"Oxford Brookes UniversityAn Analysis and Evaluation of the Business and Financial Performance of Oman OilMarketing Company, over a Three-Year (2013 to 2014) PeriodPrepared By: ACCA Registration Number: Period: Word Count:Table of ContentsPart 1: Project Objectives and Overall Research Approach ..................................................................31.1. Why I have Chosen Topic an Analysis and Evaluation of the Business and FinancialPerformance of an Organization for over a Three-Year Period. ............................................................... 31.2. Why I have Chosen Oman Oil Marketing Company ...................................................................... 41.3. What are the Objectives of My Research ..................................................................................... 41.4. What are the Questions of My Research ...................................................................................... 51.5 What is the Approach of my research .......................................................................................... 5Part 2: Information Gathering and Use of Accounting and Business Techniques ...................................72.1 What are the Sources of Information for Me ............................................................................... 7Primary Data Sources ............................................................................................................................ 7Secondary Data Sources........................................................................................................................ 72.2 What is the Limitation of Information Gathered .......................................................................... 82.3 What are the Ethical Issues ........................................................................................................... 92.4 What are the Financial and Business Techniques Used for My Research .................................... 9Ratio Analysis ...................................................................................................................................... 10SWOT Analysis ..................................................................................................................................... 11Porter’s Five Forces ............................................................................................................................. 122.5 Oman Oil Marketing Company ................................................................................................... 132.6 Shell Oman Marketing Company ................................................................................................ 13Part 3: Financial Analysis-Results-Conclusion and Recommendations ................................................ 143.1 Financial Analysis ........................................................................................................................ 14Sales (OMR.) ........................................................................................................................................ 14Gross Profit Ratio ................................................................................................................................ 17Net Profit Ratio ................................................................................................................................... 20Current Ratio (Times) .......................................................................................................................... 22Return on Capital Employed Ratio ...................................................................................................... 23Activity Ratios ..................................................................................................................................... 26Earnings per Share (OMR.) .................................................................................................................. 293.2 Business Analysis ......................................................................................................................... 31SWOT Analysis ..................................................................................................................................... 31Porter’s Five Forces Analysis ............................................................................................................... 333.3 Conclusion ................................................................................................................................... 351 3.4 Recommendations ...................................................................................................................... 37 2 Part 1: Project Objectives and Overall Research ApproachIn this part I have discussed different things like; why I have chosen the topic, why I havechosen Oman Oil Marketing Company, What are the objectives, questions, and approach of myresearch. 1.1. Why I have Chosen Topic an Analysis and Evaluation of the Business andFinancial Performance of an Organization for over a Three-Year Period. There were around 20 topics where from I have to chose one topic. I have chosen topic“An Analysis and Evaluation of the Business and Financial Performance of a Specific Companyover a Three-Year period”. There are many reasons why I have chosen the topic like; to work ona topic or in other words to conduct the financial analysis of the company, we needed secondaryinformation. Reaching to secondary financial data of a company is not a difficult task. Keepingin view of the availability of relevant data, I have chosen this topic because obviously I want toprepare a good research report. The main reason behind choosing the topic is I have a seriousinterest in financial area. There are other reasons behind choosing the topic. This topic providesme opportunity to understand and conduct financial and business analysis of a company, it isimportant for me as an ACCA student. 