NATIONAL COLLEGE OF BUSINESS ADMINISTRATION AND ECONOMICS

Human Resource Management Project Fall 2011

Group Members: Umar Javaid Nouman Anwar Hassan Haider Submitted To: Mr. Sikander Aziz Submission Date: 15th December, 2011.

Human Resource Management-Project Fall-2011

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?

Human Resource Management-Project Fall-2011

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

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Organizations Selected

Sr. No 1.

Name Pakistan State Oil Ltd

Sector Government

Address PSO House, Khayaban-e-Iqbal, Clifton, P.O.Box 3983, Karachi 75600, Pakistan Shell House, 6 Ch. Khaliquzzaman Road,Clifton, Karachi75530, Pakistan

2.

Shell Pakistan Ltd

Private

Human Resource Management-Project Fall-2011

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-

Human Resource Management-Project Fall-2011

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.

Human Resource Management-Project Fall-2011

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.

Human Resource Management-Project Fall-2011

 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

Human Resource Management-Project Fall-2011

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 companys 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 PSOs 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 worlds leading businesses has found success in aligning business goals with those of human resource. PSOs 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

Human Resource Management-Project Fall-2011

employees. Each year employees are nominated for two companywide ceremonies namely; Shaukat Raza Mirza Management Excellence Award and PSO Managing Directors 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

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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.

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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

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 Compensations and Benefits o Medical o Provident Fund o Loans o Rewards o Million Liter Awards o Hajj Draw-2002 o Final Assistance o Special Allowances for Minorities Performance Management Employee Relations Companys Performance Community Welfare Health safety and environment

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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 groups 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.

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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 worlds 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: Shells 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 Shells 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. Shells global telephone helpline and website enable employees to report breaches of its Code of Conduct and the Shell General Business Principles, confidentially and anonymously.

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Work Environment: Diversity and inclusion Shells approach Shell aims to provide equal opportunities and create a workplace that supports all it staff and values their differences. Shells dedication to diversity and inclusion applies across Shell. HR Practices of Shell: Recruitment Selection Orientation Training o On-the-job learning o Training for recognized professional qualifications o Personal Development program Direction and support o Tailored training for all of its starters Performance Evaluation Compensation and Benefits o Financial Rewards and Benefits Program o Shell Share Save Scheme o Balancing work and life o Time off and time out o Sports and Social Activities o Listening to its Employees Career Development Concern for Environment Concern for Safety Shells 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 its 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.

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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 in Millions of Pakistan Rupees Assets As of: Jul 02 2005 Jul 02 2006 Jul 02 2007 Jul 02 2008

Cash and Equivalents Short-Term Investments TOTAL CASH AND SHORT TERM INVESTMENTS Accounts Receivable Notes Receivable

1,921.9 10.1 1,932.0 6,791.1 28.5

1,898.9 -1,898.9

1,522.3 -1,522.3

3,018.6 -3,018.6

11,715.9 13,600.0 33,904.7 25.7 53.2 55.5

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Other Receivables TOTAL RECEIVABLES Inventory Prepaid Expenses Other Current Assets TOTAL CURRENT ASSETS Gross Property Plant and Equipment Accumulated Depreciation NET PROPERTY PLANT AND EQUIPMENT Long-Term Investments Accounts Receivable, Long Term Loans Receivable, Long Term

10,358.0 14,562.6 15,751.2 15,681.8 17,177.6 26,304.1 29,404.4 49,642.1 20,713.9 28,293.7 29,689.9 62,475.9 67.9 842.9 62.6 1,475.4 73.0 1,823.7 206.0 536.1

40,734.4 58,034.7 62,513.3 115,878.7 14,329.3 14,656.4 16,223.0 16,757.2 -6,217.8 -7,156.1 -8,231.7 -9,314.0 8,111.5 2,317.8 -45.2 7,500.3 3,279.0 655.6 39.6 408.3 96.3 7,991.3 2,990.6 498.6 127.8 401.0 214.7 7,443.2 2,701.1 354.1 123.2 407.3 202.4

