comparison of financial performance of two public limited company
TRANSCRIPT
THE FINANCIAL PERFORMANCE OF
PADMA OIL COMPANY LIMITED AND
MEGHNA PETROLEUM LIMITED
A COMPARATIVE STUDY
The Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited
A Comparative Study
(Submitted as a partial requirement for MBA program)
Submitted to Submitted by
Prof Sowkatul Meher Mohammed Khairul Bashar
Dean ID 777-G10-15
Business Administration
Southern University
Chittagong
Date of Submission December 30 2010
The Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited
A Comparative Study
(Submitted as a partial requirement for MBA program)
Submitted to Submitted by
Prof Sowkatul Meher Mohammed Khairul Bashar
Dean ID 777-G10-15
Business Administration
Southern University
Chittagong
Date of Submission December 30 2010
The Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited
A Comparative Study
(Submitted as a partial requirement for MBA program)
Submitted to Submitted by
Prof Sowkatul Meher Mohammed Khairul Bashar
Dean ID 777-G10-15
Business Administration
Southern University
Chittagong
Date of Submission December 30 2010
Letter of transmittalToProf Sowkatul MeherDeanBusiness AdministrationSouthern UniversityBangladesh
Subject Submission of Report
Sir
With great pleasure amp humble submission I am submitting my report about the comparative
Financial Performance of Padma Oil Company Limited and Meghna Petroleum Limited While
making this report I came across many obstacles and difficulties but at the same time it was my
great pleasure to experience many interesting and important things about the oil sector
I take great pleasure in informing you that I have completed my report on the topic ldquoThe
Financial Performance of Padma Oil Company Limited and Meghna Petroleum Limited
A Comparative Studyrdquo that was assigned to me as an essential requirement for the completion
of Masters in Business administration degree
I hope you will accept this report and oblige me thereby
Sincerely yours
Mohammed Khairul Bashar
Id 777-G10-15
Acknowledgement
First of all I would like to thank Allah the supreme authority of the universe
In the process of preparing this report I came across many obstacles However I was very
fortunate to get the help of some individuals to overcome them I would like to thank my
colleagues and seniors of Padma Oil Co Ltd for their selfless support and help I would
specially acknowledge the help of Mr Mohammed Hashem Deputy Manager of Padma Oil
Company Ltd Moreover I would like to thank Mr Mohammed Sadek Deputy Manager of
Meghna Petroleum Ltd for providing me with specific information which was necessary for the
report
Last but not least I sincerely offer my gratitude to my supervisor Mr Prof Sowkatul Meher
Dean Business Administration Southern University for his generous supervision and guidance
without which it would not be possible for me to prepare this report
Table of Contents
Executive Summary
10 Introduction 02
11 Origin of the report 03
12 Objective of the study 04
13 Scope of the study 04
14 Methodology 04
141 Research design 04
142 Data collection 05
143 Data analysis and interpretation 05
15 Limitation 07
20 Company overview 09
21 Padma Oil Company Limited 09
211 Company Profile 09
212 Company History 10
22 Meghna Petroleum Limited 11
221 Company Profile 11
222 History 12
30 Literature Review 14
40 Financial Statement Analysis 16
41 Financial statements 16
411 Balance sheet 17
4111 Padma Oil Company Limited 17
4112 Meghna Petroleum Limited 18
412 Income Statement 19
4121 Padma Oil Company Limited 19
4122 Meghna Petroleum Limited 20
413 Cash Flow Statement 21
4131 Padma Oil Company Limited 21
4132 Meghna Petroleum Limited 22
42 Findings and Analysis 23
421 Comparative Trend and Ratio Analysis 23
4211 Liquidity Ratios 23
4212 Profitability Ratios 26
4213 Market Measures 30
4214 Capital Structure amp Solvency 33
422 Cash flow Analysis 34
50 Conclusion 38
Bibliography 39
List of Figures
Figure 01 Current Ratio 24
Figure 02 Quick Ratio 25
Figure 03 Net working Capital 26
Figure 04 Gross Earnings of POCL and MPL (in 000s) 27
Figure 05 Net Profit Margin 27
Figure 06 Return on Assets 28
Figure 07 Net Profit Amount (in 000s) 29
Figure 08 Total assets (in 000s) 29
Figure 09 ROE 30
Figure 10 EPS 31
Figure 11 PE ratio 32
Figure 12 Dividend Yield 32
Figure 13 Debt to Equity Ratio 33
Figure 14 Closing Balance (in 000s) 34
Figure 15 Net cash Flow (in 000s) 34
Figure 16 Net cash outflow in investing activities 35
Figure 17 Operating expense payment without income tax 36
viii
Executive Summary
Padma Oil Company Limited (POCL) and Meghna Petroleum Limited (MPL) are two big oil
marketing companies of Bangladesh This report offers a comparative analysis of the financial
performance between these two companies
Financial statement analysis was done through ratio and trend analysis which present some fine
scope for comparison Comparison is done on matters like profitability liquidity and other
financial aspects
Profitability condition analysis surely speaks in favor of MPL as it has higher average net profit
net profit margin ROA and ROE for last few years On the other hand POCL in spite of having
comparatively higher total assets performs lower So MPL is more profitable
Current and quick ratios for both the companies are poor Though MPL has a higher current
ratio POCL has a higher average quick ratio suggesting its better liquidity condition However a
more deep analysis on the cash flow statements suggests that MPL has a more stable but lower
liquidity position POCL on the other hand is having some cash crisis recently
Both the companies have no considerable long term debt which makes them less prone to
financial risk and dependant on equity In terms of market presence MPL is newbie as it was
listed in 2007 which makes it difficult to compare it with more established listed company
POCL in terms of market measures However POCL has a healthy and increasing EPS but
declining PE ratio whereas MPL shows good performance over its short life on stock market
Higher debt-to-equity risk suggests POCL has more dependency on debt
Overall MPL is performing better than POCL financially
Chapter 01
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 3
Lube Blending Plants
6 Eastern Lubricants Blenders Limited(ELBL)
100 099 5932 BPC4068 Others
7Standard Asiatic Oil Company Limited(SAOCL)saoclcom
050 050 50 BPC50 Private
11 Origin of the report
The report is tilted ldquoThe Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited A Comparative Studyrdquo The research is done as a part of the
MBA internship program of Southern University Bangladesh It has been prepared under the
supervision of honorable teacher Mr Prof Sowkatul Meher
Padma Oil Company Ltd and Meghna Petroleum Ltd are two oil marketing companies under
Bangladesh Petroleum Corporation
Padma Oil Company Limited is not only the biggest but also the oldest with its antecedents
stretching well back to the colonial period of British-India Its ancestral enterprise ldquo Rangooon
Oil Company ldquo established petroleum business in this part of the world by the middle of
nineteenth century
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978
Oil sector in Bangladesh is a very unique industry As part of its operation is government
regulated (ex Selling price) the companiesrsquo operation is a bit different than other companies A
comparative study of the companiesrsquo financial performance can reveal a lot about this unique
sector
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 5
142 Data collection
For completing my research describing the reason behind the problem and fulfilling the
objectives data has been collected from the secondary sources The secondary sources
information is taken mainly from the last three yearsrsquo annual reports of Padma Oil Company
Limited and Meghna Petroleum Limited
143 Data analysis and interpretation
Data has been analyzed and interpreted using the financial indicators financial ratios references
and personal judgment I also used some graph to analyze my findings To complete this research
paper however the selected indicators are given below
Current ratio The current ratio is a popular financial ratio used to test a companys liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities
Quick ratio An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio betters the position of the company
Net working capital ratio A measure of both a companys efficiency and its short-term
financial health Positive working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash accounts receivable and inventory)
Return on Assets Return on assets measures a companyrsquos earnings in relation to all of the
resources it had at its disposal (the shareholdersrsquo capital plus short and long-term borrowed
funds) Thus it is the most stringent and excessive test of return to shareholders If a company
has no debt the return on assets and return on equity figures will be the same
Return on Equity The amount of net income returned as a percentage of shareholders
equity Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
The Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited
A Comparative Study
(Submitted as a partial requirement for MBA program)
Submitted to Submitted by
Prof Sowkatul Meher Mohammed Khairul Bashar
Dean ID 777-G10-15
Business Administration
Southern University
Chittagong
Date of Submission December 30 2010
The Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited
A Comparative Study
(Submitted as a partial requirement for MBA program)
Submitted to Submitted by
Prof Sowkatul Meher Mohammed Khairul Bashar
Dean ID 777-G10-15
Business Administration
Southern University
Chittagong
Date of Submission December 30 2010
The Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited
A Comparative Study
(Submitted as a partial requirement for MBA program)
Submitted to Submitted by
Prof Sowkatul Meher Mohammed Khairul Bashar
Dean ID 777-G10-15
Business Administration
Southern University
Chittagong
Date of Submission December 30 2010
Letter of transmittalToProf Sowkatul MeherDeanBusiness AdministrationSouthern UniversityBangladesh
Subject Submission of Report
Sir
With great pleasure amp humble submission I am submitting my report about the comparative
Financial Performance of Padma Oil Company Limited and Meghna Petroleum Limited While
making this report I came across many obstacles and difficulties but at the same time it was my
great pleasure to experience many interesting and important things about the oil sector
I take great pleasure in informing you that I have completed my report on the topic ldquoThe
Financial Performance of Padma Oil Company Limited and Meghna Petroleum Limited
A Comparative Studyrdquo that was assigned to me as an essential requirement for the completion
of Masters in Business administration degree
I hope you will accept this report and oblige me thereby
Sincerely yours
Mohammed Khairul Bashar
Id 777-G10-15
Acknowledgement
First of all I would like to thank Allah the supreme authority of the universe
In the process of preparing this report I came across many obstacles However I was very
fortunate to get the help of some individuals to overcome them I would like to thank my
colleagues and seniors of Padma Oil Co Ltd for their selfless support and help I would
specially acknowledge the help of Mr Mohammed Hashem Deputy Manager of Padma Oil
Company Ltd Moreover I would like to thank Mr Mohammed Sadek Deputy Manager of
Meghna Petroleum Ltd for providing me with specific information which was necessary for the
report
Last but not least I sincerely offer my gratitude to my supervisor Mr Prof Sowkatul Meher
Dean Business Administration Southern University for his generous supervision and guidance
without which it would not be possible for me to prepare this report
Table of Contents
Executive Summary
10 Introduction 02
11 Origin of the report 03
12 Objective of the study 04
13 Scope of the study 04
14 Methodology 04
141 Research design 04
142 Data collection 05
143 Data analysis and interpretation 05
15 Limitation 07
20 Company overview 09
21 Padma Oil Company Limited 09
211 Company Profile 09
212 Company History 10
22 Meghna Petroleum Limited 11
221 Company Profile 11
222 History 12
30 Literature Review 14
40 Financial Statement Analysis 16
41 Financial statements 16
411 Balance sheet 17
4111 Padma Oil Company Limited 17
4112 Meghna Petroleum Limited 18
412 Income Statement 19
4121 Padma Oil Company Limited 19
4122 Meghna Petroleum Limited 20
413 Cash Flow Statement 21
4131 Padma Oil Company Limited 21
4132 Meghna Petroleum Limited 22
42 Findings and Analysis 23
421 Comparative Trend and Ratio Analysis 23
4211 Liquidity Ratios 23
4212 Profitability Ratios 26
4213 Market Measures 30
4214 Capital Structure amp Solvency 33
422 Cash flow Analysis 34
50 Conclusion 38
Bibliography 39
List of Figures
Figure 01 Current Ratio 24
Figure 02 Quick Ratio 25
Figure 03 Net working Capital 26
Figure 04 Gross Earnings of POCL and MPL (in 000s) 27
Figure 05 Net Profit Margin 27
Figure 06 Return on Assets 28
Figure 07 Net Profit Amount (in 000s) 29
Figure 08 Total assets (in 000s) 29
Figure 09 ROE 30
Figure 10 EPS 31
