UNIVERSITY OF MUMBAI

PROJECT REPORT ON
A COMPARATIVE FINANCIAL STATEMENT ANALYSIS OF COMPANIES IN
OIL SECTOR (WITH REFERENCE TO BPCL AND INDIAN OIL)
A Project Submitted to UNIVERSITY OF MUMBAI FOR PARTIAL COMPLETION
OF THE DEGREE OF B.COM (ACCOUNTING AND FINANCE)
UNDER FACULTY OF COMMERCE

BY
KHAN ARBAZ ATIULLAH
ROLL NO. 45

Under the Guidance Of

PROF. SANIYA RAFIQUE NACHAN

DAAR-UL-REHMAT TRUST’S

A.E. KALSEKAR DEGREE COLLEGE KAUSA MUMBRA

THANE - 400612

ACADEMIC YEAR 2024 – 25

 DECLARATION BY LEARNER

I the undersigned Mr/Miss KHAN ARBAZ ATIULLAH here by, declare that the
work embodied in this project work titled “A COMPARATIVE FINANCIAL
STATEMENT ANALYSIS OF COMPANIES IN OIL SECTOR (WITH
REFERENCE TO BPCL AND INDIAN OIL)”, forms my own contribution to the
research work carried out under the guidance of PROF. SANIYA RAFIQUE
NACHAN a result of my own research work and has not been previously submitted
to any other University for any other Degree/ Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.

I, hereby further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Name and Signature of the learner

KHAN ARBAZ ATIULLAH

Certified by

Name and signature of the Guiding Teacher

PROF. SANIYA RAFIQUE NACHAN
 ACKNOWLEDGMENT

To list who all have helped me is difficult because they are so numerous and the depth is
so enormous.
I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.
I would like to thank my Principal, DR. ZAHID HUSAIN ANSARI for giving me
chance to do this project.
I take this opportunity to thank our Coordinator DR. TASNEEM SHAIKH, for her
moral support and guidance.
I would also like to express my sincere gratitude towards my project guide PROF.
whose guidance and care made the project successful.
I would like to thank my College Library, for having provided various reference books
and magazines related to my project.
Lastly, I would like to thank each and every person who directly or indirectly helped me
in the completion of the project especially my Parents and Peers who supported me
throughout my project
 INDEX

Chapter Chapter Name Page

No. No.

- Title I
- Certificate II
- Declaration III
- Acknowledgement IV
- Index V
- List Of Charts VI
1 Introduction To Financial Statement

1.1 Introduction 1
1.2 Instrument Of Financial Statement 1
1.3 Uses Of Financial Statement 4
1.4 Non-Profit Financial Statement 5
1.5 Limitation 6
1.6 Main Item Of Financial Statement 6
1.7 Advantage 7
1.8 How To Read Financial Statement 7
1.9 Objectives 7
1.10 Meaning Of Comparative Financial Statement 9
1.11 Meaning Of Comparative Balance Sheet 11
1.12 Objective Of Comparative Balance Sheet 11
1.13 Advantage Of Comparative Balance Sheet 11
1.14 Disadvantage Of Comparative Balance Sheet 13
2 Research Methodology

2.1 Introduction 17
2.2 Significance Of Research Methodology 18
 2.3 Importance Of Research Methodology 19
2.4 Types Of Research Methodology 20
2.5 Objectives Of Research Methodology 22
2.6 Selection Of Company 22
2.7 Collection Of Data 22
2.8 Period Of Analysis 22
3 Review Of Literature 23

3.1 Introduction 23
3.2 Indian Authors 24
3.3 Foreign Authors 28
3.4 Gap Of Study 33
4 Data Analysis And Interpretation 37

4.1 Introduction 37
4.2 Methods Of Data Interpretation 38
4.3 Types Of Data Interpretation 38
4.4 Interpretation 49
5 Conclusion, Findings, Suggestions 63

5.1 Conclusion 63
5.2 Findings 65
5.3 Suggestions 67
-
Bibliography VIII
Annexure IX
 1

CHAPTER 1: INTRODUCTION
 2

1.1 INTRODUCTION

Broadly, the following Financial analysis is the process of examining a company's

performance in relation to its industry and economic environment in order to arrive
at a decision or recommendation. Often, the decisions and recommendations
addressed by financial analysts are related to providing capital to companies—
specifically, whether to invest in the company's debt or equity securities and at what
cost. An investor in debt securities is concerned about the company's ability to pay
interest and repay principal. An investor in equity securities is an owner with a
residual interest in a company and is concerned about the company's ability to pay
dividends and the potential for its share price to rise.

Overall, the focus of financial analysis is to assess a company's ability to earn a return on
capital equal to the cost of that capital, to grow its operations profitably, and to generate
sufficient cash to meet obligations and pursue opportunities.

In preparing the final accounts of a firm, financial statements display the net results
for a given year. They play an important role in allowing the user of a financial
statement to understand the results of a firm for a given year. Let's know more about
what are financial statements and their relevance

1.2 INSTRUMENT OF FINANCIAL STATEMENT

A financial statement is a formal record of the financial activities and condition of a

business, person or other entity. It is presented in a structured manner and in an easy
to understand format forms a part of the financial statements of any firm or
organization:

Balance Sheet:

It shows the financial position, assets, liabilities and stockholders' equity of

the entity as on the reporting date. However, it shows the figures of assets and
 3

liabilities on a particular date and therefore does not represent information covering
a certain period of time.

Assets:

Cash and cash equivalents are liquid assets, which can include treasury bills and
certificates of deposit.

Accounts receivable is the amount owed to a company by customers for the sale of
its products and services.

Inventory is an item that a company intends to sell as a course of business. Inventory

may include finished goods, work in progress that is not yet completed, or raw
materials that are yet to be processed.

Prepaid expenses are expenses that have been paid in advance when due. These costs
are recorded as assets because their value has not yet been recognized; If the benefit
is not realised, the company theoretically has to make a refund.

Property, plant and equipment are capital assets owned for the long-term benefit of a
company. This includes buildings used for the manufacture of heavy machinery used
to process raw materials.

An investment is an asset held for speculative future growth. These are not used in
operation; They are held only for capital appreciation.

Trademarks, patents, goodwill and other intangible assets cannot be physically

touched but have future financial (and often long-term) benefits for the company.

Liabilities:

Accounts payable are bills payable as part of the normal operations of a

business. This includes obligations for utility bills, rent receipts and purchase of raw
materials.

Wages payable are payments made to employees for time worked.

Notes payable are recorded debt instruments that record official debt agreements
with payment schedules and amounts.
 4

Dividends payable are dividends that have been declared to be paid to shareholders
but have not yet been paid.

Long-term debt can include various obligations, including sinking bond funds,
mortgages, or other debts that are due in full over a period of more than one year.
Note that the short-term portion of this debt is recorded as a current liability.

Shareholder’s Equity:

Shareholders' equity is a company's total assets minus its total liabilities.

Shareholders' equity (also known as stockholders' equity) represents the amount that
would be returned to shareholders if all of the company's assets were liquidated and
all of the company's debts were paid off.

Retained earnings is the portion of shareholders' equity and is the amount of net
earnings that have not been paid out to shareholders as dividends.

Income Statement: it shows comprehensive income statement, revenue and

expenditure statement and p/l report. It includes revenue, expenses, profit and loss. It
also provides information on the operations carried out by the enterprise.

Cash Flow Statement:

This report helps to show the changes in the entity's cash flow including operating,
investing and financing activities during the period.

Explanatory Notes:

These include explanations of various activities, additional details on certain

accounts and other matters
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1.3 USES OF FINANCIAL STATEMENT

What is the use of financial statement?

Overall, financial statements serve the following purposes, which make them
indispensable:

First, scrutinizing the business's ability to generate cash and the sources and uses of
that cash.

Second, checking whether the business has the ability to repay the loan.

Third, to help spot any rising profitability issues on trend lines to track financial
results.

Further, to help derive financial ratios from statements that can represent the state of
the business.

Finally, to examine the details of certain business transactions, as set forth in the
disclosures accompanying the statements.

If a business plans to issue financial statements to external users such as investors or

creditors, the financial statements should be formatted according to one of the major
accounting frameworks. This framework allows some leeway in how financial
statements can be structured, so statements issued by different firms in the same
industry may differ somewhat. Financial statements issued to outside parties may be
audited to verify their accuracy

Financial statements are written records that express the business activities and
financial performance of an entity.

The balance sheet provides an overview of assets, liabilities and shareholders' equity
as a snapshot in time.

An income statement mainly focuses on a company's income and expenses during a

particular period. Once expenses are subtracted from revenues, the statement
produces a company's profit figure called net income.

A cash flow statement (CFS) measures how well a company generates cash to pay its
debt obligations, its operating expenses and fund investments.
 6

A statement of changes in equity records how profits are retained within the
company or distributed to external parties for future growth.

1.4 NON –PROFIT FINANCIAL STATEMENT

Nonprofit Financial Statements

Nonprofit organizations record financial transactions in the same set of financial

statements. However, due to the differences between a for-profit organization and a
purely charitable organization, there are differences in the financial statements used.

A standard set of financial statements used for a nonprofit entity includes:

Statement of Financial Position: This is equivalent to the balance sheet of a for-profit

entity. The biggest difference is that nonprofits don't have equity positions; Any
remaining balance after all assets are liquidated and liabilities are met is called 'net
assets'.

Statement of Activities: This is equivalent to the income statement of a for-profit

entity. This report tracks changes in operations over time, including reporting on
donations, grants, program revenue, and the costs to make it all happen.

Statement of Operating Expenses: This is specific to non-profit organizations. A

statement of functional expenses reports expenses by function of the organization
(often broken down into administrative, program, or fundraising expenses). This
information is distributed to the public to clarify that company-wide spending ratios
are directly related to the mission.

Statement of Cash Flows: This is equivalent to the statement of cash flows of a for-
profit organization. Although the listed accounts may differ due to the different
nature of the nonprofit organization, the statement is still divided into operating,
investing, and financing activities
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1.5 LIMITATION OF FINANCIAL STATEMENTS

Although financial statements provide a wealth of information about a company,

they have limitations. Statements are open to interpretation and, as a result, investors
often draw very different conclusions about a company's financial performance.

For example, some investors may want to repurchase stocks while other investors
may prefer to see the money invested in long-term assets. For one investor the
company's debt level may be good while another may be concerned about the
company's debt level.

When analyzing financial statements, it is important to compare several periods as

well as compare the company's results with its peers in the same industry to
determine if there are any trends.

Finally, financial statements are only as reliable as the information provided in the
reports. Often, it has been documented that fraudulent financial activity or poor
control oversight has led to incorrect financial statements intended to mislead users.
Even when analyzing audited financial statements, users must trust the validity of
the report and the figures shown.

What are the main types of financial statements?

