Dividend payout ratio:
The dividend payout ratio is the amount of dividends paid to stockholders relative to the amount
of total net income of a company. The payout ratio is a key financial metric used to determine
the sustainability of a company's dividend payments.
Formula: Dividend Payout Ratio =
Dividend Per Share
Diluted Earnings Per Share
Calculations:
2019
2018
7 .
45.2
= 0.15
=> 15%
No dividend declared in 2018 so no
dividend payout ratio.
Interpret
ation:
A lower payout ratio is generally preferable to a higher payout ratio, with a ratio greater than
100% indicating the company is paying out more in dividends than it makes in net income
In 2015 company payout ratio is 8% while that of in 2014 company hadn’t announced any
dividends.
 Dividend yield
A financial ratio that indicates how much a company pays out in dividends each year relative
to its share price. Dividend yield is represented as a percentage and can be calculated by
dividing the dollar value of dividends paid in a given year per share of stock held by the
dollar value of one share of stock.
Formula:
Dividend yield = dividend per share
Market price per share
Calculations:
2015
2014
No dividend declared in 2014 so no
dividend yield.
6 .
454
= 0.013 => 1.3%
Interpretation:
In 2015 company had dividend yield of 1.3% against market price of per share. But in 2014
company wasn’t announced any dividend so there was no dividend to elaborate the analysis.
This shows that how much a company pays out in dividends each year relative to its share price.
So 1.3% is showing that company is not performing well to full fill the required rate by share
holders. That’s the reason company wasn’t announced dividends last year.
 Book value per share:
Book value per share ratio determines the value of an equity in an organization relative to a
market’s will provide a comparative analysis between book value and market value in book
value per share analysis should consider common share holder and their equity on the
whole.ttashare holder equity –proffered share convert in common shareholder equity.
Formula: total stockholder equity – preferred stock equity
# Of common share outstanding
Calculations:
2014
2015
168088188000
179,059,805,000
271,685,939
271,685,939
= 659.06
= 618.6
Interpretation:
With this ratio we depict that during the year company book value is increase that
investors may view the stock as more valuable, and the stock price increases. In 2015 the
company’s equity increase thus increase in book value in 2015.
Investor ratio summary
Ratio
2015
2014
Earnings per share:
68.8
84.9
Price earnings ratio
6.6
6.08
Dividend payout ratio
8%
-
Dividend yield
1.3%
-
Book value per share
659.06
618.6
Company’s Leverage:
 These ratios measures investor response to owning company stock and also the cot of
issuing the stock market ratio and concerned will the return and value of investments.
 Profitability calculated that measure the amount of income each share will receive if
all of the constable security like (share option right purchase common share, bound,
prefer stock that will convert to common stock on basic earnings per share.
 In 2015 company’s earnings per share decreases which means company’s worth
decreases and net income decreases during the year.
 In 2015 company payout ratio is 8% while that of in 2014 company hadn’t announced
any dividends.
 During the year company book value is increase that investors may view the stock as
more valuable, and the stock price increases. In 2015 the company’s equity increase
thus increase in book value in 2015
 PROFITIBILITY RATIO:
Profitability ratios compare income statement accounts and categories to show a company's
ability to generate profits from its operations. Profitability ratios focus on a company's return on
investment in inventory and other assets. These ratios basically show how well companies can
achieve profits from their operations.
Investors and creditors can use profitability ratios to judge a company's return on investment
based on its relative level of resources and assets. In other words, profitability ratios can be used
to judge whether companies are making enough operational profit from their assets. In this sense,
profitability ratios relate to efficiency ratios because they show how well companies are using
their assets to generate profits. Profitability is also important to the concept of solvency and
going concern.
Profitability ratios are a class of financial metrics that are used to assess a business's ability to
generate earnings compared to its expenses and other relevant cost incurred during a specific
period of time. For most of these ratios, having a higher value relative to a competitor's ratio or
relative to the same ratio from a previous period indicates that the company is doing well.
Some industries experience seasonality in their operations. The retail industry, for example,
typically experiences higher revenues and earnings for the Christmas season. It would not be
useful to compare a retailer's fourth-quarter profit margin with its first-quarter profit margin..