Figure 11 PE ratio 32
Figure 12 Dividend Yield 32
Figure 13 Debt to Equity Ratio 33
Figure 14 Closing Balance (in 000s) 34
Figure 15 Net cash Flow (in 000s) 34
Figure 16 Net cash outflow in investing activities 35
Figure 17 Operating expense payment without income tax 36
viii
Executive Summary
Padma Oil Company Limited (POCL) and Meghna Petroleum Limited (MPL) are two big oil
marketing companies of Bangladesh This report offers a comparative analysis of the financial
performance between these two companies
Financial statement analysis was done through ratio and trend analysis which present some fine
scope for comparison Comparison is done on matters like profitability liquidity and other
financial aspects
Profitability condition analysis surely speaks in favor of MPL as it has higher average net profit
net profit margin ROA and ROE for last few years On the other hand POCL in spite of having
comparatively higher total assets performs lower So MPL is more profitable
Current and quick ratios for both the companies are poor Though MPL has a higher current
ratio POCL has a higher average quick ratio suggesting its better liquidity condition However a
more deep analysis on the cash flow statements suggests that MPL has a more stable but lower
liquidity position POCL on the other hand is having some cash crisis recently
Both the companies have no considerable long term debt which makes them less prone to
financial risk and dependant on equity In terms of market presence MPL is newbie as it was
listed in 2007 which makes it difficult to compare it with more established listed company
POCL in terms of market measures However POCL has a healthy and increasing EPS but
declining PE ratio whereas MPL shows good performance over its short life on stock market
Higher debt-to-equity risk suggests POCL has more dependency on debt
Overall MPL is performing better than POCL financially
Chapter 01
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 3
Lube Blending Plants
6 Eastern Lubricants Blenders Limited(ELBL)
100 099 5932 BPC4068 Others
7Standard Asiatic Oil Company Limited(SAOCL)saoclcom
050 050 50 BPC50 Private
11 Origin of the report
The report is tilted ldquoThe Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited A Comparative Studyrdquo The research is done as a part of the
MBA internship program of Southern University Bangladesh It has been prepared under the
supervision of honorable teacher Mr Prof Sowkatul Meher
Padma Oil Company Ltd and Meghna Petroleum Ltd are two oil marketing companies under
Bangladesh Petroleum Corporation
Padma Oil Company Limited is not only the biggest but also the oldest with its antecedents
stretching well back to the colonial period of British-India Its ancestral enterprise ldquo Rangooon
Oil Company ldquo established petroleum business in this part of the world by the middle of
nineteenth century
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978
Oil sector in Bangladesh is a very unique industry As part of its operation is government
regulated (ex Selling price) the companiesrsquo operation is a bit different than other companies A
comparative study of the companiesrsquo financial performance can reveal a lot about this unique
sector
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 5
142 Data collection
For completing my research describing the reason behind the problem and fulfilling the
objectives data has been collected from the secondary sources The secondary sources
information is taken mainly from the last three yearsrsquo annual reports of Padma Oil Company
Limited and Meghna Petroleum Limited
143 Data analysis and interpretation
Data has been analyzed and interpreted using the financial indicators financial ratios references
and personal judgment I also used some graph to analyze my findings To complete this research
paper however the selected indicators are given below
Current ratio The current ratio is a popular financial ratio used to test a companys liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities
Quick ratio An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio betters the position of the company
Net working capital ratio A measure of both a companys efficiency and its short-term
financial health Positive working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash accounts receivable and inventory)
Return on Assets Return on assets measures a companyrsquos earnings in relation to all of the
resources it had at its disposal (the shareholdersrsquo capital plus short and long-term borrowed
funds) Thus it is the most stringent and excessive test of return to shareholders If a company
has no debt the return on assets and return on equity figures will be the same
Return on Equity The amount of net income returned as a percentage of shareholders
equity Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Letter of transmittalToProf Sowkatul MeherDeanBusiness AdministrationSouthern UniversityBangladesh
Subject Submission of Report
Sir
With great pleasure amp humble submission I am submitting my report about the comparative
Financial Performance of Padma Oil Company Limited and Meghna Petroleum Limited While
making this report I came across many obstacles and difficulties but at the same time it was my
great pleasure to experience many interesting and important things about the oil sector
I take great pleasure in informing you that I have completed my report on the topic ldquoThe
Financial Performance of Padma Oil Company Limited and Meghna Petroleum Limited
A Comparative Studyrdquo that was assigned to me as an essential requirement for the completion
of Masters in Business administration degree
I hope you will accept this report and oblige me thereby
Sincerely yours
Mohammed Khairul Bashar
Id 777-G10-15
Acknowledgement
First of all I would like to thank Allah the supreme authority of the universe
In the process of preparing this report I came across many obstacles However I was very
fortunate to get the help of some individuals to overcome them I would like to thank my
colleagues and seniors of Padma Oil Co Ltd for their selfless support and help I would
specially acknowledge the help of Mr Mohammed Hashem Deputy Manager of Padma Oil
Company Ltd Moreover I would like to thank Mr Mohammed Sadek Deputy Manager of
Meghna Petroleum Ltd for providing me with specific information which was necessary for the
report
Last but not least I sincerely offer my gratitude to my supervisor Mr Prof Sowkatul Meher
Dean Business Administration Southern University for his generous supervision and guidance
without which it would not be possible for me to prepare this report
Table of Contents
Executive Summary
10 Introduction 02
11 Origin of the report 03
12 Objective of the study 04
13 Scope of the study 04
14 Methodology 04
141 Research design 04
142 Data collection 05
143 Data analysis and interpretation 05
15 Limitation 07
20 Company overview 09
21 Padma Oil Company Limited 09
211 Company Profile 09
212 Company History 10
22 Meghna Petroleum Limited 11
221 Company Profile 11
222 History 12
30 Literature Review 14
40 Financial Statement Analysis 16
41 Financial statements 16
411 Balance sheet 17
4111 Padma Oil Company Limited 17
4112 Meghna Petroleum Limited 18
412 Income Statement 19
4121 Padma Oil Company Limited 19
4122 Meghna Petroleum Limited 20
413 Cash Flow Statement 21
4131 Padma Oil Company Limited 21
4132 Meghna Petroleum Limited 22
42 Findings and Analysis 23
421 Comparative Trend and Ratio Analysis 23
4211 Liquidity Ratios 23
4212 Profitability Ratios 26
4213 Market Measures 30
4214 Capital Structure amp Solvency 33
422 Cash flow Analysis 34
50 Conclusion 38
Bibliography 39
List of Figures
Figure 01 Current Ratio 24
Figure 02 Quick Ratio 25
Figure 03 Net working Capital 26
Figure 04 Gross Earnings of POCL and MPL (in 000s) 27
Figure 05 Net Profit Margin 27
Figure 06 Return on Assets 28
Figure 07 Net Profit Amount (in 000s) 29
Figure 08 Total assets (in 000s) 29
Figure 09 ROE 30
Figure 10 EPS 31
Figure 11 PE ratio 32
Figure 12 Dividend Yield 32
Figure 13 Debt to Equity Ratio 33
Figure 14 Closing Balance (in 000s) 34
Figure 15 Net cash Flow (in 000s) 34
Figure 16 Net cash outflow in investing activities 35
Figure 17 Operating expense payment without income tax 36
viii
Executive Summary
Padma Oil Company Limited (POCL) and Meghna Petroleum Limited (MPL) are two big oil
marketing companies of Bangladesh This report offers a comparative analysis of the financial
performance between these two companies
Financial statement analysis was done through ratio and trend analysis which present some fine
scope for comparison Comparison is done on matters like profitability liquidity and other
financial aspects
Profitability condition analysis surely speaks in favor of MPL as it has higher average net profit
net profit margin ROA and ROE for last few years On the other hand POCL in spite of having
comparatively higher total assets performs lower So MPL is more profitable
Current and quick ratios for both the companies are poor Though MPL has a higher current
ratio POCL has a higher average quick ratio suggesting its better liquidity condition However a
more deep analysis on the cash flow statements suggests that MPL has a more stable but lower
liquidity position POCL on the other hand is having some cash crisis recently
Both the companies have no considerable long term debt which makes them less prone to
financial risk and dependant on equity In terms of market presence MPL is newbie as it was
listed in 2007 which makes it difficult to compare it with more established listed company
POCL in terms of market measures However POCL has a healthy and increasing EPS but
declining PE ratio whereas MPL shows good performance over its short life on stock market
Higher debt-to-equity risk suggests POCL has more dependency on debt
Overall MPL is performing better than POCL financially
Chapter 01
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 3
Lube Blending Plants
6 Eastern Lubricants Blenders Limited(ELBL)
100 099 5932 BPC4068 Others
7Standard Asiatic Oil Company Limited(SAOCL)saoclcom
050 050 50 BPC50 Private
11 Origin of the report
The report is tilted ldquoThe Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited A Comparative Studyrdquo The research is done as a part of the
MBA internship program of Southern University Bangladesh It has been prepared under the
supervision of honorable teacher Mr Prof Sowkatul Meher
Padma Oil Company Ltd and Meghna Petroleum Ltd are two oil marketing companies under
Bangladesh Petroleum Corporation
Padma Oil Company Limited is not only the biggest but also the oldest with its antecedents
stretching well back to the colonial period of British-India Its ancestral enterprise ldquo Rangooon
Oil Company ldquo established petroleum business in this part of the world by the middle of
nineteenth century
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978
Oil sector in Bangladesh is a very unique industry As part of its operation is government
regulated (ex Selling price) the companiesrsquo operation is a bit different than other companies A
comparative study of the companiesrsquo financial performance can reveal a lot about this unique
sector
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 5
142 Data collection
For completing my research describing the reason behind the problem and fulfilling the
objectives data has been collected from the secondary sources The secondary sources
information is taken mainly from the last three yearsrsquo annual reports of Padma Oil Company
Limited and Meghna Petroleum Limited
143 Data analysis and interpretation
Data has been analyzed and interpreted using the financial indicators financial ratios references
and personal judgment I also used some graph to analyze my findings To complete this research
paper however the selected indicators are given below
Current ratio The current ratio is a popular financial ratio used to test a companys liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities
Quick ratio An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio betters the position of the company
Net working capital ratio A measure of both a companys efficiency and its short-term
financial health Positive working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash accounts receivable and inventory)
Return on Assets Return on assets measures a companyrsquos earnings in relation to all of the
resources it had at its disposal (the shareholdersrsquo capital plus short and long-term borrowed
funds) Thus it is the most stringent and excessive test of return to shareholders If a company
has no debt the return on assets and return on equity figures will be the same
Return on Equity The amount of net income returned as a percentage of shareholders
equity Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Acknowledgement
First of all I would like to thank Allah the supreme authority of the universe
In the process of preparing this report I came across many obstacles However I was very
fortunate to get the help of some individuals to overcome them I would like to thank my
colleagues and seniors of Padma Oil Co Ltd for their selfless support and help I would
