Ratios Of Two British Petroleum Companies Finance Essay

Gross saless for this company have been increased with 5.12 ratios, last twelvemonth and this twelvemonth the operating per centum of gross revenues is 20 % as comparison to last twelvemonth it is same this twelvemonth every bit good, this demonstrates the company ‘s stability during the last twosome of old ages. ROCE is decreased this twelvemonth from 21 to 18 which showing the gross revenues per lb of plus is decreased, therefore current twelvemonth assets has non been used efficiently.

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The present ratio calculates a company ‘s strength to come up with its current liabilities out of the present assets. a ratio of minimal 2:1 rate is expected. The company ‘s present ratio is more however better than the old twelvemonth, so it can be said that this twelvemonth the company has utilized in proper manner.

Gearing ratio is traveling up in the current twelvemonth as comparison to the last twelvemonth, which is taking to a small hazard of settlement as the proportion of long term liabilities to capital employed is being traveling up, so the company need to pay more involvement as set abouting more outside assets, this will take to convey down the net income and bringing portion holders investings at hazard. Though this company does non demo any mark of pitching to the high degree.

Interest screen ratio has come down as comparison to the last twelvemonth, which makes the company wage less as involvement.

Interest screen ratio is reduced as comparison to the old twelvemonth, as the company gaining less involvement screen in long term. The company is equal to pay out involvement on long term liabilities if the company ‘s net income is reduced. Dividend screen ratio is besides reduced throughout this twelvemonth which puting less opportunities of geting dividend to the portion holders if the net net income is falling.

Quick ratio is turning better which shows that the company is more equal to pay off its current liabilities out of its current assets however the net incomes per portion is falling a spot.

No-Fat Limited

Gross saless of the No-Fat Limited are besides heightened with a small balance. Compare to the old twelvemonth the operating net income ratio is besides the same, the net net income ratio is reduced from 28 % to 20 % comparison to last twelvemonth and this show the disbursals are increased this twelvemonth.

The company is highly pitched as its using a high balance of international capital, which brings more opportunities of the colony of the company.

The earning per portion is reduced, which shows that the company ‘s fixed cost is increased during the present twelvemonth.

Quick ratio is besides reduced, conveying the company less capable to congregate its current liabilities quickly.

Decreasing net net income is besides bring oning the portion holders to acquire less dividend and low involvement to pay out for its long term liabilities, these things puting the company in tally a hazard.

The assets of the company have non been used really good, which result in diminishing ROCE ratio of the company this twelvemonth.

B. Petroleum. ( company 1 )

Current twelvemonth

Current Ratio

Currant Assets /Current Liabilitiess

( 4000.00 + 9000.00 + 5000.00 ) / 15000.00 = 1.2

Operating net income ratio

Net income before revenue enhancement and interest/sales

8100.00 / 40500.00 = 20 %

Net net income ratio

Net income after involvement and revenue enhancement / gross revenues

8100.00 – 2430.00 = 5670.00

5670.00 – 276.00 = 5394.00 / 40500.00

5394.00 / 40500.00 = 13 % .

Gearing ratio

External liabilities / entire capital employed

2300.00 + 600.00 = 2900.00

2900.00 / 6000.00 + 36200.00 + 2300.00 + 600.00 = 6.4

Gaining per portion

Net income after revenue enhancement / entire Numberss of portions

( 8100.00 -276.00 – 2430.00 ) / 36200.00 = 15p

Interest screen ratio

Operating net income / entire involvement during the twelvemonth

8100.00 / 276.00 = 29 Timess

Dividend screen ratio

Net profit/dividend paid during the twelvemonth

5394.00 / ( 36200.00 x 7 ) = 5394.00 / 2534.00 = 2.12 times

Tax return on capital employed

Operating net income / Total capital employed

8100.00 / ( 36200.00 + 600.00 + 6000.00 ) = 18

Quick acid ratio

Current assets without stock/current liabilities = ( debtors+ hard currency ) /c. liabilities

( 9000.00 + 4000.00 ) / 15000.00 = .86 %

Previous twelvemonth

Current Ratio

Currant Assets /Current Liabilitiess

( 3000.00 + 7000.00 + 5000.00 ) / 14000.00 = 1.07

Operating net income ratio

Net income before revenue enhancement and interest/sales

7705.00 / 38525.00 = 20 %

Net net income ratio

Net income after involvement and tax/sales

( 7705.00 – 180.00 – 2311.00 ) / 38525.00 = 13.5 %

Gearing ratio

External liabilities/total capital employed

600.00 / ( 4500.00 + 600.00 + 30500.00 ) = 1.69

Interest screen ratio

Operating profit/total involvement during the twelvemonth

7705.00 / 180.00 = 43 times

Dividend screen ratio

Net net income / dividend paid during the twelvemonth

( 180.00 – 7705.00 – 2311.00 ) / 30500.00 x.8 = 5214.00 / 24400.00 = 21 times

Gaining per portion

Net income after tax/total Numberss of portions

5214.00 / 30500.00 = 17p

Tax return on capital employed

Operating net income / entire capital employed

7705.00 / 35600.00 = 21

Quick acid ratio

Current assets without stock / current liabilities = ( debitors + hard currency ) / current liabilities

