .29

2007 10273.54 34298.98 .30

2008 11676.84 42472.26 .27

2009 12128.11 39797.51 .30

2010 13086.71 50296.46 .26


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INTERPRETATION

The proprietary ratio establishes the relationship between shareholders funds to

total assets. It determines the long-term solvency of the firm. This ratio indicates

the extent to which the assets of the company can be lost without affecting the

interest of the company.

In IOC, HPCL & BPCL, the proprietary ratio follows the same pattern. It first

decreases in year 2008 and then increase again in year 2009.

The share holders funds include capital and reserves and surplus. The reserves

and surplus is increased due to the increase in balance in profit and loss account,

which is caused by the increase of income from services.

Total assets, includes fixed and current assets. And the cost of current assets in

2008 is very high and the fixed assets are almost same which affected the

proprietary ratio.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

IOC HPCL BPCL

2006

2007

2008

2009

2010


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2. DEBT-EQUITY RATIO = DEBT(long-term loans)/EQUITY

FOR IOC

FOR HPCL

Debt-Equity Ratio of IOC

Year Debt Equity Ratio

2006 26404.31 29302.67 .90

2007 27082.69 34857.29 .78

2008 35523.17 41086.25 .87

2009 44972.06 43998.18 1.02

2010 44,566.25 50,552.93 .88

Debt-Equity Ratio of HPCL

Year Debt Equity Ratio

2006 6663.83 8735.74 .77

2007 10517.53 9598.65 1.096

2008 16786.70 10563.29 1.589

2009 22755.17 10730.63 2.120

2010 21,302.37 11,557.97 1.84


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FOR BPCL

Debt-Equity Ratio of BPCL

Year

Debt Equity Ratio

2006 8373.6 9077.88 .92

2007 21102.78 10273.54 2.05

2008 26699.22 11676.84 2.29

2009 21102.78 10273.54 2.05

2010 22195.2 13086.71 1.69


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GRAPHICAL REPRESENTATION

INTERPRETATION

The debt- equity ratio compares the total debts with the total assets. Higher liabilities imply

greater financial risk. It measures the degree of indebtedness of the firm out of the total financing

of the firm.

IOC has the low DE Ratio. It implies a low risk to lenders and creditors of the firm and also non-

existence of trading on equity. Its Debt as well as equity is increasing every year which increases

its ratio. But in 2010, the debt portion decreases.

In HPCL, the ratio is increasing year after year as the company is incorporating more debt from

outside. But the debt decreases to much extent in 2010 same as IOC.

BPCL has high DE Ratio. There is huge increase in debt in year 2008 which increases its ratio

and the debt decreases again in 2009 and 2010 and so as the debt-equity ratio.

0

0.5

1

1.5

2

2.5

IOC HPCL BPCL

2006

2007

2008

2009

2010


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III.THE ACTIVITY RATIOS

1. WORKING CAPITAL TURNOVER RATIO

= Net Sales/working capital

y Working capital = Current Assets Current Liabilities.

FOR IOC

FOR HPCL

Working Capital Turnover Ratio of IOC

Year NetSales Working Capital Ratio

2006 1,67,085.86 6,484.63 25.76

2007 199396.17 9351.30 20.66

2008 224428.14 18350.32 12.23

2009 262654.42 9177.15 28.62

2010 2,56,912.75 9,881.06 26.00

Working Capital Turnover Ratio of HPCL


2006 70,615.68 1,670.65 42.26

2007 83571.14 1345.21 62.10

2008 96442.92 6863.68 14.05

2009 109377.60 4236.88 25.81

2010 101,347.51 4,086.83 24.8


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FOR BPCL

Working Capital Turnover Ratio of BPCL


2006 74,432.14 2,550.13 29.19

2007 92839.06 1883.97 49.28

2008 107057.16 4605.83 23.24

2009 129532.80 2581.06 50.18

2010 1,17,782.48 6,893.49 17.10


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INTERPRETATION

In this graph it is clearly shown that the working capital turnover ratio of all the three companies

is least in the year 2008. A high WCT Ratio reflects the better utilization of the working capitalof the company. The working capital is also increased greater due to the increase in from

services because the huge increase in current assets.

In IOC, there is high net sales but the working capital is very high which keeps the ratio low.