specially acknowledge the help of Mr Mohammed Hashem Deputy Manager of Padma Oil
Company Ltd Moreover I would like to thank Mr Mohammed Sadek Deputy Manager of
Meghna Petroleum Ltd for providing me with specific information which was necessary for the
report
Last but not least I sincerely offer my gratitude to my supervisor Mr Prof Sowkatul Meher
Dean Business Administration Southern University for his generous supervision and guidance
without which it would not be possible for me to prepare this report
Table of Contents
Executive Summary
10 Introduction 02
11 Origin of the report 03
12 Objective of the study 04
13 Scope of the study 04
14 Methodology 04
141 Research design 04
142 Data collection 05
143 Data analysis and interpretation 05
15 Limitation 07
20 Company overview 09
21 Padma Oil Company Limited 09
211 Company Profile 09
212 Company History 10
22 Meghna Petroleum Limited 11
221 Company Profile 11
222 History 12
30 Literature Review 14
40 Financial Statement Analysis 16
41 Financial statements 16
411 Balance sheet 17
4111 Padma Oil Company Limited 17
4112 Meghna Petroleum Limited 18
412 Income Statement 19
4121 Padma Oil Company Limited 19
4122 Meghna Petroleum Limited 20
413 Cash Flow Statement 21
4131 Padma Oil Company Limited 21
4132 Meghna Petroleum Limited 22
42 Findings and Analysis 23
421 Comparative Trend and Ratio Analysis 23
4211 Liquidity Ratios 23
4212 Profitability Ratios 26
4213 Market Measures 30
4214 Capital Structure amp Solvency 33
422 Cash flow Analysis 34
50 Conclusion 38
Bibliography 39
List of Figures
Figure 01 Current Ratio 24
Figure 02 Quick Ratio 25
Figure 03 Net working Capital 26
Figure 04 Gross Earnings of POCL and MPL (in 000s) 27
Figure 05 Net Profit Margin 27
Figure 06 Return on Assets 28
Figure 07 Net Profit Amount (in 000s) 29
Figure 08 Total assets (in 000s) 29
Figure 09 ROE 30
Figure 10 EPS 31
Figure 11 PE ratio 32
Figure 12 Dividend Yield 32
Figure 13 Debt to Equity Ratio 33
Figure 14 Closing Balance (in 000s) 34
Figure 15 Net cash Flow (in 000s) 34
Figure 16 Net cash outflow in investing activities 35
Figure 17 Operating expense payment without income tax 36
viii
Executive Summary
Padma Oil Company Limited (POCL) and Meghna Petroleum Limited (MPL) are two big oil
marketing companies of Bangladesh This report offers a comparative analysis of the financial
performance between these two companies
Financial statement analysis was done through ratio and trend analysis which present some fine
scope for comparison Comparison is done on matters like profitability liquidity and other
financial aspects
Profitability condition analysis surely speaks in favor of MPL as it has higher average net profit
net profit margin ROA and ROE for last few years On the other hand POCL in spite of having
comparatively higher total assets performs lower So MPL is more profitable
Current and quick ratios for both the companies are poor Though MPL has a higher current
ratio POCL has a higher average quick ratio suggesting its better liquidity condition However a
more deep analysis on the cash flow statements suggests that MPL has a more stable but lower
liquidity position POCL on the other hand is having some cash crisis recently
Both the companies have no considerable long term debt which makes them less prone to
financial risk and dependant on equity In terms of market presence MPL is newbie as it was
listed in 2007 which makes it difficult to compare it with more established listed company
POCL in terms of market measures However POCL has a healthy and increasing EPS but
declining PE ratio whereas MPL shows good performance over its short life on stock market
Higher debt-to-equity risk suggests POCL has more dependency on debt
Overall MPL is performing better than POCL financially
Chapter 01
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 3
Lube Blending Plants
6 Eastern Lubricants Blenders Limited(ELBL)
100 099 5932 BPC4068 Others
7Standard Asiatic Oil Company Limited(SAOCL)saoclcom
050 050 50 BPC50 Private
11 Origin of the report
The report is tilted ldquoThe Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited A Comparative Studyrdquo The research is done as a part of the
MBA internship program of Southern University Bangladesh It has been prepared under the
supervision of honorable teacher Mr Prof Sowkatul Meher
Padma Oil Company Ltd and Meghna Petroleum Ltd are two oil marketing companies under
Bangladesh Petroleum Corporation
Padma Oil Company Limited is not only the biggest but also the oldest with its antecedents
stretching well back to the colonial period of British-India Its ancestral enterprise ldquo Rangooon
Oil Company ldquo established petroleum business in this part of the world by the middle of
nineteenth century
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978
Oil sector in Bangladesh is a very unique industry As part of its operation is government
regulated (ex Selling price) the companiesrsquo operation is a bit different than other companies A
comparative study of the companiesrsquo financial performance can reveal a lot about this unique
sector
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 5
142 Data collection
For completing my research describing the reason behind the problem and fulfilling the
objectives data has been collected from the secondary sources The secondary sources
information is taken mainly from the last three yearsrsquo annual reports of Padma Oil Company
Limited and Meghna Petroleum Limited
143 Data analysis and interpretation
Data has been analyzed and interpreted using the financial indicators financial ratios references
and personal judgment I also used some graph to analyze my findings To complete this research
paper however the selected indicators are given below
Current ratio The current ratio is a popular financial ratio used to test a companys liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities
Quick ratio An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio betters the position of the company
Net working capital ratio A measure of both a companys efficiency and its short-term
financial health Positive working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash accounts receivable and inventory)
Return on Assets Return on assets measures a companyrsquos earnings in relation to all of the
resources it had at its disposal (the shareholdersrsquo capital plus short and long-term borrowed
funds) Thus it is the most stringent and excessive test of return to shareholders If a company
has no debt the return on assets and return on equity figures will be the same
Return on Equity The amount of net income returned as a percentage of shareholders
equity Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Table of Contents
Executive Summary
10 Introduction 02
11 Origin of the report 03
12 Objective of the study 04
13 Scope of the study 04
14 Methodology 04
141 Research design 04
142 Data collection 05
143 Data analysis and interpretation 05
15 Limitation 07
20 Company overview 09
21 Padma Oil Company Limited 09
211 Company Profile 09
212 Company History 10
22 Meghna Petroleum Limited 11
221 Company Profile 11
222 History 12
30 Literature Review 14
40 Financial Statement Analysis 16
41 Financial statements 16
411 Balance sheet 17
4111 Padma Oil Company Limited 17
4112 Meghna Petroleum Limited 18
412 Income Statement 19
4121 Padma Oil Company Limited 19
4122 Meghna Petroleum Limited 20
413 Cash Flow Statement 21
4131 Padma Oil Company Limited 21
4132 Meghna Petroleum Limited 22
42 Findings and Analysis 23
421 Comparative Trend and Ratio Analysis 23
4211 Liquidity Ratios 23
4212 Profitability Ratios 26
4213 Market Measures 30
4214 Capital Structure amp Solvency 33
422 Cash flow Analysis 34
50 Conclusion 38
Bibliography 39
List of Figures
Figure 01 Current Ratio 24
Figure 02 Quick Ratio 25
Figure 03 Net working Capital 26
Figure 04 Gross Earnings of POCL and MPL (in 000s) 27
Figure 05 Net Profit Margin 27
Figure 06 Return on Assets 28
Figure 07 Net Profit Amount (in 000s) 29
Figure 08 Total assets (in 000s) 29
Figure 09 ROE 30
Figure 10 EPS 31
Figure 11 PE ratio 32
Figure 12 Dividend Yield 32
Figure 13 Debt to Equity Ratio 33
Figure 14 Closing Balance (in 000s) 34
Figure 15 Net cash Flow (in 000s) 34
Figure 16 Net cash outflow in investing activities 35
Figure 17 Operating expense payment without income tax 36
viii
Executive Summary
Padma Oil Company Limited (POCL) and Meghna Petroleum Limited (MPL) are two big oil
marketing companies of Bangladesh This report offers a comparative analysis of the financial
performance between these two companies
Financial statement analysis was done through ratio and trend analysis which present some fine
scope for comparison Comparison is done on matters like profitability liquidity and other
financial aspects
Profitability condition analysis surely speaks in favor of MPL as it has higher average net profit
net profit margin ROA and ROE for last few years On the other hand POCL in spite of having
comparatively higher total assets performs lower So MPL is more profitable
Current and quick ratios for both the companies are poor Though MPL has a higher current
ratio POCL has a higher average quick ratio suggesting its better liquidity condition However a
more deep analysis on the cash flow statements suggests that MPL has a more stable but lower
liquidity position POCL on the other hand is having some cash crisis recently
Both the companies have no considerable long term debt which makes them less prone to
financial risk and dependant on equity In terms of market presence MPL is newbie as it was
listed in 2007 which makes it difficult to compare it with more established listed company
POCL in terms of market measures However POCL has a healthy and increasing EPS but
declining PE ratio whereas MPL shows good performance over its short life on stock market
Higher debt-to-equity risk suggests POCL has more dependency on debt
Overall MPL is performing better than POCL financially
Chapter 01
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 3
Lube Blending Plants
6 Eastern Lubricants Blenders Limited(ELBL)
100 099 5932 BPC4068 Others
7Standard Asiatic Oil Company Limited(SAOCL)saoclcom
050 050 50 BPC50 Private
11 Origin of the report
The report is tilted ldquoThe Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited A Comparative Studyrdquo The research is done as a part of the
MBA internship program of Southern University Bangladesh It has been prepared under the
supervision of honorable teacher Mr Prof Sowkatul Meher
Padma Oil Company Ltd and Meghna Petroleum Ltd are two oil marketing companies under
Bangladesh Petroleum Corporation
Padma Oil Company Limited is not only the biggest but also the oldest with its antecedents
stretching well back to the colonial period of British-India Its ancestral enterprise ldquo Rangooon
Oil Company ldquo established petroleum business in this part of the world by the middle of
nineteenth century
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978
Oil sector in Bangladesh is a very unique industry As part of its operation is government
regulated (ex Selling price) the companiesrsquo operation is a bit different than other companies A
comparative study of the companiesrsquo financial performance can reveal a lot about this unique
sector
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 5
142 Data collection
For completing my research describing the reason behind the problem and fulfilling the
objectives data has been collected from the secondary sources The secondary sources
information is taken mainly from the last three yearsrsquo annual reports of Padma Oil Company
Limited and Meghna Petroleum Limited
143 Data analysis and interpretation
Data has been analyzed and interpreted using the financial indicators financial ratios references
and personal judgment I also used some graph to analyze my findings To complete this research
paper however the selected indicators are given below
Current ratio The current ratio is a popular financial ratio used to test a companys liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities
Quick ratio An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio betters the position of the company
Net working capital ratio A measure of both a companys efficiency and its short-term
financial health Positive working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash accounts receivable and inventory)
Return on Assets Return on assets measures a companyrsquos earnings in relation to all of the
resources it had at its disposal (the shareholdersrsquo capital plus short and long-term borrowed
funds) Thus it is the most stringent and excessive test of return to shareholders If a company
has no debt the return on assets and return on equity figures will be the same
Return on Equity The amount of net income returned as a percentage of shareholders
equity Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
412 Income Statement 19
4121 Padma Oil Company Limited 19
4122 Meghna Petroleum Limited 20
413 Cash Flow Statement 21
4131 Padma Oil Company Limited 21
4132 Meghna Petroleum Limited 22
42 Findings and Analysis 23