3 1.2. Why I have Chosen Oman Oil Marketing Company I have chosen Oman Oil Marketing Company as the main company for analysis and haveselected Shell Oman Marketing Company for comparison analysis. It is necessary for me tochoose a company for my research work which is a reputable company and have sufficient dataso that I could complete my research work efficiently. As Oman Oil Marketing Company is areputable and famous company within Oman and have sufficient information available thereforeI have chosen Oman Oil Marketing Company. There are few other reasons. Oman Oil MarketingCompany is one of the top companies of Oman. Oman Oil Marketing Company has a substantialcontribution in economic development of Oman. (Omanoil 2015) Due to importance of OmanOil Marketing Company for the economy of Oman, I was motivated to choose Oman OilMarketing Company for my analysis. 1.3. What are the Objectives of My Research Before starting this project, there were many motivations behind my research. The mainobjectives behind my research are enlisted below: ? To conduct a performance analysis of a company. ? To conduct a financial analysis of Oman Oil Marketing Company in order toanalyze its financial stability in term of profitability, liquidity, efficiency in usingthe assets of the company, and how well the company is conducting its businessoperations or activities. ? To conduct a business analysis of Oman Oil Marketing Company with the help ofSWOT Analysis and Porter’s Five Forces Model Analysis. ? To extract a valuable conclusion about Oman Oil Marketing Company regardingits financial and business stability and environment. ? To provide recommendations for Oman Oil Marketing Company to improve itsfinancial and business performance. 4 1.4. What are the Questions of My Research To complete this report, there are certain questions which need to be answered in thisresearch work. The certain questions regarding my research are given below: ? What are factors or elements of the financial and business environment of OmanOil Marketing Company which are affecting its financial and business stability? ? What are the strengths and weaknesses of Oman Oil Marketing Company whichare affecting Oman Oil Marketing Company internally? ? What are the threats and opportunities for Oman Oil Marketing Company whichis affecting Oman Oil Marketing Company externally? ? What are the forces in the competitive environment of Oman Oil MarketingCompany which are affecting the competitive position as well as competitiveperformance of Oman Oil Marketing Company?? What measures could be taken in order to improve the financial and businessperformance of Oman Oil Marketing Company? 1.5 What is the Approach of my research As ACCA student, I have to complete this project efficiently and in a professionalmanner. In order to complete this research project in an efficient and professional manner, Ideveloped a systematic approach. To complete this project in a professional and systematicmanner, I have used different tools and techniques used in financial and business analysis. Byfollowing a systematic and professional approach, first I have to choose a topic. I chosen thetopic “An Analysis and Evaluation of the Business and Financial Performance of a SpecificCompany over a Three-Year period” by keeping in view the pros and cons of the topic. Then Ihave to choose a company, I chosen Oman Oil Marketing Company, again keeping in view thepros and cons of choosing the company. Then I have to choose the objectives of my research. Iformulated objectives of my research by keeping in view the instruction given by OBU forcompletion of this project. After that I have to formulate research questions. I formulated my5 research questions by keeping in view the objectives of my research. In order to prepare a goodprofessional report, I collected raw data and information from the available sources about OmanOil Marketing Company. After collecting raw data and information about Oman Oil MarketingCompany from available sources, I organized the raw data and information in way that isunderstandable for the reader.6 Part 2: Information Gathering and Use of Accounting and BusinessTechniques2.1 What are the Sources of Information for Me Basically there were two sources for collection of data and information about myresearch topic. The two basic sources of information are primary sources and secondary sources.These sources are discussed below: Primary Data SourcesThe data or information gathered through firsthand is called Primary Data. There aredifferent sources of primary data and information like; Survey Questionnaire, legal cases,personal diaries, maps, transcripts, and files. As there was not any need for primary data,therefore, I have not used any of these sources for my research work. (Kumar 2005)Secondary Data SourcesSecondary data or information is already collected or existed. There are different sourcesfor secondary data which includes but not limited to print media, annual reports, websites,internet, journals, books… (Kumar 2005) I have used different available secondary sources tocollect relevant data and information about my chosen topic and company. Few of these sourcesare described below: Print MediaPrint media is prominent sources of information. We can get information about theeconomic, financial, and business situation of a country as well as of a company. Newspapers arethe main part of print media. In newspapers, press releases, updates, and reports about thespecific country, industry, and the company are printed. (Kumar 2005)Annual Reports7 To conduct a financial analysis of a specific company, annual reports of the companyhelp a lot. The annual reports of Oman Oil Marketing Company and Shell Oman MarketingCompany have helped a lot to me for completion of this report. I have utilized the annual reportsof the Oman Oil Marketing Company and Shell Oman Marketing Company to complete my ratioanalysis like; activities, efficiency in using the assets, maintaining liquidity… I downloaded theannual reports of Oman Oil Marketing Company and Shell Oman Marketing Company fromtheir respective websites. (Kumar 2005)Internet Internet is a big and vast source to get information about a specific country, industry, andcompany. Internet provides us access to necessary sources like; online journals, books,newspapers, websites. Internet helped me to gain access to online books, journals, newspapers,and websites of Oman Oil Marketing Company and Shell Oman Marketing Company.