I have chosen this company because it has a universal image and British petroleum is involved in dirt free cities movement in Europe. BP took very bigger steps for addressing towards type of weather changes which is a major concern in European countries. British petroleum is trying new pioneering new solar and airstream businesses and hygienic technologies of energy and storage space of carbon dioxide from usual remnant fuels. Creating and deliver superior products and services that meet the needs of the society. Attract succeeding age group of people. In this report I have discussed briefly the ratio analysis of British petroleum and what are the issues the companying is facing and how the company can get back to its original position.
British petroleum is large-scale oil and Gas business and well familiar over the world and its main control center is in London, United Kingdom. It is fourth leading in terms of revenue it earns yearly. It has been in service over eighty countries across the world. It produces 3.8 million oil equivalents per day and has various service stations approximately 22,400 across worldwide.
The recent development is that BP is not leaving United States as it has too much venture to walk away. Since the damage occurred in the Gulf of Mexico which resulted in eleven staff dead. The company had begun its trust in rebuilding process of national and state government. Huge process has been made to clean up the spills. End of the relief is a vital landmark to repair the gulf coast. The work has not yet done. However is it fully loyal for remedying the harm spill of Mexico and the atmosphere that caused the living of the people.
BP is trying its best for precautionary measures such as security and working education facility that support the employees to distribute out of harm’s way, trustworthy and in charge function which should be the top agenda of the company to discuss in every annual general meeting. Shipping plays a vital role in for security purpose in terms of transportation.
1. Profit margin: It is the size of the company industrialized and allocation competence during making method. Every company would like their company to gain more profit and should have a huge market share in the world. The profit margin will tell the shareholder the proportion of proceeds left after deducting the price tag of commodities sold. From the calculation obtained shows that there is no loss or gain. For past three years the profit margin has maintained constant in the British petroleum. Boost in manufacture will be ahead of the company anticipated long term enlargement. The main policy of the company will be deliver lucrative growth. The strategic alliance in the United States of two major gas producers will help the company to get back to huge profit if proper coordination and even cooperation like working harmony is necessary for these to gain profit.
2. Assets turn over: It will be the appraise of firm’s competence in generating sales or income. Companies with small profit periphery will in general have far above the ground asset turned over. Because of this reason the asset turnover is very low in this year as compared to the previous year.
3. Return on assets: It shows how the company is gainful to its total possessions. It will show clearly that how successfully the company will generate the income. Return on asset will tell what income earns from the asset which the company brought. As the calculation obtained shows that the company has not gained but has lost because of no asset turn over. BP expand its fabrication through enhanced equipment and as well as development of other countries. BP concentrated to expand its organization so it acquired more sophisticated equipment which were very expensive. In long run it can gain huge profit.
4. Debtors day: The Company which borrows something from other company is the debtors. From the calculation obtained it has borrowed around 65.8 as compared to 40 the previous year. Borrowing the products is not a good sign for the company. BP faced worst disasters in the past so it takes some time for recycle process. So it has taken very high debts for clearing the spills.
5. Creditors days: The business of giving credit to other company and providing a certain period of time to return back the amount from where the company had brought it. From the results obtained from calculation we can conclude that the company has gained lot of credit which is very high as compared to the previous year. It’s not a good sign for the company and shareholder won’t invest their funds in that company.
6. Stock days: Lesser the venture in stock is the better for the company. But based on the result obtained from the calculation the company has almost doubled the stock which is not a good prospect.
7. Current ratio: It will correctly give the complete picture of the company whether the company has enough resources to pay the bill yearly. As the figures shows that it is in the positive side and has enough resources to pay back. Current ratio will means volume cost of the existing resources will be accurately equal to the volume cost of the liabilities. Generally the shareholders will look for 2:1 current ratio which means two times the existing property over current liabilities.
8. Quick ratio: It is the indication of company power and limitation. The calculation shows that there are many liquidity assets that can be easily converted into cash. In the current year there is a slight increase in the quick ratio as compared to the previous year. Quick ratio is the summation of the currency, saleable securities and receivables dividend by recent liability.