421 Comparative Trend and Ratio Analysis 23
4211 Liquidity Ratios 23
4212 Profitability Ratios 26
4213 Market Measures 30
4214 Capital Structure amp Solvency 33
422 Cash flow Analysis 34
50 Conclusion 38
Bibliography 39
List of Figures
Figure 01 Current Ratio 24
Figure 02 Quick Ratio 25
Figure 03 Net working Capital 26
Figure 04 Gross Earnings of POCL and MPL (in 000s) 27
Figure 05 Net Profit Margin 27
Figure 06 Return on Assets 28
Figure 07 Net Profit Amount (in 000s) 29
Figure 08 Total assets (in 000s) 29
Figure 09 ROE 30
Figure 10 EPS 31
Figure 11 PE ratio 32
Figure 12 Dividend Yield 32
Figure 13 Debt to Equity Ratio 33
Figure 14 Closing Balance (in 000s) 34
Figure 15 Net cash Flow (in 000s) 34
Figure 16 Net cash outflow in investing activities 35
Figure 17 Operating expense payment without income tax 36
viii
Executive Summary
Padma Oil Company Limited (POCL) and Meghna Petroleum Limited (MPL) are two big oil
marketing companies of Bangladesh This report offers a comparative analysis of the financial
performance between these two companies
Financial statement analysis was done through ratio and trend analysis which present some fine
scope for comparison Comparison is done on matters like profitability liquidity and other
financial aspects
Profitability condition analysis surely speaks in favor of MPL as it has higher average net profit
net profit margin ROA and ROE for last few years On the other hand POCL in spite of having
comparatively higher total assets performs lower So MPL is more profitable
Current and quick ratios for both the companies are poor Though MPL has a higher current
ratio POCL has a higher average quick ratio suggesting its better liquidity condition However a
more deep analysis on the cash flow statements suggests that MPL has a more stable but lower
liquidity position POCL on the other hand is having some cash crisis recently
Both the companies have no considerable long term debt which makes them less prone to
financial risk and dependant on equity In terms of market presence MPL is newbie as it was
listed in 2007 which makes it difficult to compare it with more established listed company
POCL in terms of market measures However POCL has a healthy and increasing EPS but
declining PE ratio whereas MPL shows good performance over its short life on stock market
Higher debt-to-equity risk suggests POCL has more dependency on debt
Overall MPL is performing better than POCL financially
Chapter 01
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 3
Lube Blending Plants
6 Eastern Lubricants Blenders Limited(ELBL)
100 099 5932 BPC4068 Others
7Standard Asiatic Oil Company Limited(SAOCL)saoclcom
050 050 50 BPC50 Private
11 Origin of the report
The report is tilted ldquoThe Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited A Comparative Studyrdquo The research is done as a part of the
MBA internship program of Southern University Bangladesh It has been prepared under the
supervision of honorable teacher Mr Prof Sowkatul Meher
Padma Oil Company Ltd and Meghna Petroleum Ltd are two oil marketing companies under
Bangladesh Petroleum Corporation
Padma Oil Company Limited is not only the biggest but also the oldest with its antecedents
stretching well back to the colonial period of British-India Its ancestral enterprise ldquo Rangooon
Oil Company ldquo established petroleum business in this part of the world by the middle of
nineteenth century
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978
Oil sector in Bangladesh is a very unique industry As part of its operation is government
regulated (ex Selling price) the companiesrsquo operation is a bit different than other companies A
comparative study of the companiesrsquo financial performance can reveal a lot about this unique
sector
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 5
142 Data collection
For completing my research describing the reason behind the problem and fulfilling the
objectives data has been collected from the secondary sources The secondary sources
information is taken mainly from the last three yearsrsquo annual reports of Padma Oil Company
Limited and Meghna Petroleum Limited
143 Data analysis and interpretation
Data has been analyzed and interpreted using the financial indicators financial ratios references
and personal judgment I also used some graph to analyze my findings To complete this research
paper however the selected indicators are given below
Current ratio The current ratio is a popular financial ratio used to test a companys liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities
Quick ratio An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio betters the position of the company
Net working capital ratio A measure of both a companys efficiency and its short-term
financial health Positive working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash accounts receivable and inventory)
Return on Assets Return on assets measures a companyrsquos earnings in relation to all of the
resources it had at its disposal (the shareholdersrsquo capital plus short and long-term borrowed
funds) Thus it is the most stringent and excessive test of return to shareholders If a company
has no debt the return on assets and return on equity figures will be the same
Return on Equity The amount of net income returned as a percentage of shareholders
equity Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
List of Figures
Figure 01 Current Ratio 24
Figure 02 Quick Ratio 25
Figure 03 Net working Capital 26
Figure 04 Gross Earnings of POCL and MPL (in 000s) 27
Figure 05 Net Profit Margin 27
Figure 06 Return on Assets 28
Figure 07 Net Profit Amount (in 000s) 29
Figure 08 Total assets (in 000s) 29
Figure 09 ROE 30
Figure 10 EPS 31
Figure 11 PE ratio 32
Figure 12 Dividend Yield 32
Figure 13 Debt to Equity Ratio 33
Figure 14 Closing Balance (in 000s) 34
Figure 15 Net cash Flow (in 000s) 34
Figure 16 Net cash outflow in investing activities 35
Figure 17 Operating expense payment without income tax 36
viii
Executive Summary
Padma Oil Company Limited (POCL) and Meghna Petroleum Limited (MPL) are two big oil
marketing companies of Bangladesh This report offers a comparative analysis of the financial
performance between these two companies
Financial statement analysis was done through ratio and trend analysis which present some fine
scope for comparison Comparison is done on matters like profitability liquidity and other
financial aspects
Profitability condition analysis surely speaks in favor of MPL as it has higher average net profit
net profit margin ROA and ROE for last few years On the other hand POCL in spite of having
comparatively higher total assets performs lower So MPL is more profitable
Current and quick ratios for both the companies are poor Though MPL has a higher current
ratio POCL has a higher average quick ratio suggesting its better liquidity condition However a
more deep analysis on the cash flow statements suggests that MPL has a more stable but lower
liquidity position POCL on the other hand is having some cash crisis recently
Both the companies have no considerable long term debt which makes them less prone to
financial risk and dependant on equity In terms of market presence MPL is newbie as it was
listed in 2007 which makes it difficult to compare it with more established listed company
POCL in terms of market measures However POCL has a healthy and increasing EPS but
declining PE ratio whereas MPL shows good performance over its short life on stock market
Higher debt-to-equity risk suggests POCL has more dependency on debt
Overall MPL is performing better than POCL financially
Chapter 01
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 3
Lube Blending Plants
6 Eastern Lubricants Blenders Limited(ELBL)
100 099 5932 BPC4068 Others
7Standard Asiatic Oil Company Limited(SAOCL)saoclcom
050 050 50 BPC50 Private
11 Origin of the report
The report is tilted ldquoThe Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited A Comparative Studyrdquo The research is done as a part of the
MBA internship program of Southern University Bangladesh It has been prepared under the
supervision of honorable teacher Mr Prof Sowkatul Meher
Padma Oil Company Ltd and Meghna Petroleum Ltd are two oil marketing companies under
Bangladesh Petroleum Corporation
Padma Oil Company Limited is not only the biggest but also the oldest with its antecedents
stretching well back to the colonial period of British-India Its ancestral enterprise ldquo Rangooon
Oil Company ldquo established petroleum business in this part of the world by the middle of
nineteenth century
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978
Oil sector in Bangladesh is a very unique industry As part of its operation is government
regulated (ex Selling price) the companiesrsquo operation is a bit different than other companies A
comparative study of the companiesrsquo financial performance can reveal a lot about this unique
sector
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 5
142 Data collection
For completing my research describing the reason behind the problem and fulfilling the
objectives data has been collected from the secondary sources The secondary sources
information is taken mainly from the last three yearsrsquo annual reports of Padma Oil Company
Limited and Meghna Petroleum Limited
143 Data analysis and interpretation
Data has been analyzed and interpreted using the financial indicators financial ratios references
and personal judgment I also used some graph to analyze my findings To complete this research
paper however the selected indicators are given below
Current ratio The current ratio is a popular financial ratio used to test a companys liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities
Quick ratio An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio betters the position of the company
Net working capital ratio A measure of both a companys efficiency and its short-term
financial health Positive working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash accounts receivable and inventory)
Return on Assets Return on assets measures a companyrsquos earnings in relation to all of the
resources it had at its disposal (the shareholdersrsquo capital plus short and long-term borrowed
funds) Thus it is the most stringent and excessive test of return to shareholders If a company
has no debt the return on assets and return on equity figures will be the same
Return on Equity The amount of net income returned as a percentage of shareholders
equity Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
viii
Executive Summary
Padma Oil Company Limited (POCL) and Meghna Petroleum Limited (MPL) are two big oil
marketing companies of Bangladesh This report offers a comparative analysis of the financial
performance between these two companies
Financial statement analysis was done through ratio and trend analysis which present some fine
scope for comparison Comparison is done on matters like profitability liquidity and other
financial aspects
Profitability condition analysis surely speaks in favor of MPL as it has higher average net profit
net profit margin ROA and ROE for last few years On the other hand POCL in spite of having
comparatively higher total assets performs lower So MPL is more profitable
Current and quick ratios for both the companies are poor Though MPL has a higher current
ratio POCL has a higher average quick ratio suggesting its better liquidity condition However a
more deep analysis on the cash flow statements suggests that MPL has a more stable but lower
liquidity position POCL on the other hand is having some cash crisis recently
Both the companies have no considerable long term debt which makes them less prone to
financial risk and dependant on equity In terms of market presence MPL is newbie as it was
listed in 2007 which makes it difficult to compare it with more established listed company
POCL in terms of market measures However POCL has a healthy and increasing EPS but
declining PE ratio whereas MPL shows good performance over its short life on stock market
Higher debt-to-equity risk suggests POCL has more dependency on debt
Overall MPL is performing better than POCL financially
Chapter 01
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 3
Lube Blending Plants
6 Eastern Lubricants Blenders Limited(ELBL)
100 099 5932 BPC4068 Others
7Standard Asiatic Oil Company Limited(SAOCL)saoclcom
050 050 50 BPC50 Private
11 Origin of the report
The report is tilted ldquoThe Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited A Comparative Studyrdquo The research is done as a part of the
MBA internship program of Southern University Bangladesh It has been prepared under the
supervision of honorable teacher Mr Prof Sowkatul Meher
Padma Oil Company Ltd and Meghna Petroleum Ltd are two oil marketing companies under
Bangladesh Petroleum Corporation
Padma Oil Company Limited is not only the biggest but also the oldest with its antecedents
stretching well back to the colonial period of British-India Its ancestral enterprise ldquo Rangooon
Oil Company ldquo established petroleum business in this part of the world by the middle of
nineteenth century
