ratio analysis of financial statements of hindustan petroleum and bharat petroleum

7/29/2019 Ratio analysis of financial statements of Hindustan Petroleum and Bharat petroleum.

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FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is the collective name for the tools and techniques that

are intended to provide relevant information to decision-makers. The primary

objective of financial reporting is to provide information to present and potential

investors, creditors, and others in making rational investment, credit and other

decisions. Effective decision-making requires evaluation of the past performance of

companies and assessment of their future prospects.

Purpose of financial statement analysis:

The purpose of this analysis is to assess a companys financial health andperformance. Financial statement analysis consists of comparisons for the same

company over periods of time and for different companies in the same industry or

different industries.

Financial statement analysis enables investors and creditors to

Evaluate past performance and financial position; and

Predict future performance.

Standards of comparison:

Financial analysts look for pertinent standards of comparisons to determine whether

the results of their financial statement analysis are favourable or unfavourable. For

this purpose, comparisons are made with the following:

General rule-of-thumb indicators

Past performance of the company

Internal standards Industry standards

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

The most commonly used analytical techniques are:

1. Horizontal analysis

2. Trend analysis

3. Vertical analysis

4. Ratio analysis


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RATIO ANALYSIS

Ratio analysis involves establishing a relevant financial relationship between

components of financial statements. Two companies may have earned the same

amount of profit in a year, but unless the profit is related to sales or total assets, it is

not possible to conclude which of them is more profitable. Ratio analysis helps in

identifying significant relationship between financial statement items for further

investigation. If used with understanding of industry factors and general economic

conditions, it can be a powerful tool for recognizing a companys strengths as well as

its potential trouble spots. Commonly used financial ratios are as follows:

PROFITABILITY

RATIO

LIABILITY

RATIO

SOLVENCY

RATIO

CAPITAL

RATIO

Profit margin Current ratio Debt on equity Price earnings

Asset turnover Quick ratio Liability to equity Dividend yield

Return on assets Debtors turnover Interest coverage Price to book ratio

Return on equity

Earnings per share

Thus financial ratios are used to evaluate profitability, liquidity, solvency, and capital

market strength.


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PROFITABILITY RATIO

Profitability ratios measure the degree of operating success of a company. Investors

are keen to learn about the ability of the company to earn revenues in excess of its

expenses. They will not be interested in a company that does not earn a sufficient

margin on its sales. Failure to earn an adequate rate of profit over a period will also

drain the companys cash and impair its liquidity. The commonly used rations to

evaluate profitability are:

1. Profit margin

2. Asset turnover

3. Return on assets

4. Return on equity

5. Earnings per share


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1.PROFIT MARGIN

EXPLANATION: This ratio is also known as return on sales (ROS). It measures the

amount of net profit earned by each rupee of revenue.

HINDUSTAN PETROLEUM BHARAT PETROLEUM

2010-11 2011-2012 2012-2013

HINDUSTAN PETROLEUM 1.24 0.55 0.43

BHARAT PETROLEUM .95 .61 1.10

=

100

1539.01123772.42

100 = 1.24 %

991.43

178139.23 100 = 0.55 %

904.71

206529.34

100 = 0.43 %

Year 2010-2011

Year 2011-2012

Year 2012-2013

1546.68163218.21

100 = .95%

1311.27

5211972.97 100 = .618%

2642.90

240115.75 100 = 1.10%

Year 2010-2011

Year 2011-2012

Year 2012-2013


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INTERPRETATION:

INTERCOMPANY COMPARISON:

Between HP and BP it can be analyzed that there is a very little profit margin difference i.e. its just

0.29% in 2010-11, .06% in 2011-12, 0.67% in 2012-13.

INTRACOMPANY COMPARISON

HP: In case of HP, profit margin ratio is consistent with only very little variation i.e. from 2010-

2011till 2012-2013, it has shown a consistent decrease of 0.69% and 0.12% which is not a good

indicator. It indicates that there is an increase in material cost, salaries and wages and other operating

expenses.

BP: in case of BP, profit margin ratio is not consistent, it shows varied variations i.e. from 2010-11 to

2011-12, it shows a decrease of 0.34% and from 2011-12 to 2012-13, it shows an increase of 0.49%,

which is good indicator.


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2.ASSET TURNOVER

EXPLANATION: This is a measure of a firms efficiency in utilizing its assets. It

indicates how many times the assets were turned over in a period in order to

generate sales. If the asset turnover is high, we can infer that the enterprise is

managing its assets efficiently. A low asset turnover implies the presence of more

assets than a business needs for its operations.


