human resource management - comparison of pso with shell pakistan ltd

Human Resource Management – Project Fall 2011

Group Members:

Umar Javaid Nouman Anwar Hassan Haider

Submitted To:

Mr. Sikander Aziz

Submission Date:

15th December, 2011.

1 Human Resource Management-Project Fall-2011

NATIONAL COLLEGE OF BUSINESS ADMINISTRATION AND ECONOMICS

Abstract

In this project we have to take two organizations, one from the Government Sector and one from the Private Sector. The organizations should be approximately of same level in terms of size, spread and strength. We have to describe each organization in terms of some parameters like its Overall Mission, Main Objectives, Organizational Structure, People and Work Environment, HR Practices and Pay Scales. And at the end we have to conclude on the basis of our research done, which organization is better in the performance of its main objectives and how?


Table of Content

Chapter # 01:

Introduction of PSO Ltd

Chapter # 02:

Introduction of Shell Pakistan Ltd

Chapter # 03:

Financial and Trend Analysis of PSO for the Year 2007-2008

Chapter # 04:

Financial Comparison of PSO and Shell

Chapter # 05:

Conclusion

Work Citied


Organizations Selected

Sr. No

Name Sector Address

1. Pakistan State Oil Ltd Government PSO House, Khayaban-e-Iqbal, Clifton, P.O.Box 3983, Karachi 75600, Pakistan

2. Shell Pakistan Ltd Private Shell House, 6 Ch. Khaliquzzaman Road,Clifton, Karachi-75530, Pakistan


CHAPTER # 01

Introduction of PSO

PSO is a public company with 1,940 employees. It is the leading oil company of Pakistan. The Pakistani government's move toward a nationalized oil sector began in 1974, with the passage of Petroleum Products (Federal Control) Act. Under the new legislation, the government took control of the two Pakistani oil companies, Pakistan National and Dawood Petroleum. Following the takeover, Dawood was renamed Premier Oil Company. Also in 1974, the government founded a new agency, the Petroleum Storage Development Corporation (PSDC). That entity was subsequently renamed Pakistan State Oil (PSO) in 1976.

Following the adoption of the new name, PSO then took over both Pakistan National and Premier, in what was then the largest ever merger to take place in Pakistan. One month later, the government also took over the operations of Esso in Pakistan, which were placed under PSO. As such, PSO became the undisputed leader in the Pakistani market.

Pakistan State Oil Company Limited is that country's leading oil marketing and distribution company. Formerly a state-run agency, PSO controls approximately 70 percent of Pakistan's total finished fuel products market, and as much as 80 percent of the total furnace oil market, the main fuel oil market in the country. PSO also controls 60 percent of the country's diesel fuel market. Despite a nationally operating network of more than 3,750 PSO-branded filling stations, many of which include convenience stores, PSO's share of the consumer gasoline and lubricants markets has dropped to just 40 percent, in large part due to Shell Pakistan's aggressive expansion of its own retail network. Other major competitors include Total and refinery operators Attock and Caltex. PSO itself has engaged in a strategy of developing vertically integrated operations, including backing the construction of a new refinery.

The company also produces and markets a variety of products under its own brand, including motor oils and lubricants. PSO's sales extend to jet fuels and marine fuels, LPG, CNG, kerosene, and other petrochemicals. The company is also the leading supplier to Pakistan's utility and industrial sectors. Nonetheless, retail sales remain the company's largest revenue-


generator, representing some 90 percent of the group's sales. These topped PKR 254 billion ($4.27 billion) in 2005, making PSO Pakistan's largest company and the flagship of the Pakistani government's privatization effort in the early 2000s. The Pakistani government continues to hold more than 25.5 percent of PSO's shares, while a group of institutional investors, primarily banks, control more than 37.5 percent of group stock. PSO has been hailed for its dramatic turnaround, from inefficient government-run organization to a streamlined, modern corporation, a transformation largely credited to the leadership of Managing Director Tariq Kirmani. PSO is listed on the Karachi Stock Exchange.

Principal Divisions:

Audit Department; Aviation Marine; Corporate Planning; Imports; Industrial Consumer; IT Achievement; Lube Sales & Agency; Lubricants; Non Fuel Retail; Operations Department; Power Projects; Product Movement; Product Storage; PSO Cards; Quality Assurance; Retail Departments; Retail News; Security Services.

Principal Competitors:

Shell remains PSO's largest competitor in the country, with a market share of more than 25 percent. Other competitors includes: Total Parco Pakistan Ltd, Attock Oil Company Ltd and Caltex Oil Pakistan Ltd.

Vision, Mission and Values:

Vision:

“To excel in delivering value to customers as an innovative and dynamic energy company that gets to the future first.”


Mission: “We are committed to leadership in energy market through

competitive advantage in providing the highest quality petroleum products and services to our customers, based on:

Professionally trained, high quality, motivated workforce, working as a team in an environment, which recognizes and rewards performance, innovation and creativity, and provides for personal growth and development

Lowest cost operations and assured access to long-term and cost

effective supply sources

Sustained growth in earnings in real terms

Highly ethical, safe environment friendly and socially responsible business practices “

Values:

Excellence We believe that excellence in our core activities emerges from a passion for satisfying our customers' needs in terms of total quality management. Our foremost goal is to retain our corporate leadership.