(Kumar2005)Academic MaterialDuring my ACCA, I completed a number of courses related to financial and businessanalysis of an organization. These courses helped a lot in conducting financial and businessanalysis of Oman Oil Marketing Company and Shell Oman Marketing Company.(Kumar 2005)2.2 What is the Limitation of Information Gathered While completing this report, there were different issues with me and there are certainlimitations to the data and information provided in this report. As mentioned in the previoussection that there was not as much need to collect data first hand or from primary sourcestherefore, major part of this report is extracted from the secondary sources. Even though,secondary sources are an authentic sources but it could be altered according to the requirement ofspecific user. Keeping in view the issue of authenticity, the conclusion of my report lacks interms of authenticity. (Kumar 2005) But, I have tried to gather data and information fromrelatively authentic sources after a deep research. Moreover, I have prepared this report8 specifically for Oman Oil Marketing Company therefore; conclusion of this report can’t apply toother companies working in Oman, and in the industry.As per the instructions of OBU, I have to complete this project within a time limit. Wehave to understand that the secondary sources require lot’s of extended time period. We requirelots of time to conduct the search and find an authentic and relevant sources for our researchtopic. As the given time period was limited and I have to complete the project within a specifictime period, therefore, I have conducted a limited research to find an authentic and relevantsource of information for my research topic. 2.3 What are the Ethical Issues When we have to conduct a research work we have to come across with different ethicalissues. Same was the case with my research work. I came across different ethical issues whichare briefly discussed in ensuing paragraphs. It is the policy of OBU as well as of other institutions to provide information fromauthentic sources and all the details about the source from where we gathered the data andinformation also be provided. This was not easy task for me. Internet is used a wide range ofusers with different ethical approaches. Someone from them publishes or adds the work ofsomeone else with his or her own name. I tried my best to gather information from reliable andauthentic sources. I also tried to provide information of actual source. The other ethical issue which I have to face is that there are certain secondary sourceswhere author provides or compiles data and information on the basis of biasness which is notgood from ethical perspective. We should have a balanced and unbiased approach when weconduct research work. I have kept this norm of balanced and unbiased approach while gatheringand compiling data and information about my research topic. 2.4 What are the Financial and Business Techniques Used for My ResearchIn order to conduct and complete financial and business analysis of Oman Oil MarketingCompany I have used different financial and business analysis techniques which are discussedbelow. 9 Ratio Analysis Ratio analysis is one of the popular techniques utilized by the companies and financialanalysis all over the world. This technique was widely used in the past and it is used today aswell. Ratio analysis provides us insights into different aspects of the financial operations andstability of a company like; liquidity, operations, assets utilization… With the help of ratioanalysis, we can compare the performance of a company over a period of time or even with itscompetitors. (Revsine 2005) Keeping in view the benefits of ratio analysis, I have utilized ratioanalysis to analyze the financial stability of Oman Oil Marketing Company over a period of threeyears from 2012-2014 and against the performance of Shell Oman Marketing Company. I haveutilized different ratios which are briefly discussed below. ? Profitability RatiosWith the help of profitability ratios, we can analyze the profitability of company over aperiod or against the profitability of a rival company. With the help of profitability ratio analysis,a company could find any issues into its profitability and could take time measures to overcomethe issues. (Revsine 2005) ? Liquidity Ratios With the help of liquidity, we can analyze the ability of a company to pay its short termliabilities. I have used liquidity ratio to analyze the liquidity performance of Oman Oil MarketingCompany over a period of three years from 2012-2014 and against the performance of ShellOman Marketing Company. (Revsine 2005)? Efficiency RatiosWith the help of efficiency ratios, we measure how much efficiently a company is usingits assets to run its business. I have used efficiency ratios to analyze assets utilization of OmanOil Marketing Company over a period of three years from 2012-2014 and against theperformance of Shell Oman Marketing Company. (Revsine 2005)10 Ratio Analysis Limitation It is a universal principle that each and every thing has certain pros and cons. same is thething with the techniques utilized for financial analysis including ratio analysis. There are certainlimitations of the ratio analysis which are discussed below briefly. We conduct ratio analysis of a company on the basis of the figures of the company. Thesefigures does not relate to the current performance of a company. For example, figures of 2014 ofOman Oil Marketing Company provided in the annual report of 2014, does not tell us about theperformance of Oman Oil Marketing Company in the month of March 2015. So, we can say thatratio analysis does not provide us insights into the current performance of the company.Moreover, ratio analysis does not provide us information what the company is going to do in thefuture. (Revsine 2005)SWOT AnalysisSWOT Analysis is an environmental analysis. SWOT Analysis is conducted to analyzethe internal and external environment of a specific organization. With the help of SWOTAnalysis we are able to understand and know about the strengths, weaknesses, possibleopportunities and threats for the company. I have utilized SWOT Analysis to analyze theexternal and internal environment analysis of Oman Oil Marketing Company. It has helped meidentifying the strengths, weaknesses, possible opportunities and threats for the company.