2010-2011 2011-2012 2012-2013HINDUSTAN PETROLEUM 3.28 2.7 2.8

BHARAT PETROLEUM 4.56 3.48 7.17

INTERPRETATION:

INTERCOMPANY COMPARISON: Not much variation can be found in this case between the

asset turnover ratios of both the companies, except for 2010-2011 and 2012-2013 with a difference of

1.28% and 4.34%. A higher asset turnover ratio in case of BP shows that the company is managing its

assets in a very efficient manner as compared to HP.

Asset turnover =

.

123772.42

37715.46= 3.28

178139.23

65934.22= 2.70

206529.34

73677.14= 2.80

Year 2010-2011

Year 2011-2012

Year 2012-2013

163218.21

35089.12= 4.56

211972.97

60741.46= 3.489

240115.75

33493.67= 7.17

Year 2010-2011

Year 2011-2012

Year 2012-2013


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.

INTRACOMPANY COMPARISON:

HP: The Company shows small degree of variation and its asset turnover ratio is gradually

falling. However the magnitude of change is not very high. A falling asset turnover ratio

shows there are more assets present in the business than it needs and are therefore not being

utilized to its optimum use.

BP: The Company shows a higher degree of variation of 3.69% from 2011-12 to 2012-13. In

the year 2012-2013, it is the highest i.e. 7.17%, which indicates company is utilizing assets

efficiently. However a fall in the previous year shows that there is either non availability of

resources or it has not utilised resources to their optimum level.


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3.RETURN ON ASSETS

EXPLANATION: It is also known return on investment. This is a measure of

profitability from a given level of investment. It is an excellent indicator of a

companys overall performance.

Return on assets = Profit after Tax/Average Total Assets *100


2010-2011 2011-2012 2012-2013



INTERPRETATION:

INTERCOMPANY COMPARISON: Between the 2 companies HP and BP there is not much

difference in return on assets, except in the year 2012-13 i.e. 2.76% which s a quite good

difference as compared to previous year. BP shows a higher return on asset as compared to HP.

The highest difference being in the case of 2012-2013 i.e. Of 2.76 %, it shows that BP is able to

acquire more profitability from its given level of investments as compared to HP.


HP: The Company shows a high degree of variation in the year 2011-2012 i.e. of 2.58%. In 2012-

13 it came down to 1.22% as compared to 1.50% of 2012-13. It indicates that company is not able

1539.0137715.46

100 = 4.08 %

991.43

65934.22 100 = 1.50 %

904.71

73677.14

100 = 1.22%

Year 2010-2011

Year 2011-2012

Year 2012-2013

1546.5835089.12

100 = 4.40%

1311.27

6074.46 100 = 2.15%

2642.90

66297.19

100 = 3.98%

Year 2010-2011

Year 2011-2012

Year 2012-2013


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to acquire a high level of profitability from its investments. It therefore points towards a

decreasing overall profitability of the company.

BP: There is a much variation in case of BP can be seen in all the years i.e. in 2010-11, 2011-12

and 2012-13. In 2011-12, it recorded a fall of 2.25% as compared to the year 2010-11. But in2012-13, it recorded an increase of 1.83%.This shows that there is not much consistency in

acquiring a good level of profitability from its investments. The company is facing a decrease in

the overall profitability on assets.


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4.RETURN ON EQUITY

This is a measure of profitability from shareholders standpoint. It measures the

efficiency in the use of shareholders funds.

Return on equity = Profit after Tax / Average Shareholders Equity*100


2010-2011 2011-2012 2012-2013



INTERPRETATION:

INTERCOMPANY COMPARISON: Between the 2 companies, BP shows a higher ROE

as compared to HP except in the year 2010-11. Highest difference is in the year 2012-13 i.e.

of 9.84. It shows that BP has a higher efficiency in the use of shareholders funds as compared

to HP.


HP: TheYear 2011-2012 shows the highest fall in the ROE which indicates that the company

is not managing its funds in the most efficient manner.

1539.01

12051.88100 = 12.77 %

991.43

12834.16100 = 7.72%

904.71

13424.46100 = 6.73%

Year 2010-2011

Year 2011-2012

Year 2012-2013

1546.68

13572.16 100 = 11.40%

1311.27

8185.74 100 = 16.01%

2642.90

15773.94 100 = 16.67%

Year 2010-2011

Year 2011-2012

Year 2012-2013


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BP: The Company managed to enjoy an increasing rate on ROE. In the year 2010-11, the

ROE was 11.40%, which climbed to 16.01% in 2011-12, which further laddered to 16.57% in

2012-13. It indicates that the company is managing its funds in the most efficient manner.