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978
Oil sector in Bangladesh is a very unique industry As part of its operation is government
regulated (ex Selling price) the companiesrsquo operation is a bit different than other companies A
comparative study of the companiesrsquo financial performance can reveal a lot about this unique
sector
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 5
142 Data collection
For completing my research describing the reason behind the problem and fulfilling the
objectives data has been collected from the secondary sources The secondary sources
information is taken mainly from the last three yearsrsquo annual reports of Padma Oil Company
Limited and Meghna Petroleum Limited
143 Data analysis and interpretation
Data has been analyzed and interpreted using the financial indicators financial ratios references
and personal judgment I also used some graph to analyze my findings To complete this research
paper however the selected indicators are given below
Current ratio The current ratio is a popular financial ratio used to test a companys liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities
Quick ratio An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio betters the position of the company
Net working capital ratio A measure of both a companys efficiency and its short-term
financial health Positive working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash accounts receivable and inventory)
Return on Assets Return on assets measures a companyrsquos earnings in relation to all of the
resources it had at its disposal (the shareholdersrsquo capital plus short and long-term borrowed
funds) Thus it is the most stringent and excessive test of return to shareholders If a company
has no debt the return on assets and return on equity figures will be the same
Return on Equity The amount of net income returned as a percentage of shareholders
equity Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Chapter 01
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 3
Lube Blending Plants
6 Eastern Lubricants Blenders Limited(ELBL)
100 099 5932 BPC4068 Others
7Standard Asiatic Oil Company Limited(SAOCL)saoclcom
050 050 50 BPC50 Private
11 Origin of the report
The report is tilted ldquoThe Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited A Comparative Studyrdquo The research is done as a part of the
MBA internship program of Southern University Bangladesh It has been prepared under the
supervision of honorable teacher Mr Prof Sowkatul Meher
Padma Oil Company Ltd and Meghna Petroleum Ltd are two oil marketing companies under
Bangladesh Petroleum Corporation
Padma Oil Company Limited is not only the biggest but also the oldest with its antecedents
stretching well back to the colonial period of British-India Its ancestral enterprise ldquo Rangooon
Oil Company ldquo established petroleum business in this part of the world by the middle of
nineteenth century
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978
Oil sector in Bangladesh is a very unique industry As part of its operation is government
regulated (ex Selling price) the companiesrsquo operation is a bit different than other companies A
comparative study of the companiesrsquo financial performance can reveal a lot about this unique
sector
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 5
142 Data collection
For completing my research describing the reason behind the problem and fulfilling the
objectives data has been collected from the secondary sources The secondary sources
information is taken mainly from the last three yearsrsquo annual reports of Padma Oil Company
Limited and Meghna Petroleum Limited
143 Data analysis and interpretation
Data has been analyzed and interpreted using the financial indicators financial ratios references
and personal judgment I also used some graph to analyze my findings To complete this research
paper however the selected indicators are given below
Current ratio The current ratio is a popular financial ratio used to test a companys liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities
Quick ratio An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio betters the position of the company
Net working capital ratio A measure of both a companys efficiency and its short-term
financial health Positive working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash accounts receivable and inventory)
Return on Assets Return on assets measures a companyrsquos earnings in relation to all of the
resources it had at its disposal (the shareholdersrsquo capital plus short and long-term borrowed
funds) Thus it is the most stringent and excessive test of return to shareholders If a company
has no debt the return on assets and return on equity figures will be the same
Return on Equity The amount of net income returned as a percentage of shareholders
equity Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 2
10 Introduction
Bangladesh Petroleum Corporation is a statutory organization under Petroleum and Mineral
Resources Division Ministry of Power Energy and Mineral Resources Government of Peoples
Republic of Bangladesh This corporation was established in the year 1977 for the purposes of
import refining and processing of crude petroleum blending of lubricants export and marketing
of petroleum products including by-products and lubricants At present it has 3 (three) oil
marketing companies 2 (two) blending plants 1 (one) LPG bottling company and a refinery as
its subsidiaries The position of the corporation in relation to these companies is similar to that of
a holding company
BPC has 7 (Seven) subsidiary companies of which there are 3 (three) Oil Marketing Companies
1 (one) Refinery 1 (one) LP Gas Plant and 2 (two) Lube Blending Plants Company-wise share
of BPC are as under
Name of subsidiariesCapital (Tk in crore )
OwnershipAuthorized Paid-up
Refinery
1 (a) Eastern Refinery Limited (ERL)erlgovbd
50000 3300 100 BPC
Oil Marketing Companies
2 Padma OilCompany Limited(POCL)
poclgovbd10000 2940 5035 BPC
4965 Other
3 Jamuna Oil Company Limited (JOCL)jamunaoilgovbd
30000 450070 BPC30 Others
4 Meghna Petroleum Limited (MPL)mplgovbd
40000 4000100 BPC30 Others
5 LP Gas Limited (LPG) 5000 1000 100 BPC
Page 3
Lube Blending Plants
6 Eastern Lubricants Blenders Limited(ELBL)
100 099 5932 BPC4068 Others
7Standard Asiatic Oil Company Limited(SAOCL)saoclcom
050 050 50 BPC50 Private
11 Origin of the report
The report is tilted ldquoThe Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited A Comparative Studyrdquo The research is done as a part of the
MBA internship program of Southern University Bangladesh It has been prepared under the
supervision of honorable teacher Mr Prof Sowkatul Meher
Padma Oil Company Ltd and Meghna Petroleum Ltd are two oil marketing companies under
Bangladesh Petroleum Corporation
Padma Oil Company Limited is not only the biggest but also the oldest with its antecedents
stretching well back to the colonial period of British-India Its ancestral enterprise ldquo Rangooon
Oil Company ldquo established petroleum business in this part of the world by the middle of
nineteenth century
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978
Oil sector in Bangladesh is a very unique industry As part of its operation is government
regulated (ex Selling price) the companiesrsquo operation is a bit different than other companies A
comparative study of the companiesrsquo financial performance can reveal a lot about this unique
sector
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 5
142 Data collection
For completing my research describing the reason behind the problem and fulfilling the
objectives data has been collected from the secondary sources The secondary sources
information is taken mainly from the last three yearsrsquo annual reports of Padma Oil Company
Limited and Meghna Petroleum Limited
143 Data analysis and interpretation
Data has been analyzed and interpreted using the financial indicators financial ratios references
and personal judgment I also used some graph to analyze my findings To complete this research
paper however the selected indicators are given below
Current ratio The current ratio is a popular financial ratio used to test a companys liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities
Quick ratio An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio betters the position of the company
Net working capital ratio A measure of both a companys efficiency and its short-term
financial health Positive working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash accounts receivable and inventory)
Return on Assets Return on assets measures a companyrsquos earnings in relation to all of the
resources it had at its disposal (the shareholdersrsquo capital plus short and long-term borrowed
funds) Thus it is the most stringent and excessive test of return to shareholders If a company
has no debt the return on assets and return on equity figures will be the same
Return on Equity The amount of net income returned as a percentage of shareholders
equity Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 3
Lube Blending Plants
6 Eastern Lubricants Blenders Limited(ELBL)
100 099 5932 BPC4068 Others
7Standard Asiatic Oil Company Limited(SAOCL)saoclcom
050 050 50 BPC50 Private
11 Origin of the report
The report is tilted ldquoThe Financial Performance of Padma Oil Company Limited and
Meghna Petroleum Limited A Comparative Studyrdquo The research is done as a part of the
MBA internship program of Southern University Bangladesh It has been prepared under the
supervision of honorable teacher Mr Prof Sowkatul Meher
Padma Oil Company Ltd and Meghna Petroleum Ltd are two oil marketing companies under
Bangladesh Petroleum Corporation
Padma Oil Company Limited is not only the biggest but also the oldest with its antecedents
stretching well back to the colonial period of British-India Its ancestral enterprise ldquo Rangooon
Oil Company ldquo established petroleum business in this part of the world by the middle of
nineteenth century
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978
Oil sector in Bangladesh is a very unique industry As part of its operation is government
regulated (ex Selling price) the companiesrsquo operation is a bit different than other companies A
comparative study of the companiesrsquo financial performance can reveal a lot about this unique
sector
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 5
142 Data collection
For completing my research describing the reason behind the problem and fulfilling the
objectives data has been collected from the secondary sources The secondary sources
information is taken mainly from the last three yearsrsquo annual reports of Padma Oil Company
Limited and Meghna Petroleum Limited
143 Data analysis and interpretation
Data has been analyzed and interpreted using the financial indicators financial ratios references
and personal judgment I also used some graph to analyze my findings To complete this research
paper however the selected indicators are given below
Current ratio The current ratio is a popular financial ratio used to test a companys liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities
Quick ratio An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio betters the position of the company
Net working capital ratio A measure of both a companys efficiency and its short-term
financial health Positive working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash accounts receivable and inventory)
Return on Assets Return on assets measures a companyrsquos earnings in relation to all of the
resources it had at its disposal (the shareholdersrsquo capital plus short and long-term borrowed
funds) Thus it is the most stringent and excessive test of return to shareholders If a company
has no debt the return on assets and return on equity figures will be the same
Return on Equity The amount of net income returned as a percentage of shareholders
equity Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 4
12 Objective of the study
It is mandatory to have few objectives to make a work successful From the very beginning of
the study I tried to conduct the research with a view to achieve some specific objectives The
objectives of the report are given below
1 To analyze the financial statements of the companies through the
a Trend analysis
b Ratio analysis
2 Compare the financial performance of two companies based on the analysis
13 Scope of the study
The research provided me a clear idea about implication of financial terms The scope of the
study is limited within the company and its financial data and performance
14 Methodology
The chronological selection of methods for a particular research is called research methodology
The methods I selected for my research are given below
141 Research design
The research done is descriptive research because this research describing the information which
is taken from the last 3 years annual reports from the Padma Oil Company Limited and Meghna
Petroleum Limited
As the data has been collected from secondary sources like company financial report for that the
research is based on observation of the financial data from the annual report
