Final Project

Mehak Fatima
Junaid Ajmal
Ahmed Raza
Shahriyar Naveed
Ratio Analysis
• The current ratio of the company is 1.25x whereas the average current ratio of the industry is 3.54x.
• The quick ratio of the company is also less i.e., 1.24x as compared to industry i.e. 2.8x
• The inventory turnover ratio of the company is 25.30x which is quite high as compared to average industry ratio that is
13.47x
• The average DSO of Mari Petroleum is 914days.
• The average fixed asset turnover ratio of the industry is 2.20x whereas the Mari Petroleum as 1.74x.
• The total asset turnover ratio of Mari Petroleum is 0.27x and that of industry is 0.39x.
• The OM of the company is 56.7% and the average percentage of OM of industry is 40.67%
• The Profit Margin of the company is 40.92% and the average PM of industry is 19.60%.
• ROA of Mari Petroleum is 11.05% and that of the industry is 15.61%. the lower percentage of ROA shows that the
company has larger amount of total assets.
• ROE of Mari petroleum is 38.24% and that of industry is 19.60%.
• The BEP of Mari Petroleum Company is 15.33% and the BEP of industry is 18.1%.
• Debt to equity ratio is zero.
Horizontal Analysis

Horizontal Analysis or Trend Analysis, is a method where financial statements are compared to reveal
financial performance over a specific period of time
Further it is used to spot financial trends over a specific time.
Horizontal Analysis (Balance Sheet)
• In 2018-19, total assets increased by 53% primarily due to increase in current assets.
• Increase in current assets is mainly due to increase in trade debts and cash and cash equivalents.
• On equity and liabilities side, share capital and reserves increased by 58% mainly due to increase in profit
and loss account on account of retained profit.
• Non current liabilities increased by 26% primarily due to increase in provision for decommissioning cost
• while current liabilities increased by 52% principally due to increase in GIDC payable.
Horizontal Analysis (INCOME STATEMENT)
• Increase in net sales, other income and finance income were the major reasons for increase in profitability in
2018-19 as compared to 2017-18.
• This was partially offset by increase in royalty, operating expenses, exploration and prospecting expenditure,
other charges, finance cost and provision for taxation.
Balance Sheet (Horizontal Analysis)
Income Statement (Horizontal Analysis)
Vertical Analysis

It is the proportional analysis of a financial statement, where each line item on a financial statement is listed as
a percentage of another item.
Vertical Analysis (Balance Sheet)
• In 2018-19, total assets comprise of 83% current assets and 17% non-current assets.
• Current assets increased from the last year mainly due to increase in trade debts and cash and cash equivalents.
• Further, increase in non current assets is mainly due to increase in property, plant and equipment and exploration
and evaluation assets.
• On the other side, liabilities and equity almost remained in the same proportion as compared to the last year.
VERTICAL ANALYSIS (INCOME STATEMENT)
• During 2018-19, net sales were 50.58% of gross sales as compared to 40.66% in the last year.
• Further, percentage of profit for the year to gross sales increased to 20.70% from 15.37% of the last year.
Balance Sheet (Vertical ANALYSIS)
Income Statement (Vertical Analysis)
Company’s Future investment plans:
Short-Term (1-2 Years):
The Company will remain focused on its core business, with the objective of extending its exploration portfolio and
generating revenue streams through improved production through field optimization .
Medium-Term (3-5 Years):
the Company intends to focus on investments aimed at adding high-potential blocks to its portfolio by expanding into
Pakistan's undeveloped frontier regions.
Long-Term (6-8 Years):
MPCL plans to modernize its business strategy in order to respond to the projected changes in the worldwide energy sector,
bearing in mind the constantly changing environment of the global energy industry. In the long run, the Company wants to
drastically modify its existing business strategy by focusing on renewable and alternative energy efforts.
Capital Budgeting technique
Issues In the capital Budgeting
Weighted Average Cost of Capital
Rfr 2.4% By using the formula below
Market premium 5.0% WACC Wd*Rd + Ws*Rs(1-T)
Beta 0.95
Rs 0.0715 WACC 7.2%

rd 4.3%
rd(1-T) 0.031875
Wd 0%
We 100%
 Capital Structure

• A company's capital structure is the specific form of financing such as debt or equity.
• It adopts to fund its overall operations and growth. Mari Petroleum Company is using
Equity Based Financing as a source of Capital.
• The selling of company shares to raise capital is called as the equity financing. When
investors buy stock in a corporation, they are also buying ownership rights in the
company.
• The selling of all equity, such as common stock, preferred stock, share warrants, and so
on, is known to as equity financing.
 Optimal Capital Structure
• Equity financing relieve a company of any kind of financial commitments,
and the owners are not obligated to repay the money.
• Mari Petroleum is based on optimal capital structure.
Current Lending Rate in Pakistan 10.76%
Company's Tax Rate 29%
Cost of Equity 5.65%

Weight of Equity 90% 80% 70% 60% 50%

Weight of Debt 10% 20% 30% 40% 50%
WACC 0.00% 0.00% 0.00% 0.00% 0.00%
 Change in Current Capital Structure:

• We will not recommend any change in this capital structure because of the following factors :
• Alternative funding source:
• The fundamental benefit of equity financing is that it provides enterprises with an alternative to debt financing. Angel investors,
venture capitalists, and financial institutions can help startups that don't qualify for significant bank loans afford their
expenditures. Because the company does not have to repay its shareholders, equity financing is seen as less risky than debt
financing in this scenario.
• Access to business contacts, management expertise, and other sources of capital:
• The administration of a corporation could also benefit from equity financing. Some investors are personally motivated to
contribute to a company's growth want to be involved in its operations.
• Their successful experiences enable them to offer essential support in the form of business contacts, management skills, and
access to alternative financing sources. Many angel investors and venture capitalists are willing to help businesses in this way. It
is critical during the early stages of a company's development.
• These factors shows that Equity based Financing is a better option and provides Mari petroleum stability in Market.
 Change in Current Capital Structure:

• Access to business contacts, management expertise, and other sources of capital:

• The administration of a corporation could also benefit from equity financing. Some
investors are personally motivated to contribute to a company's growth want to be
involved in its operations.
• Their successful experiences enable them to offer essential support in the form of business
contacts, management skills, and access to alternative financing sources. Many angel
investors and venture capitalists are willing to help businesses in this way. It is critical
during the early stages of a company's development.
• These factors shows that Equity based Financing is a better option and provides Mari
petroleum stability in Market.