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5.EARNING PER SHARE

Financial analysts regard the earning per share (EPS) as an important measure of

profitability. EPS is useful in comparison over time.

Earnings per share =Profit after Tax / No. of shares


2010-2011 2011-2012 2012-2013



INTERPRETATION:

INTERCOMPANY COMPARISON: Between the two companies BP shows a higher EPS as

compared to HP except in the year 2010-11. Major differences are in the year 2011-12 and 2012-13. It

shows the earning of each shareholder on each share. Shareholders of BP are more likely to be in a

more profitable position than of HP due to its higher EPS.

1539.01

33.863= 45.44 /

911.43

33.863= 26.92 /

904.71

33.863 = 26.71 /

Year 2010-2011

Year 2011-2012

Year 2012-2013

42.78 /

1311.27

36.15= 36.29 /

2642.90

72.38

= 36.55 /

Year 2010-2011

Year 2011-2012

Year 2012-2013


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HP: The EPS is inconsistent, with highest in the year 2010-2011 and lowest in the year 2012-2013. It

shows a consistent decrease in the EPS which is not a good indicatorfor the companys shareholders.

BP: There is not much difference in the EPS in the year 2011-12 and 2012-13. But a difference of

8.49% can be seen between the years 2010-2011 and 2012-13. The EPS in the year 2012-13, indicates

the declining profitability in holding the sharesas compared to the year 2010-11.


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LIQUIDITY RATIOS

Liquidity is the ability of a business to meet its short-term obligations when they fall

due. An enterprise should have enough liquid and other current assets which can beconverted into cash so that it can pay its suppliers and lenders on time. The

commonly used ratios to evaluate liquidity are:

1. Current ratio

2. Quick ratio

3. Debtor turnover

4. Inventory turnover


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1.CURRENT RATIO

This is the ratio of current assets to current liabilities. It is a widely used indicator of a

companys ability to pay its debts in the short-term, and shows the amount of current

assets a company has per rupee of current liabilities. A current ratio of more than

one means that a business has more current assets per rupee of current liabilities,

implying that it may be able to pays its current liabilities using its current5 assets. In

other words, its operations will not be disrupted. Current ratio is expected to be at

least 2:1.

Current ratio = Current Assets / Current Liabilities


2010-2011 2011-2012 2012-2013

HINDUSTAN PETROLEUM 1.36:1 .86:1 .88:1

BHARAT PETROLEUM 1.25:1 .84:1 .90:1

INTERPRETATION:

INTERCOMPANY COMPARISON: Between HP and BP the current ratio is almost equal. It does

not show very high level of variation. The highest difference is in the year 2010-11 i.e. 0.11%. It helps

in measuring the liquidity of the business.

26590.97

19606.60= 1.36: 1

36759.74

42700.36= 0.86: 1

38230.64

43262.65= 0.88: 1

Year 2010-2011

Year 2011-2012

Year 2012-2013

27604.21

21958.43= 1.25: 1

39445.33

4667.55= .84:1

38389.81

42693.40= 0.90: 1

Year 2010-2011

Year 2011-2012

Year 2012-2013


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HP: The ideal current ratio is preferred as 2:1 but in case of HP it does not show the ideal condition

in any of the three years. A lower current ratio indicates that there are fewer current assets than current

liabilities. In the year 2011-12, it recorded a current ratio of 0.86:1 which is not a good indicator for

the company, i.e. the company has the assets of only 0.86 times to its current liabilities.

BP: Just like HP, this company also does not show the ideal condition in any of the three years. In the

year 2012-13 it recorded a current ratio of 0.90:1 which is not a good indicator for the company i.e.

the company has the assets of only 0.90 times to its current liabilities.


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2.QUICK RATIO

All current assets are not equally liquid. While cash is readily available to make

payments to suppliers and debtors can be converted into cash with some effort,

inventories are two steps away from cash. Thus a large current ratio by itself is not a

satisfactory measure of liquidity when inventories constitute a major part of the

current assets .Therefore, the quick ratio or acid test ratio is computed as a

supplement to the current ratio. This ratio relates relatively more liquid current assets

less inventories, to current liabilities. Quick ratio is expected to be 1:1

Quick ratio = Quick Assets / Current Liabilities


2010-2011 2011-2012 2012-2013

HINDUSTAN PETROLEUM .51 .40 .50

BHARAT PETROLEUM .55 .5 .5

INTERPRETATION:

INTERCOMPANY COMPARISON: Between HP and BP, there is not a much difference in the

quick ratio. The ideal quick ratio is considered to be 1:1, but none of the two has managed to achieve

it. Both of them are inefficient to convert its liquid assets into cash to pay off its liabilities.