Deferred Tax Assets, Long Term 124.7 Other Long-Term Assets TOTAL ASSETS LIABILITIES & EQUITY Accounts Payable Accrued Expenses Short-Term Borrowings 829.6

52,307.9 70,168.5 74,737.3 127,110.0

16,902.1 27,165.9 32,382.1 69,342.2 4,425.1 4,811.6 4,058.2 7,648.9 3,387.0 9,064.8 6,385.6 10,997.9

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Current Income Taxes Payable Other Current Liabilities, Total

-6,625.5

1,695.3 6,488.3

69.4 6,482.5

726.7 6,283.8

TOTAL CURRENT LIABILITIES 32,764.2 47,056.6 51,385.8 93,736.2 Pension & Other PostRetirement Benefits Other Non-Current Liabilities TOTAL LIABILITIES Common Stock Retained Earnings Comprehensive Income and Other TOTAL COMMON EQUITY TOTAL EQUITY TOTAL LIABILITIES AND EQUITY 1,323.7 675.2 1,554.9 744.0 1,644.1 768.3 1,574.2 834.6

34,763.1 49,355.5 53,798.2 96,145.0 1,715.2 1,715.2 1,715.2 1,715.2

15,077.3 18,142.5 18,029.7 28,310.1 752.4 955.4 1,194.3 939.7

17,544.8 20,813.1 20,939.2 30,965.0 17,544.8 20,813.1 20,939.2 30,965.0 52,307.9 70,168.5 74,737.3 127,110.0

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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 As of: in Millions of Pakistan Rupees Revenues TOTAL REVENUES Cost of Goods Sold GROSS PROFIT Selling General & Admin Expenses, Total Depreciation & Amortization, Total Other Operating Expenses OTHER OPERATING EXPENSES, TOTAL OPERATING INCOME Interest Expense Interest and Investment Income Jul 02 2005 Jul 02 2006 Jul 02 2007 Jul 02 2008

212,503.7 298,250.0 349,706.3 495,278.5 212,503.7 298,250.0 349,706.3 495,278.5 199,431.0 281,965.7 338,388.5 466,217.4 13,072.6 2,861.4 984.0 83.0 3,928.5 9,144.1 -257.0 20.1 16,284.4 2,923.8 1,082.4 903.8 4,910.0 11,374.4 -622.3 -11,317.8 3,188.5 1,140.1 -674.2 3,654.3 7,663.5 -891.6 20.0 29,061.1 3,808.7 1,166.8 257.7 5,233.3 23,827.8 -745.5 77.1

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NET INTEREST EXPENSE Income (Loss) on Equity Investments Currency Exchange Gains (Loss) Other Non-Operating Income (Expenses) EBT, EXCLUDING UNUSUAL ITEMS Gain (Loss) on Sale of Assets Other Unusual Items, Total Legal Settlements Other Unusual Items EBT, INCLUDING UNUSUAL ITEMS Income Tax Expense Earnings from Continuing Operations NET INCOME

-236.9 221.8 32.6 -113.7 9,047.9 -4.9 148.5 -148.5 9,191.4 3,535.6 5,655.9 5,655.9

-622.3 1,038.9 -110.8 -261.8 11,418.3 ----11,418.3 3,893.6 7,524.7 7,524.7 7,524.7 7,524.7

-871.6 330.3 -6.5 -266.5 6,849.2 26.1 246.7 78.6 184.8 7,122.0 2,432.2 4,689.8 4,689.8 4,689.8 4,689.8

-668.4 294.3 -1,558.9 -622.4 21,272.4 31.2 73.7 -37.6 113.1 21,377.4 7,323.6 14,053.8 14,053.8 14,053.8 14,053.8

NET INCOME TO COMMON 5,655.9 INCLUDING EXTRA ITEMS NET INCOME TO COMMON 5,655.9 EXCLUDING EXTRA ITEMS

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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 2nd July, 2008
Net Sales Cost of goods sold Gross Profit Expenses Net Income 495278.5 466217.4 29061.1 15007.3 14053.8