In HPCL, the working capital is very less in 2007 which increases the ratio, but the working

capital increases in the next years.

In BPCL, the net sales is increasing every year. But there is huge increase in the working capital

in 2008 which lower down the ratio. But again it increases in 2009.

0

10

20

30

40

50

60

70

IOC HPCL BPCL

2006

2007

2008

2009

2010


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2. FIXED ASSETS TURNOVER RATIO

= Cost of sales/Net fixed assets

y Cost of Sales = Income from Services

y Net Fixed Assets = Fixed Assets Depretiation

FOR IOC

FOR HPCL

Fixed Assets Turnover Ratio of IOC

Year NetSales Net FixedAssets Ratio

2006 1,67,085.86 22821.96 7.32

2007 199396.17 30584.62 6.52

2008 224428.14 29882.93 7.51

2009 262654.42 31570.47 8.32

2010 2,56,912.75 38353.9 6.70

Fixed Assets Turnover Ratio of HPCL


200670,615.68

6648.43 10.6

2007 83571.14 12360.40 6.76

2008 96442.92 14394.41 6.70

2009 109377.60 15674.53 6.98

2010 101,347.51 14056.15 7.21


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FOR BPCL

Fixed Assets Turnover Ratio of BPCL


2006 74,432.14 9149.37 8.13

2007 92839.06 10076.93 9.12

2008 107057.16 10870.46 9.85

2009 129532.80 10890.26 11.89

2010 1,17,782.48 12427.03 9.48


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INTERPRETATION

This ratio shows the firms ability in generating sales from all financial resources

committed to total assets. The ratio indicates the account of one rupee investment

in fixed assets.

The ratio of BPCL is bit higher than that of two as the net fixed assets are higher

in BPCL which raise its fixed assets ratio over others.

And in all the companies the fixed assets turnover ratio is increasing for three

years.

The income from services is greatly increased in the current years due to the

increase in the Operations & Maintenance fee due to the increase in extra invoice

and the net fixed assets are reduced because of the increased charge of

depreciation. Finally, that effected a huge increase in the ratio compared with the

previous three years ratio.

0

2

4

6

8

10

12

IOC HPCL BPCL

2006

2007

2008

2009

2010


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3. CAPITAL TURNOVER RATIO

= Cost of Goods Sold/Capital Employed

Cost of Goods Sold = Income from Services

Capital Employed = Capital + Reserves and Surplus

FOR IOC

FOR HPCL

Capital Turnover Ratio of IOC

Year Cost of Goods Sold Capital Employed Ratio

2006 1,67,085.86 29302.67 5.70

2007 199396.17 34857.29 5.72

2008 224428.14 41086.25 5.46

2009 262654.42 43998.18 5.97

2010 2,56,912.75 50,552.93 5.08

Capital Turnover Ratio of HPCL

Year Cost of Goods Sold Capital Employed Ratio

200670,615.68 8396.8 8.40

2007 83571.14 9598.65 8.70

2008 96442.92 10563.29 9.13

2009 109377.60 10730.63 10.19

2010 101,347.51 11,557.97 8.67


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FOR BPCL

Capital Turnover Ratio of BPCL

Year Cost of Goods

Sold Capital Employed Ratio

2006 74,432.14 9077.88 8.19

2007 92839.06 10273.54 9.04

2008 107057.16 11676.84 9.17

2009 129532.80 12128.11 10.68

2010 1,17,782.48 13086.71 9.00


67/93

~ 67 ~


INTERPRETATION

This is another ratio to judge the efficiency and effectiveness of the company likeprofitability ratio.

IOC is having lesser capital turnover ratio than rest two oil companies. And that of

HPCL and BPCL is almost same increasing over four years and then decreases in

recent year. The cost of goods of IOC is higher, but its capital reserves are far

greater because of high general reserves which lessen its capital turnover ratio.

The income from services is greatly increased compared with the previous year

and the total capital employed includes capital and reserves & surplus. Higher ratio

shows that the greater sales are being made per rupee of Capital Employed in the

firm and there is higher profit.