9. Gearing: It is concerned with the shareholders finance must be larger than the long period sum unpaid. The gearing ratio shows that there is no much change in the recent years.
10. Return on equity: It will show how the company has again invested so that it can get additional income. Other way is what the profit generated given the resources provided by the shareholders. From the results through calculation return on investment is less and has dropped as compared to the previous year.
11. Earnings per share: It shows the quantity of net earnings which relate to per share. Higher the value of earning per share will be better for the company. The company has less earning per share when compared to previous year which is not excellent for the company. We can say in another way like it reveals the company skill to produce profit to owner fairness.
12. Price earning ratio: It is usually calculated to know how expensive the stock may be. Usually the company having lower price earning ratio will be better. But the calculation shows that price earning ratio is slight higher in the current year as compared to previous year which is not healthy symbol for the company. The high Price earnings ratio shows that greater than before order investors look forward to earning expansion in the future. Price earning can also be designed by estimating coming year earning per share in the denominator.
13. Interest coverage ratio: It shows how the company will pay the interest for the debts it has taken. Lower the interest coverage will be better. The calculation shows that it has higher interest coverage than the previous years. It measures the company ability to its interest payments. A far above the ground ratio indicates superior economic physical condition as the company is extra capable of gathering its interest obligation from in service income. If the company has less than one which clearly tells that company has to put up for sale off some assets otherwise move up more equity in sort to pay back a quantity of balance due.
14. Dividend per share: It means whatever the company has earned has to be paid to the shareholder in the form of dividends. Dividends are a form of profit sharing to the investors. As the calculation shows that there is no change in the past years so company is not giving the dividends to the shareholders.
One of the worst environmental disaster happened in Gulf of Mexico which tarnished the image of British petroleum. For cleaning the spills the company has to invest huge amount which led to loss in the profit margin and other things like asset turnover were low because of these situation. The financial economy has hit a very low due to the gulf spills of Mexico and the shares of the company has significantly dropped which is not a good thing to happen . The company will find it very difficult to come out of this stage because lot of venture is there in US so it has to convince the US government that the company will take proper measures to clean up the spills as quickly as possible.
British petroleum has taken several strategies to cover the well which took them to finish that work for five months. The environmental disaster happens quickly but the company will have to stay positive and do all necessary steps to build the reputation once again. It’s not easy to build the image all over again but sincere steps have to be taken by the chairman of the company board of directors and the employees and even investors play a major role in building the same reputation which the company had generated previously.
The Company at the moment is not having good mark on the minds of the people because of recent environmental disaster happened in Gulf of Mexico. But the balance sheet of the third quarter of the current year shows that it has gained profit because it’s operating in different parts of the world and supplying oil to other part of the world. This shows that it has making study progress and on the road to recovery. The company has alliance with the Amoco Corporation of the United States and Repsol of Spain which are the leading shareholders for supply of gas in Atlantic region and British petroleum made a strategic alliance with these companies keeping in mind and good understanding with these companies help them to have a strong market share in the world. The weakness of the company may be hike in the price of the petrol due to the disaster happened in the Gulf of Mexico so that they can recover financially. Since the company has taken good measures but still there will be leakage in the pipeline which may occur due to human errors so that may cause life of the people. Like recently occurred in Gulf of Mexico. Processing plant flare-up may also occur which is another possibility these are all the things the company has to face and proper and accurate measures has to be taken such that these situation doesn’t not happen again.
British petroleum has a strong position even after the disaster happened in Mexico. It has alliance with two leading united states gas producer they can recover from this situation. BP is top in the minor country in gas producing and these will also have a major concern for recovery of the company image. The shareholders have to be very tolerant so that they will earn a huge profit from this company. Another major plus point for this company is that other major leading companies of gas producers are fading. So the company will get back to its original position but it takes some time in long term perspective people can invest on this company and the company net income and profit will be increased as the days pass. Another major factor is that more than billion of assets will help the company to recover the debts. Due to these assets it has been fiscally well-built and in good health well thought-out so that it won’t be a capture of other company which can’t happen because of the assets it’s having.
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