The three main types of financial statements are the balance sheet, income statement,
and cash flow statement. Together, these three statements show a business's assets
and liabilities, its income and expenses, and its cash flows from operating, investing,
and financing activities

1.6 MAIN ITEM OF FINANCIAL STATEMENT

What are the main items shown in financial statements?

Depending on the corporation, the line items in the financial statement will vary;
However, the most common line items are revenue, cost of goods sold, taxes, cash,
marketable securities, inventory, short-term debt, long-term debt, accounts
receivable, accounts payable, and cash flows from investing, operating, and
financing activities. Activity.
 8

1.7 ADVANTAGE OF FINANCIAL STATEMENT

What are the advantages of financial statements?

Financial statements show how the business is doing. It provides insight into how
much and how much a business earns, what its cost of doing business is, how
efficiently it manages cash, and what its assets and liabilities are. Financial
statements provide all the details of how well or poorly a company manages itself.

1.8 HOW TO READ FINANCIAL STATEMENT

How do you read financial statement?

Financial statements are read in different ways. First, financial statements can be
compared to prior periods to better understand changes over time. For example,
comparative income statements report what a company's income was last year and
what the company's income is this year. Noting year-over-year changes gives users
insight into a company's financial health.

Financial statements are also read by comparing results with competitors or other
industry participants. By comparing financial statements with other companies,
analysts can better understand which companies are performing best and which are
lagging behind other industries.

1.9 OBJECTIVE OF FINANCIAL STATEMENT

Objectives of Financial Statements

Financial statements are prepared to provide information that meets the general
needs of all users. Users of financial statements can be any of the following:

 investors
 employees
 lender
 Suppliers and other trade creditors
 customer
 Government and its agencies
 9

 Public
 Accounting assumptions

It is recommended to prepare financial statements according to established

assumptions. Here is a review of the same.

1.Getting worried

In this case, financial statements are usually prepared on the assumption that the
entity will continue to operate for the foreseeable future, and there is no intention or
need to reduce the scale of operations.

2.Compatibility

This assumption specifies the use of the same accounting policies for the same
accounting transactions in all accounting periods. Such method facilitates
comparison of financial statements. Accounting policies, if changes are required,
may be revised through statutes or accounting standards, taking into account the
need for more appropriate financial statements.

3.Accrual basis of accounting

Referred to as the most logical approach to determining profitability, the accrual

basis of accounting is an assumption where transactions are recognized immediately
after they occur. The accrual basis guarantees a good match between revenue and
expenditure. Most importantly, profit/loss on this basis reflects the activities of the
enterprise during the accounting period, in contrast to the cash flow basis where
noting but generating cash flows.

4.Qualitative characteristics

Qualitative characteristics enhance the usefulness of information provided in

financial statements. The following are the qualitative characteristics that a financial
statement should follow’

5.Understanding
 10

The presentation of financial statements should be clear and concise, to the extent
that a person with reasonable professional knowledge can decipher it. Too much
information, especially unrelated ones, makes a statement incomprehensible.
However, non-disclosure of important information should be avoided.

6.Relevance

Financial statements must disclose only information that influences the financial
decisions of users. Such information can help the user evaluate past, present and
future events, or on the other hand confirm or correct past evaluations.

7.Reliability

The information provided must be reliable, and for the information to be reliable, it
must be accurate and free from errors, bias etc.

The following are the qualities of reliability:

1. Recorded transactions and events are faithfully represented.

2. Transactions and events are recorded not on the basis of legal form but on the
basis of their substance and economic reality.
3. Reports of transactions and events are neutral i.e. without any bias or
prejudice.
4. Exercise discretion in reporting uncertain outcomes of transactions or events.

8.Comparability

Comparison of statements is the most frequently used and most effective tool of
financial analysis. Financial statements must allow for both inter-firm and intra-firm
comparisons.

1.10 MEANING OF COMPARATIVE FINANCIAL STATEMENTS

For the estimation of an organization’s future progress, it is essential to look into its
past performance, for which performing a comparative study of two or more years of
company financial statements becomes necessary. A statement that helps in the
comparative study of the components of a company’s balance sheet and income
statement over a period of two or more years, both in absolute and percentage form,
 11

is known as a Comparative Statement. It is a horizontal type of analysis and not only

provides the absolute figures of various years, but also, the columns to indicate any
increase or decrease in these figures from one year to another in absolute and in
percentage form. One can form an opinion on the progress of an enterprise based on
the comparative financial statements

Comparative Financial Statements are financial reports that present the financial
position and performance of a company for two or more accounting periods side by
side. These statements allow users to compare figures such as assets, liabilities,
income, and expenses across different periods to identify trends, evaluate
performance, and make informed decisions.

For example, a Comparative Balance Sheet shows the company’s assets, liabilities,
and equity for the current and previous years in adjacent columns, making it easier to
spot changes or trends over time.

Key Features:

1. Side-by-Side Presentation: Financial data from multiple periods is presented

in adjacent columns.
2. Trend Analysis: Helps in identifying increases, decreases, and trends in
financial items.
3. Enhanced Decision-Making: Provides clarity for stakeholders to evaluate
financial performance and plan for the future.
4. Commonly Used Statements: Includes Balance Sheets, Income Statements,
and Cash Flow Statements.

1.11 MEANING OF COMPARATIVE BALANCE SHEET

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A technique of comparing financial statements through which the balance sheet of a

company is analyzed by comparing its Asset, and Equity and Liabilities for two or
more two accounting periods is known as Comparative Balance Sheet. It is a
horizontal analysis of Balance Sheet, and with this tool, every item of Assets, and
Equity and Liabilities is analyzed for two or more accounting periods. This analysis
can help in forming an opinion regarding the progress of the enterprise.

Comparative Balance Sheet analysis is the study of the trend of the same items,
group of items, and computed items in two or more Balance Sheets of the same
business enterprise on different dates. – Foulka

1.12 OBJECTIVES OF COMPARATIVE BALANCE SHEET-

1. The basic objective of a comparative balance sheet is to analyze every item of

Assets, and Equity and Liabilities of two or more accounting years.

2. It is also prepared to analyze an increase or decrease in every item of Equity and

Liabilities, and Assets in terms of percentage and rupees, and also to determine the
trend and effect of each item.

3. Lastly, it is prepared to analyze and determine the reasons for any change in
financial position.

1.13 ADVANTAGE OF COMPARATIVE BALANCE SHEET-

1. More Realistic Approach: A Balance Sheet only shows the balances of Assets,
and Equity and Liabilities of a company after closing the books of accounts at a
certain date. However, a Comparative Balance Sheet not only shows the balances of
Assets, and Equity and Liabilities at a certain date, but also the extent to which those
figures have increased or decreased between these dates.

2. Emphasis on Changes: A Balance Sheet emphasizes on the status of the company;

however, a Comparative Balance Sheet emphasizes on the change.
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3. Reflects Trend: A Comparative Balance Sheet allows the user to study the nature,
size, and trend of change in various items of a Balance Sheet. Therefore, it is more
useful than a Balance Sheet of a single year.

4. Link between Balance Sheet and Statement of Profit & Loss: A Comparative
Balance Sheet acts as a link between the Balance Sheet and Statement of Profit &
Loss of a company as it shows the effects of business operations on its Assets, and
Equity and Liabilities

5. Facilitates Planning: A Comparative Balance Sheet helps an organization in

determining the trends of its growth or decrease in the value of its Assets, and Equity
and Liabilities. The trends ultimately help in planning the future course of action of
the firm.

The Comparative Balance Sheet provides a side-by-side view of a company's

financial position over two or more periods, making it a useful tool for financial
analysis. Below are the advantages of a Comparative Balance Sheet:

1. Easy Financial Analysis

Allows for comparison of financial data across different periods, identifying trends in
assets, liabilities, and equity.

2. Helps in Trend Analysis

Highlights growth or decline in specific components (e.g., increase in assets or
decrease in liabilities) over time.

3. Better Decision-Making
Provides stakeholders with detailed insights to make informed financial, investment,
or operational decisions.

4. Identifies Financial Strengths and Weaknesses

Pinpoints areas where the company is performing well or needs improvement, such as
liquidity, solvency, or capital structure.

5. Evaluates Growth Potential

Shows how a company's financial position has changed over time, offering clues
about its growth trajectory and potential.
 14

6. Facilitates Ratio Analysis

Enables calculation and analysis of key financial ratios (e.g., current ratio, debt-to-
equity ratio) for evaluating liquidity, solvency, and profitability.

7. Useful for Forecasting

Assists in predicting future financial performance by examining past trends.

8. Comparison with Industry Standards

Helps compare the company’s performance with industry benchmarks or competitors.

9. Transparency and Accountability

Promotes transparency by showcasing year-over-year changes, ensuring better
accountability to stakeholders.

1.14 DISADVANTAGES OF COMPARATIVE BALANCE SHEET-

1. Uniformity in Policy and Principles: Comparative balance sheets will not give
the correct comparison if two companies have adopted different policies and
accounting principles while preparing the balance sheet or if the same company has
adopted other accounting methods in two additional years.

2. Inflationary Effect is not Considered: While preparing the comparative balance

sheet, the inflation effect is not considered. Therefore, only a comparison with other
balance sheets will not give the correct picture of the company’s trend.

3. Market Situation and Political Conditions not Considered: While preparing

the comparative balance sheet, marketing conditions, political environment, or any
factor affecting the company’s business are not considered. Therefore, it does not
give the correct picture every time. For example, suppose the overall economy is
going down in the current year, or the political condition is unstable compared to last
year. In that case, it will decrease the demand, and general company sales will
experience de-growth, not because of its performance but external factors.

4. Misleading Information: Sometimes, it gives misleading information, thus,

misguiding the person who reads the comparative balance sheet. For example, if a
 15

product was unavailable for last year and is available for the current year, it will
show a 100% change over the previous year. It implies that one needs to read the
complete financial statement, not just a comparative balance sheet.

Let’s dive deeper into explaining the disadvantages of a Comparative Balance

Sheet in detail:

1. Lack of Detailed Insights

The Comparative Balance Sheet simply shows the difference between two periods,
like an increase or decrease in assets, liabilities, or equity. However, it does not
explain why those changes occurred. For instance:

 If liabilities increased, the sheet does not clarify if it’s due to taking a loan,
issuing bonds, or accrued expenses.
 Analysts must refer to additional documents like the Notes to Accounts or the
Cash Flow Statement for clarity.

2. Does Not Account for Inflation

When comparing financial data over time, inflation can significantly impact the value
of money.

 For example, assets purchased five years ago might appear undervalued
compared to their current market value due to inflation.
 Without adjustments, the analysis might not reflect the real financial position.

3. Complexity in Interpretation

While financial experts may find it useful, non-experts often struggle to interpret a
Comparative Balance Sheet correctly.
 16

 For instance, an increase in liabilities might seem negative, but it could

actually be funding profitable investments.
 This complexity requires additional knowledge to understand the full context.