0

2

4

6

8

10

12

IOC HPCL BPCL

2006

2007

2008

2009

2010


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4. CURRENT ASSETS TO FIXED ASSETS RATIO

= Current Assets/Fixed Assets

FOR IOC

FOR HPCL

Current Assets to Fixed Assets Ratio of IOC

Year CurrentAssets FixedAssets Ratio

2006 38423.26 25,023.42 1.53

2007 39060.38 33141.41 1.18

2008 52931.30 32558.56 1.63

2009 44535.19 34392.45 1.29

2010 59,388.80 41,132.99 1.44

Current Assets to Fixed Assets Ratio of HPCL

Year CurrentAssets FixedAssets Ratio

2006 11,009.98 7,337.40 1.5

2007 11464.70 8,820.84 1.29

2008 19297.37 11,929.28 1.61

2009 15992.69 11,654.55 1.37

2010 20,641.94 19,194.26 1.07


69/93

~ 69 ~

FOR BPCL

Current Assets to Fixed Assets Ratio of BPCL

Year CurrentAssetss FixedAssets Ratio

2006 13,528.98

9,917.37

1.36

2007 14841.4010,981.04

1.35

2008 20971.3311,968.67

1.75

2009 17275.1811,965.79

1.44

2010 24,883.9413,669.35

1.82


70/93

~ 70 ~


INTERPRETATION

The graph shows that IOC is having good current assets to fixed assets ratio. its

having current assets as well as fixed assets higher than that of two companies dueto which its ratio has increased.

And in all the companies, the ratio is the highest. Current assets are increased due

to the increase in the sundry debtors and loans & advances, and the net fixed assets

of the firm are decreased due to the fall in proposed division and corporate

dividend tax and there is no major increment in the fixed assets.

The increment in current assets and the decrease in fixed assets resulted an increase

in the ratio of 2008 compared with the previous year

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

IOC HPCL BPCL

2006

2007

2008

2009

2010


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IV. PROFITABILITY RATIOS

1. NET PROFIT RATIO

= Net profit after tax/Net sales

y

Net profit after tax = Net profit(-) Depreciation(-) Interest(-)y Income tax.

y Net sales = Income from services

FOR IOC

FOR HPCL

Net Profit Ratio of IOC

Year Net profit after tax Net sales Ratio

2006 4,238.43 1,67,085.86 .026

2007 5,449.42 199396.17 .027

2008 6,078.13 224428.14 .027

2009 7,648.90 262654.42 .029

2010 10,304.14 2,56,912.75 .040

Net Profit Ratio of HPCL


2006 164.0570,615.68 .0023

2007 1571.17 83571.14 .019

2008 1134.88 96442.92 .012

2009 574.98 109377.60 .005

2010 1,301.37 101,347.51 .013


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~ 72 ~

FOR BPCL

Net Profit Ratio of BPCL


2006 430.79 74,432.14 .0058

2007 2,149.62 92839.06 .023

2008 1,353.26 107057.16 .013

2009 2,528.77 129532.80 .019

2010 1,597.73 1,17,782.48 .013


73/93

~ 73 ~


INTERPRRETATION

The net profit ratio is the overall measure of the firms ability to turn each rupee ofincome

from services in net profit. If the netmargin is inadequate the firm will fail to achieve

return on shareholders funds. High net profit ratio will help the firm service in the fall of

income from services, rise in cost of production or declining demand.

The net profit of IOC is the highest among the three oil companies because the income from

services is more to much extent. And in the nextconsequent year the ratio is increasing as

the income from services decreases than the last year i.e., 2010.

In HPCL net profit ratio is very less in 2006 as the net of t profit of the company is very low & it

fluctuates in the following years. In BPCL the net profit after tax is increasing and decreasing

after every alternate year due to corporate taxes, which makes the ratio fluctuating every year.