(QueenslandGovernment 2015)? StrengthThrough strengths analysis, I have analyzed the system, resources, and the other internalfactors of the company which give any type of strength to Oman Oil Marketing Company.(QueenslandGovernment 2015)? WeaknessesThrough weaknesses analysis, I have analyzed the system, resources, and the otherinternal factors of the company which create any type of weaknesses for Oman Oil MarketingCompany. (QueenslandGovernment 2015)11 ? OpportunitiesThrough opportunities analysis, I have analyzed potential opportunities for Oman OilMarketing Company in terms of extending its market, business, and resources.(QueenslandGovernment 2015) ? ThreatsThrough threats analysis, I have analyzed potential threats for Oman Oil MarketingCompany in terms of its market, business, and resources. (QueenslandGovernment 2015)SWOT Analysis Limitation As discussed previously, each technique has certain limitations so same is the case withSWOT Analysis. On the basis of SWOT Analysis, we view the single aspect of a particular itemof a specific company in context of its internal or external environment. We should have tounderstand that a specific item or event could be a weakness for the organization on a certaintime and could be converted into strength later on. Moreover, the resources are interlinked, so wecan not solely conclude on the basis of the outfit of a particular resource or event. These pointsare ignored while we conduct SWOT Analysis. (QueenslandGovernment 2015)Porter’s Five Forces Through this model we conduct competitive environmental analysis of an organizationwhich tells us where a company stands among its competitors in the market and what strengthsor weakness it has. Through the model, I have analyzed the business performance of Oman OilMarketing Company in terms of; Rivalry, Bargaining power of buyers and suppliers, Threat ofsubstitutes and new entrants. (MarketMuscatSecurities 2013)Porter’s Five Forces Model Limitation Due to the shortage of space, it is not possible for me to discuss and describe all theinefficiencies of this model. Therefore, I will mention only one of those. This technique ofanalysis is beneficial for those companies which are working only in a specific industry and havelimited number of products. Porter’s Five Forces Model is not much beneficial for thosecompanies which are working in more than one industry or which have a wide range of products.(MarketMuscatSecurities 2013)12 2.5 Oman Oil Marketing Company 2003 was the year when Oman Oil Marketing Company was established. It isheadquartered in Muscat. In the energy sector of Oman, Oman Oil Marketing Company isleading. Core business of Oman Oil Marketing Company includes; lubrication sales, aviationrefueling, storage as well as distribution, and marketing of lubricants and fuels. (Wikipedia 2015) 2.6 Shell Oman Marketing Company Shell Oman Marketing is the part of Shell. Shell started its operations in Oman aboutsixty years ago in 1958. In the development of energy sector of Oman, Shell has a significantrole. Shell Oman Marketing Company provides transport fuel, card serves, lubricants, and oil.(ShellOman 2015)13 Part 3: Financial Analysis-Results-Conclusion andRecommendations3.1 Financial AnalysisSales (OMR.)Oman Oil Marketing Company Oman Oil MarketingSales (OMR)CompanyIncrease / (Decrease)2012 278,522,526 100.00%6.34 %2013 296,190,8522014 357,124,657 20.57 %(Table: 1, Source: Annual Reports)If we analysis the business performance of Oman Oil Marketing Company then we cansay that the sales of Oman Oil Marketing Company have increased over a three years period oftime. If we see, in the year 2012 the sales were about 278 M. In the year 2013, the sales of OmanOil Marketing Company increased to about 296 M from 278 M in year 2012. Oman OilMarketing Company witnessed about 6% increase in its sales during the year 2013 against thesales of 278 M in previous year. This was on account of opening of new sales points andincreasing its market share. 14 Oman Oil Marketing Sales (OMR) 40,00,00,00035,71,24,65735,00,00,00027,85,22,526 29,61,90,85230,00,00,00025,00,00,00020,00,00,00015,00,00,00010,00,00,0005,00,00,000- 2012 2013 2014 Oman Oil Marketing Company (OMR)Chart 1: Figure Taken from Table: 1During the year 2014, the sales of Oman Oil Marketing Company increased to 357 Mfrom 296 M of year 2013. There was an increase of 21% in the sales of Oman Oil MarketingCompany against the relatively minor increase of 6% in previous year 2013. We can understandwhy Oman Oil Marketing Company gained continuous and significant increase during the periodunder review 2012-2014. As mostly, the prices of energy sector products were on the rise duringthe period under review, as a result, Oman Oil Marketing Company able to get highercompensation for its products. There was another reason behind this continuous increase; thecontinuous increase was on account of opening of new points of sale from Oman Oil MarketingCompany. Shell Oman Marketing Company Shell OmanSales (OMR)Marketing CompanyIncrease / (Decrease)403,552,000 100.00%20126.64%430,355,000201315OMR361,511,000 (16.00) %2014(Table: 2, Sources: Annual Reports)If we analysis the performance of Shell Oman Marketing Company of three years timeperiod, we can see that sales of Shell Oman Marketing Company are pretty much unstable overthe period. The sales of Shell Oman Marketing Company were about 403 M in year 2012. Thesales of Shell Oman Marketing Company increased to 430 M in year 2013. Shell OmanMarketing Company witnessed a relatively smaller increase in its sales of about 7% against thesales of 403 M in year 2012. This was on account of increasing prices of energy products in themarket and successful expansion of business operations. On the other hand, the situation wasopposite in year 2014 for Shell Oman Marketing Company. Shell Oman Marketing Companywitnessed a significant decrease of 16%. Shell Oman Marketing Sales (OMR) 44,00,00,000 43,03,55,00042,00,00,000 40,35,52,000 40,00,00,000 38,00,00,000 36,15,11,000 36,00,00,000 