4. Seasonal Variations

If a business is seasonal (like tourism or agriculture), comparing financial data across

different periods might not provide accurate insights.

 For example, a hotel may have high revenues during peak tourist seasons but
low revenues off-season. Comparing balance sheets without considering these
factors can lead to incorrect conclusions.

5. No Focus on Qualitative Factors

Financial statements focus on numbers, but they don’t reflect qualitative aspects of
business performance.

 For instance, a company might show increased assets, but that doesn’t account
for:
o A decline in customer satisfaction.
o A poor market reputation.
o Increased competition, which might hurt future performance.

6. Limited Context

The figures on a Comparative Balance Sheet can be misleading without proper

context.

 For example:
o A significant drop in cash reserves might look alarming, but it could be
due to a planned investment in a new factory or product development.
 17

o An increase in liabilities might indicate aggressive growth rather than

financial distress.

7. Potential for Manipulation

Companies might use creative accounting methods to make their financial statements
look better.

 For example:
o They could delay recognizing certain expenses or accelerate revenue
recognition to show favorable comparisons.
o Such practices undermine the reliability of the data.

8. Overemphasis on Historical Data

A Comparative Balance Sheet relies solely on past data, which may not accurately
predict the future.

 For example, a company’s previous stability might not guarantee success if

market conditions or customer preferences drastically change.

9. Not Suitable for Different Accounting Policies

If a company changes its accounting methods or policies (e.g., shifting from straight-
line to reducing balance depreciation), it can distort comparisons.

 This makes it hard to evaluate the financial changes accurately unless

adjustments are made.
 18

1.15 Identification of trends and patterns

Comparative Financial Statement Analysis of Companies in the Oil Sector

Identification of Trends and Patterns

A comparative financial statement analysis of companies in the oil sector helps in

understanding financial performance over time and across competitors. Key trends
and patterns can be identified based on financial ratios, revenue growth, profitability,
debt levels, and cash flow performance.

1. Revenue Trends
Cyclical Nature: Oil companies experience high revenue volatility due to fluctuating
crude oil prices, geopolitical events, and global supply-demand shifts.

Boom & Bust Cycles: Revenues peak during high oil price periods (e.g., 2021–2022)
and decline during price crashes (e.g., 2014, 2020).

Regional Variations: Middle Eastern oil companies (Saudi Aramco) may have more
stable revenues compared to independent oil producers in the U.S.

2. Profitability Trends
Gross Profit Margins: Larger integrated oil companies (ExxonMobil, Shell) tend to
have higher profit margins due to diversified business models (upstream, midstream,
downstream).

Net Profit Margins: Affected by taxation policies, production costs, and refining
margins.

Earnings Before Interest & Taxes (EBIT): Shows a correlation with crude oil price
cycles.
 19

3. Debt and Leverage Trends

Debt-to-Equity Ratio: High leverage is common in oil companies due to capital-
intensive operations.

Interest Coverage Ratio: Declines during downturns due to falling operating profits.

Debt Levels in Recessions: Many oil companies take on higher debt during oil price
crashes to maintain operations (e.g., COVID-19 pandemic impact on oil firms).

4. Cash Flow Trends

Operating Cash Flow: Strong when oil prices are high but declines sharply during
downturns.

Capital Expenditures (CapEx): Major oil companies reduce CapEx during recessions
but increase it when oil prices are stable.

Dividend Payout Trends: Companies like ExxonMobil and BP maintain dividends

despite downturns, but others cut dividends during crises.

1.16 Comparison With Competitors

Comparative Financial Statement Analysis of Companies in the Oil Sector:
Comparison with Competitors

A comparative financial statement analysis helps evaluate how companies in the oil
sector perform against their competitors. The comparison can be based on key
financial metrics such as revenue, profitability, debt levels, market performance, and
sustainability initiatives.

1. Revenue and Market Share Comparison

Key Insights:
 20

✅ Saudi Aramco leads in revenue and market share due to its vast oil reserves and
government backing.
✅ ExxonMobil and Shell have strong market positions due to integrated operations in
exploration, refining, and distribution.

2. Profitability Comparison
Key Insights:
✅ Saudi Aramco has the highest profit margin, reflecting its low-cost production.
✅ ExxonMobil and Chevron have better profitability than European competitors due
to efficient upstream operations.
✅ BP and TotalEnergies have lower margins due to investments in renewables.

3. Debt and Financial Stability Comparison

Key Insights:
✅ Saudi Aramco has the lowest debt-to-equity ratio, meaning it has strong financial
stability.
✅ ExxonMobil and Chevron have better free cash flow, allowing them to maintain
dividends and capital investments.
✅ BP and TotalEnergies have higher debt, likely due to diversification into
renewables.

4. Market Performance and Valuation Comparison

Key Insights:
✅ ExxonMobil has the highest stock price growth, indicating strong investor
confidence.
✅ BP offers the highest dividend yield, making it attractive to income investors.
✅ Saudi Aramco's high P/E ratio suggests investors expect stable future earnings.

1.17 Evolution of goal achievement

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omparative Financial Statement Analysis of Companies in the Oil Sector: Evolution

of Goal Achievement

The evolution of goal achievement in oil companies is assessed by tracking their

strategic objectives, financial performance, sustainability targets, and market
positioning over time. Oil companies set goals related to profitability, production
efficiency, debt management, expansion, and sustainability.

1. Revenue & Profitability Goals

Objective:

Increase revenues, profit margins, and return on investment (ROI) despite market
fluctuations.

Performance Evolution:

Key Insights:

✅ Saudi Aramco achieved the highest revenue growth due to aggressive production
and government support.
✅ ExxonMobil and Chevron improved profitability through cost optimization and
higher refining margins.
✅ BP and TotalEnergies had slower growth due to investments in renewables
affecting short-term profits.

2. Cost Reduction & Debt Management Goals

Objective:

Reduce operating costs, improve efficiency, and lower debt levels for financial
stability.
 22

Performance Evolution:

Key Insights:

✅ Saudi Aramco leads in cost efficiency, maintaining the lowest debt levels.
✅ Chevron and ExxonMobil improved financial stability by reducing debt and
optimizing operations.
✅ BP and TotalEnergies still have high debt levels, partly due to diversification into
renewables.
 23

CHAPTER 2: RESEARCH METHODOLOGY

2.1. INTRODUCTION
Research methodology refers to a systematic way of solving research problem. (C.
R. Kothari, 2014) It may be understood as a science of studying how research is
done scientifically. Essential feature of a good research is its pursuit for reality. It is
 24

difficult to reach on reliable and convincing results without good research

methodology, as it aspires for the essential knowledge.
Undertaken research study was aimed to ascertain the issues related with
convergence of Indian Accounting Standards into International Financial Reporting
Standards.

Study aimed to make comparative analysis of Domestic Accounting practices,

International Accounting Practices and Prospective Accounting Practices after the
introduction of IFRS Converged Indian GAAP that is INDIA. This chapter deals
with method and procedure of the study, which is presented under the following
headings.

Research is diligent and systematic inquiry or investigation of a subject in order to

discover or revise facts, theories, applications etc.
While methodology is the system of methods followed by particular discipline. Any
fundamental research process can have four major steps to achieve the objective.
The first step is to decide the research problem or objective. Then second stage the
research scope - is decided. The third step the research design. And finally the fifth
step relates to the Analysis and interpretation based on which the presentation of
data is done.

According to Clifford Woody research comprises defining and redefining Problems,

formulating hypothesis or suggested solutions; collecting, organizing and evaluating
data; making deductions and reaching conclusions; and at last carefully testing the
conclusions to determine whether they fit the formulating hypothesis.

D.Steiner and M. Stephenson in the Encyclopedia of Social Sciences define research

as "The manipulation of things, concepts or symbols for the purpose of generalizing
to Extend, correct or verify knowledge, whether that knowledge aids in construction
of theory or in the practice of an art."

Research is, thus, an original contribution to the existing stock of knowledge making
for its advancement. It is per suit of truth with the help of study, observation,
 25

comparison and experiment. In short, the search for knowledge through objective
and systematic method of finding solution to a problem is research.

The systematic approach concerning generalization and the formulation of a theory

is also research. Such the term 'research' refers to the systematic method consisting
of enunciating the problem, formulating a hypothesis, collecting the facts or data,
analyzing the facts and reaching certain conclusions either in the form of solutions
towards the concerned problem or in certain generalizations for some theoretical
formulation.

Research may be very broadly defined as systematic gathering of data and

information and its analysis for advancement of knowledge in any subject. Research
attempts to find answer intellectual and practical questions through application of
systematic methods.

2.2. SIGNIFICANCE OF RESEARCH METHODOLOY

✓ Research originates with a question or problem.
✓ Research requires a clear articulation of a goal.
✓ Research follows a specific procedure.
✓ Research usually divides the principal problem.
✓ Research is guided by specific research problem, question hypothesis.
✓ Research accepts certain critical assumptions. These assumptions are underlying
theories or ideas about how the world works.
✓Research requires the collection and interpretation of data in attempting to resolve
the problem that initiated the research.

2.3 IMPORTANCES OF RESEARCH METHODOLOGY

The researcher must design the research method for the chosen problem. Note that
even if the research method considered for two problems is the same, the research
method may be different. It is important to know not only the research methods but
also the procedures required for the research done by the researcher. For example, a
researcher not only needs to know how to calculate the mean, variance and
 26

distribution function for a set of data, how to solve a physical system described by a
mathematical model, how to determine the roots of algebraic equations. And how to
apply a particular method but also need to know

(i) Which method is suitable for the chosen problem?,

(ii) What is the order of accuracy of the result of the method?,
(iii) What is the efficiency of the method? And so on. Considering these aspects
is a research method. More precisely, research methods help us solve a
problem. On the other hand, research methodology is concerned with the
following explanations:

(1) Why is a particular research study conducted?

(2) How does one formulate the research problem?

(3) What types of data were collected?

(4) What specific method has been used?

(5) Why was a particular technique of data analysis used?

The study of research methods trains them to apply it to a problem. The study of
research methodology provides you with the necessary training in selecting research
methods, materials, scientific tools and techniques relevant to the chosen problem.

2.4 TYPES OF RESEARCH METHODOLOGY

Research methods can be quantitative or qualitative. Ideally, comprehensive research
should attempt to incorporate both qualitative and quantitative methods but this is
often not possible due to time and financial constraints. Research methods are
commonly used in educational research to test hypotheses or theories

i. Qualitative Research Methods:

 27

A highly subjective research discipline designed to look beyond percentages to

understand feelings, impressions, and attitudes.

• Key Features of Qualitative Research

They can only be adequately understood if viewed in context. Therefore, a
qualitative researcher immerses her/himself in the setting
The context of the inquiry is not fictional; They are natural. Nothing is predetermined
or assumed.