Cohesiveness We endeavor to achieve higher collective and individual goals through team. This is inculcated in the organization through effective communication.

Respect We are an Equal Opportunity Employer attracting and recruiting the finest people from around the country. We value contribution of individuals and teams. Individual contributions are recognized through our reward and recognition program.

Integrity We uphold our values and Business Ethics principles in every action and decision. Professional and personal honesty, dedication and commitment are the landmarks of our success. Open and transparent business practices are based on ethical values and respect for employees, communities and the environment.


Innovation We are committed to continuous improvement, both in New Product and processes as well as those existing already. We encourage Creative Ideas from all stakeholders.

Corporate Responsibility We promote Health, Safety and Environment culture both internally and externally. We emphasize on Community Development and aspire to make society a better place to live in.

Organizational Structure:

Organizational formal framework by job tasks is divided into groups but is coordinated. The basis on which jobs are grouped in order to accomplish organizational goals is functional departmentalization.

Chain of Command:

It is an unbroken line of authority that extends from the upper levels of the organization to the lowest levels and defines who reports to whom.

As PSO follows traditional objective setting, decisions are made totally by the top management. The authority is given to the managers to give orders and employees are bound to follow them. It is the responsibility of the employees to perform those duties assign to them.

Unity of Command:

At PSO unity of command hoes in the following sequence:

Chairman Managing Director 7 General Managers Divisional Managers 1 Sales Executive 8-12 sales Officers

Managing Director is answerable to the Chairman. MD has 7 General Managers working under him. Every G.M has


8DMsworking under him. Every DM has a Sales Executive and under him there are 8-12 sales officers.

Centralization:

PSO is highly centralized company i.e. decision-making is totally concentrated in the upper levels of the organization. The Top management makes the company’s key decisions with little or no input from the lower level employees. PSO is more centralized because the environment is stable, organization is large and lower level managers are not as capable or experienced at making decisions as the upper level managers.

People:

“Human Resource – PSO’s Strategic Business Partner

People being our one of the most important source of long-term competitive advantage, PSO invests in the development of its human resource through trainings, skills development and inculcating performance management culture. PSO like many of the world’s leading businesses has found success in aligning business goals with those of human resource.

PSO’s HR Mission:

We value people of PSO as our greatest Resource

As a partner in Business we undertake to achieve business goals through people

We aspire to create a good working environment for our people

where they are motivated to reach PSO goals ”

Work Environment:

“

Employee Recognition To boost the morale of employees a reward and recognition

scheme is in place for the last few years and has been a great source of creating a spirit of healthy competition amongst


employees. Each year employees are nominated for two company-wide ceremonies namely; ‘Shaukat Raza Mirza Management Excellence Award’ and ‘PSO Managing Director’s Performance Award’. It acknowledges exceptional, smart and beyond the call of duty performance.

Motivation Survey

Special efforts for continuously enriching our business systems and implementing relative strategies have always been fruitful which are aimed at augmenting a work culture that enhances employee motivation as well as gaining a better understanding of forces that shapes motivation, attitude, behaviour patterns and expectations. Employee Motivation surveys are conducted that recognize the needs, opinions, concerns and perceptions of our human capital about the organization and what they value in terms of professional and personal interests and incentives. Keeping a human element is mind these surveys help identify a meaningful employee relationship with the organizational objectives and understand their job responsibilities and work expectations.

Communication

o Open-book & direct approach environment

o An assortment of forums/meetings at hand (Executive Committee, Management Committee, Employee Leadership Team) inspire discipline and accelerate establishment of processes & systems

o Encourage team work & group dynamics while

inculcating a sense of ownership through empowered Cross Functional Teams (CFTs)

o Employ Business Process Reengineering (BPR) to

maintain an international working environment by streamlining processes and removing unnecessary layers


o Interactive sessions are regularly held by the Managing Director at all levels because clear, coherent and consistent messages ensure that employees are able to integrate the inputs into their thinking

o All organizational changes are announced

Zero Tolerance We have high ethical standards and a ‘Business Principles and

Ethics Policy’ in place. We value, encourage and inculcate corporate reforms, good governance, best business practices and an environment of continued adherence to ‘Zero Tolerance’, resulting in the development of our human capital and meeting all business challenges.

Cafeteria/fitness facility/recreational activities

PSO encourages recreational activities of workforce at all levels. Formation and functioning of “PSO Club” provides assistance to employees for their mental and physical health as well as for their social activities. Sports and recreational activities are organized through this forum, where employees and their families are encouraged to participate. It is our top priority to ensure the employees are in good shape and health. To physically show that we care, we have in-house food service with subsidized meals in a cafeteria that can cater all the employees stationed at PSO House. Employees can enjoy gymnasium facility right in PSO's corporate vicinity, a convenience of walking from your workstation to a private gym for a revitalizing workout.”

HR Practices at PSO:

What is Human Resource Management?

Human resource management is staffing an organization with competent, high performing employees who are capable of sustaining their performance level over a long period of time.