Consider Net Sales = 495278.5 as 100%. I. II. III. Cost of goods sold as a %age of Net Sales = (466217.4/495278.5)x100=94.13% Expenses as a %age of Net Sales = (15007.3/495278.5)x100 = 3.03% Net income as a %age of Net Sales = (14053.8/495278.5)x100= 2.83%

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

Net Sales Cost of goods sold Gross Profit Expenses Net Income

349706.3 338388.5 11317.8 6628.0 4689.8

Consider Net Sales = 349706.3 as 100%. I. II. III. Cost of goods sold as a %age of Net Sales = (338388.5/349706.3)x100= 96.76% Expenses as a %age of Net Sales =(6628.0/346706.3)x100= 1.89% Net Income as a %age of Net Sales = (4689.8/349706.3)x100= 1.35%

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

Total Assets Total Liabilities Total Equity/capital Current Assets Fixed Assets

127110.0 96145.0 30965.0 115878.7 11231.3

Consider Total Assets 127110 as 100% I. Total Liabilities as a %age of Total Assets=(96145/127110)x100 = 75639%

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

IV.

Total Liabilities Current Liabilities Long term Liabilities

96145.0 93736.2 2408.8

Consider Total Liabilities 96145.0 as 100% I. Current Liabilities as % of Total Liabilities = (93736.2/96145.0)x100 = 97.494% Long Term Liabilities as % of Total Liabilities = (2408.8/96145.0)x100 = 2.505%

II.

Current Assets

115878.7

Consider Total Current Assets 115878.7 as 100% I. Cash & equiv. as a %age of Current Assets = (3018.6/115878.7)x100 = 2.62% A/C Receivable as a %age of Current Assets = (33904.7/115878.7)x100 = 29.25% Notes Receivable as a %age of Current Assets =

II.

III.

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(55.5/115878.7)x100 = 0.04789% IV. Other Receivable as a %age of Current Assets = (15681.8/115878.7)x100 = 13.53% Inventory as a %age of Current Assets = (62475.9/115878.7)x100 = 53.915% Prepaid Exp as a %age of Current Assets = (206/115878.7) x100 = 0.178% Other Current Assets as a %age of Current Assets = (536.1/115878.7)x100 = 0.46%

V.

VI. VII.

Fixed Assets

11231.3

Consider Total Fixed Assets 11231.3 as 100% I. Net Property plant & equip as %age Fixed Assets = (7443.2/11231.3)x100 = 66.27% Long term investments as a %age Fixed Assets = (2701.1/11231.3)x100 = 24.05% A/C Receivable Long Term as a %age Fixed Assets = (354.1/11231.3)x100 = 3.153% Loans Receivable Long Term as a %age Fixed Assets = (123.2/11231.3)x100 = 1.097% Deferred Tax as a %age Fixed Assets = (407.3/11231.3)x100 = 3.63% Other Long term Assets as a %age Fixed Assets = (202.4/11231.3)x100 = 1.81%

II.

III.

IV.

V.

VI.

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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% Accrued Exp as a %age of Current Liabilities = (6385.6/93736.2)x100 = 6.812% Short Term Borrowings as %age of Current Liabilities = (10997.9/93736.2)x100 = 11.73% Current Income Tax payable as a % of Current Liabilities = (726.7/93736.2)x100 = 0.775% Other Current Liabilities as a %age of Current Liabilities = (6283.8/93736.2)x100 = 6.71% 2408.8

II.

III.

IV.

V.

Long term Liabilities

Consider Long Term Liabilities 2408.8 as 100% I. Pension & Post Retirement as % of Long Term Liabilities = (1574.2/2408.8)x100 = 65.35% Other Long Term Liabilities as % of Long Term Liabilities =(834.6/2408.8)x100 = 34.65%

II.

Total Capital

30965.0

Consider Total Capital 30965.0 as 100%

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I.

Common Stock as a % of Total capital = (1715.2/30965)x100 = 5.54% Retained Earnings as a % of Total capital = (28310.1/30965)x100 = 91.43% Comprehensive income & other as a % of Total capital = (939.7/30965)x100=3.03%

II.

III.