The research is quantitative research as the analyzed data are absolute data (net income debt
equity earnings per share etc)
Page 5
142 Data collection
For completing my research describing the reason behind the problem and fulfilling the
objectives data has been collected from the secondary sources The secondary sources
information is taken mainly from the last three yearsrsquo annual reports of Padma Oil Company
Limited and Meghna Petroleum Limited
143 Data analysis and interpretation
Data has been analyzed and interpreted using the financial indicators financial ratios references
and personal judgment I also used some graph to analyze my findings To complete this research
paper however the selected indicators are given below
Current ratio The current ratio is a popular financial ratio used to test a companys liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities
Quick ratio An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio betters the position of the company
Net working capital ratio A measure of both a companys efficiency and its short-term
financial health Positive working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash accounts receivable and inventory)
Return on Assets Return on assets measures a companyrsquos earnings in relation to all of the
resources it had at its disposal (the shareholdersrsquo capital plus short and long-term borrowed
funds) Thus it is the most stringent and excessive test of return to shareholders If a company
has no debt the return on assets and return on equity figures will be the same
Return on Equity The amount of net income returned as a percentage of shareholders
equity Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 5
142 Data collection
For completing my research describing the reason behind the problem and fulfilling the
objectives data has been collected from the secondary sources The secondary sources
information is taken mainly from the last three yearsrsquo annual reports of Padma Oil Company
Limited and Meghna Petroleum Limited
143 Data analysis and interpretation
Data has been analyzed and interpreted using the financial indicators financial ratios references
and personal judgment I also used some graph to analyze my findings To complete this research
paper however the selected indicators are given below
Current ratio The current ratio is a popular financial ratio used to test a companys liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities
Quick ratio An indicator of a companys short-term liquidity The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher the
quick ratio betters the position of the company
Net working capital ratio A measure of both a companys efficiency and its short-term
financial health Positive working capital means that the company is able to pay off its short-term
liabilities Negative working capital means that a company currently is unable to meet its short-
term liabilities with its current assets (cash accounts receivable and inventory)
Return on Assets Return on assets measures a companyrsquos earnings in relation to all of the
resources it had at its disposal (the shareholdersrsquo capital plus short and long-term borrowed
funds) Thus it is the most stringent and excessive test of return to shareholders If a company
has no debt the return on assets and return on equity figures will be the same
Return on Equity The amount of net income returned as a percentage of shareholders
equity Return on equity measures a corporations profitability by revealing how much profit a
company generates with the money shareholders have invested
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 6
Earnings per share The earnings per share ratio are mainly useful for companies with publicly
traded shares Most companies will quote the earnings per share in their financial statements
saving you from having to calculate it yourself By itself EPS doesnt really tell you a whole lot
But if you compare it to the EPS from a previous quarter or year it indicates the rate of growth a
companyrsquos earnings are growing (on a per share basis)
PE ratio a high PE suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower PE However the PE ratio doesnt tell us the whole story
by itself Its usually more useful to compare the PE ratios of one company to other companies
in the same industry to the market in general or against the companys own historical PE It
would not be useful for investors using the PE ratio as a basis for their investment to compare
the PE of a technology company (high PE) to a utility company (low PE) as each industry has
much different growth prospects
Dividend yield The dividend yield ratio allows investors to compare the latest dividend they
received with the current market value of the share as an indicator of the return they are earning
on their shares
Net asset per share An expression for net asset value that represents a funds (mutual
exchange-traded and closed-end) or a companys value per share It is calculated by dividing the
total net asset value of the fund or company by the number of shares outstanding
Dividend A taxable payment declared by a companys board of directors and given to its
shareholders out of the companys current or retained earnings usually quarterly Dividends are
usually given as cash (cash dividend) but they can also take the form of stock (stock dividend)
or other property Dividends provide an incentive to own stock in stable companies even if they
are not experiencing much growth
Return on shareholdersrsquo fund The Return on Shareholdersrsquo Funds (ROSF) ratio has
historically been used by industry investors as a measure of the profit for the period which is
available to the ownerrsquos stake in a business The Return on Shareholdersrsquo Funds ratio is
therefore a measure of profitability
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 7
Report Methodology Diagram
15 Limitation
I came across certain limitation while preparing this internship report They are stated below
It was impossible for me to collect some data because of the confidential issue
I had to depend on the data of the head office
As I am a full time working employee it was not possible for me to prepare the report as
I intended due to time shortness
As Meghna Petroleum Ltd was listed as a public company in 2007 I had only two yearsrsquo
data on this company on market measures
Poor online presence of both the companies
Collecting FinancialStatements
PampL Statement Cash Flow StatementBalance Sheet
Ratio amp TrendAnalysis
Cash Flow Analysis
Comparing thefinancial performance
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Chapter 02
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 9
20 Company overview
21 Padma Oil Company Limited
211 Company Profile
The main headquarter of Padma Oil Company Limited is situated at Strand Road in Chittagong
city of Bangladesh It distributes petroleum products to whole Bangladesh from its main
installation which situated in Chittagong at Guptahal Patenga
Here is the company summary which will help anyone to introduce about the company in a short
time
Corporate Headquarter Padma Bhaban Strand road Chittagong - 4000 Bangladesh
Resident Office 6 Paribagh Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 April 1965
Business Line Procuring Storage and marketing of petroleum products
lubricants and greases bitumen and LPG Manufacturing
and Marketing of Agro chemicals
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 100 million taka
Paid up capital 49 million taka
Number of shares 4900000
Number of shareholders 2188
Number of employee 949
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 10
212 Company History
Like every successful company this company also has a glorious history to establish itself as a
leading oil company Here is the history of Padma Oil Company limited
Padma oil company Limited is not only the biggest but also the oldest company from the colonial
period of British-India
In 1871 ldquoRangoon Oil Companyrdquo was registered as joint stock Company in Scotland having its
main business activities in Burma
In 1881 the name was changed to Burma Oil Company Burma Oil Company established their ldquo
Moheshkhali Oil Installationrdquo at Chittagong in the year 1903 MS Bullock brothers (A major
distributor of Burma Oil Company) established their trading office at Shadar ghat in Chittagong
Bangladesh
In the 1929 Burma Oil Company took over the office of Bullock Brothers at Sadargat
Chittagong and established it as their head office
In 1947 Burma Oil Company amp Burma Shell oil storage amp Distribution Company were
operating Petroleum business in the area what now comprise Bangladesh
Burma shell established Aviation depot was at Tejgaon Airport in 1948
In 1965 Burma shell transferred their share to BOC and ldquoBurma Eastern Limitedrdquo was formed
with 49 share of BOC The rest portion of ht e share was issued to public amp private individual
of Pakistan
In 1977 it became a subsidiary of Bangladesh Petroleum Corporation
In 1985 BOC transfer their share to BPC and the company name was changed as ldquoPadma Oil
Company limitedrdquo
The name was changed to Padma Oil Company limited from 3rd September 1988 and its shares
are listed with both the Chittagong and Dhaka stock exchange
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 11
22 Meghna Petroleum Limited
221 Company Profile
Meghna Petroleum Limited started its journey with an Authorized Capital and Paid-up capital of
Tk 100 million and Tk 50 million respectively The company was converted to Public limited
company from private limited company on 29 May 2007 and its authorized capital was
increased to Tk 4000 million On 27 August 2007 the paid-up capital of the company was
increased to Tk 400 million by issuing Bonus Share
The company was enlisted with DSE and CSE on 14 November 2007 and 2nd December 2007
respectively with a view of off-load of 12 crore shares under direct listing procedure On 14
January 2008 the shares of the company were off-loaded in the two capital market At present
there is a Board of Directors comprising of 9 members to run the company The overall activities
of the company are performed with the approval of the Board of Directors
Corporate Headquarter 58-59 Agrabad CA Chittagong-4100 Bangladesh
Resident Office Meghna Bhaban 131 Motijheel CA Dhaka Bangladesh
Main Installation Guptahal Patenga Chittagong Bangladesh
Year of Incorporation 27 December 1977
Business Line Procuring Storage and marketing of petroleum products
lubricants Bitumen LPG amp Battery Water
Stock Exchange ListingDhaka Stock Exchange
Chittagong stock Exchange
Authorized capital 400 Crore taka
Paid up capital 44 Crore taka
Number of employee 411
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 12
222 History
Meghna petroleum Limited has been serving the nation for the last four decades through
marketing of petroleum products It was set up on December 27 1977 as a private limited
company with the objectives of taking over all the physical possession of fixed assets of the
erstwhile Meghna Petroleum Marketing Company Limited and Padma Petroleum Limited as on
March 31 1978 Meghna Petroleum Marketing Company Limited was created after acquiring the
operation of the then ESSO Eastern Inc (1962) of America in 1975 and Padma Petroleum
Limited was created in 1972 after acquiring the operation of the then Dawood Petroleum Limited
(1968)
In the year 1976 the assets and liability of the company were transferred and handed over to
Bangladesh Petroleum Corporation (BPC) as per BPC Ordinance no LXXXVIII Since then
Meghna Petroleum Limited has been functioning as a subsidiary of BPC
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Chapter 03
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 14
30 Literature Review
Peeler J Patsula on January 23 2006 in his article ldquosuccessful business analysisrdquo tries to
define that a sound business analysis tells others a lot about good sense and understanding of the
difficulties that a company will face We have to make sure that people know exactly how we
arrived to the final financial positions We have to show the calculation but we have to avoid
anything that is too mathematical A business performance analysis indicates the further growth
and the expansion It gives a physiological advantage to the employees and also a planning
advantage
Chidambaram Rameshkumar Dr N Anbumani on February 2 2006 in his article ldquoAn
overview on financial statements and ratio analysisrdquo argue that Ratio Analysis enables the
business ownermanager to spot trends in a business and to compare its performance and
condition with the average performance of similar businesses in the same industry To do this
compare your ratios with the average of businesses similar to yours and compare your own ratios
for several successive years watching especially for any unfavorable trends that may be starting
Ratio analysis may provide the all-important early warning indications that allow you to solve
your business problems before your business is destroyed by them
Susan Ward on May 1 2008 in his article ldquoFinancial Ratio Analysis for Performance