9968.69

19606.60= 0.51: 1

17305.21

42700.36= 0.40: 1

21791.94

43262.65= 0.50: 1

Year 2010-2011

Year 2011-2012

Year 2012-2013

12228.92

21958= 0.55: 1

23497.27

46667.55= .5: 1

21699.44

42693.40= .50:1

Year 2010-2011

Year 2011-2012

Year 2012-2013


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HP: A lower quick ratio indicates that the company is inefficient to convert its current assets into cash

in order to pay off its liabilities. The quick ratio is much below to ideal ratio i.e. 1:1 which indicates

the company is inefficient to pay off its current obligations.

BP: The quick ratio is lesser than the ideal ratio in all the years which indicates that the company

does not have many liquid assets to pay off its current obligations. Inventories are not included as it

might not be possible to sell off the inventories immediately.


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3..DEBTOR TURNOVER RATIO

A companys ability to collect from its customers in a prompt manner enhances its

liquidity. The debtor turnover ratio measures the efficacy of a firms credit policy and

collection mechanism and shows the number of times each year the debtor turn in to

cash. It provides some indication of the quality of a firms debtors and collection effort

.High debtor turnover indicates that debtors are being converted rapidly into cash

and the quality of the companys portfolio is good.

Debtors turnover ratio = Sales / Average Debtors




INTERPRETATION:

INTERCOMPANY COMPARISON: Between HP and BP, HP showed higher turnover ratio except

in the year 2010-11. which proves that HP has good quality debtors i.e. Debtors are rapidly converting

into cash.

123772.42

2545.86= 48.61

178139.23

3321.01= 53.64

206529.34

4250.10= 48.59

Year 2010-2011

Year 2011-2012

Year 2012-2013

163218.21

2363.55= 61.28

211972.97

4455.59= 47.57

241795.98

5201.76= 46.48

Year 2010-2011

Year 2011-2012

Year 2012-2013


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HP: A decrease in ratio from the year 2011-12 to 2012-13 indicates that the debtors are increasing

while an increase in the ratio from 2010-11 to 2011-12, indicates that the debtors are decreasing and

they are converting into cash.

BP: This Company do not have good quality of debtors. The ratio has been decreased constantly, it

indicates that debtors are not being converted into cash at a good rate.


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AVERAGE DEBT COLLECTION

It is common to express debtors turnover in AVERAGE DEBT COLLECTION

PERIOD, in order to calculate relative to the companys credit period.

Average debt collection period = 360 / Debtors Turnover


2010-2011 2011-2012 2012-2013



INTERPRETATION

INTERCOMPANY COMPARISON: Between HP and BP, HP takes less time in collection of debts

from its customers as compared to BP, except in the year 2010-11.

.


HP: The average debt collection period is decreasing from the year 2010-11 to 2011-12, it indicates

that the company takes less time in collection of debts. But it showed an increase in avg. debt

collection period from 2011-12 to 2012-13, i.e. 6.71 days to 7.40 days.

360

48.61 = 7.40

360

53.64= 6.71

360

48.59= 7.40

Year 2010-2011

Year 2011-2012

Year 2012-2013

360

61.27 = 5.87

360

47.57= 7.56

360

46.48= 7.74

Year 2010-2011

Year 2011-2012

Year 2012-2013


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BP: The average debt collection period is increasing constantly, it indicates that the company takes

more time in collection of debts.


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4.INVENTORY TURNOVER RATIO

This ratio shows the number of times a companys inventory is turned to sales.

Investment in inventory represents idle cash .The lesser the inventory, the greater

the cash available for meeting operating needs. High inventory turnover is a sign of

efficient inventory management.

Inventory turnover management = Cost of Goods Sold / Average Inventory


2010-2011 2011-2012 2012-2013



INTERPRETATION:

INTERCOMPANY COMPARISON: Between HP and BP, HP has a lower inventory turnover ratio

which indicates that BP has better inventory management than HP. BP has fast moving inventory and

it runs lower risk of obsolescence as compared to HP.


