By looking at the past ten years balance sheets (British Petroleum 2009), it is evident that company has increased its current assets till 2007 and then there is decline of 3% in 2008(see figure 10). However, the average historical rate is about 12% as in figure 10 in appendix. Current liabilities have also increased at about the same rate nearly 14% on average (figure 10 in appendix). Company has substantially increased in its long term debt almost 53% from 1999 to 2000 but it has controlled this number to around 9% in the subsequent years in order to reduce its financial leverage (see figure 10). If we look at the outstanding shares trend, it is obvious that company has not issued too many shares in the past years and this rate is about negative 0.3% on average as in figure 10 in appendix (British Petroleum 2009).
Past ten years income statements of the company showed that sales of the company have been increasing till 2008 except from 2001 to 2003(British Petroleum 2009). The average rate of increase is almost 20% in the last ten years (see figure 9 in the appendix). EBIT of the company have also been showing average growth rate of about 27%. In the year 2000, there is the highest increase in the EBIT of almost 141% which is all time high number in the last ten years. Total net income has also shown positive trend till 2006. But it has been decreasing onwards till 2008 because of the rising operating cost, decline in sales and EBIT, as compared to the previous years. Earnings per share of the company have been decreasing till 2005 and then there is almost steady rate of growth till 2008. The average tax rate of the last ten years of the company is almost 6%.
The key financial ratios of the firm are showing overall better financial position. P/E ratio is calculated by dividing the market value per share to the earning per share (Investopedia 2009). A higher price to earnings ratio proposes that investors start expecting higher retunes from their investment as compared to the low P/E companies (Investopedia 2009). Average price to earnings (P/E) ratio has been decreasing over the years except in the year 2000 (see figure8). P/E ratio in 2009 was 20.6 while the industry average was 17.8. So company is currently performing above the industry average in this respect.
Price to sales (P/S) ratio is another financial indicator of the company financial health (Brigham & Ehrhardt, 2001). P/S ratio is calculated by dividing the market price per share to the sales revenue per share (Ross et al. 2002). The Price to Sales (P/S) ratio shows the relationship between share price of the stock and the total net sales per share (Investor Glossary 2009). If this ratio is lower, it means that market forces are willing to pay higher prices for the stock (Smart and Megginson 2008).
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