0

0.005

0.01

0.015

0.02

0.025

0.03

0.035

0.04

IOC HPCL BPCL

2006

2007

2008

20009

2010


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2.RESERVES AND SURPLUS TO CAPITAL RATIO

= Reserves& Surplus/Capital

FOR IOC

FOR HPCL

Reserves and surplus to capital ratio of IOC

Year Reserves andSurplus Capital Ratio

2006

8,777.8817,513.02

.50

2007

9,912.00 21,102.78.47

200811,315.30 26,699.22

.42

2009

11,766.57 33,299.52

.35

2010

12,725.17 35,281.91.36

Reserves and surplus to capital ratio of HPCL

Year Reserves andSurplus Capital Ratio

2006 8,396.80 15,399.57 .54

2007 9,259.70 20,116.18 .46

2008 10,224.28 27,349.99 .37

2009 10,391.62 33,485.80 .31


75/93

~ 75 ~

2010 11,218.96 32,860.34 .34


76/93

~ 76 ~

FOR BPCL

Reserves and surplus to capital ratio of BPCL

Year Reserves and

Surplus Capital Ratio

2006

8,777.88 17,513.02

.50

2007 991221,102.78

.47

2008 11315.3026,699.22

.42

2009 11766.57 33,299.52 .35

2010

12,725.17 35,281.91.36


77/93

~ 77 ~


INTERPRETATION

The ratio is used to reveal the policy pursued by the company a very

high ratio indicates a conservative dividend policy and vice-versa. Higher the ratiobetter will be the position.

This ratio is showing almost the same pattern for the five years in all

three companies. Its decreasing continuously because the capital of the

companies is increasing at faster rate than the reserves and surplus. And the

capital decreases in the recent year due to reduction in unsecured loans and

payment of the dividends.

0

0.1

0.2

0.3

0.4

0.5

0.6

IOC HPCL BPCL

2006

2007

2008

2009

2010


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3. EARNINGS PER SHARE

= Net profit after tax/No of Equity Share

FOR IOC

FOR HPCL

Earning per share of IOC

Year Net Profit No. of equity shares Ratio

2006 4,238.43 116.79 36.29

2007 5,449.42 119.24 46.66

2008 6,078.13 119.24 50.98

2009 7,648.90 119.65 64.15

2010 10,304.14 242.79 42.44

Earning per share of HPCL

Year Net Profit No of equity shares Ratio

2006 164.05 33.96 4.83

2007 1571.17 45.53 34.51

2008 1134.88 72.15 15.65

2009 574.98 23.84 24.12

2010 1,301.37 32.52 40.02


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FOR BPCL

Earning per share of BPCL

Year

Net sales

No. of equity s

hares Ratio

2006 430.79 30 14.36

2007 2,149.62 36.15 59.46

2008 1,353.26 36.15 37.43

2009 2,528.77 36.15 69.94

2010 1,597.73 36.15 44.19


80/93

~ 80 ~


INTERPRETATION

Earnings per share ratio are used to find out the return that the shareholders earn from their

shares. After charging depreciation and after payment of tax, the remaining amount will be

distributed by all the shareholders.

EPS of IOC is aapreciable and it has been increasing continuously every year as the net sales of

the company is increasing and the number of shares is same. But in 2010 it decreased due to

increase in the number of shares.

In HPCL, both the net sale and the number of shares are fluctuating every year, due to which the

EPS is fluctuating & in BPCL there is not much fluctuation in no. of shares, but net profit after

tax is changing every year which is fluctuating their earning per share ratio.

Net profit after tax is decreased due to the huge decrease in the income e from services. That is

the amount which is available to the shareholders to take.

0

10

20

30

40

50

60

70

IOC HPCL BPCL

2006

2007

2008

2009

2010


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4. OPERATING PROFIT RATIO

= Operating Profit/Net Sales

Operating Profit = Net Sales Operating cost

FOR IOC

FOR HPCL

Operating-Profit Ratio of IOC

Year Operating Profit NetSales Ratio

2006 7,809.26 1,67,085.86 .05

2007 10762.18 199396.17 .05

2008 11295.90 224428.14 .05

2009 13,524.35 262654.42 .05

2010 12453.59 2,56,912.75 .048

Operating-Profit Ratio of HPCL


2006 814.9470,615.68 .01

2007 2,518.74 83571.14 .03

2008 1,846.68 96442.92 .02

2009 3,291.02 109377.60 .03

2010 2,543.18 101,347.51 .02


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FOR BPCL

Operating-Profit Ratio of BPCL


2006 1,101.16 74,432.14 .015

2007 3,717.79 92839.06 .04

2008 3,150.97 107057.16 .03

2009 4,540.63 129532.80 .03

2010 2,434.51 1,17,782.48 .02


83/93

~ 83 ~


INTERPRETATION

The operating profit ratio is used to measure the relationship between net profits and sales of a

firm. Depending on the concept, it will decide.