( 6000.00 + 3000.00 ) / 14000.00 = .64 %

Company 2: No-Fat Limited

Current twelvemonth

Current Ratio

Currant Assets / Current Liabilitiess

( 150000.00 + 15000.00 + 730000.00 ) / 350000.00 = 2.56

Operating net income ratio

Net income before revenue enhancement and interest/sales

144375.00 / 412500.00 = 35 %

Net net income ratio

Net income after involvement and revenue enhancement / gross revenues

( 144375.00 – 62000.00 ) / 412500.00 = 20 %

Gearing ratio

External long-run liabilities / entire capital employed

( 150000.00 + 250000.00 + 200000.00 ) / ( 150000.00 + 250000.00 + 200000.00 + 20000.00 + 90000.00 ) = 600000 / 710000 = 84 %

= 84 %

Interest screen ratio

Operating profit/total involvement during the twelvemonth

144375.00 / 62000.00 = 2.32 times

Dividend screen ratio

Net profit/dividend paid during the twelvemonth

82375.00 / 27000.00 = 2.75 times

Gaining per portion

Net income after tax/total Numberss of portions

82375.00 / 180000.00 = 45p

Quick acid ratio

Current assets without stock/current liabilities = ( debitors + hard currency ) /c. liabilities

( 150000.00 + 15000.00 ) / 350000.00 = 50 %

Tax return on capital employed

Operating profit/total capital employed

144375.00 / 710000.00 = 20 %

Previous twelvemonth

Current Ratio

Currant Assets /Current Liabilitiess

( 384000.00 + 90000.00 + 16000.00 ) / 200000.00 = 2.45 %

Operating net income ratio

Net income before revenue enhancement and interest/sales

125543.00 / 358695.00 = 35 %

Net net income ratio

Net income after involvement and tax/sales

( 125543-25000 ) /358695 =28 %

Gearing ratio

External long-run liabilities /total capital employed

( 150000.00 + 130000.00 ) / ( 130000.00 + 90000.00 + 100000.00 + 150000.00 ) = 280000

= 280000 / 470000 = 59 %

Interest screen ratio

Operating net income / entire involvement during the twelvemonth

125543.00 / 25000.00 = 5 times

Dividend screen ratio

Net net income / dividend paid during the twelvemonth

125543.00 / 18000.00 = 6.97 times

Quick acid ratio

Current assets without stock / current liabilities = ( debtors+ hard currency ) /c. liabilities

( 90000.00 + 16000.00 ) / 200000.00 = 53 %

Tax return on capital employed

Operating net income / entire capital employed

125543.00 / 470000.00 = 26 %

Gaining per portion

Net income after tax/total Numberss of portions

100543.00 / 180000.00 = 55p

Petroleum ( company 1 )

Current twelvemonth old twelvemonth

Asset Turnover = 32400 =.058 30820 =0.77

47500

Acid Test Ratio = 18000-5000 = 0.8:1 15000-6000 = 0.5:1

15000 14000

Operating Net income Margin = 25 % ( given ) 25 % given

Current Ratio = 18000 =1.2:1 15000 1.06:1

15000 14000

ROCE = 8100 ten 100 = 16.03 % 7705 ten 100 = 19.55 %

44800 + 3000 38000 + 1000

Debtors Collection Period= 9000 x 365 = 101 yearss 6000 ten 365 = 71 Dayss

32400 30820

No-Fat Limited. Company 2

Ratio Comparison between both companies

British crude oil

No-Fat Limited

Previous Year

This twelvemonth

Previous Year

This Year

Current ratios.

1.07

1.2

2.45

2.56

Operating Net income ratios.

20 %

20 %

35 %

35 %

Net net incomes.

13.5 %

13 %

28 %

20 %

Gearing ratios.

1.69

6.4

59 %

84 %

Gaining Per portions.

17 P

15 P

55 P

45 P

Interest Cover ratios.

43 times

29 times

5 times

2.32 times

Dividend Covers ratios.

2.1 times

2.12 times

6.97 times

2.75 times

Quick Acid ratios.

64 %

86 %

53 %

50 %

ROCE.

21 %

18 %

26 %

20 %

Decision ;

To be a possible investor the age, position and overall state of affairs is non considered as they look for the growing and dividends to cover the disbursals as he is a pupil. And it could be suggested that British Petroleum is the better option to travel with for him.

Comparing to No-Fat Limited British Petroleum can be considered as a stable in fiscal ways as it is matured and Profit doing company.

Taking into consideration the No-Fat Limited is enduring from several drawbacks as it is doing less net incomes, where as there is addition in fixed disbursals which may take to no or less payment of involvement in its long term liabilities and its prone to settlement. Hence it can be said that it would non be a worth to put in it.

Because of high pitching ratios of a company may acquire the investor into loss.

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