Statoil Performance Analysis

A. Financial Statement and Ratio Analysis

No.
1

Ratio
Liquidity
Current Ratio

Measures the ability of the firm to

meet its short-term obligations.

Quick Ratio

The purpose is the same as

current ratio, but it is more
accurate to measure the ability of
liquid asset to cover the short
term debts

Activity
Inventory Turnover

Measures the activity, or liquidity

of a firm's inventory.

Average age of inventory

(days)

The average number of days

sales in inventory.

Average collection period

(days)

The average amount of time

needed to collect accounts
receivable

Total Assets Turnover

Description

Debt

Indicates the efficiency with which

the firm uses its assets to
generate sales

Debt ratio

Measures the proportion of total

assets financed by the firms
creditors

Debt-to-Equity ratio

Measures the relative proportion

of total liabilities and common
stock equity used to finance the
firms total assets.

Profitability
Gross profit margin

Measures the percentage of each

sales dollar remaining after the
firm has paid for its goods.

Net profit margin

Measures the percentage of each

sales dollar remaining after all
costs and expenses, including
interest, taxes, and preferred
stock dividends, have been
deducted

Earnings per share

Represents the number of dollars

earned during the period on the
behalf of each outstanding share
of common stock

ROA
(Return on Total Assets)

Measures the overall effectiveness

of management in generating
profits with its available assets.

ROE
(Return on equity)

Measures the return earned on

common stockholders investment
in the firm

Market

price/earnings (P/E) ratio

Measures the amount that

investors are willing to pay for
each dollar of a firms earnings.

market/book (M/B) ratio

Provides an assessment of how

investors view the firms
performance.

Formula

Statoil ASA
Y2004
Y2005

BP plc
Y2005

Current Assets/Current Liabilities

1.06

0.99

1.05

(Current Assets-Inventory)/Current
Liabilities

0.95

0.88

0.78

Cost of goods sold/Inventory

26.99

27.30

9.81

(365 Inventory turnover)

13.52

13.37

37.22

31,736.00

43,361.00

42,632.00

832.21

1,069.97

683.47

38.13

40.53

62.38

1.22

1.35

1.21

AR (Account Receivable)

Average sales/day
AR/Annual Sales/365

Sales/Total Assets

Total liabilities/Total assets

65.10%

Total liabilities/Common stock equity

1.90

Gross Profit/Sales ;
(Gross Profit = Sales-COGS)

Earnings available for common

stockholders/Sales
(Based on Statoil's income
statement, there is no data for
preferred stocks dividends)

Earnings available for common

stockholders/number shares
outstanding

62.58%

NOK

61.35%

1.70

1.59

38.05%

39.64%

22.32%

8.20%

7.87%

8.96%

11.50

NOK

14.19

1.14

Earnings available for common

stockholders/Total assets

10.04%

10.63%

10.80%

Earnings available for common

stockholders/Common stock equity

29.30%

28.82%

27.93%

Market price per share of common

stock/Earnings per share

1.68

N/A

Market price per share of common

stock/common stock equity/number
shares outstanding

0.49

N/A

Evaluation
From the comparison of this liquidity ratio specifically in the end of
2005, it was revealed that Statoil has ability to pay its short term
payable (such as payment to the vendor/contractor) is lower than
BP.
From the comparison of this liquidity ratio specifically in the end of
2005, it was revealed that Statoil has more liquid assets to pay its
short term payable (such as payment to the vendor/contractor)
than BP. These liquid assets are ready to be converted to the cash
whenever the company needs to pay its short term debts.

The company that is able to keep inventory turnover higher than

its competitors, more likely will be most successful. The main
indicator is the average number of day's sales of the inventory.
From the comparison of this activity ratio specifically in the end of
2005, it was revealed that BP needed 37 days to sell its
inventories, meanwhile Statoil only 13 days. The ability to sell the
inventories rapidly will contribute to generate significant income.

From the comparison of this activity ratio specifically in the end of

2005, it was revealed that Statoil needed lesser day than BP to
collect its AR wherein contribute to generate significant cash flow.
Statoil's average sales per day (annual sales) is higher than BP,
this indicator was aligned with the inventory turnover ratio which
showing that Statoil is able to sell their inventories/goods more
than BP.

From the comparison of this activity ratio specifically in the end of

2005, it was revealed that Statoil is more efficient than BP in
managing its assets to generate sales

From the comparison of this debt ratio specifically in the end of

2005, it was revealed that eventhough there's only slight
difference between BP and Statoil in portion of financing assets
using liability but Statoil has bigger portion of liability and equity
to finance its assets than BP (see debt-equity ratio). Apparently,
Statoil would decreased the amount of dividend shared to the
investors/shareholders, since they retained some portion of net
income to pay its all debts/liabilities compared than BP.

From the comparison is particular profitability ratio comparison

specifically in the end of 2005, it was revealed that Statoil has
higher gross profit margin than BP, meaning Statoil is able to
generate higher sales to cover all direct cost related to produce
inventories/goods
From this particular profitability ratio comparison specifically in the
end of 2005, it was revealed that BP generated higher earnings to
be available for investors/shareholders. Statoil does have gross
profit margin higher than BP but it is before deducted by other
expenses (operating, tax, and interest)

From this particular profitability ratio comparison specifically in the

end of 2005, it was revealed that Statoil generated higher EPS
than BP, since Statoil has lower outstanding shares amount than
BP, compared to its net income
From this particular profitability ratio comparison specifically in the
end of 2005, it was revealed that both companies have same level
of efficiency in using their assets to generate profits

From the comparison of this profitability ratio specifically in the

end of 2005, it was revealed that both company generated almost
the same return to their investors/shareholders

The book value is higher than its market price, meaning it is

undervalued. The price is likely to be increasing in the future
depends on its performance and industry's going concern as well