34,00,00,000 32,00,00,000 2012 2013 2014 Shell Oman Marketing Company (OMR) Chart 2: Figure Taken from Table 2The sales of Shell Oman Marketing Company decreased to 361 M in year 2014 againstthe sales of 430 M and against the increase of 7% in last year 2013. This tells us that Shell Oman16OMRMarketing Company could not benefit from the increasing prices of energy products during theperiod. The decrease in the sales was on account of losing business to its competitors, not doingproper marketing, and not providing products and services according to the needs of its targetcustomers. In terms of sales, Oman Oil Marketing Company is ahead of its competitor ShellOman Marketing Company as Oman Oil Marketing Company is enjoying continuous increasinggrowth sales during the period under review while sales of Shell Oman Marketing Company areunstable.Gross Profit Ratio Oman Oil Shell OmanGP% Marketing MarketingIncrease / Increase /Company Company(Decrease) (Decrease)100.00 % 100.00 %2012 9.32 9.701.63% (1.11) %2013 9.47 9.60(4.69) % 4.59 %2014 9.02 10.04(Table: 3, Source: Annual Report)Oman Oil Marketing Company If we see the financial performance of Oman Oil Marketing Company in terms of earninggross profits then we can see that it has shown an unstable performance. In year 2012, Oman OilMarketing Company earned about 9.32% gross profit. The gross profit margin of Oman OilMarketing Company increased to 9.47% in year 2013. Oman Oil Marketing Company earnedmarginal 2% increased profit than the last year. In the year 2014, the situation was opposite forOman Oil Marketing Company. The gross profit margin was decreased for Oman Oil MarketingCompany in year 2014. Oman Oil Marketing Company earned a 9.02 percent gross profit in year2014 which was 5% less than the gross profit margin of year 2013. 5% decrease is a significantdecrease. There were different factors which caused this decrease. There was marginal increase17 in cost of goods sold. The cost of goods sold was 90.53% of sales in year 2013 which wasincreased to 90.98% in year 2014. Shell Oman Marketing Company On the other hand, Shell Oman Marketing Company was no different from Oman OilMarketing Company. Shell Oman Marketing Company also had unstable performance during theperiod under review. For Shell Oman Marketing Company, the gross profit margin was 9.70% inyear 2012 which decreased to 9.60% in year 2013. In year 2013, the gross margin profit of ShellOman Marketing Company was decreased about 1.11% which was due to marginal increase incost of goods sold. Cost of goods sold for Shell Oman Marketing Company was 90.30% of salesin year 2012 which increased to 90.41% in year 2013. In year 2014, Shell Oman MarketingCompany enjoyed a significant increase of 5% in gross profit margin. Gross profit margin forShell Oman Marketing Company increased to 10.04% in year 2014 against the gross profit of9.60% in year 2013. During the year 2013, the cost of goods sold for Shell Oman MarketingCompany was increased, the management of Shell Oman Marketing Company tried to decreaseits cost of goods sold by improving its supply chain and controlling the wastage. 18 Gross Profit % 10.2 10.04 10 9.8 9.7 9.6 9.6 9.47 9.32 9.4 9.2 9.02 9 8.8 8.6 8.4 2012 2013 2014 Oman Oil Marketing Company Shell Oman Marketing Company Chart 3: Figure Taken from Table 3In terms of earning gross profit margin, both the companies are facing similar situation.They have unstable gross profit margin during the period under review.19PercentageNet Profit Ratio Oman Oil Shell OmanNP% Marketing MarketingIncrease / Increase /Company Company(Decrease) (Decrease)100.00% 100.00%2012 3.24 3.056.00% (7.71) %3.43 2.812013(8.58) % 20.84%2014 3.14 3.40(Table: 4, Source: Annual Reports)Oman Oil Marketing Company There was no different story for Oman Oil Marketing Company in term of earning netprofit margin. Normally, when a company has a gross profit margin then it is expected thatcompany will earn net profit and in case company sustains a gross loss margin then it is expectedthat the company will sustain a net loss. On the same lines, if there is increase or decrease in thegross profit margin then there will be change in the net profit margin accordingly. Oman OilMarketing Company was no different from other companies and its net profit marginperformance or situation is no different than the gross profit margin in terms of increase anddecrease. Net profit margin for Oman Oil Marketing Company was 3.24% in year 2012 whichincreased to 3.43% in year 2013. There was 6% increase for Oman Oil Marketing Company innet profit margin in year 2013. There were different reasons behind the increase like; staff costsfor Oman Oil Marketing Company decreased to 3.9 m in year 2013 against the 4.2 m cost of year2012. Share of profit from investment also increased to 0.084 m from 0.040 m. Oman OilMarketing Company received a handsome amount of 0.17 m in year 2013 in shape of dividendwhich was Zero in year 2012. On the other hand, there was decrease in net profit margin in year 2014. It decreased to3.14% from 3.43%. Oman Oil Marketing Company witnessed a 8.58% decrease in its net profit20 margin this was on account of increase in cost of goods sold, staff costs, other operating costsand decrease in share of profits and income from dividends. Shell Oman Marketing Company Situation for Shell Oman Marketing Company was no different in terms of net profitmargin than the gross profit margin. Gross profit margin for Shell Oman Marketing Companywas 3.05% in year 2012. It decreased to 2.81% in year 2013. It was due to increase in cost ofgoods sold, selling and distribution expenses, and decrease in interest income. In year 2014, thenet profit margin for Shell Oman Marketing Company increased to 3.40% in year 2014 whichamounts to a 21% increase than the previous year. This was on account of decrease in selling,distribution, administrative expenses, and interest expense. Net Profit % 4 3.4 3.43 3.5 3.24 3.14 3.05 2.81 3 2.5 2 1.5 1 0.5 0 2012 2013 2014 Oman Oil Marketing Company Shell Oman Marketing CompanyChart 4: Figure Taken from Table: 4In terms of earning gross profit margin, both the companies are facing similar situation.They have unstable gross profit margin during the period under review. 