Importance of Human Resource Management

HRM is an important strategic tool and it can contribute to the development of a sustainable competitive advantage.


It is the most important intermediary body between the employees and the organization that works to develop relations advantageous to both. All activities related to non-management employees are handled by the industrial relations division and that of Management employees are handled by the personnel division of the HRM.

HR Philosophy of PSO

Consider human asset - the only asset – which appreciates with the passage of time

Right person at the right place

Continuously re-align organization in line with contemporary

business practices

Make Organization lean and flexible to become more responsive

Handle HR issues with all fairness and transparency

Human Resource Management of PSO:

Alongside the development of its physical facilities, PSO is deeply conscious of the pivotal role that human resources play in the success of an organization. As a matter of fact, human resource development has been identified as an area of key importance. While strengthening the ranks of its work force with quality professionals at various levels of management, the company also undertakes several initiatives for improving productivity and efficiency at all levels of services. Through computer training, various courses, sponsorships of staff for studies at professional institutions and seminars, the company is providing its employees ongoing opportunities for continuous self-improvement and learning.

HR planning Recruitment De-recruitment Selection Orientation Training and Development Confirmation Compensations and Benefits


o Medicalo Provident Fundo Loanso Rewardso Million Liter Awardso Hajj Draw-2002o Final Assistanceo Special Allowances for Minorities

Performance Management Employee Relations Company’s Performance Community Welfare Health safety and environment


CHAPTER # 02

Introduction of Shell Pakistan

Shell Pakistan is divided into 8 functional areas i.e. Retail, Lubricants, Aviation, Operations, Finance, Corporate, Human Resource and Commercial Fuels. It has played a leading role in abridging the growing energy demand gap in Pakistan. We are represented in all aspects of the upstream and downstream oil business in Pakistan - in exploration both onshore and offshore, in refining, as well as a 26% share holding in the white oil pipeline.

Currently Shell in Pakistan is headed by Mr. Sarim Sheikh, Chairman and Managing Director of Shell Pakistan Limited (SPL) and Chairman of Shell Companies in Pakistan.

Shell has over 100 years of experience in developing the technology and services that make us a leading provider of innovative and new fuels today. We were the first to introduce retail visual identity on its forecourts. We strive to meet and exceed customer expectations by delivering the best fuels and service to our customers at every site, every visit, everyday. With a dynamic portfolio and a fast-growing retail network, the Shell Brand is the most preferred brand amongst motorists across Pakistan.

Vision, Mission and Values:

Vision:

“To be the Top Performer of First Choice”

Mission: Creating a secure business environment, minimizing economic losses, and business disruptions, safeguarding the group’s integrity and reputations.

Values: Shell sets high standards of performance and ethical behavior that it applies internationally. The Shell General Business Principles, Code of Conduct and Code of Ethics help everyone at Shell act according to its core values of honesty, integrity and respect for people and to comply with relevant legislation and regulations.


Main Objectives:

The objectives of Shell Pakistan Ltd. are to engage efficiently, responsibly and profitably in oil, gas, chemicals and other selected businesses and to participate in the search for and development of other sources of energy to meet evolving customer needs and the world’s growing demand for energy.

Shell aim to work closely with its customers, partners and policy-makers to advance more efficient and sustainable use of energy and natural resources.

Organizational Structure of Shell:

Shell is the largest multinational organization with many product lines. Employees tend to be functional specialists organized according to market/product distinction.

Shell Pakistan is divided into five functional areas i.e. Retail, Commercial, Operations, Finance, and Human Resources.

Management attempts to find synergy among divisional activities through the use of committees and horizontal linkages.

Decision of major impact result from strategic plans made by organizational staff

People:

Shell’s people are central to the delivery of its strategy and it involves them in the planning and direction of their work. Shell creates a work environment that values differences and provides channels to report concerns.

Listening to Shell’s people

Shell value communication and consultation with its employees, directly or via staff councils or recognized trade unions.

Shell encourages its staff to report their views about its processes and practices safely and confidentially to managers or Human Resources staff. Shell’s global telephone helpline and website enable employees to report breaches of its Code of Conduct and the Shell General Business Principles, confidentially and anonymously.


Work Environment:

Diversity and inclusion – Shell’s approach

Shell aims to provide equal opportunities and create a workplace that supports all it staff and values their differences. Shell’s dedication to diversity and inclusion applies across Shell.

HR Practices of Shell:

Recruitment Selection Orientation Training

o On-the-job learningo Training for recognized professional qualificationso Personal Development program Direction and supporto Tailored training for all of its starters

Performance Evaluation Compensation and Benefits

o Financial Rewards and Benefits Programo Shell Share Save Schemeo Balancing work and lifeo Time off and time outo Sports and Social Activitieso Listening to its Employees

Career Development Concern for Environment Concern for Safety Shell’s Code of Conduct

Recommendation for HR Department of Shell

We have studied different functions of HR department of Shell and we found practices of Human Resource department nearly same. But we have analyzed that HR department of Shell Pakistan is not involved in Strategic Planning of Shell. Rather it’s the Global HR department; which is involved in policy making. It is our recommendation that Shell should give full authority and control to country managers as the policy and procedures are different from country to country.