The operating profit ratio of IOC is higher than that of two companies because of high operating

profit of the company. There is more purchases of raw material. It has been almost at the same

level for all the year.

In HPCL & BPCL it is pretty low and is fluctuating every year. And in the recent year the

operating profits reduced to low value which decreases the ratio.

0

0.005

0.01

0.015

0.02

0.025

0.03

0.035

0.04

0.045

0.05

IOC HPCL BPCL

2006

2007

2008

2009

2010


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5. PRICE-EARNING RATIO = Market Price Per Share/No. of Equity

Share

y Market Price Per Share = (Capital + Reserves & Surplus)/

No. of Equity Shares

y EPS = Earning Before Interest& Tax/No. of Equity Share

FOR IOC

FOR HPCL

Price Earning Ratio of IOC

Year Market price per share EPS Ratio

2006 250.90 36.29 6.91

2007 292.93 46.66 6.28

2008 344.57 50.98 6.76

2009 362.2 64.15 5.65

2010 208.22 42.44 4.91

Price Earning Ratio of HPCL


2006 246.46 4.83 51.02

2007 210.82 34.51 6.10

2008 146.41 15.65 9.35

2009 450.11 24.12 18.66

2010 356.03 40.02 8.89


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FOR BPCL

Price Earning Ratio of BPCL


2006 302.60 14.36 21.07

2007 284.19 59.46 4.76

2008 322.92 37.43 8.63

2009 335.49 69.94 4.80

2010 362.01 44.19 8.19


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~ 86 ~

GRAPHICALREPRESENTATION

INTERPRETATION

The ratio is calculated to make an estimate of application in the value of share of a company. The

investors expectations are reflected in the market price of the shares

The graph shows that price-earning ratio of IOC is decreasing from 2006 to 2010 due to increase

in the market price of the share and EPS is decreasing.

In HPCL the EPS in 2006 is very low which is shooting up its price earning ratio upto 50. In

year 2009 also, it increased at rapid. Its because of decrease in EPS due to less earnings after tax.

But BPCLs ratio shows the different pattern because its EPS has increased as the net sales of the

company increased. In 2006, EPS is very low due to which PER is high. And then every next

year the ratio is fluctuating due to fluctuation in the EPS.

0

10

20

30

40

50

60

IOC HPCL BPCL

2006

2007

2008

2009

2010


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CHAPTER- 4

FINDINGS&

CONCLUSION.


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~ 88 ~

FINDINGS OF THE STUDY

y The Current Ratio of IOC is higher in each of the three years. And the

companies are having the highest ratio in year 2008 due to moreacquisition of current assets in that year.

y Quick asset ratio is highly affected by the sundry debtors. HPCL is more

capable over others in the current year to convert its assets quickly into

cash and is more efficient to meet its short-term liabilities.

y The absolute liquidity ratio analysis shows that HPCL is having strong

position of holding ready cash in the current year. IOC & BPCL are more or

less have the same capability of absolute liquidity.

y The proprietary ratio in three years shows that IOC is more capable in long-term solvency. It has more shareholders capital as well as total assets. And

all of the three companies are having lowest ratio in year 2008 because of

rise in the current and fixed assets.

y The Debt-Equity ratio of IOC is low as the company is more dependent on

shareholders rather than borrowing from outside. BPCLs DE Ratio is high

and hence having high degree of financial leverage.

y The working capital turnover ratio of IOC Is the least as its current assets

are high. The ratio of BPCL is appreciable. It means there is high

profitability in the company.

y IOC has high fixed assets turnover ratio. It means the company is utilizing its

fixed assets efficiently.

y Both HPCL as well as BPCL have high capital turnover ratio. It means the

sales made per rupee of Capital Employed in the firms is greater and hence

higher is the profit. Whereas in IOC there is low sales in relation to

excessive capital is being used.

y The analysis of current assets to fixed assets depicts that the IOC has the

higher ratio. IOC has current as well as fixed ratio in large quantity which

provides the company to make more profits by utilizing them.