21PercentageCurrent Ratio (Times) Oman Oil Shell OmanCR Marketing MarketingIncrease / Increase /Company Company(Decrease) (Decrease)100.00% 100.00 %2012 1.31 1.1510.07% 0.07%1.44 1.152013(6.37) % 7.30%2014 1.35 1.23(Table: 5, Source: Annual Reports)Oman Oil Marketing Company Oman Oil Marketing Company is unstable in terms of maintaining its liquidity during theperiod under review. Even though Oman Oil Marketing Company had sufficient current assets tomeet its current liabilities during all the years of the period under review but its liquidity is goingup and down. The current ratio for Oman Oil Marketing Company was 1.31 in year 2012 whichincreased to 1.44 in year 2013. Oman Oil Marketing Company witnessed an increase of 10%.Because there was significant increase in trade and other receivables and cash and bank. On theother hand, current ratio for Oman Oil Marketing Company decreased to 1.35 in year 2014which amounts to a 6% decrease. This was on account of significant increase in trade and otherpayables and current tax liabilities. Shell Oman Marketing Company On the other hand, Shell Oman Marketing Company continuously improved its liquidityduring the period under review. Current ratio for Shell Oman Marketing Company was 1.147which increased to 1.148 in year 2013 and increased to 1.23 in year 2014. Oman Oil MarketingCompany witnessed an increase of 0.07% and 7.30% in year 2013 and 2014 respectively. Thiswas on account of increase in receivables and prepayments, cash at bank and in hand, decrease inshort term loans, payable and accruals, income tax payables, and provisions. 22 Current Ratio (Times) 1.6 1.44 1.35 1.31 1.4 1.23 1.15 1.15 1.2 1 0.8 0.6 0.4 0.2 0 2012 2013 2014 Oman Oil Marketing Company Shell Oman Marketing CompanyChart 5: Figure Taken from Table 5In is said by the experts that a company must have sufficient current assets to meets itscurrent liabilities in order to run business operations smoothly. Both companies have succeededin mainlining sufficient liquidity. In terms of ratio, Oman Oil Marketing Company is maintaininghigher liquidity but it is unstable.Return on Capital Employed Ratio Return on Oman Oil Shell OmanCapital Marketing MarketingIncrease / Increase /EmployedCompany Company(Decrease) (Decrease)100.00% 100.00%2012 13.39 16.640.92% (4.13) %2013 13.52 15.95(2.95) % 11.43%2014 13.12 17.77(Table: 6, Source: AnnualReports)23TimesOman Oil Marketing Company It is necessary for all commercial companies to earn sufficient returns on capitalemployed to achieve long term sustainability. Return on capital employed was 13.39% in year2012. It increased to 13.52% in year 2013 and decreased to 13.12% in year 2014. Oman OilMarketing Company witnessed a 0.92% increase and 2.95% decrease in year 2013 and year 2014respectively. Reason for earning marginally higher Return on Capital Employed in year 2013was that Oman Oil Marketing Company earned a significant higher profit even though there wassignificant increase in capital employed. Reason for earning decreased return on capitalemployed in year 2014 is that there was significant increase in capital employed even thoughthere was increase in net profit but increase in net profit was less than the increase in capitalemployed.Shell Oman Marketing Company Return on capital employed for Shell Oman Marketing Company was 16.64% in year2012 which decreased to 15.95% in year 2013 because there was decrease in net profit andincrease in capital employed. In year 2014, there was increase in return on capital employed forShell Oman Marketing Company. Return on Capital Employed for Shell Oman MarketingCompany increased to 17.77% which was on account of huge decrease in capital employed andincrease in profits. 24 ROCE % 20 17.77 18 16.64 15.95 16 13.52 13.12 13.39 14 12 10 8 6 4 2 0 2012 2013 2014 Oman Oil Marketing Company Shell Oman Marketing Company Chart 6: Figure Taken from Table 6In terms of figures, Shell Oman Marketing Company is clearly earning higher return oncapital employed which shows that Shell Oman Marketing Company is using the capitalemployed and the assets of the company more efficiently than Oman Oil Marketing Company. 25PercentageActivity RatiosOman Oil Marketing Company Activity Receivable Payable InventoryIncrease / Increase / Increase /Ratios Days Days Days(Decrease) (Decrease) (Decrease)100.00% 100.00% 100.00%2012 35 44 813.17% 2.53% (24.27) %2013 39 45 6(11.37) % (2.01) % 21.47%2014 35 44 7(Table: 7, Source: Annual Report)In terms of receivable collection period, the performance of Oman Oil MarketingCompany is unstable. Receivable days were 35 days in year 2012 which increased to 39 days inyear 2013 and reduced to 35 days in year 2014. The reason for increase in the year 2013 is thatOman Oil Marketing Company was not able to collect sales amounts efficiently and there wasincrease in accounts receivables. On the other hand, in 2014, the collection of sales was efficienttherefore, Oman Oil Marketing Company able to decrease receivable days. In terms of payable days, the situation remained almost unchanged around the 44 daysmark. Payable days were 44, 45, and 44 in year 2012, 2013, and 2014 respectively. In terms ofinventory days, the situation is no different; it remained around the 6 days mark. Inventory dayswere 8, 6, and 7 days in year 2012, 2013, and 2014 respectively. 26 Activity Ratios of Oman Oil Marketing Company 50 45 44 44 45 39 40 35 35 35 30 25 20 15 8 6 10 7 5 0 2012 2013 2014 Receivable Days Payable Days Inventory Days Chart 7: Figure Taken from Table 727DaysShell Oman Marketing CompanyActivity Receivable Payable InventoryIncrease / Increase / Increase /Ratios Days Days Days(Decrease) (Decrease) (Decrease)100.00% 100.00% 100.00%36 43 18201211.17% 0.55% (37.14) %40 43 112013(21.60) % (8.67) % 13.02%2014 31 39 13(Table: 8, Source: Annual Reports)In terms of receivable days, the performance of Shell Oman Marketing Company isunstable during the period under review. During the year 2012, the receivable days were 36which increased to 40 days in year 2013 which was on account of inefficiency in term of salescollection and increase in account receivable. In year 2014, the accounts receivable decreased to31 days which shows the efficiency of Shell Oman Marketing Company. In terms of payable days, the situation remains pretty much same around the 40 daysmark. Payable days were 43 days each in year 2012 and 2013 and it was 39 days in year 2014. Interms of inventory days, inventory days were 18 in year 2012 which decreased to 11 days in year2013 on account of increasing sales and maintaining a lower level of inventory. Inventory daysmarginally increased to 13 days in year 2014. 