Chapter # 03

Financial Statements for Pakistan State Oil Company Ltd. (PSO)

Although debt as a percent of total capital decreased at Pakistan State Oil Company Ltd. over the last fiscal year to 26.21%, it is still in-line with the Oil, Gas and Consumable Fuels industry's norm. Additionally, even though there are not enough liquid assets to satisfy current obligations, Operating Profits are more than adequate to service the debt. Accounts Receivables are among the industry's worst with 17.55 days worth of sales outstanding. This implies that revenues are not being collected in an efficient manner. Last, inventories seem to be well managed as the Inventory Processing Period is typical for the industry, at 36.18 days.

Balance Sheet:

Currency inMillions of Pakistan Rupees

As of: Jul 022005

Jul 022006

Jul 022007

Jul 022008

Assets

Cash and Equivalents 1,921.9 1,898.9 1,522.3 3,018.6

Short-Term Investments 10.1 -- -- --

TOTAL CASH AND SHORT TERM INVESTMENTS

1,932.0 1,898.9 1,522.3 3,018.6

Accounts Receivable 6,791.1 11,715.9

13,600.0 33,904.7

Notes Receivable 28.5 25.7 53.2 55.5


Other Receivables 10,358.0 14,562.6

15,751.2 15,681.8

TOTAL RECEIVABLES 17,177.6 26,304.1

29,404.4 49,642.1

Inventory 20,713.9 28,293.7

29,689.9 62,475.9

Prepaid Expenses 67.9 62.6 73.0 206.0

Other Current Assets 842.9 1,475.4 1,823.7 536.1

TOTAL CURRENT ASSETS 40,734.4 58,034.7

62,513.3 115,878.7

Gross Property Plant and Equipment

14,329.3 14,656.4

16,223.0 16,757.2

Accumulated Depreciation -6,217.8 -7,156.1 -8,231.7 -9,314.0

NET PROPERTY PLANT AND EQUIPMENT

8,111.5 7,500.3 7,991.3 7,443.2

Long-Term Investments 2,317.8 3,279.0 2,990.6 2,701.1

Accounts Receivable, Long Term

-- 655.6 498.6 354.1

Loans Receivable, Long Term 45.2 39.6 127.8 123.2

Deferred Tax Assets, Long Term 124.7 408.3 401.0 407.3

Other Long-Term Assets 829.6 96.3 214.7 202.4

TOTAL ASSETS 52,307.9 70,168.5

74,737.3 127,110.0

LIABILITIES & EQUITY

Accounts Payable 16,902.1 27,165.9

32,382.1 69,342.2

Accrued Expenses 4,425.1 4,058.2 3,387.0 6,385.6Short-Term Borrowings 4,811.6 7,648.9 9,064.8 10,997.9


Current Income Taxes Payable -- 1,695.3 69.4 726.7

Other Current Liabilities, Total 6,625.5 6,488.3 6,482.5 6,283.8

TOTAL CURRENT LIABILITIES 32,764.2 47,056.6

51,385.8 93,736.2

Pension & Other Post-Retirement Benefits

1,323.7 1,554.9 1,644.1 1,574.2

Other Non-Current Liabilities 675.2 744.0 768.3 834.6

TOTAL LIABILITIES 34,763.1 49,355.5

53,798.2 96,145.0

Common Stock 1,715.2 1,715.2 1,715.2 1,715.2

Retained Earnings 15,077.3 18,142.5

18,029.7 28,310.1

Comprehensive Income and Other

752.4 955.4 1,194.3 939.7

TOTAL COMMON EQUITY 17,544.8 20,813.1

20,939.2 30,965.0

TOTAL EQUITY 17,544.8 20,813.1

20,939.2 30,965.0

TOTAL LIABILITIES AND EQUITY

52,307.9 70,168.5

74,737.3 127,110.0


Income Statements for Pakistan State Oil Company Ltd. (PSO)

Year over year, Pakistan State Oil Company Ltd. has been able to grow revenues from 349.7B to 495.3B. Most impressively, the company has been able to reduce the percentage of sales devoted to cost of goods sold from 96.76% to 94.13%. This was a driver that led to a bottom line growth from 4.7B to 14.1B.

Income Statement:

Currency inMillions of Pakistan Rupees

As of: Jul 022005

Jul 022006

Jul 022007

Jul 022008

Revenues 212,503.7 298,250.0 349,706.3 495,278.5

TOTAL REVENUES 212,503.7 298,250.0 349,706.3 495,278.5

Cost of Goods Sold 199,431.0 281,965.7 338,388.5 466,217.4

GROSS PROFIT 13,072.6 16,284.4 11,317.8 29,061.1

Selling General & Admin Expenses, Total

2,861.4 2,923.8 3,188.5 3,808.7

Depreciation & Amortization, Total

984.0 1,082.4 1,140.1 1,166.8

Other Operating Expenses 83.0 903.8 -674.2 257.7

OTHER OPERATING EXPENSES, TOTAL

3,928.5 4,910.0 3,654.3 5,233.3

OPERATING INCOME 9,144.1 11,374.4 7,663.5 23,827.8

Interest Expense -257.0 -622.3 -891.6 -745.5

Interest and Investment Income

20.1 -- 20.0 77.1


NET INTEREST EXPENSE -236.9 -622.3 -871.6 -668.4

Income (Loss) on Equity Investments

221.8 1,038.9 330.3 294.3

Currency Exchange Gains (Loss)

