Financial Analysis

Financial Analysis

Financial Analysis

Introduction

Shell the oil giant is the global company engaged in the business of petrochemicals. It is an international group which operates in more than 80 countries having 90,000 employees. Headquarter of the company is situated in Netherlands. The company is headed by Peter Voser. Royal Dutch Shell is the parent company of Shell Group. The company age is more than 100 years and now from petrochemicals to energy Shell is the worldwide global player with the highest revenues. Financial Analysis is the process of assessing the financial position of a company by analysing is stability, viability and profitability. One of the primary objectives of financial analysis is to recognize changes in financial trends, to help measure the progress made by an enterprise and identify a relationship to draw a logical conclusion on the performance of the company. Another major aspect of a financial analysis is comparing the performance of the company with its competitors.

To determine the financial strength and weaknesses of a company; analysing its Balance Sheet and Statement of Income will give a thorough account of its performance. Similarly, the financial position of Royal Dutch Shell is scrutinized using various ratios over the period of three years from December 31, 2008 to December 31, 2010.

Performance & profitability ratios show a company's overall efficiency and performance. These ratios represent the firm's ability to translate its capital employed into sales and these sales dollars into profits at various stages of measurement. Ratios that give you an idea about returns represent the firm's ability to measure the overall efficiency of the firm in generating returns for its shareholders (Collin, www.crfonline.org, 2011).

This ratio deals with the profit after tax of the company. (Key Business Ratios, D&B). Net profit margin of the company has been quite variable during the period under review. Profits had declined by 52% in FY 2009; the prime reason behind the drop was the recession that gripped the world near end of 2008. The oil industry saw a massive fluctuation, as Walker, A., BBC News, (2009) pointed out that crude oil prices dropped drastically from around $150 a barrel to $40, before settling in the mid of August 2009 to around $70. This caused a decline in NP margin by 21% from fiscal year 2008. During the FY 2010, margin has increased to 5.32% showing a corresponding increase of 21%.Specifically the company is in the business of oil and gas exploration the company is more than 100 years old and has a history of shining colors the company has achieved sublime growth in the past years (Collin, 2011).

From the total production 48% of the total production is of Natural Gas. During a single year the company sold 18.9 million tonnes of LNG. According to the company records Shell is producing oil and gas of 3.3 million barrels. All over the world the company owns more than 43,000 stations. The company is also recognized as the best performer from the past 2 ...