Some profitability ratio is as follows:
o Profit ratio:
o Net profit margin:
o Return on Asset ratio
o Total asset turnover ratio
o DUPOUNT analysis
o Return on equity
o Operating Margin Ratio
 Profit ratio:
The net profit percentage is the ratio of after-tax profits to net sales. It reveals the
remaining profit after all costs of production, administration, and financing have been
deducted from sales, and income taxes recognized.It is one of the best measures of the
overall results of a firm, especially when combined with an evaluation of how well it is using
its working capital. The measure is commonly reported on a trend line, to judge performance
over time. It is also used to compare the results of a business with its competitors
 Net profit margin:
Net profit margin is ratio that shows segregated relation related to company's net profit and its
revenue. this ratio shows how much money is collected by company as revenue and which
transmitted into profit. The higher ratio of net profit margin will be considered as better.
Formula:
Net profit Margin = Net profit
Net sales
Calculations
2015
2014
26413442000
25025071000
206205987000
200653482000
= 0.121
= 0.1316
Interpretation:
The measure is commonly reported on a trend line, to judge performance over time. It is also
used to compare the results of a business with its competitors. Here the net profit ratio show that
company’s profit decreases during the year. While sales is also deceases but the decrease in sales
is less than the decrease in net profit.
 Return on Asset ratio
Return on asset ratio is an indicator of how profitable a company is relative to its total asset
this ratio will indicate the efficiency of management in utilizing the asset to generate revenue.
Higher to return on asset the better will be the indication about company circumstances because
in this situation the company is gaining more profit against lesser investment
Formula:
= Net income
Total Asset
Calculations:
2015
2014
26413442000.
124,814,725,000
25025071000
115,146,026,000
=0.11
=0.112
Interpretation:
Higher the return on asset better will be the company conditions and position in market. Here
with is analysis we depicts that un 2015 company’s return on asset is decrease thus showing that
company is facing bad circumstances and need to improve its condition.
 Total asset turnover ratio:
Total asset turnover ratio is ratio of the value of the company's sales or revenue generated
relative to the value of its assets. This ratio indicate how efficiently the management is replying
its assets to generate maximum sales
A higher asset turnover ratio is always considered as favourable because it indicates the
efficient utilization of assets.Lower asset turnover ratio indicates the inefficiently and pour
management of organization
Formula:
Total asset turnover ratio= Net Sales
.
Average total Asset
Calculations:
2015
2014
200653482000
236301239500
= 0.849
ation:
206205987000
222248988000
=0.927
Interpret
Higher the asset turnover better the company’s position and management of assets while lower
the turnover inefficient and poor the management of assets in the company. In 2015 company
show lower turnover then 2014 that means company is not managing it efficiently and it needs to
improve.
 DUPOUNT analysis: (return on asset)
This analysis advised by DuPont also known as DuPont model. This analysis indicates the
financial position of an organization by considering three elements
1. Profit Margin
2. Total Asset turnover
3. Financial leverage
DuPont analysis breaks down the return on equity to expand it for calculation and utilization
of return for investor .Moreover DuPont analysis is the combination of multiplication of
operating income margin and total asset turnover which will result exactly equal to return on
an asset of an organization. This model is derived to analyze different performance measure.
Formula:
Return on asset = Net profit margin x Total Asset Turnover
Calculations:
2015
2014
0.13 x 0.849
0.121 x 0.927
= 0.11
= 0.1121
Interpretation:
This analysis ensures the correctness and preciseness on previous calculated ratio, such as
asset turnover and net profit margin and return on asset.
Also we depicts that the company performance is decrease during the year as its ratios are
showing downward trend. So company should focus on maintain and efficient utilization of
assets.
 Return on equity
Return on equity (ROE) is the amount of net income returned as a percentage of
shareholders equity. Return on equity measures a corporation's profitability by revealing how
much profit a company generates with the money shareholders haveinvestor
Formula:
Return on equity ratio =
Net income
S.H equity
Calculation:
2015
2014
26,413,442,000
179,059,805,000
25,025,071,000
168,088,188,000
=0.147
= 0.148
Interpretation:
This ratio shows the return on equity. During the year 2014 company return on equity was 14.8%
while that in 2015 its 14.7% it is a minor and slightly change but show decreases in return.