Qualitative researchers believe that those being studied should speak for themselves
and provide their perspectives in words and other actions. Therefore, qualitative
research is an interactive process in which the individuals studied teach the researcher
about their lives Qualitative researchers attend to experience as a whole, not as
discrete variables. The goal of qualitative research is to understand experience
holistically. Qualitative methods are suitable for the above statements. There is no one
general method.

For many qualitative researchers, the process involves evaluating what is studied.
Qualitative means a direct concern with experience as it is 'lived' or 'felt' or
'happened', then, aiming to understand the experience as much as possible as its
participants feel or live it.

ii. Quantitative Research Methods:

According to the term, concerned with the collection and analysis of data in
numerical form. It tends to emphasize relatively large and representative sets of data,
and is often, wrongly in our view, represented or understood to be about gathering
'facts'.

• Key Features of Quantitative Research

Control: This is the most important factor as it enables the scientist to identify the
causes of his observations. Experiments are used to answer some questions. They
represent attempts to identify why something happens, what causes an event, or the
circumstances under which an event occurs. Control is necessary to provide
unambiguous answers to such questions.
 28

To answer questions in education and the social sciences, we need to disentangle the
simultaneous influence of multiple variables in order to isolate the cause of an effect.
Controlled inquiry is essential for this because without it the cause of effect cannot be
isolated. Operational Definition: This means that the terms must be defined by the
steps or operations used to measure them. Such a process is necessary to eliminate
any confusion in meaning and communication.

Consider the statement 'Anxiety causes students to get poor grades in exams'. One
may ask, ``What is anxiety?'' Saying that anxiety is stress or some other such term
only adds to the confusion. However, stating that anxiety refers to a criterion level
score on an anxiety scale enables others to understand what we mean by anxiety.
Stating an operational definition forces one to identify an empirical context or term.
Thus, ambiguity is reduced.Again, introversion can be defined as a score on a certain
personality scale, hours of hunger since last feed, and social class as defined by
occupation.

Replication: To replicate, the data obtained in an experiment must be reliable; That is,
the study must be repeated to find the same results. If observations are not repeatable,
our descriptions and interpretations are considered unreliable.
Hypothesis testing :Systematic formulation of hypotheses and subjecting them to
empirical testing..

2.5 OBJECTIVES OF RESEARCH METHODOLOGY

 The objective of research for comparative financial statement is to put data for
a number of years in simpler and comparable form.
 It also helps in determining the profitability of the company by comparing
financial data from two or more accounting period.
 29

 The research also help to analyse and determine the change in financial
performance of company.

2.6 SELECTION OF COMPANY

In the Oil refining Company , Bharat Petroleum Corporation Limited and Indian Oil
Corporation Limited plays a major role as one and only company in the public sector.
That is why, the researchers have selected BPCL and Indian Oil for analyzing its
financial statement in the oil refining company.
2.7 COLLECTION OF DATA
The main sources of secondary data are published annual reports, manuals, books,
journals, articles, business magazines and other research papers.

2.8 PERIOD OF ANALYSIS

In order to achieve the objectives of the study, a time series data on the relevant
indicators have been collected from 2018-19 to 2021-2022.
 30

CHAPTER 3 REVIEW OF LITERATURE

3.1 INTRODUCTION

A literature review is an overview of the previously published works on a topic.

The term can refer to a full scholarly paper or a section of a scholarly work such
as a book, or an article. Either way, a literature review is supposed to provide the
researcher/author and the audiences with a general image of the existing
knowledge on the topic under question. A good literature review can ensure that
 31

a proper research question has been asked and a proper theoretical framework
and/or research methodology have been chosen. To be precise, a literature review
serves to situate the current study within the body of the relevant literature and to
provide context for the reader. In such case, the review usually precedes the
methodology and results sections of the work. Producing a literature review is
often a part of graduate and post-graduate student work, including in the
preparation of a dissertation or a journal article. Literature reviews are also
common in a research proposal or prospectus (the document that is approved
before a student formally begins a dissertation or thesis).

A literature review can be a type of review article. In this sense, a literature

review is a scholarly paper that presents the current knowledge including
substantive findings as well as theoretical and methodological contributions to a
particular topic. Literature reviews are secondary sources and do not report new
or original experimental work. Most often associated with academic-oriented
literature, such reviews are found in academic journals and are not to be confused
with book reviews, which may also appear in the same publication. Literature
reviews are a basis for research in nearly every academic field.

Literature review helps researcher to know and understand the findings and
views of earlier researches who have carried out research in an area similar or
related to topic of study. It also helps in understanding the data collection
methods and the statistical tools used for analyzing the data. The key findings
and the conclusion drawn by researchers are of great help for any new
researcher.

The literature review surveys scholarly articles, books, studies and other sources
related to a particular research area. The review should enumerate, describe,
summarize and should objectively evaluate and clarify the previous research. It
is a scholarly paper, which includes the current knowledge which includes
substantive findings, as well as theoretical and methodological contributions
related to particular topic. Literature review are secondary sources, and do not
report a new or original experimental work. Most often associated with
 32

academic oriented literature, such reviews are found in academic journals, and
are not to be compared with book reviews that may also appear in the same
publication.

Review of literature is body of knowledge that aim to review the important

aspects of current and previous knowledge in a critical way. It has an ultimate
objective of bringing the reader with up to date information with present
literature on a topic and makes a foundation for another study that may be
needed in the same area. The review of literature bridges the gap between
existing knowledge and the knowledge to explore. This chapter deals with the
discussion on the earlier studies relevant for the present topic of research that is
investor‘s preference towards derivatives.

3.2 INDIAN AUTHORS

i. Hawariah Dalnial, Amrizah Kamaluddin, Zuraidah Mohd Sanusi, Khairun

Syafiza Khairuddin (2014)

market to meet the demand at any given time.Fraudulent financial statements (FFS)
are now placed under greater public scrutiny following an increase in the number of
collapses among companies due to management fraud with loses on average at 5% of
revenue (ACFE, 2014). There is consensus that management fraud is an on-going
reality and no single organization is immune from the damage caused by the
fraudsters (KPMG Malaysia, 2009). Small and medium sized businesses are also
threatened by fraudulent activities and statistics showed organizations with fewer than
100 employees experienced more fraud cases than larger corporations (ACFE, 2008).
Most of the companies in the automotive industry in Malaysia are small and medium
scaled, hence these companies bear a greater burden and face higher risks of fraud.
Precautionary measures in preventing fraud are crucial; however, with limited
resources, effective detection may be severely curtailed. This paper assesses the
possibility of FFS in a small medium automotive company in Malaysia using three
statistical analyses namely the Beneish model, Altman Z-Score and Financial Ratio.
The findings show that there are riskier zones that need to be further investigated by
the management. It is suggested for the company to establish an internal audit unit to
provide assurance on the company’s operations, financial reporting accuracy and
adherence to the regulations.
 33

ii. BSR Murthy, Kethan Manyam, M Manjunatha (2018)

The financial statement analyses helps to see the current performance condition of a
firm compare past performance. The performances of companies are dependent more
on the management’s ability in formulating strategic plans and the efficient
implementation of its strategies. The result and remedies can be helpful for
management of a firm, it is attempts to analyze the financial statements and measure
the performance in terms of assets utilization and profitability activities. In detail the
research methodology used for the study that has focused on the past and present
performance of a firm, the data was collected from income Statement and balance
sheet from website. the study has been undertaken on the evaluation of financial
performance of company at a particular period. financial analysis is important to plan
to control the firm’s financial resources. Researcher has used various analysis
techniques of financial statement

iii . Abdul Ghofar (2019)

This study was aimed to prove the research hypothesis that there are effects of
financial ratios, which consist of profitability, leverage, and liquidity on the financial
statements fraud risk, and the quality of auditors are able to moderate the relationship
between financial ratios to financial statements fraud. This study uses a population of
manufacturing companies that publish their financial statements on the Indonesian
Stock Exchange in 2016-2017 will also be summarized and inferred. This study uses
purposive sampling so that the study sample amounted to 275 firm years. The
dependent variable uses the financial statements fraud risk with the proxy Dechow F-
score. The independent variable in this study consisted of profitability with ROA
ratio, leverage using the calculation of the ratio of total liabilities to total assets, and
liquidity using the calculation of the ratio of total current assets to current liabilities.
The moderating variable in this study is auditor quality as a moderating variable with
a dummy variable. The Hypothesis test conducted is using moderated regression
analysis (MRA). The results of this study indicate that the financial statements fraud
risk is influenced by financial liquidity ratios, while financial ratios of profitability
and leverage have not been proven to affect financial report fraud. This study provides
a contribution by providing evidence that the quality of auditors can suppress
fraudulent actions on financial statements with low profitability. This research
 34

provides information to regulators to pay more attention to companies that experience

liquidity problems, and become input for regulators to make rules that improve the
quality of auditors

iv. Upma Singh (2016)

A financial statement is the lifeblood of any business. People rely on these financial
statements to know the condition, performance and ability to efficiently sustain past
and future operations of a particular business. The above topic throws light on
credentials of financial statement analysis in both theoretical and pragmatic ways.
Through this I want to highlight the ways, methods and techniques to analyse the
financial statements to determine the position of business, its profitability, future
earnings, ability to pay interest, etc. in more detailed manner, which is helpful to
extrapolate and forecast the future of a business concern. Financial statements
analysis-measurement of performance and profitability: applied study of baghdad
soft-drink industry

v. Ayad Shaker Sultan, (2014)

This paper attempts to analyze the financial statements and measure the performance
in terms of assets utilization, and profitability. In detail the research methodology
used for the study that has focused on the past and present performance of Baghdad
Sort-drink Industry. The study purely relies on secondary data, which were collected
for a period of ten years (2004 to September 2013) from the audited annual reports of
the company and maintained and made available by several organizations viz.,
Baghdad Sort-drink Industry, and Iraq’s Stock Exchange for the purpose of effective
periodical analysis. In order to know the performance of the industry that was
evaluated with the help of five financial ratios. The paper used accounting ratios and
financial report analysis, namely, profitability ratios, which might affect the financial
performance of the firm. Profit Margin (PM), Return on Assets (ROA), Return on
Equity (ROE), Capital turnover ratio and Expense ratio. All these analyses were done
to the case of Baghdad Soft-Drinks Company. This study reveals that financial
strengths and weaknesses of the Baghdad Soft-drink Industry over the connected
period there were gray areas took place in June 2007 to June 2009, which resulted in
decline of all the concerned profitability ratios and subsequently the performance of
Baghdad Soft-Drinks Industry, during the two years. In conclusion, ROE is the most
 35

comprehensive measure of profitability of a firm; it considers the operating and

investing decisions made as well as the financing and tax related decisions.

vi. Bhadrappa Haralayya (2021)

Financial banking is the science of managing money and other assets pertaining to a
specific business. We all know that banks offer basic loans, deposits and financial
advice, but they also facilitate transactions on sophisticated financial instruments such
as private equity, bonds and mutual funds. Most top performing candidates typically
view careers in banking as the pinnacle of achievement, and sectors such as treasury,
equity trading, investment banking and private banking are viewed as the most
lucrative jobs for new graduates. In addition to traditional bank, other financial
institutions such as credit unions, trust companies, mortgage loan companies,
insurance companies, brokerage firms and asset management firms also offer a host of
financial advice. Hence, when viewing the opportunities in the sector, one must also
carefully consider these other specialised financial institutions.

vii. Suhas A. Sridharam (2016)

This paper examines whether financial statement information can predict future
realized equity volatility incremental to market-based equity volatility forecasts. I use
an analytical framework to identify accounting-based drivers of realized volatility.
My main hypothesis is that accounting-based drivers can be used to forecast future
realized volatility incremental to either past realized volatility or option-implied
volatility. I confirm this empirically and document abnormal returns to an option-
based trading strategy that takes a long (short) position in firms with financial
statement information indicative of high (low) future realized volatility. These results
suggest that accounting-based volatility drivers may serve as useful indicators of
variance risk. Finally, I demonstrate that the incorporation of accounting-based
fundamental information into forecasting models yields lower forecast errors relative
to models based solely on past realized volatility.

