Analysis: Oil and Petroleum Sector

Only available on StudyMode
  • Download(s) : 67
  • Published : November 26, 2010
Open Document
Text Preview

In the year 2009 the inventory turnover for shell was 6 days and 11 days respectively for raw materials and finished goods. As compared to other firms in the same industry this is lower. This tells us that Shell is moving towards the process of just in time inventory and this is good for its future reduction in cost. Moreover we can see that the company enjoys an 11% return on its assets which is a good sign. An important point to note here is that inventory is a significant part of the total assists for the firm. This is understandable if we see the expensive price of fuel today.

Inventory turnover for Raw materials in Attock petroleum is 50.36; this shows how fast Raw Material inventory is converted manufactured goods. It takes 7 days for Attock Petroleum to convert its Raw Materials to Finished Goods. This period is shorter as compared to the other companies. This means Attock Petroleum is efficient in managing and selling its inventory. But the inventory Turnover of Finished Goods is low and it requires 15 days to sell Finished Product. This is inefficient and is moving away from just in time method although with regard to conversion of raw materials into manufactured goods, the company is moving towards JIT. Its total inventory as percentage of total assets is low which means it has lower inventory levels as compared to other firms and this makes it more towards JIT. Although the Gross margin % of Attock is low, its net profit margin is high, showing relatively higher production expenses and lower operating expenses. Its return on assets is average as compared to other companies.

Inventory turnover for Raw materials in National refinery limited is 15 which is very low for the industry. Also it takes 24 days for National Refinery to convert their raw material into manufactured goods and this is very slow and huge amount of raw material inventories are...
tracking img