131184.13

14600.75= 8.98

170205.64

18038.40= 9.435

198492.04

177946.60= 11.06 :

Year 2010-2011

Year 2011-2012

Year 2012-2013

152933.34

13701.97= 11.16

199381.59

15661.37= 12.73

226532.27

16319.21= 13.88

Year 2010-2011

Year 2011-2012

Year 2012-2013


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HP: An increase in ratio in the years 2010-11, 2011-12 and 2012-2013, indicates that the company is

able to reduce its cost on interest, insurance and storage charges.

.

BP: An increase in ratio in the years 2010-11, 2011-12 and 2012-2013, indicates that the company is

able to reduce its cost on interest, insurance and storage charges.


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SOLVENCY RATIO

Long term solvency of a business is affected by extent of debt used to finance the

assets of the company. The presence of heavy debt in company capital structure isthought to reduce company solvency because debt is more risky than equity. The

debt to equity ratio and the interest coverage ratio are important indicator of

solvency. The commonly used ratio to measure solvency are as follows:

1. Debt on equity ratio

2. Liability to equity ratio

3. Interest coverage ratio


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1.DEBT EQUITY RATIO

A wise mix of debt and equity can increase the returns on equity :

a) Debt is generally cheaper than equityb) Interest payments are tax deductible expenses.

However, excessive use of debt financing is risky. A company has a legal obligationto make interest and principle payments at a due date .if a company takes on somuch debts that it becomes unable to make the required interest and principledisbursements on time, the creditors may force liquidation of the company.

The ratio indicates the extent of use of financial leverage .A high debt equity ratioindicates aggressive use of leverage. A low ratio suggests that the company has asmall degree of leverage is too conservative.

Debt to equity ratio = secured loans +unsecured loans / shareholders equity




INTERPRETATION:

INTERCOMPANY COMPARISON: In all the years HP has a high debt equity ratio as compared to

BP which indicates that HP is more risky for creditors.


25021.19

12545.80= 1.99: 1

27479.259

13122.52= 2.09: 1

32458.27

13726.40= 2.37: 1

Year 2010-2011

Year 2011-2012

Year 2012-2013

18971.87

14057.62= 1.34: 1

21246.44

14913.86= 1.42: 1

23546.21

16634.02= 1.41: 1

Year 2010-2011

Year 2011-2012

Year 2012-2013


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HP:There has been an increase in the ratio in all the years which indicates lower proportion of owner

supplied capital.This indicates that the company is not safe for creditors and the company is not

conservative.

BP: There has been increase in ratio from 2010-11 to 2011-12 indicating that the company has

become risky for creditors and it does aggressive use of leverage


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2. LIABILITY TO EQUITY RATIO

A variant of the debt to equity ratio is the liabilities to equity ratio. It is especially

useful in the case of firms that keep rolling over short term obligations

Liability to equity ratio = all liabilities / shareholders equity


2010-2012 2011-2012 2012-2013



INTERPRETATION:

INTERCOMPANY COMPARISON: Both the companies have high ratio indicating that both the

companies have become risky for creditors.


HP: It has a consistent liability to equity ratio.

BP: A much higher increase in ratio in the year 2011-12 indicates company has made aggressive use

of leverage and is not safer for the creditors.

47823.42

12545.80= 3.81: 1

58561.55

12545.8= 4.41: 1

62518.33

13726.40= 4.59: 1

Year 2010-2011

Year 2011-2012

Year 2012-2013

19979.41

14057.62= 1.42: 1

50693.12

14913.86= 3.39: 1

50383.37

16634.02= 3.02: 1

Year 2010-2011

Year 2011-2012

Year 2012-2013


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INTEREST COVERAGE RATIO

This is a measure of the protection available to creditors for payment of interest

charges by the companies. The ratio shows whether the company has sufficient

income to cover its interest requirement by a wide margin. A high ratio implies

adequate safety for payment of interest even if there was to be a drop in the

companys earnings.

Interest coverage ratio = Profit before interest and tax / Interest expenses


2010-2011 2011-2012 2012-2013



INTERPRETATION:

INTERCOMPANY COMPARISON: This ratio indicates whether the company has sufficient

income to cover its interest payments.BP has a much higher interest coverage ratio as compared to HP

which indicates BP has an adequate safety for payment of interest even if there is a drop in the

companys earnings.


HP: There has been a consistent decrease in ratio indicating that the company doesnt provide

adequate protection to its creditors for payment of interest charges.