Return on equity measures a corporation's profitability by revealing how much profit a company
generates with the money shareholders has investor
 Operating Margin Ratio
The operating ratio is a financial term defined as a company's operating expenses as a
percentage of revenue. This financial ratio is most commonly used for industries which
require a large percentage of revenues to maintain operations. The operating ratio shows the
efficiency of a company's management by comparing operating expense to net sales.
Formula
Operating ratio = Operating income
Net sales
Calculations:
2015
= 26,413,442,000
200,653,482,000
2014
= 26,026,071,000
206,205,987,000
= 0.13
= 0.12
Interpretation:
The smaller the ratio, the greater the organization's ability to generate profit.
If revenues decrease. When using this ratio, however, investors should be aware that it
doesn't take debt repayment or expansion into account.
 Gross profit Margin:
Gross profit margin is a financial metric used to assess a company's financial health and business
model by revealing the proportion of money left over from revenues after accounting for the cost
of goods sold (COGS). Gross profit margin is also known as gross margin.
Formula
Gross Profit Margin
=Gross Profit
Net sales
Calculations:
2015
2014
77171384000
77927187000
200653482000
206205987000
=0.38
=0.733
Interpretation:
The gross profit of company is decreases in 2015 this shows that company is facing such
circumstances in which it is unable to generate it profit.
Profitability Ration Summary:
Ratio
2015
2014
Net profit margin
0.1325
0.121
Return on Asset ratio
0.11
0.112
Total asset turnover ratio
0.849
0.927
Return on equity
0.147
0.148
Operating Margin Ratio
0.13
0.12
Gross profit Margin
0.38
0.733
Interpretation:
 As per analysis of PSO Company the overall performance of this organization is
averagely to mark. Because this organization is not attaining its economies of scales and
not performing business activities efficiently.
 The Return on Asset is constant during the year there is no improving in this regard.
 And a decrease in Total asset turnover ratio shoeing company is not maintaining its asset
and utilization of assets are not efficiently that’s why there is no improvement in
company performance.
 DebtRatio (long Term debt analysis)
Long-term debt is a financial obligation for which payments will be required after one year from
the measurement date. This information is used by investors, creditors, and lenders when
examining the long-term liquidity of a business.
Long-term debt is classified in a separate line item in a company's balance sheet. Examples of
long-term debt are those portions of bonds, loans, and leases for which the payment obligation is
at least one year in the future.
For a firm being financially sustainable means being able to carry its debt.Usually, the debt ratio
analysis is being applied to a company by potential creditors to see, how creditworthy it is and
analyze its willingness and ability to pay the debt. Generally, greater amount of company’s debt
means greater financial risk of its bankruptcy. Long-term debt paying ability of a firm can be
viewed as indicated by the income statement and by the balance sheet.
 Time Interest Earned
The times interest earned ratio, sometimes called the interest coverage ratio, is a coverage ratio
that measures the proportionate amount of income that can be used to cover interest expenses in
the future.
In some respects the times interest ratio is considered a solvency ratio because it measures a
firm's ability to make interest and debt service payments. Since these interest payments are
usually made on a long-term basis, they are often treated as an ongoing, fixed expense. As with
most fixed expenses, if the company can't make the payments, it could go bankrupt and cease to
exist. Thus, this ratio could be considered a solvency ratio.
Formula
Times interest earned ratio = Income before Interest and Taxes
Interest Payment
Calculation:
2015
2014
26,413,442,000
25,025,071,000
692,940,000
776,511,000
= 34.01
=36.11
Interpretation:
This ratio is associated with solvency ratio. it indicates a firms long-term debt paying ability . it
show how many times company could pay the interest and taxes.
Higher the value more the favourable will be the company condition. Here in PSO Company the
ratio value decrease that means company ability is decrease during the year. In 2014 company
pays 36 times while in 2015 it 34 times.
 Fixed Charge Coverage
The fixed charge coverage ratio is used to examine the extent to which fixed costs consume the
cash flow of a business. The ratio is most commonly applied when a company has incurred a
large amount of debt, and must make ongoing interest payments. If the resulting ratio is low, it is
a strong indicator that any subsequent drop in the profits of a business may bring about its
failure. The ratio is typically used by lenders evaluating an existing or prospective borrower.