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

Total Assets Total Liabilities Total Equity/Capital Current Assets Fixed Assets Current Liabilities Long Term Liabilities Consider total Assets 74737.3 as 100% I.

74737.3 53798.1 20939.2 62513.3 1224.0 51385.7 2412.4

Total Liabilities as a %age of total assets = (53798.1/74737.3)x100 = 71.98% Total Capital as a %age of total assets = (20939.2/74737.3)x100 = 28.02% Current Assets as a %age of total assets = (62513.3/74737.3)x100 = 83.644% Fixed Assets as a %age of total assets = (12224.0/74737.3)x100 = 16.356%

II.

III.

IV.

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Total Liabilities

53798.1

Consider Total Liabilities 53798.1 as 100% I. Current Liabilities as a %age of Total Liabilities = (51385.7/53798.1)x100 = 95.52% Long Term Liabilities as a %age of Total Liabilities = (2412.4/53798.1)x100 = 4.48%

II.

Current Assets

62513.3

Consider Current Assets 62513.3 as 100% I. Cash & equiv. as a %age of Current Assets = (1522.3/62513.3)x100 = 2.44% A/C Receivable as a %age of Current Assets = (13600/62513.3)x100 = 21.76% Notes Receivable as a %age of Current Assets = (53.2/62513.3)x100 = 0.085% Other Receivable as a %age of Current Assets = (15751.2/62513.3)x100 = 25.196% Inventory as a %age of Current Assets = (29689.9/62513.3)x100 = 47.49% Prepaid Exp as a %age of Current Assets = (73/62513.3)x100 = 0.12% Other Current Assets as a %age of Current Assets = (1823.7/62513.3)x100 = 2.92%

II.

III.

IV.

V.

VI.

VII.

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Fixed Assets

12224.0

Consider Fixed Assets 12224.0 as 100% I. Net Property plant & equip as %age Fixed Assets = (7991.3/12224) x 100 = 65.37% Long term investments as a %age Fixed Assets = (2990.6/12224)x100 = 24.46% A/C Receivable Long Term as a %age Fixed Assets = (498.6/12224)x100 = 4.08% Loans Receivable Long Term as a %age Fixed Assets = (127.8/12224)x100 = 1.05% Deferred Tax as a %age Fixed Assets = (401/12224)x100 = 3.28% Other Long term Assets as a %age Fixed Assets = (214.7/12224) x 100 = 1.76%

II.

III.

IV.

V. VI.

Current Liabilities

51385.8

Consider current liabilities 51385.8 as 100% I. A/C Payable as a %age of Current Liabilities = (32382.1/51385.8)x100 = 63.01% Accrued Exp as a %age of Current Liabilities = (3387/51385.8)x100 = 6.59% Short term Borrowings as %age of Current Liabilities = (9064.8/51385.8)x100 = 17.64% Current Income Tax payable as a % of Current Liabilities = (69.4/51385.8)x100 = 0.14%

II.

III.

IV.

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

II.

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% Retained Earnings as a % of Total capital = (18029.7/20939.2)x100 = 86.11% Comprehensive income & other as % of Total capital = (1194.3/20939.2)x100=5.7%

II.

III.

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Trend Analysis over Year (2007-2008)

Total Revenue in 2007 Total Revenue in 2008 Amount %age 349706.3 495278.5 495278.5-349706.3 = 145572.2 41.62%

Gross Profit in 2007 Gross Profit in 2008 Amount %age

11317.8 29061.1 29061.1-11317.8 = 17743.3 156.77%

Cost of Goods sold in 2007 Cost of Goods sold in 2008 Amount %age

338388.5 466217.4 466217.4-338388.5 = 127828.9 37.78%

Net Income in 2007 Net Income in 2008 Amount %age

4689.8 14053.8 14053.8-4689.8 = 9364 199.67%

Expenses in 2007 Expenses in 2008

6628.0 15007.3

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 Amount %age

15007.3-6628.0 = 8379.3 126.42%

Cash & Short term investments in 2007 Cash & Short term investments in 2008 Amount %age

