Financial Ratio Analysis: Pakistan State Oil Essay

In 2011, company is more liquid than other dickens years this is due to increase of Rs 983917 in current asset from 2010 to 2011. And in 2011 to 2012 there is decrease of Rs 227300 in current asset. Quick Ratio is naughty in 2012 because stock-in-trade i.e. inventory decreases by Rs. 6854599 in 2012. Fixed Asset upset is higher it means company has utilized its fixed assets more efficiently as comp be to other period. Debt symmetry and debt to equity ratio channelise that Company is more supplementd in 2012 than other periods.This higher supplement in part explains Companys sad financial performance of 2012 congener to 2011 because the leverage commits Companys interest payments that must be stipendiary regardless of economic and market conditions. The ratios indicate that Companys has a higher cost of sales in 2012 than the 2011.In 2012 Companys has a better liquidity position, with both the current ratio and the supple ratio being higher than other years. In 2012, total assets are higher than other two years and its fixed asset upset is significantly higher than other year. Alternatively, the poor fixed asset dollar volume may indicate overcapacity caused by extremely poor forecasts of future sales. Or, the poor ratio may indicate a fundamental inability or inefficiency in using the deployed assets. Keep in mind, though, that the debt ratios used in the ratio analysis above used total liabilities as a bar of debt. In contrast, capital structure analysis focuses specifically on semipermanent debt in calculating leverage.DuPont System of Financial AnalysisThe DuPont analysis is connatural with analyzing ratios Company has an advantage in its leverage ratio in 2012 (Assets to integrity 6.95 compared to 6.26 and 6.89) and in its use of assets in 2010 (Total Asset Turnover of 4.93 compared to 4.19 and 3.9), yet has a poorer return on equity due to its low benefit proceeds margin. While one would expect a somewhat lower net profit margin for a fi rm with a higher leverage ratio (the firm has to pay interest to service the debt that gives the higher leverage ratio).ReferencePSO Annual Report 2012 and 2011