32.6 -110.8 -6.5 -1,558.9

Other Non-Operating Income (Expenses)

-113.7 -261.8 -266.5 -622.4

EBT, EXCLUDING UNUSUAL ITEMS

9,047.9 11,418.3 6,849.2 21,272.4

Gain (Loss) on Sale of Assets

-4.9 -- 26.1 31.2

Other Unusual Items, Total 148.5 -- 246.7 73.7

Legal Settlements -- -- 78.6 -37.6

Other Unusual Items 148.5 -- 184.8 113.1

EBT, INCLUDING UNUSUAL ITEMS

9,191.4 11,418.3 7,122.0 21,377.4

Income Tax Expense 3,535.6 3,893.6 2,432.2 7,323.6

Earnings from Continuing Operations

5,655.9 7,524.7 4,689.8 14,053.8

NET INCOME 5,655.9 7,524.7 4,689.8 14,053.8

NET INCOME TO COMMON INCLUDING EXTRA ITEMS

5,655.9 7,524.7 4,689.8 14,053.8

NET INCOME TO COMMON EXCLUDING EXTRA ITEMS

5,655.9 7,524.7 4,689.8 14,053.8


Trend analysis of Financial Statements of Pakistan State Oil over the year 2007 and 2008

Component %ages of income statement for the year ended at 2 nd July, 2008

Net Sales 495278.5

Cost of goods sold 466217.4

Gross Profit 29061.1

Expenses 15007.3

Net Income 14053.8

Consider Net Sales = 495278.5 as 100%.

I. Cost of goods sold as a %age of Net Sales = (466217.4/495278.5)x100=94.13%

II. Expenses as a %age of Net Sales = (15007.3/495278.5)x100 = 3.03%III. Net income as a %age of Net Sales = (14053.8/495278.5)x100=

2.83%


Component %ages of income statement for the year ended at 2 nd July, 2007

Net Sales 349706.3

Cost of goods sold 338388.5

Gross Profit 11317.8

Expenses 6628.0

Net Income 4689.8

Consider Net Sales = 349706.3 as 100%.

I. Cost of goods sold as a %age of Net Sales =(338388.5/349706.3)x100= 96.76%

II. Expenses as a %age of Net Sales =(6628.0/346706.3)x100= 1.89%III. Net Income as a %age of Net Sales = (4689.8/349706.3)x100= 1.35%