Checkrdquo emphasis that financial analysis using ratios between key values help investors cope
with the massive amount of numbers in company financial statements For example they can
compute the percentage of net profit a company is generating on the funds it has deployed All
other things remaining the same a company that earns a higher percentage of profit compared to
other companies is a better investment option
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly With Ratiosrdquo
tries to say that ratios can be an invaluable tool for making an investment decision Even
so many new investors would rather leave their decisions to fate than try to deal with the
intimidation of financial ratios The truth is that ratios arent that intimidating even if you dont
have a degree in business or finance Using ratios to make informed decisions about an
investment makes a lot of sense once you know how use them `
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Chapter 04
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 16
40 Financial Statement Analysis
As both the companies are oil marketing companies their operations and activities are quite
similar Financial statements are always great or sometimes the only tools to analyze or measure
the performance of an organization In my report I tried to analyze the performance of these two
companies through the analysis of their balance sheet profit amp loss account or income statement
and cash flow statements of last 3 years These statements were used to do some trend and ratio
analysis which revealed the comparative performance of the two
41 Financial statements
For our convenience at first we have to have a look at the statements All the three financial
statements offer different significance The balance sheet or financial position of the company at
particular date is like a snapshot of the companyrsquos financial position It is a very important tool
as it holds a lot of important information about the company The income statement is the
financial statement of significant importance to the shareholders or owners because it shows the
profitability condition of the company Cash flow statement as its name suggests stands as a tool
to show the liquidity condition of the company A mix of trends and ratios can be brought up
from these statements which are essential for the report
First let us have a quick peep at the statements
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 17
411 Balance sheets
4111 Padma Oil Company Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 98000 49000 49000Reserves and surplus 1671931 1293957 1059772
1769931 1342957 1108772Deferred Tax 47369 42263 40917
Total Funds 1817300 1385220 1149689
Uses of FundFixed Asset- At cost 889957 748493 709092Less accumulated depreciation 461211 419124 382618
428746 329369 326474Capital work in progress 48693 99221 112394Current Asset
Inventories 5245777 3547217 5646558Debtors 957264 6793459 8193653Due from affiliated companies 16972006 12784821 13425807Advance deposit and pre-payments 110212 102611 89064Income tax receivable 154640 154640 137795Cash and Bank Balance 3360084 3466826 2091817
26799983 26849574 29584694Less Current Liabilities
Liabilities for trading supplies andservices 1498462 1222574
3605730
Liabilities for supplies and expenses 3539902 2001577 1494108Due from affiliated companies 19691811 21958676 23181250Liabilities for other finance 651106 674170 563380Other Liabilities 50723 30207 24248Liabilities for dividend 6646 5740 5157Provision for income tax 21472
25460122 25892944 28873873Net current assets 1339861 956630 710821
1817300 1385220 1149689
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 18
4112 Meghna Petroleum Limited
Taka in 00030-Jun-09 30-Jun-08 30-Jun-07
Sources of FundShareholdersrsquo FundsShare capital 440000 400000 104500Proposed issue of bonus share 22000 40000 295500Reserves and surplus 763995 580913 339531
1225995 1020913 739531Employeesgratuity 151935 145828 117684Deferred Tax 35560 31527 27367
Total Funds 1413490 1198268 884581
Uses of FundFixed Asset- AtcostLess accumulated depreciation 370618 365342 299102Capital work in progress 2356 13974 49832
372974 379316 348934Investment 4585 4585 4585Current Asset
Inventories 5762046 3442173 5267737Debtors 5333329 7042123 4578569Advance deposit and pre-payments 176462 231052 160903Cash and Bank Balance 1071800 789954 723686
12343637 11505302 10730896Less Current LiabilitiesCreditors 11047272 10448893 10032718workers profit participation fund amp WF 26938 27992 17977Liabilities for dividend 276000 180000 108500Provision for income tax -42504 34050 40638
11307706 10690935 10199833Net current assets 1035932 814367 531062
1413491 1198268 884581
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 19
412 Income Statement
4121 Padma Oil Company Limited
30-Jun-09 30-Jun-08 30-Jun-07977866 820849 729322
(36172) (26089) (18315)(5246) (6238) (5881)
(41418) (32327) (24196)936448 788522 705126
46199 67330982647 855852 705126
(550040) (590753) (450627)(80034) (85360) (83592)
(630074) (676113) (534219)352573 179739 170907205940 73440 51825558513 253179 222732
95497 107500 42374654010 360679 265106
285 3038 42654295 363717 265148
(13255)621580 345531 251893
165000 110000 (66670)5106 1346 (8897)
170106 111346 (75567)
176326460687755 477928571 3598
451474 234185and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income tax Current tax Deferred tax
Net profit after tax transferred to Reserve
Add Other Non-operating IncomeNet profitLess Contribution to workers Profit
32715 18186Participation and welfare fund 5 onnet profit
Total Operating Profit
Net Operational gainNet earnings on petroleum productsOverheadsAdministrative selling and distribution expanseInterest-through BPC
Trading Profit on PetroleumAdd Other operating incomeOperating Profit on petroleum tradingAdd Operating profit on Agro-chemical trading
Taka in 000
Earning on petroleum productsCost on Petroleum Products Packing Charges Handling Charges
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 20
4122 Meghna Petroleum Limited
30-Jun-09 30-Jun-08 30-Jun-07583468 775835 566897
(246046) (257472) (239750)(81403) (71496) (85207)(44927) (41783) (34614)
(372376) (370751) (359571)37690 43900 23413
Total Operational expenses (334686) (326851) (336158)248782 448984 230739289972 110849 128800538754 559833 359539
(26938) (27992) (17977)511816 531841 341562
(126700) (146300) (102469)Deferred Tax (4033) (4160) (27367)
(130733) (150460) (129836)
381083 381381 211726866 953 2026
and surplusEarnings per Share (EPS)
Net profit before income taxLess Provision for income taxCurrent Tax
Net profit after tax transferred to Reserve
Net profitLess Contribution to workers ProfitParticipation and welfare fund
Net Operational gain
Trading Profit (Loss)Other Income
Depriciation Amortization
Taka in 000
Earning on petroleum productsExpensesSelling Distribution and AdministrationInterest Financing Charges
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 21
413 Cash Flow Statement
4131 Padma Oil Company Limited
30-Jun-07
1037067(600231)(75097)361739
(48651)(48651)
(28913)(28913)284175
18076422091817
284175
Payment for cost and Other Expenses (75901695) (761768)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 76053093 2322749
Income tax paid (143528) (126845)Net cash inflow from operating activities 7870 1434136
B Cash flow from investing activitiesCapital Expenditure (91017) (30310)Net cash used in Investing activities (91017) (30310)
C Cash Flow From Financing ActivitiesDividend Paid (23595) (28817)Net cash used in Financing Activities (23595) (28817)Total (A+B+C) (106742) 1375099
(106742) 1375009
Opening cash and bank balances 3466826 2091817closing cash and bank balances 3360084 3466826
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 22
4132 Meghna Petroleum Limited
30-Jun-07
340030(277065)(64495)
(76285)(76285)
-Interest Received 146816 31824 31624
31624(46191)
769877723686(46191)
(1530)
Taka in 00030-Jun-09 30-Jun-08
A Cash Flow From Operating ActivitiesCollection from Gross Earnings and Other Income 751614 676946Payment for cost and Other Expenses (294744) (388949)Income tax paid (203254) (152889)Net cash inflow from operating activities 253616 135108
B Cash flow from investing activitiesCapital Expenditure (38586) (72164)Net cash used in Investing activities (38586) (72164)
C Cash Flow From Financing ActivitiesDividend Paid (80000) (28500)
Net cash used in Financing Activities 66816 3324Total (A+B+C) 281846 66268
281846 66268
Opening cash and bank balances 789954 723686closing cash and bank balances 1071800 789954
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
098
1
102
104
106
108
11
2006
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
2007 2008 2009
POCL
MPL
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 23
42 Findings and Analysis
Now that we have the financial statements we can start analyzing them for our purpose We
should not discuss any trend or ratio in isolation rather their effects on the other aspects of the
organizations As I have been instructed I will only discuss the financial aspect of their
performance and ignore the non-financial indicators
421 Comparative Trend and Ratio Analysis
4211 Liquidity Ratios
Current Ratio
Current Ratio =Current Assets
Current Liabilities
The Current Ratio expresses the relationship between the firmrsquos current assets and its current
liabilities Current assets normally include cash marketable securities accounts receivable and
inventories Current liabilities consist of accounts payable short term notes payable short-term
loans current maturities of long term debt accrued income taxes and other accrued expenses
(wages)
Figure 01 Current Ratio
POCL MPL2006 103 1082007 102 1052008 104 1082009 1053 109
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 24
The rule says that the current ratio should be at least 2 that mean the current assets should meet
current liabilities at least twice though this rule can change according to industry Both the
companies have a current ratio just over one From my research I can assume that it is the
industry average In our Figure 01 we see that MPL has a better condition than POCL in terms of
current ratio Current ratio of both the companies shows a slightly increasing trend
Quick Ratio
Quick Ratio =Quick Assets
Current Liabilities
Measures assets that are quickly converted into cash and they are compared with current
liabilities This ratio realizes that some of current assets are not easily convertible to cash eg
inventories The quick ratio also referred to as acid test ratio examines the ability of the
business to cover its short-term obligations from its ldquoquickrdquo assets only (ie it ignores stock)
Figure 02 Quick Ratio
Generally a quick ratio less than 100 suggests an alarming liquidity condition for any
organization But low current and quick ratio for both the companies led me to think that the
industry suits low liquidity ratios However we can clearly notice from the figure that POCL has
0010203040506070809
1
2006 2007 2008 2009
POCL
MPL
POCL MPL2006 088 0572007 083 0542008 09 0752009 085 058
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
0
001
002
003
004
005
006
007
008
009
2006
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
2007 2008 2009
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 25
a far better quick ratio than MPL which means POCL can repay its current debts better It also
suggests that POCL has more liquid assets than MPL
Net Working Capital
Net working capitalratio =
Net WorkingCapital
Total Assets
Figure 03 Net working Capital
Many believe that increasing sales can solve any business problem Often they are correct
However sales must be built upon sound policies concerning other current assets and should be
supported by sufficient working capital There are two types of working capital gross working
capital which is all current assets and net working capital which are current assets less current
liabilities The net working capital ratio is increased at healthy rate for both the companies I
personally believe that as both the companies are well established reducing sales should not be
considered rather increasing assets is a solution to low net working capital In comparison MPL
POCL
MPL
POCL MPL2006 0037 00662007 0024 00482008 0035 00692009 0049 0081
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 26
clearly shows a better position in net working capital as it has higher current asset However
from the quick ratio analysis (figure 02) we know that most of them are not liquid enough
4212 Profitability Ratios
Gross Earnings Trend
POCL MPL2006 668029 5253822007 729322 5668972008 820849 7758352009 977866 583468
Figure 04 Gross Earnings of POCL and MPL (in 000s)
The first indicator is the gross earnings before any expenses every year It shows a very healthy
and growing trend in case of POCL From my research I got to know that POCL is one of the
biggest companies of Bangladesh in terms of gross revenue On the other hand though MPL had
an increasing trend of gross earnings till 2008 but it had a significant fall last year
-
200000
400000
600000
800000