3230.14

884= 3.65

3358.97

2139.24= 1.57

3493.89

2019.33= 1.73

Year 2010-2011

Year 2011-2012

Year 2012-2013

3522.74

1100.7= 3.20

3683.76

1799.59= 2.05

5860.93

1825.24= 3.21

Year 2010-2011

Year 2011-2012

Year 2012-2013


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BP: There has been a decrease in ratio from 2010-11 to 2011-12 indicating that the company provides

less protection to creditors for payment of interest charges as compared to previous year.


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CAPITAL MARKET RATIO

It relates the market price of a companys share to the companys earnings and

dividend. The most commonly ratios that aid investors and analysts in understandingthe strength of the company in the capital market are as follows:

1 Price earnings ratio

2 Dividend yield

3 Price to book ratio


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1.PRICE EARNING RATIO

It measures extensively used in investment analysis. It is considered as an indicator

of firms growth prospectus.

Profit earnings ratio = Average Stock Price / Earnings Per Share


2010-2011 2011-2012 2012-2013



INTERPRETATION:

INTERCOMPANY COMPARISON: There are some variations in the P.E ratio in all the years. If

overall analysis is done it can be seen that HP has a higher P.E. ratio as compared to BP.


HP: Theyear 2010-2011 shows the highest P.E. ratio which indicates stock market is confident in the

company`s future earnings growth but it fell down in next two years but the difference was negligible

as compared to previous year.

356.88

45.448= 11.86

295.27

26.92= 10.96

283.22526.71

= 10.60

Year 2010-2011

Year 2011-2012

Year 2012-2013

306.67

42.78= 7.16

347.24

36.26= 9.5

377.7

36.55 = 10.33

Year 2010-2011

Year 2011-2012

Year 2012-2013


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BP: The Year 2010-11 shows the lowest PROFIT EARNING ratio amongst all these years which

indicates lower faith in in the company`s future earnings growth.


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2. DIVIDEND YIELD RATIO

It represents the current cash return to shareholders. It is the ratio of dividend per

share to current market price. The increase in the dividend yield indicates that the

cash returns on share went up.

Dividend yield ratio = Dividend per Share / Average Stock Price


2010-2011 2011-2012 2012-2013

HINDUSTAN PETROLEUM 3.92 2.87 3


INTERPRETATION:

INTERCOMPANY COMPARISON: Between the 2 companies HP is the one which is giving a

lesser dividend yield as compared to BP. The major difference being in the year 2010-11 between the

dividend yield of both the companies.


HP: The Company is providing a higher current cash return to its shareholders in the year 2010-11 as

compared to following years.

14

356.88100 = 3.92%

8.5

295.27100 = 2.87%

8.5

283.225100 = 3%

Year 2010-2011

Year 2011-2012

Year 2012-2013

14

306.67 100 = 4.56%

11

347.245 100 = 3.16%

11

377.7 100 = 2.91%

Year 2010-2011

Year 2011-2012

Year 2012-2013


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BP: The Company is consistently providing higher dividend yield the highest being in the year 2010-

2011. It shows the total return to shareholders in the form of dividend.


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3. PRICE TO BOOK RATIO

This measure compares a companys stock price with the book value .Book value

per share is the amount of shareholder equity dividend by the number of shares. A

low P/B ratio is often seen as an indication of under-pricing of the stock. A price to

book ratio of more than one means that the market expects the stock to earn at a

rate higher than the required rate.

Price to book ratio = average market price per share / book value per share

Book value per share = shareholders equity / no. of equity shares


2010-2011 2011-2012 2012-2013HINDUSTAN PETROLEUM 0.96:1 0.76:1 0.69:1

BHARAT PETROLEUM 0.78:1 0.85:1 1.64:1

INTERPRETATION:

INTERCOMPANY COMPARISON: Between the two companies BP shows a higher price to book

ratio in 2011-12 and 2012-13 as compared to HP. However the ratio was less 2010-11. A more than 1

ratio indicates that market expects the stock to earn at a rate higher than the required rate only in theyear2012-13 it achieved the ideal ratio.

356.88

370.49= 0.96: 1

295.27

387.51= 0.76: 1

283.225

405.35= 0.69: 1

Year 2010-2011

Year 2011-2012

Year 2012-2013

306.67

388.86= 0.78:1

347.245

408.5= 0.85: 1

377.7

230.06= 1.64:1

Year 2010-2011

Year 2011-2012

Year 2012-2013


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HP: The Company shows a consistent low price to book ratio in all the years the lowest being in the

year 2012-13.

BP: The Company shows an increasing trend in this case.The highest being in the year 2012-13.

ratio analysis of financial statements of hindustan petroleum and bharat petroleum

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