Pso Research

Topics: Petroleum, Financial statements, Financial ratios Pages: 18 (5986 words) Published: July 16, 2013
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The Agency Problem|
A Financial and Business Analysis of Pakistan State Oil Company Limited for the three year period ended June 30th 2011| Topic # 8|
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Table of Contents

Part One: Project Objectives, Research Questions & Overall Research Approach3

Part Two: Information Gathering & Choice of business and financial analysis techniques 6

Part Three: Results, Analysis, Conclusions & Recommendations 8

References 27

Part I : Project Objectives, Research Questions & Overall Research Approach Managerial success is important for firms in the modern world to be successful in achieving shareholders goals and objectives as well as those of other stakeholders. The modern corporation has compounded the problem of ensuring managerial success since ownership and control has been largely divorced which has led to what has become known as the agency problem (Grant, 2002). This exists whereby the separation of ownership and control can lead to managers of the firm pursuing their own goals at the expense of those of the shareholders who appoint them as stewards of their investments. Remember that managerial success is not just earning high returns for shareholders but also ensuring that these returns are concurrent with the long term risk and return objectives of the shareholders (BPP, 2011). To circumvent these issues, regulation has been drawn up and codes of corporate governance aimed at ensuring that a system of ethics and good practice on how to govern organizations with proper checks and balances have been drawn up the world over to varying degrees of detail and types. The overall goal of these, however, remains that shareholder interests are protected (BPP, 2011). That being said, there have been a number of recent corporate failures despite their being the existence of strong corporate governance systems in place most notably with management inefficiency or managerial failure playing a huge part. All these firms were very successful to the very brink of disaster which makes predicting failure all the more difficult. The author of this report, however, believes that financial and business analysis techniques can also be applied to understand whether managerial inefficiency is inherent or whether managerial failure can be fairly predicted. To prove the point, the author has chosen a Pakistani company, Pakistan State Oil, and undertaken to conduct a financial and business analysis of it over a three year period and hence look at factors that could suggest whether the firm is headed for sustainable success or not. The author believes that this report would prove to be a refresher on the importance of financial and business analysis in the risk management perspective and also prove that complex techniques of predicting corporate failure like the Z Score etc are in effect too just that, that is, too complex. In other words, simpler is better. The choice of PSO is a natural one in this case since it is one of the largest corporate bodies in Pakistan. A short introduction on the company is as follows: Pakistan State Oil Company Limited – An Introduction|

According to PSO’s Corporate website (2011), “The creation of Pakistan State Oil (PSO) can be traced back to the year 1974, when on January 1st; the government took over and merged Pakistan National Oil (PNO) and Dawood Petroleum Limited (DPL) as Premiere Oil Company Limited (POCL). Soon after that, on 3rd June 1974, Petroleum Storage Development Corporation (PSDC) came into existence. PSDC was then renamed as State Oil Company Limited (SOCL) on August 23rd 1976. Following that, the ESSO undertakings were purchased on 15th September 1976 and control was vested in SOCL. The end of that year (30th December 1976) saw the merger of the Premier Oil Company Limited and State Oil Company Limited, giving way to Pakistan state Oil (PSO)”. According to PSO’s Corporate...

References: Attock Petroleum Limited. (2009) Annual Report 2009. Karachi: Attock Petroleum Limited. |
Attock Petroleum Limited
Attock Petroleum Limited. (2011) Annual Report 2011. Karachi: Attock Petroleum Limited. |
BPP
Grant, Susan (2002). Stanlake’s Introductory Economics. London: Longman. |
Pakistan State Oil Company Limited
Pakistan State Oil Company Limited. (2010) Annual Report 2010. Karachi: Pakistan State Oil Company Limited. |
Pakistan State Oil Company Limited
Pakistan Credit Rating Agency. (2009) Credit Rating Report - PSO 2009. Lahore: PACRA. |
Pakistan Credit Rating Agency
Pakistan Credit Rating Agency. (2009) Oil & Gas Sector Review. Lahore: PACRA. |
Schweser (2009) CFA Level One: Financial Statement Analysis
The Economist Intelligence Unit (2010). The World In 2011. [Online]. The Economist Intelligence Unit. Retrieved From: http//: www.economist.com/publications/theworldin.htm [Accessed 20th September 2011] |
The Economist Intelligence Unit (2010)
Attock Petroleum Limited (2011) Company Information, History, Overview & Upcoming Projects [Online]. Attock Petroleum Limited . Retrieved from:http//: www.apl.com.pk [Accessed 20th September 2010] |
Business Recorder Press Reports
Dawn Press Reports. 2008, 2009, 2010 and 2011 |
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