1522.3 3018.6 3018.6-1522.3 = 1496.3 98.29%

Total Receivable in 2007 Total Receivable in 2008 Amount %age

29404.3 49642.1 49642.1-29404.3 = 20237.8 68.83%

Total Current Assets in 2007 Total Current Assets in 2008 Amount %age

62513.3 115878.7 115878.7-62513.3= 53365.4 85.37%

Fixed Assets in 2007 Fixed Assets in 2008 Amount %age

12224 11231.3 11231.3-12224 = -992.7 -8.12%

Total Assets in 2007

74737.3

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Total Assets in 2008 Amount %age

127110.0 127110.0-74737.3 = 52372.7 70.075%

Current Liabilities in 2007 Current Liabilities in 2008 Amount %age

51385.8 93736.2 93736.3-51385.8 = 88550.4 82.416%

Long Term Liabilities in 2007 Long Term Liabilities in 2008 Amount %age

2412.4 2408.8 2408.8-2412.4 = -3.6 -0.15%

Total Liabilities in 2007 Total Liabilities in 2008 Amount %age

53798.2 96145.0 96145.0-53798.2= 42346.8 78.72%

Total Capital in 2007 Total Capital in 2008 Amount %age

20939.2 30965.0 30965.0-20939.2 = 10025.8 47.88%

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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 =1.2292 This 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 =0.5922 Measure 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 companys sales are profitable upto 4.77%

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 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 = 0.722 This 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 times Average 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 times Average no. of Days to sell Inventory = 365/17.45 =21 Days

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Shell Pakistan Ltd:

Current Ratio: Current Ratio = Current Assets / Current Liabilities = 49,933.8 /42,919.9 =1.16 This 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 = 0.54 Measure 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 companys 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:

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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 times Average 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 times Averages no. of Days to sell Inventory = 365/17.72=21 Days

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o TABLE COMPARING RATIOS OF PSO & SHELL SERIEL NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. RATIOS AS OF 2ND JULY, 2008. PSO 1.22 0.59 74.28 % 4.7786 % 2.2182 % 109.28 rupee per share 0.7222 37,270 million rupee 21.37 times 17.45 times SHELL 1.16 0.54 66.5 % 8.25 % 2.29 % 106.65 rupee per share 0.253 7,013.9 million rupee 24.87 times 17.72 times

Current Ratio Quick Ratio Debt Ratio Gross Profit Margin Net Profit Margin Earnings Per Share Return on Equity Working Capital Receivable Turnover Rate Inventory Turnover Rate

o GRAPHS: CURRENT RATIO: (times)

1.23 1.22 1.21 1.2 1.19 1.18 1.17 1.16 1.15 1.14 1.13 2008 PSO SHELL

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

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current liabilities. This means that PSO has high ability of short-term debtpaying as compare to SHELL.

QUICK RATIO: (times)

0.6 0.59 0.58 0.57 0.56 0.55 0.54 0.53 0.52 0.51 2008 PSO SHELL

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.

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 DEBT RATIO: (%)

76 74 72 70 PSO 68 66 64 62 2008 SHELL

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: (%)

9 8 7 6 5 4 3 2 1 0 2008 PSO SHELL

Means sales of products of SHELL are more profitable.

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 NET PROFIT MARGIN: (%)

2.3 2.28 2.26 2.24 PSO 2.22 2.2 2.18 2.16 2008 SHELL

EARNING PER SHARE: (rupee per share)

109.5 109 108.5 108 107.5 107 106.5 106 105.5 105 2008 PSO SHELL

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

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 RETURN ON EQUITY: (%)

0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2008 PSO SHELL

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

WORKING CAPITAL: (million of rupee)

40000 35000 30000 25000 20000 15000 10000 5000 0 2008 PSO SHELL

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

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 RECIEVABLE TURNOVER RATE: (times)

26 25 24 23 PSO 22 21 20 19 2008 SHELL

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

INVENTORY TURNOVER RATE: (times)

17.75 17.7 17.65 17.6 17.55 17.5 17.45 17.4 17.35 17.3 2008 PSO SHELL

Inventory is sellout at almost equal rate in both companies.

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CHAPTER # 05:

Conclusion
Since 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.

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

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