1000000
1200000
2006 2007 2008 2009
POCL
MPL
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
0
10
20
30
40
50
60
70
2006 2007 2008
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
2008 2009
POCL
MPL
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 27
Net Profit Margin
Figure 05 Net Profit Margin
Gross earning is not an indicator of the actual performance of a company Net profit margin
shows how the company is controlling its costs Net profit margins of both the companies are
pretty good However MPLrsquos net profit margin is increasing at a great rate
Return on Assets
Income is earned by using the assets of a business productively The rate of return on total assets
indicates the degree of efficiency with which management has used the assets of the enterprise
during an accounting period This is an important ratio for all readers of financial statements
Investors have placed funds with the managers of the business The managers used the funds to
purchase assets which will be used to generate returns If the return is not better than the
investors can achieve elsewhere they will instruct the managers to sell the assets and they will
invest elsewhere The managers lose their jobs and the business liquidates
POCL MPL2006 21 272007 24 372008 29 492009 46 65
Return onAssets (ROA)
=
Net Income
Average Total Assets
POCL MPL2007 072 2602008 083 3322009 170 310
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
000
050
100
150
200
250
300
350
2007
-50000
100000150000200000250000300000350000400000450000500000
2006
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
2008 2009
POCL
MPL
2006 2007 2008 2009
POCL
MPL
Page 28
Figure 06 Return on Assets
The ratio indicates that POCL has a very poor ROA in comparison to MPL It can be described
from two perspectives A low ROA can be the result of low net profit or high average total assets
or both
Figure 07 Net Profit Amount (in 000s)
POCL
MPL
POCL
MPL
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
-
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
2006 2007 2008 2009
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 29
We can clearly notice that except last year MPL had a better net profit amount where in 2008-09
POCL showed better performance As their net profit amounts do not differ by a huge amount
the answer to such low ROA of POCL lies within the total assets of the company
Figure 08 Total assets (in 000s)
From the chart it is proven that POCL has a very high total assets contributing to its low ROA
To be specific POCL has very high current assets compared to MPL So MPL is clearly
performing better with a lot less assets than POCL
Return on Equity
Return onEquity(ROE)
=
Net Income
Average Stockholdersrsquo Equity
This ratio shows the profit attributable to the amount invested by the owners of the business It
also shows potential investors into the business what they might hope to receive as a return The
stockholdersrsquo equity includes share capital share premium distributable and non-distributable
reserves
POCL
MPL
POCL MPL2007 17 312008 19 43302009 29 3390
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
0
20
40
60
2007
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCLMPL
20082009
POCL
MPL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 30
Figure 09 ROE
Again MPL shows a higher ROE over the last few years However MPL was listed as a public
limited company just a few years ago Which means it still has a long way to go to achieve long-
term investor confidence Right now MPL surely has better position in terms of ROE
4213 Market Measures
EPS
Earning Per Share =
Net IncomeNumber ofcommon ShareOutstanding
This number represents the profit of the company equally split among each share of the stock
EPS is one of the most popular variables when valuing a company So important in fact analysts
are constantly issuing estimates on what future EPS may be Here EPS of two companies shows
a very differing trend
EPS of the POCL in this year is low than the previous period It can be the result of last yearrsquos
stock dividend of 12 For that the net profit is divided in twice than the previous period The
earning is nearly twice from the previous period and the company given stock dividend which
means that the company is in good position than the past EPS is also growing assuring
investorsrsquo positive outlook for POCL
POCL MPL2006 177 1442007 36 2032008 478 952009 461 87
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
0
10
20
30
40
50
60
2006
05
10152025303540
2007
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
2007 2008 2009
POCL
MPL
20072008
2009
POCL
MPL
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 31
Figure 10 EPS
However MPLrsquos EPS is declining for last few years Again there is an explanation As MPL was
listed just a few years back it is too early to perceive something based on this
PE
Price Earning (PE)Ratio =
Market Price ofCommon Stock Per
ShareEarning Per share
Figure 11 PE ratio
POCL MPL2007 3894 -
2008 2568 2238
2009 1323 3032
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
00
02
04
06
08
10
12
14
16
20062007
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
20072008
2009
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 32
Essentially this ratio tells us how much investor is willing to pay for every one dollar of earnings
the company pulls in As we can see POCL has a declining PE ratio over the last few years Last
year POCL stock price reached its lowest ever The low PE ratio is the result of this Again MPL
PE ratio suggests us literally nothing I could only have the PE ratio of last two years as I stated
before it became listed in 2007 and it shows an increase
Dividend Yield
Dividend Yield=
Annual DividendsPer Common Share
Market Price ofCommon Stock Per
Share
Figure 12 Dividend Yield
The dividend yield ratio indicates the return that investors are obtaining on their investment in
the form of dividends This yield is usually fairly low as the investors are also receiving capital
growth on their investment in the form of an increased share price It is interesting to note that
there is strong correlation between dividend yields and market prices Invariably the higher the
dividend the higher the market value of the share
POCL
MPL
POCL MPL2006 092007 042
2008 041 129
2009 082 152
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
0
5
10
15
20
25
30
2006 2007
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
2007 2008 2009
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 33
We can notice from the data that POCL has a U-shape pattern to their dividend yield because of
its fluctuating share price However MPL has higher and increasing pattern
4214 Capital Structure amp Solvency
Debt to Equity Ratio
Debt to Equity Ratio= Total DebtTotal Debt plus TotalEquity
Figure 13 Debt to Equity Ratio
Debt to equity ratio measures a companyrsquos capital structure It is a great means to know if the
company is dependent on debt or shareholders funds The lower the ratio the better Both the
companies show a decreasing trend but POCLrsquos ratio is a lot higher than MPL However it is
noticeable that most of their debts are current debts So better credit control measures should be
introduced
POCL
MPL
POCL MPL2006 1983 752007 2608 13992008 1931 10652009 1441 938
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 34
422 Cash flow Analysis
Cash flow analysis is primarily used as a tool to evaluate the sources and uses of funds It
provides insights into how a company is obtaining its financing and deploying its resources It is
also used as a part of liquidity analysis
The first things to look are the closing balance and the net cash flow
Figure 14 Closing Balance (in 000s)
Figure 15 Net cash Flow (in 000s)
-
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009
POCL
MPL
(200000)
-
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
-
20000
40000
60000
80000
100000
120000
2006
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
2006 2007 2008 2009
POCL
MPL
Page 35
It is clearly evident that POCL has not only more cash in hand than MPL but also it has a
growing trend On the other hand MPL is maintaining a pretty stable but healthy cash in hand It
is to note that high cash balance does not necessarily mean a good sign Though it suggests a
good liquidity position failure to invest surplus fund may affect future profitability
Net cash flow of MPL shows a lower and more stable trend than POCL POCL has an alarmingly
fluctuating net cash flow and last year it had a significant fall A closer look at the different cash
flows can be helpful to the research
Figure 16 Net cash outflow in investing activities
Net cash flows in investing activities show an interesting pattern for the companies Whereas
POCL shows a U-shape pattern MPL shows an inverted U-shape It unveils the reason for the
negative net cash flow of POCL last year resulting from a very high investment This means
MPL and POCL are on very different situations Whereas MPL is settling down after a high
investment previously undertaken and focusing on its liquidity POCL is expanding its business
in exchange of its liquidity
However only lsquoinvesting cash flowsrsquo do not depict a good picture of the real situation The
operating cash flows should be analyzed We can see from the figure 18 that POCL made an
extraordinary amount of payment last year to its creditors which clearly resulted their fall in net
cash flows
POCL
MPL
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 36
Figure 17 Operating expense payment without income tax
The overall analysis of cash flows suggests that POCL is in a tight position in terms of liquidity
because of its investment and huge amount of payment to its creditors However it is highly
unlikely that this will happen again in very near future So POCLrsquos future liquidity position is
expected to be better On the other hand MPL shows a stable position in every aspect of their
cash flows which is a positive sign
Cash flows from financing activities are rather insignificant in case of both the companies as
they do not have any notable interest bearing long-term debt It is a little surprising for big
companies like these However it led me to think that itrsquos a norm for this oil marketing industry
Dividend payments are more or less similar which hardly affects the net cash flow
Overall cash flow analysis suggests that MPL has a more stable policy towards expansion and
liquidity Other than last yearrsquos huge payment to the creditors POCL has a high but somewhat
unstable policy
- 10000000 20000000 30000000 40000000 50000000 60000000 70000000 80000000
2007
2008
2009
MPL POCL
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Chapter 05
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Page 38
50 Conclusion
Padma Oil Company Limited and Meghna Petroleum Limited are both profitable companies
They play a great role in the proper marketing of the very important and petroleum products
throughout the country Though there are a lot of government regulations exist the companiesrsquo
managing ability is vital to companiesrsquo success From this point of view both the companies are
performing well enough
The comparative study unveils some important facts about the companies Though it is
somewhat unfair to compare the two companies because of their different history market
capitalization investment etc my analysis brought out some important points
In terms of liquidity MPL is performing better MPL has a better current ratio and net working
capital ratio Though POCL has better quick ratio the cash flow analysis surely favors MPL
MPL has a more favorable profitability condition than POCL with higher average net profit
margin ROA ROE and net profit amount Not to mention POCL has total assets equals to 2-3
times of what MPL has but MPL beats POCL in net profit amount every year except last year It
is a very impressive performance
As MPL was listed as a public company on 2007 it is too early to comment on its trend on
market measures POCL has a better EPS but declining PE ratio whereas MPL had a rise in last
year in PE POCL has a more favorable debt-to-equity ratio than MPL
Ratio trend and cash flow analysis suggest that MPL perform marginally better than POCL
financially
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-
Bibliography
Annual Reports 2006-07 2007-08 2008-2009 Padma Oil Company Ltd
Annual Reports 2006-07 2007-08 2008-2009 Meghna Petroleum Ltd
Wild John J et al (2001) Financial Statement Analysis- 7th edition McGraw-Hill
Helfert Erich A (2001) The Nature of Financial Statements The Cash Flow Statement
Financial Analysis - Tools and Techniques - A Guide for Managers McGraw-Hill p 42
doi1010360071395415
Jonas Elmerraji on April 2005 in his article ldquoAnalyze Investments Quickly with Ratiosrdquo
httpwwwinvestopediacomarticlesstocks06ratiosasp
Susan Ward on May 1 2008 ldquoFinancial Ratio Analysis for Performance Checkrdquo
httpsbinfocanadaaboutcomodmanagementa3ratioshtm
Dhaka Stock Exchange website httpwwwdsebdorg
Padma Oil Company website httpwwwpoclgovbd
- File 01pdf
- File 02pdf
- File 03pdf
- File 04pdf
- File 05pdf
- File 06pdf
- File 07pdf
- File 08pdf
-