To calculate the fixed charge coverage ratio, combine earnings before interest and taxes with any
lease expense, and then divide by the combined total of interest expense and lease expense. This
ratio is intended to show estimated future results, so it is acceptable to drop from the calculation
any expenses that are about to expire.
Formula
Fixed charge coverage = Income before interest and taxes
Fixed charges
‘
Calculations:
2015
2014
26,413,442,000
=
1,597,045,000
= 16.53
25,025,071,000
1,239,933,000
= 20.18
Interpretation:
This ratio tells how many times greater the firm income compared with its fixed charges. Higher
the ratio better will be the company positioning to meet their financial challenges.
Here in PSO Company fixed charge coverage ratio deceases during the year as it up to the mark
but decrease from last year means company is not improving its condition.
 Debt Ratio
Debt ratio is a solvency ratio that measures a firm's total liabilities as a percentage of its total
assets. In a sense, the debt ratio shows a company's ability to pay off its liabilities with its assets.
In other words, this shows how many assets the company must sell in order to pay off all of its
liabilities.This ratio measures the financial leverage of a company. Companies with higher levels
of liabilities compared with assets are considered highly leveraged and more risky for lenders.
This helps investors and creditors analysis the overall debt burden on the company as well as the
firm's ability to pay off the debt in future, uncertain economic times.
Calculations:
2015
2014
= 63,119,716,000
= 62,334,770,000
242,179,512,000
= 0.26
230,422,958,000
= 0.27
Formula
Debt Ratio =Total Debt
Total Asset
Interpretation:
Lower the ratio better will be the company conditions. In PSO company last two year analysis
we depicts that company has enough assets to pay its debt against its assets.
 Debt/ Equity Ratio:
The debt to equity ratio is a financial, liquidity ratio that compares a company's total debt to total
equity. The debt to equity ratio shows the percentage of company financing that comes from
creditors and investors. A higher debt to equity ratio indicates that more creditor financing (bank
loans) is used than investor financing (shareholders).
Formula
Debt to equity ratio = Total Debt.
Share Holder Equity
Calculations:
2015
2014
63,119,716,000
62,334,770,000
172,949,711,000
151,259,397,000
= 0.364
= 0.41
Interpret
ation:
In this ratio company evaluates the financing. Favourable conditions vary company to
company. Here the equity increases during the year. And minor increase in debt also.
Here in PSO Company there is a decrease in value of ratio which shows that company is in
better position making more equity financing then debt financing.
 Debt to Tangible Net Worth Ratio
A ratio indicating the level of creditor's protection in case of the firm’s insolvency by comparing
company’s total liabilities with shareholder’s equity.
This is a more conservative indicator comparing to debt to equity ratio, because intangible assets
not always have value when a company is going through the process of liquidation. For instance,
if the trademark is not planned for use by any of other firms, its value would equal zero. In this
case funds obtained from intangible assets sale can't be used for covering the liabilities to
creditors. Eliminating intangible assets from computation is very important for analysts in terms
of measuring the real debt-paying ability of a firm.
Formula
Debt to Tangible Net Worth Ratio=
Total Liabilities
.
Shareholder's Equity - Intangible Assets
Calculations:
2015
2014
63,119,716,000
62,334,770,000
151,259,397,000
172,949,711,000
= 0.36
= 0.41
Interpretation:
This ratio shows how well creditor are protected and getting their desire return. And what if
company is winding up then how is it paying the creditor. Here the paying condition of company
is decreasing which is a alarming condition for company.
Debt Ratio Summary
Ratio
2015
2014
Time interest Earned
34
36
Debt ratio
0.26
0.27
Fixed charge Coverage ratio
16
20
Debt to equity ratio
0.364
0.41
Debt to tangible ratio
0.36
0.41
Interpretation:
 Here in PSO Company the ratio value decrease that means company ability is decrease
during the year. In 2014 company pays 36 times while in 2015 it 34 times.
 Here in PSO Company fixed charge coverage ratio deceases during the year as it up to the
mark but decrease from last year means company is not improving its condition.
 The debt to equity ratio shows the percentage of company financing that comes from
creditors and investors. A higher debt to equity ratio indicates that more creditor financing
(bank loans) is used than investor financing (shareholders).