28 Activity Ratios of Shell Oman Markeing Company 50 43 43 45 39 40 40 36 35 31 30 25 20 18 13 15 11 10 5 0 2012 2013 2014 Receivable Days Payable Days Inventory Days Chart 8: Figure Taken from Table 8In terms of receivable days, and payable days both companies are performing almostequality, these are maintaining a 35 days and 40 days mark on average. In terms of conversion ofinventory into sales, Oman Oil Marketing Company is performing lot better than Shell OmanMarketing Company. Oman Oil Marketing Company has 7 days on average while it is 14 daysfor Shell Oman Marketing Company which is double than Oman Oil Marketing Company. Earnings per Share (OMR.) Oman Oil Shell OmanEPS Marketing MarketingIncrease / Increase /Company Company(Decrease) (Decrease)100.00% 100.00%2012 0.14 0.1212.86% (1.63) %2013 0.160.1210.13% 1.65%2014 0.170.12(Table: 9, Source: Annual Reports)29DaysOman Oil Marketing CompanyIn terms of earnings per share, Oman Oil Marketing Company is enjoying continuousincrease on account of continuous increase in net profit. It earned 0.15 OMR on average duringthe period under review. Oman Oil Marketing Company earned 0.14, 0.16, and 0.17 OMR inyear 2012, 2013, and 2014 respectively. Shell Oman Marketing CompanyEarnings per share for Shell Oman Marketing Company remained stable at 0.12 OMR during allthe years of the period under review.EPS (RO) 0.18 0.17 0.16 0.16 0.14 0.14 0.12 0.12 0.12 0.12 0.1 0.08 0.06 0.04 0.02 0 2012 2013 2014 Oman Oil Marketing Company Shell Oman Marketing CompanyChart 9: Figure Taken from Table 9In terms of figures of earnings per share, Oman Oil Marketing Company is performinglot better than Shell Oman Marketing Company. Oman Oil Marketing Company is enjoyingcontinuous increase on account of continuous increasing sales while earnings per share for ShellOman Marketing Company remained stable during all the years of the period under review. 30RO3.2 Business AnalysisSWOT AnalysisStrengths? In distribution of fuel, Oman Oil Marketing Company has a substantial exposure andexperiences. ? Oman Oil Marketing Company is leading the energy market of Oman. Oman OilMarketing Company has extended knowledge about the market of Oman. ? Oman Oil Marketing Company has been able to maintain a stable financialperformance with continuous profits and maintaining sufficient liquidity. ? A strong sales and distribution network is key strength for any company. Oman OilMarketing Company has strong sales as well as distribution network.(swotanalysis24.com 2015) ? Monetary assistance is provided to staff members for abnormal circumstances whichmotivate its employees this makes Oman Oil Marketing Company strong internally. . (Storey 2007)? Staff or the employees are backbone for any organization or company. Experiencedand professional staff is a key strength for any company. Oman Oil MarketingCompany has experienced and professional workforce.(Storey 2007)Weaknesses? We saw that Oman Oil Marketing Company earning very low margin of net profit.Earning sufficient profit is a major weakness for Oman Oil Marketing Company.31 Opportunities? There is huge opportunity for Oman Oil Marketing Company to increase its growthand sales by increasing the scope of its target market or area of business. ?Oman Oil Marketing Company can increase its sales and achieve higher growth byincreasing its business operations in global markets. ? Oman Oil Marketing Company may start to offer new products and services by doingrelated or unrelated diversification(swotanalysis24.com 2015)? Each business needed additional capital to expand, to fulfill its capital needs; OmanOil Marketing Company may join hand with other companies or with venturecapitalists.? Economy of Oman is growing on average therefore, there is huge potential andopportunity for Oman Oil Marketing Company to increase its business operations byincreasing sales and market share. ? (Al-Badi 2011)Threats? Ending of sanctions on Iran and a furious competition between Iran and Saudi Arabiahas resulted in lower prices for energy products and services. If it continuous as it isthen there is serious threat for Oman Oil Marketing Company. .(Storey 2007)? Oman Oil Marketing Company may have to face serious issue regarding flow of cash.Cash is necessary for any company to run its business operations smoothly. ? On average, the interest rates are stable in Oman. But, Oman Oil Marketing Companymay have to face increased interest rates.(swotanalysis24.com 2015) (Storey 2007) 32 Porter’s Five Forces AnalysisThreat of new entrantThere are large entry barriers for new entrants in oil marketing industry therefore; threatof new entrants is very low. One of the key barrier to the entry into the oil marketing sector ofOman is required financial resources to store and distribute the oil related products and services.As for the nature of the business is concerned, to earn a substantial profits, it is necessary for acompany to do a huge volume of sales which requires setting up a large number of selling pointswhich ultimately requires substantial financial resources. As the population of Oman is verylimited and the existing companies are able to meet the requirements of the population of theOman therefore there is very less space which could motivate a new entrant into oil marketingsector of Oman. (MarketMuscatSecurities 2013)The existing players of Oman’s oil marketingsectors have almost 150 filling stations each which again require huge resources therefore a newentrant will think 1000 of times before entering into the oil marketing sector of Oman by keepingview the required financial resources and space in the market. The other factor which attracts anew entrant to the market is differentiation. A new entrant could get edge or capture marketshare from competitors is differentiation in his or her products to customers. But as fordifferentiation in oil marketing sector is concerned, there is hardly any differentiation on thebasis of price and quality. So differentiation’s absence is another major barrier to entry in the oilmarket of Oman. (MarketMuscatSecurities 2013)Substitute of productsCurrently, there are not any suitable substitutes for the products offered by Oman OilMarketing Company. But the government of Oman has been able to identify renewable sourcesfor energy. The government of Oman has plans to invest heavily in renewable energy projects.Therefore, threat of substitute’s products is high for Oman Oil Marketing Company.