Component %ages of Balance Sheet as at 2 nd July, 2008

Total Assets 127110.0

Total Liabilities 96145.0

Total Equity/capital 30965.0

Current Assets 115878.7

Fixed Assets 11231.3

Consider Total Assets 127110 as 100%

I. Total Liabilities as a %age of Total Assets=(96145/127110)x100 = 75639%


II. Capital as a %age of Total Assets = (30965/127110)x100 = 24.36%

III. Current Assets as %age of Total Assets = (115878.7/127110)x100 = 91.16%

IV. Fixed Assets as %age of Total Assets = (11231.3/127110)x100= 8.836%

Total Liabilities 96145.0Current Liabilities 93736.2Long term Liabilities 2408.8

Consider Total Liabilities 96145.0 as 100%

I. Current Liabilities as % of Total Liabilities = (93736.2/96145.0)x100 = 97.494%

II. Long Term Liabilities as % of Total Liabilities = (2408.8/96145.0)x100 = 2.505%


Consider Total Current Assets 115878.7 as 100%

I. Cash & equiv. as a %age of Current Assets =(3018.6/115878.7)x100 = 2.62%

II. A/C Receivable as a %age of Current Assets =(33904.7/115878.7)x100 = 29.25%

III. Notes Receivable as a %age of Current Assets =


(55.5/115878.7)x100 = 0.04789%

IV. Other Receivable as a %age of Current Assets = (15681.8/115878.7)x100 = 13.53%

V. Inventory as a %age of Current Assets = (62475.9/115878.7)x100 = 53.915%

VI. Prepaid Exp as a %age of Current Assets = (206/115878.7) x100 = 0.178%

VII. Other Current Assets as a %age of Current Assets = (536.1/115878.7)x100 = 0.46%


Consider Total Fixed Assets 11231.3 as 100%

I. Net Property plant & equip as %age Fixed Assets = (7443.2/11231.3)x100 = 66.27%

II. Long term investments as a %age Fixed Assets = (2701.1/11231.3)x100 = 24.05%

III. A/C Receivable Long Term as a %age Fixed Assets = (354.1/11231.3)x100 = 3.153%

IV. Loans Receivable Long Term as a %age Fixed Assets = (123.2/11231.3)x100 = 1.097%

V. Deferred Tax as a %age Fixed Assets = (407.3/11231.3)x100 = 3.63%

VI. Other Long term Assets as a %age Fixed Assets = (202.4/11231.3)x100 = 1.81%


Current Liabilities 93736.2

Consider Current Liabilities 93736.2 as 100%

I. A/C Payable as a %age of Current Liabilities = (69342.2/93736.2)x100 = 73.98%

II. Accrued Exp as a %age of Current Liabilities =(6385.6/93736.2)x100 = 6.812%

III. Short Term Borrowings as %age of Current Liabilities = (10997.9/93736.2)x100 = 11.73%

IV. Current Income Tax payable as a % of Current Liabilities = (726.7/93736.2)x100 = 0.775%

V. Other Current Liabilities as a %age of Current Liabilities = (6283.8/93736.2)x100 = 6.71%

Long term Liabilities 2408.8

Consider Long Term Liabilities 2408.8 as 100%

I. Pension & Post Retirement as % of Long Term Liabilities = (1574.2/2408.8)x100 = 65.35%

II. Other Long Term Liabilities as % of Long Term Liabilities =(834.6/2408.8)x100 = 34.65%

Total Capital 30965.0

Consider Total Capital 30965.0 as 100%

I. Common Stock as a % of Total capital = (1715.2/30965)x100 = 5.54%


II. Retained Earnings as a % of Total capital = (28310.1/30965)x100 = 91.43%

III. Comprehensive income & other as a % of Total capital = (939.7/30965)x100=3.03%

Component %ages of Balance Sheet as at 2 nd July, 2007

Total Assets 74737.3


Total Equity/Capital 20939.2


Fixed Assets 1224.0


Long Term Liabilities 2412.4

Consider total Assets 74737.3 as 100%

I. Total Liabilities as a %age of total assets = (53798.1/74737.3)x100 = 71.98%

II. Total Capital as a %age of total assets = (20939.2/74737.3)x100 = 28.02%

III. Current Assets as a %age of total assets = (62513.3/74737.3)x100 = 83.644%

IV. Fixed Assets as a %age of total assets = (12224.0/74737.3)x100 = 16.356%



Consider Total Liabilities 53798.1 as 100%

I. Current Liabilities as a %age of Total Liabilities = (51385.7/53798.1)x100 = 95.52%

II. Long Term Liabilities as a %age of Total Liabilities = (2412.4/53798.1)x100 = 4.48%


Consider Current Assets 62513.3 as 100%

I. Cash & equiv. as a %age of Current Assets = (1522.3/62513.3)x100 = 2.44%

II. A/C Receivable as a %age of Current Assets = (13600/62513.3)x100 = 21.76%

III. Notes Receivable as a %age of Current Assets = (53.2/62513.3)x100 = 0.085%

IV. Other Receivable as a %age of Current Assets = (15751.2/62513.3)x100 = 25.196%

V. Inventory as a %age of Current Assets = (29689.9/62513.3)x100 = 47.49%

VI. Prepaid Exp as a %age of Current Assets = (73/62513.3)x100 = 0.12%

VII. Other Current Assets as a %age of Current Assets = (1823.7/62513.3)x100 = 2.92%



Consider Fixed Assets 12224.0 as 100%

I. Net Property plant & equip as %age Fixed Assets = (7991.3/12224) x 100 = 65.37%

II. Long term investments as a %age Fixed Assets = (2990.6/12224)x100 = 24.46%

III. A/C Receivable Long Term as a %age Fixed Assets = (498.6/12224)x100 = 4.08%

IV. Loans Receivable Long Term as a %age Fixed Assets = (127.8/12224)x100 = 1.05%

V. Deferred Tax as a %age Fixed Assets = (401/12224)x100 = 3.28%

VI. Other Long term Assets as a %age Fixed Assets = (214.7/12224) x 100 = 1.76%


Consider current liabilities 51385.8 as 100%

I. A/C Payable as a %age of Current Liabilities = (32382.1/51385.8)x100 = 63.01%

II. Accrued Exp as a %age of Current Liabilities = (3387/51385.8)x100 = 6.59%

III. Short term Borrowings as %age of Current Liabilities = (9064.8/51385.8)x100 = 17.64%

IV. Current Income Tax payable as a % of Current Liabilities = (69.4/51385.8)x100 = 0.14%


V. Other Current Liabilities as a %age of Current Liabilities = (6482.5/51385.8)x100 = 12.62%

Long term Liabilities 2412.4

Consider Long Term Liabilities 2412.4 as 100%

I. Pension & Post Retirement as % of Long Term Liabilities = (1644.1/2412.4)x100 = 68.15%

II. Other Long Term Liabilities as % of Long Term Liabilities = (768.3/2412.4)x100 = 31.85%

Total Capital 20939.2

Consider Total Capital 20939.2 as 100%

I. Common Stock as a % of Total capital = (1715.2/20939.2)x100 = 8.19%

II. Retained Earnings as a % of Total capital = (18029.7/20939.2)x100 = 86.11%

III. Comprehensive income & other as % of Total capital = (1194.3/20939.2)x100=5.7%


Trend Analysis over Year (2007-2008)