 These ratios shows how well creditor are protected and getting their desire return. And what
if company is winding up then how is it paying the creditor. Here the paying condition of
company is decreasing which is a alarming condition for company.
Horizontal Analysis:
The horizontal analysis compares specific items over a number of accounting periods. This
analysis helps the financial managers to compares ratios or line items in a company’s financial
statements over a certain period of time.
Horizontal analysis looks at the trend of financial statements over multiple periods, using a
specified base period. Horizontal analysis typically shows the changes from the base period in
dollar and percentage. The percentage change is calculated by first dividing the dollar change
between the comparison year and the base year by the item value in the base year, then
multiplying the quotient by 100%.
Horizontal analysis of Income statement:(Base year 2014)
Item
2015
2014
Net sales
97%
100%
Cost of goods sales
96%
100%
Gross profit
99%
100%
Operating expenses
96%
100%
Operating profit
109%
100%
Income before interest and tax
105%
100%
Interest expense
130%
100%
Income tax
154%
100%
Net income
80%
100%
Horizontal Analysis Of balance sheet:
Item
2015
2014
Current asset
108%
100%
Non Current assets
101%
100%
Total assets
105%
100%
Current Liabilities
97%
100%
Noncurrent liabilities.
122%
100%
Total liabilities
101%
100%
Total equity
114%
100%
Interpretation:
 According to data given as above we see that net sales during the year 2015 is smaller
than 2014 that is3% decrease, cost of Goods sold decreases by 4%, gross profit decrease
by 1% .
 If we talk about expenses horizontal analysis during the year then operating expenses also
decreases by 4%. and operating profit increases 9% from 2014 to this year.
 Income before interest and tax increases n 2015 as of 5%, interest expense increase 30%,
income tax increases 54%.
 At the end if we analyze the net income horizontally then e can find that the income
during the year decreases which is alarming condition for the PSO company. It decreases
by 20%.
 Current assets, noncurrent assets total assets are increasing in 2015, similarly equity and
liabilities are also increases. While the current liabilities decreases 3% in 2015.
 The over experience of the company from 2014 to 2015 is not well. As it needs to
improve the policies and strategies to increase its profitably.
Vertical Analysis:
This Analysis helps the Financial Analyst to compare the different items of financial statements
the term vertical describes the way of doing the analysis as it enables to compare items in same
year. This technique also known as component percentage produces common size financial
statements. And these financial statements are more easily comparable
Vertical analysis is a method of financial statement analysis in which each entry for each of the
three major categories of accounts, or assets, liabilities and equities, in a balance sheet is
represented as a proportion of the total account. Vertical analysis is also used across other
financial statements as a percentage measure.
Vertical Analysis Of Income Statement:(Base for analysis is sale)
Item
2015
2014
Net sales
100%
100%
Cost of goods sales
61%
62%
Gross profit
38%
37%
Operating expenses
86%
87%
Operating profit
14%
12.6%
Income before interest and tax
13%
12.1%
Interest expense
0.38%
0.287
Income tax
3.4%
2.1%
Net income
9.3%
11.1%
Vertical Analysis Of balance sheet:
Item
2015
2014
Total assets (As base)
100%
100%
Non Current assets
48.4%
50.1%
Current asset
51.5%
49%
Total liabilities (as Base)
100%
Noncurrent liabilities.
Current Liabilities
Total asset(as base)
100%
19.9%
26%
80%
83%
100%
100%
Total equity
71%
27%
Total liabilities
26%
72.9%
Interpretation:
 In the above vertical analysis of income statement we observe that putting the net sales
constant the CGS decreases by 1% during the year and gross profit also increases by 1%.
 Operating expenses decreases by 1% while the operating profit is showing 2% increases in
2015.
 Net income of PSO in 2015 while doing the vertical analysis putting sales constant is
showing decrease by 2.7%.
 In vertical analysis of balance sheet we can observe that the current asset are showing
increase of 2% while that of noncurrent assets showing decrease in 2015 as of 2%.
 Company is also changes its policies regarding financing from debt or equity in 2015 the
PSO company is focusing on equity financing rather than debt financing
Cross Analysis:
We have choose Shell for the cross analysis within the petroleum industry. so following are the
cross ratio analysis for PSO with shell.