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y The net profit ratio of IOC shows that the company is efficient in

manufacturing, administrative, selling and distributing the product. And

there is high increase in corporate taxes every year.

y BPCL has the high return on assets. It means that high profit is earned by

the firm per rupee of assets used.

y The reserves & surplus and the capital employed in the companies are not

same and not changing over the years.

y EPS of companies is fluctuating every year due change in net sales. ROE of

IOC is constant for two years with still greater amount of PAT indicating an

increasing EPS.

y The Price Earning ratio of IOC & HPCL is high, indicating that the share has

low risk and investor expect high dividend growth.

y The shareholders of BPCL are getting high returns on their funds in the

company.

FINDINGS OF THE STUDY

y The Current Ratio of all three companies is not appreciable and not

satisfactory because of high current liabilities due to short term borrowings

from the government. The current ratio of the three companies is more or

less following the same pattern. And the companies are having the highest

ratio in year 2008 due to more acquisition of current assets in that year.

y Quick asset ratio is highly affected by the sundry debtors. IOC is slightly

more capable over others in the current year to convert its assets quickly

into cash and is more efficient to meet its short-term liabilities.


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y The absolute liquidity ratio analysis shows that HPCL is having strong

position of holding ready cash in the current year. IOC & BPCL are more or

less have the same capability of absolute liquidity.

y The proprietary ratio in three years shows that IOC is more capable in long-

term solvency. It has more shareholders capital as well as total assets. And

all of the three companies are having lowest ratio in year 2008 because of

rise in the current and fixed assets.

y The Debt-Equity ratio of IOC is low as the company is more dependent on

shareholders rather than borrowing from outside. BPCLs DE Ratio is high

and hence having high degree of financial leverage.

y The working capital turnover ratio of IOC Is the least as its current assets

are high. The ratio of BPCL is appreciable. It means there is highprofitability in the company.

y IOC has high fixed assets turnover ratio. It means the company is utilizing its

fixed assets efficiently.

y Both HPCL as well as BPCL have high capital turnover ratio. It means the

sales made per rupee of Capital Employed in the firms is greater and hence

higher is the profit. Whereas in IOC there is low sales in relation to

excessive capital is being used.

y The analysis of current assets to fixed assets depicts that the IOC has thehigher ratio. IOC has current as well as fixed ratio in large quantity which

provides the company to make more profits by utilizing them.

y The net profit ratio of IOC shows that the company is efficient in

manufacturing, administrative, selling and distributing the product. And

there is high increase in corporate taxes every year.

y BPCL has the high return on assets. It means that high profit is earned by

the firm per rupee of assets used.

y The reserves & surplus and the capital employed in the companies are not

same and not changing over the years.

y EPS of companies is fluctuating every year due change in net sales. ROE of

IOC is constant for two years with still greater amount of PAT indicating an

increasing EPS.


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y The Price Earning ratio of IOC & HPCL is high, indicating that the share has

low risk and investor expect high dividend growth.

y The shareholders of BPCL are getting high returns on their funds in the

company.


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CONCLUSION

y The short term solvency of IOC & HPCL is fine but that of BPCL is quite

low. But no company is touching the general standard of 2:1 of current ratio.

The quick ratio of firms are not good enough far away from the normalstandard of 1:1.

So all the Liquidity Ratios indicate not good enough short term

solvency/liquidity position of the firm.

y All the Leverage Ratio depict that none of the company has a sound

financial position. These are more in debt. But IOC position is better than

that of the two in terms of leverage. The shareholders funds are satisfactory.

The firms are paying high interest on the outstanding debts which makes

unfavorable trading on equity due to high debt, which increases risk forshareholders.

y As far as the Activity and Turnover ratios are concerned, nothing concrete

can be said as the results of three companies are very fluctuating every year

in term of sales.

y In the year 2008 all three companies are showing good results and the

turnover is satisfactory. But it decrease in 2009 due to decrease in working

capital, the fixed assets of the companies which affected their sales. And

IOC is very strong in acquisition of the fixed assets as well as current assets.y On the basis of various profitability ratios the sales of the firms is found to

be decreasing in the last year. But BPCL has managed well to maintain its

net profit. The share value of HPCL is better.

y This analysis shows that the companies were in strong position in year 2008,

but the recession in 2009 has highly affected the companies growth and their

profit came down and they are more in debts.


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Ioc Project

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