Ratio Analysis of Pa

Profitability Ratios
Nat profit Margin

(net income/net sales)

Analysis
This ratio shows a general rela
that the firm is earning more p
previous year we have found t
Gross profit Margin Ratio

(Gross profit/Net sales)*1

Analysis
This ratio shows the relations
the beneficial for the organiza
Total Assets Turnover
(Net sales/Total assets)*100

Analysis

This ratio shows the relationship

by the utilizing the assets of the
to decrease which is the negativ
ratio also decrease.

Return on Assets
(Net income/Total assets)*100

Analysis

This ratio gives a general relatio

positive indicator for the firm.Wh
ratio.This cause due to net incom
and this ratio is also increases.

Return on total equity

(Net income-preferred stock/o

Analysis
This ratio shows the relationship
increases it is good signal for the

Long term debt payi

Current Ratio

(Current assets/current liabilit

Analysis
Current ratio indicates the ext
ability increases which is very

Net working capital

(Current assets-Current liabili

Debt Ratio

(total liabilities/total asse

Analysis
Debt ratio indicates the percenta
when we comapre current year r
and it is negative sign for the co

Debt/equity ratio

(Total liabilities/stockholder's

Time interest earned ratio

(earnings before interest

Analysis
Increase in times interest earn
in 2007.

Short term debt paying

Average collection period

(365 days/account receiva

this portion based on sup

Average payment period

(365 days/accounts payab

this portion based on sup

Average age of inventory

(365 days/inventory turno

this portion based on sup

Analysis

Increase in average collection

sign for the company.Increase
resources.But increase in aver

Investor Analysis
Earning per share

(Net income/number of co

this portion based on sup

Price earning ratio

(Market price of share/ear

this portion based on sup

Divident payout

(Dividend per share/earning p

Analysis

Company has unable to at

Analysis of Pakistan State Oil Limited

bility Ratios

ome/net sales) *100

Years
PSO

2008
2.84%

2007
1.34%

shows a general relationship between net profit and sales of the year.If this ratio is high it
rm is earning more profit and this is beneficial for the organization.When we compare the r
year we have found that net profit margin is increasing.This is the good news for the organ

fit Margin Ratio

rofit/Net sales)*100

Years
PSO

2008
6.06%

2007
3.51%

shows the relationship between the gross profit andof the organization.In genarl the highe
cial for the organization.Higher ratio represent that company is efficient in generating the

ts Turnover

/Total assets)*100

Years
PSO

2008
3.89
times

2007
4.67

times

shows the relationship between the net sales and total assets.This shows that how much the compa
zing the assets of the firm.When we compare this ratio with the previous year ratio we have found
e which is the negative sin for the organization.This is due to tha inefficient use of assets.So when
decrease.

n Assets

e/Total assets)*100

Years
PSO

2008
11.06%

2007
6.28%

gives a general relationship between the net incom and total assats of the company.As this ratio in
dicator for the firm.When we compare this ratio with the previous year ratio we found that tha com
cause due to net income because we have found that the operating expenses are low for this reaso
tio is also increases.

n total equity

me-preferred stock/owner's equity)*100

Years
PSO

2008

2007

45.00%

22.00%

shows the relationship between net income and total equity.It shows the percentage earned on equ
t is good signal for the organization.

erm debt paying ability

assets/current liabilities)

Years
PSO

2008

2007

1.24
times

1.22
times

atio indicates the extent to which the claims of short term creditiors are covered by assets.
reases which is very good.

king capital

assets-Current liabilities)

bilities/total assets)*100

Years
PSO

2008
2007
22142472 11127546

Years

2008

PSO

76%

2007

72%

indicates the percentage of assets financed by creditiors.The lower the ratio,the better the compan
omapre current year ratio with the previous year ratio we have found that debt ratio increse in cur
egative sign for the company.

ilities/stockholder's eqity)

Years

PSO

2008

3.1

2007

2.57

times

times

erest earned ratio

s before interest taxes/interest expense)

Years

PSO

2008

98.09
times

2007

53.97
times

n times interest earned ratio that the debt paying ability in 2008 is better then

erm debt paying ability

collection period

s/account receivable turnover)

Years

2008

2007

PSO

21

12

Days

Days

ion based on supposed values.

payment period

s/accounts payable turnover)

Years

2008

2007

PSO

64

45

Days

Days

ion based on supposed values.

age of inventory

s/inventory turnover)

ion based on supposed values.

Years

2008

2007

PSO

19

14

Days

Days

n average collection period shows that chances for bad debts also increases and it is not a
he company.Increase in average payment period shows that company uses better its financ
.But increase in average age of inventory shows management not properly work.

or Analysis

per share

ome/number of common shares outstanding)

Years

2008

PSO

5.1

Years

2008

PSO

81.94

ion based on supposed values.

rning ratio

price of share/earning per share)

times

ion based on supposed values.

t payout
per share/earning per share)*100

Years

2008

PSO

28.68%

y has unable to attarct big investor because of low dividend payout and price

The End

f this ratio is high it shows

en we compare the ratio with
d news for the organization.

n.In genarl the higher the ratio

nt in generating the earnings.

t how much the company is generating sales

r ratio we have found that this ratio is going
se of assets.So when the sales decreases the

mpany.As this ratio increases this is a

we found that tha company is increasing in that
are low for this reason the net income increases

entage earned on equity.If this ratio

e covered by assets.The debt paying

the better the company position.

bt ratio increse in current year

ter then

eases and it is not a good

ses better its financial
erly work.

2007

14.3

2007

27.34
times

2007

76.80%

payout and price earning ratio.