Total Revenue in 2007 349706.3

Total Revenue in 2008 495278.5

∆ Amount 495278.5-349706.3 = 145572.2

%age ∆ 41.62%

Gross Profit in 2007 11317.8

Gross Profit in 2008 29061.1

∆ Amount 29061.1-11317.8 = 17743.3

%age ∆ 156.77%

Cost of Goods sold in 2007 338388.5

Cost of Goods sold in 2008 466217.4

∆ Amount 466217.4-338388.5 = 127828.9

%age ∆ 37.78%

Net Income in 2007 4689.8

Net Income in 2008 14053.8

∆ Amount 14053.8-4689.8 = 9364

%age ∆ 199.67%

Expenses in 2007 6628.0

Expenses in 2008 15007.3


∆ Amount 15007.3-6628.0 = 8379.3

%age ∆ 126.42%

Cash & Short term investments in 2007 1522.3

Cash & Short term investments in 2008 3018.6

∆ Amount 3018.6-1522.3 = 1496.3

%age ∆ 98.29%

Total Receivable in 2007 29404.3

Total Receivable in 2008 49642.1

∆ Amount 49642.1-29404.3 = 20237.8

%age ∆ 68.83%

Total Current Assets in 2007 62513.3

Total Current Assets in 2008 115878.7

∆ Amount 115878.7-62513.3= 53365.4

%age ∆ 85.37%

Fixed Assets in 2007 12224

Fixed Assets in 2008 11231.3

∆ Amount 11231.3-12224 = -992.7

%age ∆ -8.12%

Total Assets in 2007 74737.3


Total Assets in 2008 127110.0

∆ Amount 127110.0-74737.3 = 52372.7

%age ∆ 70.075%

Current Liabilities in 2007 51385.8

Current Liabilities in 2008 93736.2

∆ Amount 93736.3-51385.8 = 88550.4

%age ∆ 82.416%

Long Term Liabilities in 2007 2412.4

Long Term Liabilities in 2008 2408.8

∆ Amount 2408.8-2412.4 = -3.6

%age ∆ -0.15%

Total Liabilities in 2007 53798.2

Total Liabilities in 2008 96145.0

∆ Amount 96145.0-53798.2= 42346.8

%age ∆ 78.72%

Total Capital in 2007 20939.2

Total Capital in 2008 30965.0

∆ Amount 30965.0-20939.2 = 10025.8

%age ∆ 47.88%


Chapter # 04:

FINANCIAL COMPARISON OF PSO WITH SHELL PAKISTAN FOR THE YEARS 2007 & 2008

PSO:

Current Ratio:Current Ratio = Current Assets / Current Liabilities = 178,392 / 145,122 =1.2292This result shows that current assets of PSO are slightly greater than its current liabilities.

Quick Ratio:Quick Ratio = (Current Assets – Inventory – Prepaid Expenses) / Current liabilities = (178,392 – 92,165.8 – 279) / 145,122 =0.5922Measure of liquidity is not satisfactory in this case. Because Quick Ratio < 1.

Debt Ratio:Debt Ratio = (Total Liabilities / Total Assets) * 100 = (149,943.2 / 201,847.3) * 100 = 74.28 %This shows that 74.28% of assets are financed by the creditors. It indicates the relative size the equity position.

Gross Profit Margin:Gross Profit Margin = (Gross Profit / Net Sales) * 100 = (40,378.9 / 844,984.8) * 100 = 4.77% This implies that company’s sales are profitable upto 4.77%


Net Profit Margin:Net Profit Margin = (Net Profit after tax / Net Sales) * 100 = (18,743.6 / 844,984.8) * 100 = 2.21%

Earnings Per Share (EPS):EPS = Net Profit after tax / Outstanding = 18,743.6 / 171.518901 = 109.2 rupee per share

Return On Equity:Return on Equity = Net Income / Average Total Equity = 18,743.6 / 25,952.1 = 0.722This implies that return is earned on the equity at a rate of 0.722

Working Capital:Working Capital = Current Assets – Current Liabilities = 178,392 – 141,122 = 37,270 million rupee

Receivable Turnover Rate:Receivable Turnover Rate = Net Sales / Average Account Receivables = 844,984.8 / 39,523.25 = 21.37 timesAverage no. of Days to collect Receivables = 365/ 21.67 = 18 Days

Inventory Turnover Rate:Inventory Turnover Rate = Cost of Goods Sold / Average Inventory = 804,605.9 / 46,082.9 = 17.45 timesAverage no. of Days to sell Inventory = 365/17.45 =21 Days


Shell Pakistan Ltd:

Current Ratio:Current Ratio = Current Assets / Current Liabilities = 49,933.8 /42,919.9 =1.16This result shows that current assets of SHELL are 1.16times greater than its current liabilities.

Quick Ratio:Quick Ratio = (Current Assets – Inventory – Prepaid Expenses) / Current liabilities = (49,933.8 – 26,383.2 – 230.9) / 42,919.9 = 0.54Measure of liquidity is not satisfactory in this case. Because Quick Ratio < 1.

Debt Ratio:Debt Ratio = (Total Liabilities / Total Assets) * 100 = (45,804.4/ 68,876.8) * 100 = 66.5 %This shows that 66.5% of assets are financed by the creditors. It indicates the relative size the equity position.