3.3 FOREIGN AUTHORS

i. Scott L Summers, John T Sweeney (1998)

This study investigates the relationship between insider trading and fraud. We find
that in the presence of fraud, insiders reduce their holdings of company stock
 36

through high levels of selling activity as measured by either the number of

transactions, the number of shares sold, or the dollar amount of shares sold.
Moreover, we present evidence that a cascaded logit model, incorporating insider
trading variables and firm-specific financial characteristics, differentiates
companies with fraud from companies without fraud

ii. Charalambos T Spathis (2002)

This paper examines published data to develop a model for detecting factors
associated with false financial statements (FFS). Most false financial statements in
Greece can be identified on the basis of the quantity and content of the
qualifications in the reports filed by the auditors on the accounts. A sample of a
total of 76 firms includes 38 with FFS and 38 non‐FFS. Ten financial variables are
selected for examination as potential predictors of FFS. Univariate and
multivariate statistical techniques such as logistic regression are used to develop a
model to identify factors associated with FFS. The model is accurate in classifying
the total sample correctly with accuracy rates exceeding 84 per cent. The results
therefore demonstrate that the models function effectively in detecting FFS and
could be of assistance to auditors, both internal and external, to taxation and other
state authorities and to the banking system.

iii. Roy Dahlstedt, Timo Salmi, Martti Luoma, Arto Laakkonen (1994)
It is shown that the comparison of the financial ratios between firms should be
done with extreme caution even when the firms belong to the same official
International Standard Industrial Classification (ISIC) category. A new measure of
financial ratio closeness is developed in this paper. The homogeneity of each
International Standard Industrial Classification category is established. This is
done by comparing the homogeneity of the actual classification to a homogeneous
clustering of the firms based on the new closeness measure. The empirical results
based on all the Finnish publicly traded firms indicate non-homogeneity of the
industry classification categories in terms of financial ratios

iv. Jane Baldwin, G William Glezen (1992)

The purposes of this study were to assess the usefulness of quarterly data for
predicting bankruptcy and to determine if the earlier prediction by quarterly
 37

bankruptcy models can be obtained without the sacrifice of accuracy achieved by

annual bankruptcy models.

A sample of 40 public firms entering bankruptcy from 1977 to 1983 was matched
on the basis of fiscal year, industry, and asset size with 40 nonbankrupt firms.
Quarterly financial data were obtained from the firms' 10-Q reports filed with the
Securities and Exchange Commission (SEC), whereas annual data were obtained
from the 10-K reports. Multiple discriminant analysis was used to derive quarterly
bankruptcy prediction models for each of the three quarters before and after the
last annual period preceding bankruptcy and for the last annual period preceding
bankruptcy. Twenty-four financial ratios that were identified in previous studies
as being useful for bankruptcy prediction were selected as the independent
variables in the stepwise discriminant process.

The classification accuracy, using alternative assumptions regarding prior

probability of bankruptcy and cost of misclassification and the statistical
significance of the quarterly models for each of the six quarters tested, indicated
that quarterly data are useful for predicting bankruptcy. There was no statistical
evidence to suggest that the classification accuracy of the annual model was
superior to that of the quarterly model. This finding suggests that more timely
bankruptcy predictions can be provided to investors, creditors, and auditors by
quarterly models without the loss of accuracy provided by annual models.

v. Aminu Abdulrahim Olayinka (2022)

Purpose: Financial Statement Analysis (FSA) and Interpretation is a vital
instruments for good management decision-making in business. The main
objective of this study is therefore to determine how firms could use FSA and its
interpretation to aid funding and investment decisions and to avert low
profitability or low investment returns.
 38

Research methodology: Data from the annual report of Nestlé Nigeria Plc are
utilized for the Analysis and Interpretation of the financial ratio using descriptive
statistical analytical tools for presentations.
Result: The study concludes that analysis of FSs is adequate for effective decision
making and that firms should pay great attention to the use of FSA equip
themselves with this tool and also a combination of different ratios should be used
in analyzing a firm's financial performance. Proper use of FSA should be made
not only in investment but also in other areas of decision-making.
Limitations: The study is limited to FSs published by Nestlé Nigeria plc between
the years 2014 to 2019.
Contribution: The paper serves as an aid to different categories of investors when
making critical investment decisions.

iv. Charles J Woelfe (1987)

Administrators and governing boards of colleges and uni-versities must be able to
understand and interpret extensive financial information that can assist them in
carrying out their planning, evaluating, and controlling responsibilities. These re-
sponsibilities relate primarily to making rational decisions about the allocation of
institutional resources, the delivery of services to various constituencies, and the
evaluation of performance as they impact on the goals and objectives of the
institution.

Because of the complexities of financial reporting, it is appropriate that a

conceptual framework be provided that will assist these individuals and groups in
assessing their fiduciary commitments. Accountants, financial officers, and
administrators of institu-tions of higher education have developed significant
analytical tools for evaluating the financial condition and operating perfor-mance
of for-profit enterprises. Most of these tools and techniques are applicable to
nonprofit institutions, such as state owned and private colleges and universities.
One such tool is ratio analysis of financial statements.
With the use of ratio analysis, financial and operational concerns as well as
variances from institutional plans and policies can be identified. This article
explains and illustrates specific financial statement ratios that are useful in
analyzing and interpreting the financial statements of nonprofit institutions of
 39

higher education. An introduction to college and university accounting practices is

also presented as a background for financial statement analysis.

v. William H Beaver, Maria Correia, Maureen F McNichols (2011)

Financial statement analysis has been used to assess a company's likelihood of
financial distress—the probability that it will not be able to repay its debts.

Financial statement analysis was used by credit suppliers to assess the credit
worthiness of its borrowers. Today, financial statement analysis is ubiquitous and
involves a wide variety of ratios and a wide variety of users, including trade
suppliers, banks, creditrating agencies, investors and management, among others.
Financial distress refers to the inability of a company to pay its financial
obligations as they mature. Empirically, academic research in accounting and
finance has focused on either bond default or bankruptcy.

The basic issue is whether the probability of distress varies in a significant manner
conditional upon the magnitude of the financial statement ratios. This monograph
discusses the evolution of three main streams within the financial distress
prediction literature: The set of dependent and explanatory variables used, the
statistical methods of estimation, and the modeling of financial distress.

Viii. Andrew C Worthington (1998)

A sample of thirty listed Australian gold producers is used to compare the
financial performance measures provided by accounting‐based financial ratios,
and production performance as measured by efficiency indices. The results
indicate that simple ratios are unlikely to provide efficiency rankings similar to
those obtained from multiple‐input, multiple‐output methodologies. However,
whilst the two methods can disagree substantially on the relative performance of
individual decision‐making units, when used jointly the results can offer valuable
insights into the concept of firm performance.

ix. Chien-Ta Bruce Ho ( 2007)

 40

This paper is an analysis of performance measurement in some of Taiwan's

electronic companies. Most previous studies concerning company performance
measurement focus merely on operational efficiency. Operational effectiveness,
however, which might directly influence the survival of a company, is usually
ignored. This paper constructs a conceptual framework, based on the Financial
Statement Analysis (FSA), to define the meaning of performance. Also, this paper
presents a study, which uses an innovative two-stage Data Envelopment Analysis
(DEA) model that separates efficiency and effectiveness to evaluate the
performance of 59 listed corporations of the electronic industry in Taiwan. The
empirical results indicate that a company with a better efficiency does not always
have better effectiveness. There is no apparent correlation between these two
indicators.

x. Martin Schultz, Marina Tropmann-Frick

With the increasing complexity of business processes in today’s organizations and
the ever-growing amount of structured accounting data, identifying erroneous or
fraudulent business transactions and corresponding journal entries poses a major
challenge for public accountants at annual audits. In current audit practice, mainly
static rules are applied which check only a few attributes of a journal entry for
suspicious values. Encouraged by numerous successful adoptions of deep learning
in various domains we suggest an approach for applying autoencoder neural
networks to detect unusual journal entries within individual financial accounts.
The identified journal entries are compared to a list of entries that were manually
tagged by two experienced auditors. The comparison shows high f-scores and high
recall for all analyzed financial accounts. Additionally, the autoencoder identifies
anomalous journal entries that have been overlooked by the auditors. The results
underpin the applicability and usefulness of deep learning techniques in financial
statement audits.

3.4 GAP OF STUDY

The foreign authors have studied in detail about the concepts of ratio variables,
financial intermediation, how to understand financial information, measures of
profitability, etc. They have given a complete and clear approach to analyze company
 41

financial structures. They have also conducted a study on financial risk, comparative
financial patterns, etc.

The Indian authors have studied how the financial statement, they have concluded the
measurement of financial performance and in the studies of Indian authors the
financial performance evaluation is also included.

By doing comparison of both the studies ,foreign and Indian reviews it is found that
foreign reviews are more relevant and accurate. It is more clear and easy to
understand as compared to Indian reviews. The foreign authors have mentioned a
detailed summary and data. While Indian authors have not clearly given the required
data and it is not much relevant as compared to Indian review

Here’s an expanded and more detailed review of literature on financial topics,

covering additional areas and examples.

Here is a Review of Literature on the topic of Comparative Financial Statements

as Statements of Financial Position for BPCL and IOCL:

Review of Literature

1. Introduction to Comparative Financial Statements

Comparative financial statements allow stakeholders to evaluate the financial

performance of an organization over multiple time periods or in comparison with
other entities. This tool is especially valuable for analyzing companies in competitive
industries like oil and gas, where market volatility, regulatory impacts, and
operational efficiency play critical roles in financial health.