 Liquidity Ratio:
Current Ratio
2015
2014
PSO
2.47
2.213
Shell
0.83
0.85
Interpretation:
PSO has better results than Shells because PSO current ratio is up to the mark in both
years while the shell is low in both years. So we can say that PSO is maintaining its
current assets and liabilities efficiently.
Acid test ratio
2015
2014
PSO
1.24
1.88
Shell
0.34
0.83
Interpretation:
The acid test ratio is tougher test if liquidity than current ratio. Comparing PSO and
Shell ratio showing that PSO is in better condition to pay its short term liabilities.
 Activity ratio/Market Ratio:
Day’s sale in receivables:
2015
2014
PSO
51.88
49.9
Shell
12.63
13.82
Interpretation:
It is showing that in 2015 PSO takes 51 days to recover its receivables while shell takes
only 12 days which is good for company.
Account receivable turnover
PSO
2015
2014
7.07
7.34
3.24
Shell
3.80
Interpretation:
In 2015 PSO is receiving it account receivable 7 times while shell is 3 time. As both the
companies are showing decreasing trend during the year.
Inventory turnover in days:
2015
2014
PSO
53.4
51.8
Shell
52
40
Interpretation:
It is showing that in 2015 PSO takes 53 days to covert its inventory into sale while shell
takes 52 days there is minor and slightly difference in their inventory conversion cycle.
Earnings per Share:
2015
2014
PSO
68.5 Rs
84 Rs
Shell
87 Rs
40Rs
Interpretation:
This ratio is clearly telling that the earning of shareholder of shell company are more
better then PSO because shells had increased its EPS from 40 to 87 Rs per share while
PSO EPS is showing gradual decrease in EPS from Rs 84 to Rs 68.

Profitability Ratio:
Net Profit:
PSO
2015
2014
0.1325
0.121
Shell
0.56
0.45
Interpretation:
Net profit of PSO and Shell is showing huge difference .the profit and earning of shell are
far better than PSO.
Gross Profit Ratio
2015
2014
PSO
0.38
0.733
Shell
0.98
0.87
Interpretation:
Gross profit Ratio of PSO in 2015 is 0.38 while that of shell is 0.98 which is showing that
Shell profit during the year was better than PSO. Similarly PSO has improve its Gross
profit from 2014 to 2015 while PSO is showing Decreasing trend.

Debt Ratio:
Debt Ratio:
2015
2014
PSO
26%
27%
Shell
14%
15%
Interpretation:
PSO has more dependency on debts for financing of assets and to deal with risk. While
Shell debt ratios are lower than PSO showing less dependency on debt financing
Debt to equity ratio:
2015
2014
PSO
0.364
0.41
Shell
0.63
0.65
Interpretation:
PSO has lower ratio of equity than Shell. But both companies are not only rely on equity
financing but also debt financing to finance their asset.
Conclusion Of our analysis as investor:
When we look at the company overall situation as an investor then we keep all aspects of
company in consideration that include its liquidity position, its long term liquidity position,
market stability as well as market value of company .
Or analysis shows that company liquidity position is not good that is bad news to the investors
who invest long run. The activity ratio of a company also shows the bad position, its mean that
company is less efficient in generating cash and sales that is negative thing for short term
investors.
The profitability ratio of the company also shows the bad position as compared to previous year
which shows that company is not generating enough profit from its sales. It also shows the bad
news for the investor who invest short time period and earn profit. The debt ratio of the company
indicates that it is not in a position to pay its debt that is not a good thing for the company and it
also bad news for the investor who invests in long run. The market ratio of the company is also
showing bad position that indicates that investors perceive the bad news about the company and
are reluctant to invest in that company.
Suggestions:
Suggestions to the company are that as there are some factors missing related to assets
management so management of the company must take steps to make use of asset more effective
so that liquidity position can be improved. Company also has more debt so it is needed to low its
debt and also impose terms and condition so that company can pay its long term debts.

Market price per share in 2015 is 454 & 2014 is 514

Weighted average number of ordinary shares in issue 2015 is 271,685,939& 2014 is 271,685,939

Dividend for 2015 was 6 Rs per share and in 2014 company hadn’t declared the dividend.