Gross Profit Margin:Gross Profit Margin = (Gross Profit / Net Sales) * 100 = (21,047.9/254,890.2) * 100 = 8.75 % This implies that company’s sales are profitable upto 4.77%

Net Profit Margin:Net Profit Margin = (Net Profit after tax / Net Sales) * 100 = (5843.753 / 254,890.2) * 100 = 2.29 %

Earnings Per Share (EPS):EPS = Net Profit after tax / Outstanding = 5843.753 / 54.790313 = 106.65 rupee per share

Return On Equity:Return on Equity = Net Income / Average Total Equity


= 5843.753 / 11,536.2 = 0.50%This implies that return is earned on the equity at a rate of 0.50%

Working Capital:Working Capital = Current Assets – Current Liabilities = 49,933.8 – 42,919.9 = 7,013.9 million rupee

Receivable Turnover Rate:Receivable Turnover Rate = Net Sales / Average Account Receivables = 254,890.2 / 10,247.7 = 24.87 timesAverage no. of Days to collect receivables = 365 / 24.87=15 Days

Inventory Turnover Rate:Inventory Turnover Rate = Cost of Goods Sold / Average Inventory = 233,842.3 / 13,191.6 = 17.72 timesAverages no. of Days to sell Inventory = 365/17.72=21 Days

o TABLE COMPARING RATIOS OF PSO & SHELL


SERIEL NO.

RATIOS AS OF 2ND JULY, 2008.

PSO SHELL

1. Current Ratio 1.22 1.162. Quick Ratio 0.59 0.543. Debt Ratio 74.28 % 66.5 %4. Gross Profit Margin 4.7786 % 8.25 %5. Net Profit Margin 2.2182 % 2.29 %6. Earnings Per Share 109.28 rupee

per share106.65 rupee per share

7. Return on Equity 0.7222 0.2538. Working Capital 37,270 million

rupee 7,013.9 million rupee

9. Receivable Turnover Rate 21.37 times 24.87 times10. Inventory Turnover Rate 17.45 times 17.72 times

o GRAPHS: CURRENT RATIO: (times)

20081.12

1.14

1.16

1.18

1.2

1.22

1.24

PSOSHELL

This shows that current assets of PSO are 1.22times greater than its current liabilities and current assets of SHELL are 1.16times greater than its current liabilities. This means that PSO has high ability of short-term debt-paying as compare to SHELL.


QUICK RATIO: (times)

20080.51

0.52

0.53

0.54

0.55

0.56

0.57

0.58

0.59

0.6

PSOSHELL

Measure of Liquidity of PSO and SHELL are almost same and are less than one this means that they are not in a satisfactory position to pay back their current liabilities.

DEBT RATIO: (%)


200862

64

66

68

70

72

74

76

PSOSHELL

74.28% of total assets of PSO are financed by its creditors. And 66.65%of total assets of SHELL are financed by its creditors. This means under crucial circumstances PSO will be facing more risk.

GROSS PROFIT MARGIN: (%)

20080

1

2

3

4

5

6

7

8

9

PSOSHELL

Means sales of products of SHELL are more profitable.

NET PROFIT MARGIN: (%)


20082.16

2.18

2.2

2.22

2.24

2.26

2.28

2.3

PSOSHELL

EARNING PER SHARE: (rupee per share)

2008105

105.5

106

106.5

107

107.5

108

108.5

109

109.5

PSOSHELL

ESP of PSO is higher than shell. This means PSO is better option for an investor’s to invest in, because in PSO net income applicable to each share of common stock is higher.

RETURN ON EQUITY: (%)


20080

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

PSOSHELL

ROT of PSO is higher than SHELL. This means PSO is financially more strong and is a better option from investor’s point of view because it earn high return on equity investment.

WORKING CAPITAL: (million of rupee)

20080

5000

10000

15000

20000

25000

30000

35000

40000

PSOSHELL

PSO has a much higher ability to pay back its short-term debt.

RECIEVABLE TURNOVER RATE: (times)


200819

20

21

22

23

24

25

26

PSOSHELL

Receivables are collected more quickly in SHELL as compare to PSO.

INVENTORY TURNOVER RATE: (times)

200817.3

17.35

17.4

17.45

17.5

17.55

17.6

17.65

17.7

17.75

PSOSHELL

Inventory is sellout at almost equal rate in both companies.

CHAPTER # 05:


ConclusionSince PSO has higher ability to pay back its short-term debts, so

creditor will be more willing to give loan to PSO as compare to SHELL. This means PSO can expand its business more efficiently.

Since PSO has higher EPS and ROE as compare to SHELL, so investors are more willing to invest in it. This means PSO can raise its capital more.

Also the inventory sold at SHELL is slightly higher than at PSO, this shows that both companies have good retail sales.

Work Citied


http://www.psopk.com/ http://www.shell.com.pk/ Comparison of HRM Practices at PSO and Shell, Retrieved from URl:

http://www.scribd.com/doc/58224034/37/Comparison-of-HRM-Practices-at-PSO-and-SHELL

Project on Shell Pakistan, Retrieved from URL: http://www.amcy5.com/projects/marketing/amcy36.htm


http://www.amcy5.com/projects/marketing/amcy36.htm



http://www.shell.com.pk/

http://www.psopk.com/

human resource management - comparison of pso with shell pakistan ltd

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