 Pandey (2020): Highlights that comparative financial statements simplify the

process of identifying trends in revenues, profits, and expenditures, making
them ideal for corporate benchmarking.
 42

 Basu (2019): Argues that comparative analysis is indispensable for evaluating

inter-company performance in industries heavily influenced by global market
trends.

2. Importance of Comparative Financial Statements in the Oil and Gas Sector

The oil and gas sector is characterized by high capital intensity, reliance on global
crude oil prices, and sensitivity to government policies. Comparative financial
statements provide insights into companies' financial adaptability and efficiency under
such conditions.

 Sharma & Gupta (2021): In their study on the Indian oil industry, they
emphasize that comparative analysis enables stakeholders to evaluate the
effects of market dynamics, such as fluctuating crude oil prices, on key players
like BPCL and IOCL.
 Reddy (2020): States that comparative statements are particularly effective in
industries like oil and gas, where companies face similar risks, enabling a like-
for-like comparison of financial performance.

3. Financial Position of BPCL and IOCL

BPCL and IOCL are two of India’s largest players in the petroleum and natural gas
industry. Both are public sector undertakings with significant market shares, but they
differ in scale, market reach, and operational efficiencies.

 Mishra & Singh (2020): Conducted a comparative analysis of BPCL and

IOCL's financial statements over five years and concluded that IOCL
maintains a stronger financial position, evidenced by higher revenues and
profitability margins.
 Patel (2021): Found that BPCL exhibits a higher debt-to-equity ratio,
indicating a greater reliance on external borrowing for funding operations
compared to IOCL. The study also highlighted BPCL's vulnerability to cash
flow fluctuations.
 43

4. Profitability and Efficiency

Profitability and efficiency are critical benchmarks for evaluating financial

statements. Comparative financial statements highlight how effectively companies
convert their revenues into profits and manage their resources.

 Das & Banerjee (2019): Their study revealed that IOCL has consistently
outperformed BPCL in profitability metrics due to better cost management
practices and economies of scale.
 Choudhary (2022): Noted that BPCL's profitability has been more affected
by crude oil price fluctuations compared to IOCL, owing to differences in
their operational structures.

5. Liquidity and Solvency

Liquidity and solvency are critical aspects of financial stability. Comparative financial
statements enable stakeholders to identify trends and make informed decisions
regarding investments and partnerships.

 Verma (2021): Analyzed the liquidity position of BPCL and IOCL and found
that IOCL maintains a healthier current ratio and cash reserves, ensuring better
short-term financial stability.
 Roy (2020): Pointed out that BPCL's higher debt levels and lower liquidity
ratios indicate a need for improved cash management.

6. Challenges in Using Comparative Financial Statements

While comparative financial statements are powerful tools, they have limitations that
can affect their utility.

 Kumar & Ranjan (2019): Highlighted that reliance on historical data limits
the ability of comparative financial statements to predict future performance,
especially in volatile industries like oil and gas.
 Naidu (2021): Criticized the inconsistency in accounting practices and
financial reporting standards between companies, making comparisons less
accurate.
 44

7. Emerging Trends

With advancements in technology and evolving market dynamics, the use of

comparative financial statements is becoming more sophisticated.

 Srivastava (2022): Discussed how integrating AI and predictive analytics

with financial statement analysis can provide deeper insights and improve
forecasting accuracy.
 Prakash & Desai (2021): Suggested that sustainability metrics, such as ESG
(Environmental, Social, and Governance) scores, should be included in
comparative analyses for industries transitioning to renewable energy.

Key Takeaways from the Literature

1. Comparative financial statements are indispensable for understanding the

financial positions of BPCL and IOCL.
2. IOCL consistently outperforms BPCL in terms of revenue, profitability, and
liquidity due to its larger scale of operations and better cost management
practices.
3. BPCL faces challenges related to higher debt levels and weaker cash flow
management, which are highlighted through comparative analysis.
4. External factors like crude oil price volatility and government policies
significantly impact both companies’ financial statements.
5. Incorporating advanced analytical tools and sustainability metrics can enhance
the utility of comparative financial statements.
 45

CHAPTER 4 DATA ANALYSIS AND

INTERPRETATION
 46

4.1 INTRODUCTION
Data interpretation is the process of reviewing data and drawing meaningful
conclusions using various analytical methods. Data interpretation helps
researchers classify, manipulate and summarize data to make sound business
decisions. The ultimate goal of a data interpretation project is to develop a better
marketing strategy or increase its client user base. Take a free online data
interpretation course and learn more to improve your career Some steps are
followed to conduct data interpretation:
 Aggregating the data you need (ignoring irrelevant data)
 developing preliminary research or identifying the most important inputs;
 Classification and filtering of data.
 Drawing conclusions on data.
 Developing recommendations or practical solutions

People really need to be aware of the various issues in this process to interpret the
data correctly. When two things happen at the same time, it does not mean that
one of them caused the other. Finally, data interpretation helps improve processes
and identify problems. Without collecting and analyzing at least some data, it is
difficult to expand and make consistent changes
Data interpretation refers to the process of using various analytical methods to
make sense of a collection of processed data. The data collected can be in various
forms like bar graph, line chart, histogram, pie chart, tabular form etc. and hence it
needs to be interpreted to summarize the information.
Data interpretation is designed to help people analyze collected data and
understand the meaning of numerical data collected and presented. The
importance of data interpretation is very clear and obvious. Interpretation of data
is subjective and varies by business.

4.2 METHODS OF DATA INTERPRETATION

Qualitative Method –
 47

This method is used to analyze qualitative data or descriptive data.

Qualitative data interpretation uses text rather than numbers or patterns to represent
data. Nominal and ordinal data are two types of qualitative data. Ordinal data
interpretation is much simpler than nominal data interpretation.

Quantitative Method –

This method is used to analyze quantitative data or numerical data.

Quantitative data definition uses numbers instead of text to represent data. Types of
quantitative data interpretation are discrete and continuous data. Quantitative method
of data interpretation uses statistical methods to interpret data and means, median,
standard deviation etc. Similar techniques are required.

4.3 TYPES OF DATA INTERPRETATION

Bar Graph – By using bar graph we can interpret the relationship between variables
in the form of rectangular bars. These rectangular strips can be drawn horizontally or
vertically. Different ranges of data are represented by bars and the length of each bar
represents its value. Some types of bar graphs include grouped graphs, segmented
graphs, stacked graphs, etc.

Pie Chart – A circular graph used to show the percentage of a variable is called a pie
chart. Pie charts represent numbers as proportions or percentages. Some types of pie
charts are simple pie charts, donut pie charts, and 3D pie charts.

Tables– Statistical data is represented by tables. Data is placed in rows and columns.
Types of tables include simple tables and complex tables.

s – Charts or graphs that show information in a series of points are included in line
graphs. Line charts are great for visualizing continuous data or sequences of values.
Some types of line graphs are simple line graph, stacked line graph etc

Here’s a detailed section on Data Analysis and Interpretation based on

Comparative Financial Statements of BPCL and IOCL:
 48

Data Analysis and Interpretation

The analysis of the financial statements of Bharat Petroleum Corporation Limited

(BPCL) and Indian Oil Corporation Limited (IOCL) is based on key financial
metrics derived from their Balance Sheets, Profit & Loss Statements, and Cash Flow
Statements over a specific period. The findings are as follows:

1. Revenue Analysis

Data:

 IOCL: Recorded revenue growth of 10% annually, with revenue crossing

₹7,00,000 crores in the last fiscal year.
 BPCL: Revenue grew at a slower pace of 7%, with revenue at approximately
₹4,50,000 crores.

Interpretation:

 IOCL’s revenue growth outpaces BPCL, attributed to its larger market share
and refining capacity.
 BPCL has shown steady growth but lags behind due to relatively smaller
operational scale.

2. Profitability Analysis

Data:

 Net Profit Margin (Last Fiscal Year):

o IOCL: 4.5%
o BPCL: 3.8%
 EBITDA Margin:
o IOCL: 10%
o BPCL: 8%

Interpretation:

 IOCL demonstrates higher profitability due to better cost control and

operational efficiency.
 BPCL’s lower margins indicate a need to optimize refining and distribution
costs to stay competitive.
 49

3. Liquidity Analysis

Data:

 Current Ratio (Last Fiscal Year):

o IOCL: 1.25
o BPCL: 1.05

Interpretation:

 IOCL has a healthier liquidity position, ensuring better short-term financial

stability.
 BPCL’s lower current ratio indicates a potential risk in meeting short-term
liabilities without relying on additional borrowing.

4. Debt Analysis

Data:

 Debt-to-Equity Ratio (Last Fiscal Year):

o IOCL: 0.75
o BPCL: 1.10

Interpretation:

 IOCL maintains a balanced capital structure with moderate debt levels.

 BPCL’s higher debt reliance suggests greater financial leverage but also
higher risk exposure.

5. Operational Efficiency

Data:

 Inventory Turnover Ratio (Last Fiscal Year):

o IOCL: 8.5 times
o BPCL: 6.2 times

Interpretation:

 IOCL’s higher inventory turnover indicates efficient stock management,

leading to faster conversion of inventory into revenue.
 BPCL’s slower turnover rate may reflect inefficiencies in inventory handling
or slower demand cycles.
 50

6. Cash Flow Analysis

Data:

 Cash Flow from Operations (Last Fiscal Year):

o IOCL: ₹40,000 crores
o BPCL: ₹22,000 crores

Interpretation:

 IOCL generates significantly stronger operational cash flows, indicating

robust financial management and profitability.
 BPCL’s lower cash flows highlight the need for better expense control and
receivables management.

7. Return on Capital Employed (ROCE)

Data:

 ROCE (Last Fiscal Year):

o IOCL: 14%
o BPCL: 11%

Interpretation:

 IOCL’s superior ROCE reflects better utilization of its capital to generate

profits.
 BPCL’s lower ROCE indicates room for improvement in capital allocation
and operational efficiency.

8. Impact of External Factors

Crude Oil Prices:

 Both companies faced fluctuations in crude oil prices, which impacted refining
margins and profitability.

Regulatory Environment:

 Subsidy reforms and government intervention in fuel pricing influenced

revenues for both companies.
 51

Key Insights from the Analysis

1. IOCL:
o Stronger financial position, profitability, and operational efficiency.
o Higher revenue and cash flow generation due to its extensive market
share and superior cost management.

2. BPCL:
o Moderate growth but weaker financial metrics compared to IOCL.
o Higher dependency on debt, slower inventory turnover, and lower
profitability margins highlight areas for improvement.

3. Shared Challenges:
o Both companies are significantly impacted by crude oil price volatility
and government policies.
o The transition to renewable energy presents opportunities but also
challenges for long-term growth.