(MarketMuscatSecurities 2013)Bargaining power of buyersWe can divide bargaining power of buyers for Oman Oil Marketing Company into twosections; one is aviation and commercial buyers and the second segment is retail buyers. As for33 the bargaining power of the aviation and commercial buyers is concerned, contract are singed onthe basis of bidding. The buyer which offers lower bids gets the contract. So the bargainingpower of the aviation and commercial buyers is highly in favor of buyers. As for the bargainingpower of retail buyers is concerned in terms of money; there is no bargaining power with theretail buyers. However, if the retail buyers are able to find a more suitable and closer alternativethen they can easily switch over to other brand or company. (MarketMuscatSecurities 2013)Bargaining power of suppliersThere are strict regulations of the Oman which doesn’t provide any bargaining power tothe supplier for aviation and commercial as well as for retail buyers. Hence, there is close link orrelationship of products of oil in Oman and the international market. (MarketMuscatSecurities2013) RivalryThe nature of the market of oil marketing sector of Oman is oligopoly as there are onlythree major players in the market. All the competition on aviation, commercial, and retail level isbetween these companies. Moreover, the scope of price competition is also limited, because thereis very little liberty for the oil marketing companies in selling their products.(MarketMuscatSecurities 2013) 34 3.3 ConclusionOman Oil marketing sector considered as a backbone for the economy of Oman. There isan important role of oil marketing sector in economy of Oman. The major part of the totalrevenues as well as gross domestic product of Oman is consisted on the activities of the oilmarketing sector. In this report, I was asked to prepare a report on a chosen topic from a list of20 topics. I chose the topic “An Analysis and Evaluation of the Business and FinancialPerformance of a Specific Company over a Three-Year period”. I chose Oman Oil MarketingCompany for my analysis. I conducted financial and business analysis of Oman Oil MarketingCompany. For financial analysis I conducted ratio analysis and for comparison I compared theperformance of Oman Oil Marketing Company against the performance of Shell OmanMarketing Company. For financial analysis I calculated different ratios like; gross profit, netprofit, current ratio, return on capital employed, receivable days, payable days, inventory days,and earnings per share. Through my analysis I found that the sales of Oman Oil Marketing Company haveincreased continuously over the three year period 2012-2014. On the other hand sales of ShellOman Marketing Company were unstable during the period. In terms of earning gross and netprofits in figures, both companies earned profit during all the three years under review. In termsof liquidity, both companies were maintaining sufficient current assets to meet their currentliabilities but Oman Oil Marketing Company was maintaining higher liquidity. In terms of usingassets efficiently by both companies, both companies were earning significant amount of returnon capital employed more than 10% but Shell Oman Oil Marketing Company was able to earngreater return than Oman Oil Marketing Company. In terms of receivable days both companies were maintaining almost an equal number days period of 35 days on average during the three years period under review while in terms ofpayable days both companies were maintaining almost an equal number of days period of 40days on average during the three years period under review. As for the conversion of inventory isconcerned, In terms of conversion of inventory into sales, Oman Oil Marketing Company isperforming lot better than Shell Oman Marketing Company. Oman Oil Marketing Company has35 7 days on average while it is 14 days for Shell Oman Marketing Company which is double thanOman Oil Marketing Company. In terms of figures of earnings per share, Oman Oil Marketing Company is performinglot better than Shell Oman Marketing Company. Oman Oil Marketing Company is enjoyingcontinuous increase on account of continuous increase while earnings per share for Shell OmanMarketing Company remained stable during all the years of the period under review. 36 3.4 Recommendations? The prices of oil related products are continuously decreasing due to ending of mostof sanctions on Iran and due to the rivalry between Iran and Saudi Arabia and due tobad situation in Syria, Libya, and Iraq. There is severe need for Oman Oil MarketingCompany to enter into related or unrelated diversification because depending on asingle source for income in long run is not a wise thing therefore, Oman OilMarketing Company needs to diversify its business. (MarketMuscatSecurities 2013) ? We saw that Oman Oil Marketing Company is earning a very modest net profit interms of percentage. Oman Oil market needs to expand its business by doingdiversification which requires substantial resources and therefore Oman OilMarketing Company needs to earn increased profits to make a surplus for additionalactivities. ? Oman Oil Marketing Company needs to make joint venture with other companies togenerate alternatives for revenues. ? Oman Oil Marketing Company needs to expand its business operations tointernational markets. ? Renewable energy sources are the sector where government Oman is focusing, thereis great potential in this sector in future, and Oman Oil Marketing Company needs toinvest in this sector. (Al-Badi 2011)37 "