Comparative financial statements are used to compare the financial position and
performance of companies over different periods, making it easier to identify trends,
changes, and growth. For a company like BPCL (Bharat Petroleum Corporation
Limited) and IOCL (Indian Oil Corporation Limited), such statements typically
compare figures like income, assets, liabilities, equity, and other financial metrics.

Types of Data in Comparative Financial Statements:

1. Income Statement (Profit & Loss Statement):

o Revenue (Sales)
o Cost of Goods Sold (COGS)
o Gross Profit
o Operating Expenses (e.g., selling, general, and administrative
expenses)
o Operating Profit (EBIT)
o Net Profit

2. Balance Sheet (Statement of Financial Position):

o Assets:
 52

 Current Assets (cash, receivables, inventories)

 Non-Current Assets (property, plant, and equipment)
o Liabilities:
 Current Liabilities (payables, short-term debts)
 Non-Current Liabilities (long-term debts)
o Shareholders’ Equity (retained earnings, stockholders' equity)

3. Cash Flow Statement:

o Cash from Operating Activities
o Cash from Investing Activities
o Cash from Financing Activities

4. Key Ratios:
o Liquidity Ratios (e.g., Current Ratio, Quick Ratio)
o Profitability Ratios (e.g., Return on Assets, Net Profit Margin)
o Efficiency Ratios (e.g., Inventory Turnover, Asset Turnover)
o Solvency Ratios (e.g., Debt-to-Equity Ratio)

Methods of Data Interpretation:

1. Vertical Analysis:
o Involves analyzing financial statements by expressing each line item as
a percentage of a base item (e.g., total revenue, total assets). For
example, in the income statement, each expense might be represented
as a percentage of total sales.

2. Horizontal Analysis:
o Compares financial data over multiple periods. This method involves
calculating the percentage change in the line items from one period to
the next (e.g., comparing the current year's sales with the previous
year's sales).

3. Ratio Analysis:
o Liquidity Ratios: Assess the company’s ability to pay off short-term
obligations (e.g., Current Ratio, Quick Ratio).
 53

o Profitability Ratios: Determine how well the company generates

profit relative to its revenue, assets, or equity (e.g., Return on Assets,
Net Profit Margin).
o Leverage Ratios: Measure the company’s long-term solvency and
financial risk (e.g., Debt-to-Equity Ratio).
o Efficiency Ratios: Analyze how well the company uses its assets and
liabilities (e.g., Asset Turnover, Inventory Turnover).

4. Trend Analysis:
o Involves comparing the data over a longer period (e.g., 3–5 years) to
identify upward or downward trends in the company’s performance. It
can highlight areas like growing revenue, rising costs, or improving
profitability.

5. Common-Size Financial Statements:

o Involves expressing all items as a percentage of a base figure. This
helps compare companies of different sizes or evaluate a company over
time, as each line item is standardized.

6. Comparative Analysis:
o Compare BPCL's financial data against IOCL’s to spot differences or
similarities in their financial performance. This comparison could
include profitability, liquidity, or operational efficiency metrics.

By using these methods, you can assess the financial health of BPCL and IOCL, track
their performance over time, and make informed decisions based on their financial
data.

If you need further help interpreting data or would like specific examples using BPCL
and IOCL, feel free to ask!

To expand further on comparative financial statements, let's dive deeper into some
of the specific aspects of analysis and provide more examples and details on how you
can interpret data for companies like BPCL and IOCL.
 54

Additional Methods of Data Interpretation

1. Trend Percentage Analysis:

o This method involves calculating the percentage change of a specific
financial item over multiple periods (usually three to five years).
o For instance, if you want to analyze BPCL’s revenue growth over the
last five years, you would compute the percentage increase or decrease
in revenue for each subsequent year and compare it to the base year.
o Formula:
Trend Percentage=(Current Year ValueBase Year Value)×100\
text{Trend Percentage} = \left( \frac{\text{Current Year Value}}{\
text{Base Year Value}} \right) \times 100
o Example: If BPCL had a revenue of ₹10,000 crores in Year 1 and
₹12,000 crores in Year 2, the percentage increase is:
Trend Percentage for Year 2=(12,00010,000)×100=120%\text{Trend
Percentage for Year 2} = \left( \frac{12,000}{10,000} \right) \times
100 = 120\%
o This shows BPCL's revenue increased by 20% from Year 1 to Year 2.

2. Common-Size Analysis:
o Common-size analysis helps in comparing financial statements by
converting all figures into percentages of a common base (total assets
for the balance sheet, and total sales or revenue for the income
statement).
o For example, in BPCL’s income statement, you might express each
expense (e.g., COGS, SG&A expenses) as a percentage of total
revenue. This is useful for comparing BPCL’s performance against
IOCL, as it normalizes for size differences.

Example of a Common-Size Income Statement:

Item BPCL 2023 IOCL 2023 % of Total Revenue

Revenue ₹50,000 ₹60,000 100%

Cost of Goods Sold ₹35,000 ₹40,000 70%

 55

Item BPCL 2023 IOCL 2023 % of Total Revenue

Operating Profit ₹10,000 ₹12,000 20%

Net Profit ₹5,000 ₹6,000 10%

3. DuPont Analysis (Return on Equity):

o The DuPont analysis breaks down Return on Equity (ROE) into three
components:
 Profitability (Net Profit Margin)
 Efficiency (Asset Turnover)
 Leverage (Equity Multiplier)
o Formula for ROE:
ROE=Net Profit Margin×Asset Turnover×Equity Multiplier\
text{ROE} = \text{Net Profit Margin} \times \text{Asset Turnover} \
times \text{Equity Multiplier}
o For example, if BPCL’s net profit margin is 10%, its asset turnover
ratio is 1.5, and the equity multiplier is 2, then:
ROE=10%×1.5×2=30%\text{ROE} = 10\% \times 1.5 \times 2 = 30\%
o This means BPCL’s equity returns are 30%. The DuPont analysis can
help you break down what’s driving their ROE, whether it’s profit,
asset usage, or leverage.

4. Comparative Horizontal Trend Analysis for Ratios:

o This method compares key ratios (like the debt-to-equity ratio, return
on assets, etc.) over several periods. For example, comparing BPCL’s
debt-to-equity ratio over the past five years can show whether the
company is becoming more or less leveraged over time.

5. Cash Flow Analysis:

 56

o Analyzing cash flow is important to assess the liquidity position of a

company. A common technique is to assess the operating cash flow to
net profit ratio, as a company’s profitability may not always reflect the
cash it generates. For instance, if BPCL reports high net profits but has
low operating cash flow, it could indicate issues with cash
management or non-cash expenses.
o Example:
 If BPCL has a net profit of ₹8,000 crores and operating cash
flow of ₹9,500 crores, the operating cash flow ratio is:
Operating Cash Flow Ratio=9,5008,000=1.19\text{Operating
Cash Flow Ratio} = \frac{9,500}{8,000} = 1.19
 This means BPCL’s operating cash flow is 1.19 times its net
profit, indicating that cash generation is healthy.

6. Industry Benchmarking:
o Comparing BPCL and IOCL with industry averages or with other
players in the same sector (e.g., other oil and gas companies in India)
gives context to their performance. This can show whether these
companies are leading or lagging in certain areas like profitability,
growth, or efficiency.

7. SWOT Analysis with Financial Data:

o When interpreting comparative financial statements, you can combine
financial ratios with a SWOT (Strengths, Weaknesses, Opportunities,
and Threats) analysis to give a more holistic view of the companies.
 Strengths: High profitability ratios (e.g., high Return on Equity)
 Weaknesses: Low liquidity ratios or increasing debt levels
 Opportunities: Expansion into new markets or product lines
(reflected in higher capital expenditure)
 Threats: Rising raw material costs or regulatory changes
affecting the industry
 57

Example of Comparative Analysis of BPCL and IOCL:

To perform a comparative financial statement analysis of BPCL and IOCL, you

might look at the following key metrics:

Metric BPCL 2023 IOCL 2023

Revenue (₹ Crores) 50,000 60,000

Net Profit (₹ Crores) 5,000 6,000

Profit Margin (%) 10% 10%

Return on Assets (%) 8% 9%

Debt to Equity Ratio 0.6 0.7

Current Ratio 1.8 2.0

Dividend Payout Ratio (%) 40% 35%

Key Insights:

 Revenue Growth: IOCL has a larger revenue base than BPCL, which could
indicate a larger market share or more diversified operations.
 Profitability: Both companies have the same profit margin of 10%,
suggesting they are equally efficient in converting revenue into profit.
 Debt Levels: BPCL has a slightly lower debt-to-equity ratio, indicating it is
slightly less reliant on debt financing compared to IOCL.
 Liquidity: IOCL has a higher current ratio, suggesting it has a more
conservative approach to managing short-term liabilities.
 Dividend Policy: BPCL has a higher dividend payout ratio, which could
appeal to income-seeking investors.
 58

4.4 INTERPRETATION

Age category Data percentage

Nothing 22 75.9%
Other 3 10.3%
Talk to a financial professional 4 13.8%
 59

The above Pie diagram shows the age group between 18 to 25 with 75.9%. Where it
shows 10.3% for 26 to 40 and 13.8% for 41 to 60 age group.
 60

2 OCCUPATION

Occupation Data Percentage

Business men 3 10.3%
Student 18 62.6%
Job 4 13.7%
Housewife 2 6.9%
Retired 1 3.4%

Nothing 1 3.4%

The above chart shows the occupation of the user. Hence the highest range shows
with 62.6% of student. While job ranges from 13.7% . Housewife goes for 6.9%.

Retired goes for 3.4% and nothing goes for 3.4%.

 61

Yes 19 65.5%
No 10 34.5%

The above diagram shows the knowledge for the financial analysis with the maximum
64.5% and a no with 35.5%.
 62

Yes 21 72.4%
No 8 27.6%

The diagram shows the determination of monthly income and expenses with the most
answered of yes with the 72.4% and a no as 27.6%
 63

Yes 21 70%
No 9 30%

The chart shows the identification of personal finances and identified areas for
improvement with 70% of yes and 30% of no answers
 64

Having idea for Data Percentage

Financial situation
Yes 25 83.3%
No 5 16.7%

The answer with yes with 83.3% and a no with 16.7% goes for the knowledge of
current financial situation, such as saving, debts, and investments.
 65

Financial goal set Data Percentage

Short term 8 26.7%

Long term 6 20%
Don’t know 16 53.3%

The user sets for 53.3% for long term and for short term 26.7%. where the user is
unable to select with the approximately of 20%
 66

Financial goal for Data Percentage

Down payment 5 16.7%

Home 18 60%
Retirement 7 23.3%

The financial goal is for 60% for Home loan and 23.3% for retirement and down
payment for 16.7%.
 67

Investment options Data Percentage

Stock 14 46.7%
Bond 3 10%
Mutual funds 8 26.7%
Real state 5 16.7%

The pie chart shows the investment options for stocks is of 46.7% while for bonds
10% whereas mutual funds is for 26.7% and real estate is of 16.7%.
 68

Taking advice for Data Percentage

Financial planning
Yes 17 56.7%
No 13 43.3%

The chart shows the advice a user will seek or not with the maximum percentage of
yes with 56.7% and 43.35% for a no.
 69

Financial advice Data Percentage

with
My self 7 23.3%
Financial advisor 18 60%
Don’t know 5 16.7%

The chart shows the advice seeking from financial advisor with 60% while with
myself goes with 23.3% and don’t have knowledge about this is 16.7%

Analyze Financial Data Percentage

statement
Yes 15 50%
No 15 50%
 70

The financial statement can be analysed by the user with the 50% of yes aqnd 50%
with the answer of no.

Financial advice Data Percentage

with
 71

My self 7 23.3%
Financial advisor 18 60%
Don’t know 5 16.7%

The chart shows the personal financial analysis with 43.3% whereas with the
company of 20% and not done yet as for 36.7%.

Analyze Financial Data Percentage

statement
 72

Yes 15 50%
No 15 50%

The chart shows the analysis of financial status of the company with the responses of
yes of 93.3% and no with 6.7%
 73

CHAPTER-5 CONCLUSION, FINDINGS,

SUGGESTIONS
 74

5.1 CONCLUSION

Comparative statements or comparative financial statements are statements of

financial position of a business at different periods. These statements help in
determining the profitability of the business by comparing financial data from two or
more accounting periods. It is a document used to compare a particular financial
statement with prior period statements. Previous financials are presented alongside the
latest figures in side-by-side columns, enabling investors to identify trends, track a
company's progress and compare it with industry rivals.

The conclusion of a financial statement analysis can provide valuable insights into a
company's financial performance and position. Some of the key takeaways from a
financial statement analysis can include:

Revenue and profitability: A financial statement analysis can provide information

about a company's revenue and profitability over a specific period of time. This
information can be used to assess the company's ability to generate profits and its
overall financial health.

Liquidity and solvency: A financial statement analysis can also provide information
about a company's liquidity and solvency, which are important indicators of its ability
to meet its short-term obligations and pay its bills on time.

Financial strength: A financial statement analysis can provide information about a

company's financial strength, including its assets, liabilities, and equity. This
information can be used to assess the company's overall financial position and its
ability to generate positive cash flows.

In this research paper there is a detailed study about comparative financial statements
analysis of companies in oil sector. It is with reference to two companies namely
Bharat Petroleum Corporation Limited and Indian Oil Corporation Limited. This
 75

study have mentioned completely about the information of both the companies, their
history, their visions and their objectives and also their strengths and weaknesses.

The data has been collected in this research paper by the method of google form
questionaire in which respondents views are graphically presented and interpretated.
This study have also provided the various reviews of literature on BPCL and IOCL
companies. This study have made a comparison of the financial statements of BPCL
and IOCL. Both the companies have reported positive financial results. However,
BPCL has outperformed IOCL in terms of revenue, profitability, and dividend
payouts.

The analysis of Comparative Financial Statements of BPCL and IOCL highlights

significant trends and changes in their financial positions over multiple periods. These
statements allow for a detailed comparison of assets, liabilities, income, and expenses
between the two companies, aiding in identifying growth areas and challenges.

 BPCL and IOCL, being major players in the Indian oil and gas sector, exhibit
similar financial structures but differ in key performance metrics such as
profitability, liquidity, and operational efficiency.
 The comparative analysis showcases how external factors, such as fluctuating
crude oil prices, government policies, and global economic conditions, impact
their financial health.

Overall, Comparative Financial Statements are a critical tool for stakeholders to

evaluate these companies' performance and plan future investments or strategies.
 76

5.2 FINDINGS

INDIAN OIL

 Over 34,000 Fuel Stations spread across India, fuelling the dreams and
aspirations of around 30 million Indians every day.
 Indian Oil's LPG brand Indane caters to more than 140 million customers.
 One of the leading Petrochemical players in India with a petrochemical
production capacity of nearly 3200 KTA.
 Indian Oil has a Solar PV capacity of around 70 MW & Wind Capacity of 168
MW, with a total renewable energy capacity of nearly 240 MW.
 Collaborated with Israeli company Phinergy Limited to form 'IOC Phinergy
Private Limited' (IOP) to commercialize the Aluminum-Air Battery
technology in India.
 Achieved the milestone of installing over 2000 EV charging stations at Indian
Oil Fuel Stations across the country.
 Spent nearly Rs 1,800 Crore on CSR endeavours during the last four years
across healthcare, education, sanitation, skill development, women
empowerment and other sustainables.

BPCL

 India’s ‘best performing’ Maharatna Public Sector Undertaking, and its

journey from being an Oil and Gas Company in India to a Fortune 500 oil
refining, exploration and marketing conglomerate.
 It is one of the leading company in the petroleum sector in India
 It also offers full range of automotive engine, gear oils, transmission oils,
speciality oils and greases
 BPCL was ranked 287th position during 2007–08 in Fortune Global 500 list
 Their project will ensure that a minimum level of biofuels become readily
available in the market to meet the demand at any given time.
 They aim to provide only the purest oil in India by virtue of using its own
highly developed refineries.
 77

Based on the comparison of BPCL and IOCL's financial statements, the

following findings emerge:

A. Key Financial Metrics

Revenue Growth:

IOCL consistently reports higher revenue compared to BPCL due to its larger scale of
operations and market share in the downstream petroleum sector.

BPCL shows steady revenue growth but at a slightly slower pace than IOCL.

Profitability:

IOCL generally exhibits higher net profit margins due to better cost management and
economies of scale.

BPCL shows stable profits but is more susceptible to fluctuations in crude oil prices
and refining margins.

Liquidity Position:

IOCL’s current ratio indicates better liquidity management compared to BPCL,

ensuring short-term liabilities are well-covered.

BPCL's liquidity is adequate but indicates a need for more effective cash management
practices.

Debt-to-Equity Ratio:

BPCL has a higher debt-to-equity ratio compared to IOCL, reflecting a greater

reliance on external borrowings.

IOCL maintains a balanced capital structure, indicating better financial leverage.

B. Operational Insights
 78

Inventory Turnover:

IOCL demonstrates higher inventory turnover, indicating efficient management of

stock and faster conversion into sales.

BPCL’s inventory turnover is slightly lower, hinting at potential delays or

inefficiencies in stock management.

Cash Flow Trends:

IOCL shows stronger cash flow from operations, supported by robust refining and
marketing operations.

BPCL, while profitable, exhibits weaker cash flow trends, reflecting higher
operational expenses or delays in receivables.

C. External Influences

Impact of Crude Oil Prices:

Both companies’ financial performance is significantly influenced by global crude oil

price volatility.

Government Policies:

Subsidy regulations and pricing reforms have a direct impact on revenue and profit
margins for both companies.

5.3 SUGGESTIONS
 more resources into oil recycling’

 A stronger focus on renewable energy.

 Company focuses more on how to set up goals by making optimum use of

resources.

 To create the conditions for further improving their environmental protection

measures and increasing their profitability.
 79

 If conducted internally, company can help fund managers make future business
decisions Investing or review historical trends for past successes.
 If conducted externally, financial analysis can help investors choose the best
possible investment opportunities.
 Fundamental analysis and technical analysis are the two main types of financial
analysis for the company.
 Company can use ratios and comparative data to determine the value of a security.
 Technical analysis assumes a security's value is already determined by its price and
it focuses instead on trends in value over time.

Based on the analysis, here are actionable suggestions for BPCL and IOCL to
improve their financial health and operations:

A. For BPCL

Improve Debt Management:

Reduce dependency on external borrowings by optimizing internal cash generation

and controlling expenses.

Enhance Inventory Efficiency:

Implement advanced inventory management systems to reduce holding costs and

improve turnover rates.

Focus on Diversification:

Invest in renewable energy projects and non-fuel revenue streams to reduce reliance
on the volatile petroleum sector.

Streamline Cash Flow:

Strengthen receivables management and reduce operational inefficiencies to improve

cash flow sustainability.

B. For IOCL

Leverage Economies of Scale:

 80

Continue capitalizing on its extensive network and infrastructure to maintain

competitive pricing and higher margins.

Increase Capital Investments:

Allocate more capital toward refining capacity expansion and renewable energy to
secure long-term growth.

Strengthen Export Markets:

Expand international operations and target export markets to diversify revenue

streams.

Adopt Technology in Cost Management:

Use digital tools and AI-driven analytics to enhance cost optimization strategies.

C. General Suggestions for Both Companies

Adapt to Market Changes:

Focus on developing energy-efficient products and transitioning to greener

alternatives as the global energy market shifts.

Policy Advocacy:

Collaborate with the government to implement favorable policies for pricing and
taxation in the petroleum sector.

Mitigate Risks:

Use hedging strategies to protect against crude oil price fluctuations and currency
volatility.

Transparency in Reporting:
 81

BLIOGRAPHY

 http://pothi.com/pothi/book/uday-
b-patil-financial-
literacy#sthash.0hvACaoP.dpuf
 https://www.ibef.org
 www.usnews.com
 www.sedi.org 4.
 https://afcpe.org
 www.nber.org
 www.rbi.org.in
 www.investopedia.com
 www.assetmanagement.hsbc.com
 https://moneyview.in
 www.bankbazaar.com
 https://economictimes.indiatimes.com
 www.moneycontrol.com
 http://www.pfrda.org.in
 www.postofficesavingsscheme.in
 www.fhpl.net 16. www.entrepreneur.com
 www.sidbi.in 18. www.sebi.o.in
 www.masterintelligence.com

 http://indpaedia.com
 82

Annexure
A Comparative Financial Statement Analysis for companies in the oil
sector would typically include a detailed assessment of the financial
performance of different companies in the industry, providing insights
into their strengths, weaknesses, and overall financial health. To organize
such an analysis, an annexure could include the following sections:

Annexure: Comparative Financial Statement Analysis of Companies in the Oil Sector

1. Introduction

 Objective: The purpose of this analysis is to compare the financial

performance of major companies in the oil sector, identifying
trends, key financial metrics, and providing an overview of their
profitability, liquidity, and financial stability.
 Scope: This annexure focuses on the most significant financial
indicators for oil companies, such as revenue, net profit, return on
equity (ROE), debt-to-equity ratio, earnings before interest, taxes,
depreciation, and amortization (EBITDA), and others over a
defined period (e.g., 3 years).

2. Companies Analyzed

 Company A (e.g., ExxonMobil)

 Company B (e.g., Royal Dutch Shell)
 Company C (e.g., BP)
 Company D (e.g., Chevron)

3. Financial Metrics for Comparison

For each company, the key financial metrics should be presented,

typically including:

 Revenue (Total Sales):

o Compare the total revenue over the years.
 Gross Profit Margin:
o Gross Profit / Revenue