Ratio Analysis On Imperial Oil Limited

2361 words - 9 pages

EXECUTIVE SUMMARYShould we invest in Imperial Oil Limited? How has it performed over the past two years? What will be the future performance of the company? In this report, we will explore the financial performance of the company. By analyzing different ratios and other related information, we intend to report the company's financial situation and advise investors whether to invest in the company or not.Established in 1880, Calgary-based Imperial Oil Limited operates in the industry of Integrated Oil and Gas. The company refines and sells petroleum products under the Esso brand name. Its main business segments include: natural resources, petroleum products and chemicals. Presently, it is listed on TSX and AMEX market with the symbol "IMO".By looking at the company's 2005 audited financial statements, we will mainly conduct ratio analysis relating to market value, profitability and efficiency, earning quality, safety and risk. We will further look at a MD&A report, newsletter, and the company's website for non-financial information. Through a comparison with its main competitor, Shell Canada Limited, and the industrial average, our analysis will be further extended. After identifying the financial statistics and marketing trends, we will conclude on how the company deserves the attention of the investors.INTRODUCTIONImperial Oil Limited is Canada's largest integrated oil company with over 5100 employees. It is engaged in the exploration, production and sale of crude oil and natural gas. The company's operations are conducted in three main segments: natural resources, petroleum products and chemicals. It is the largest refiner/marketer in Canada with a 25% market share for total petroleum products. It markets more than 700 petroleum products throughout Canada under brand name 'Esso' (Imperial Oil Limited, 2006).Imperial follows the cost-cum-differentiation strategy which aims at providing better customer value at a lower cost. They strive to provide customers with high quality products and services and at the same time maintain a best-in-class cost structure in every part of the business (Imperial Oil Limited, 2006).This report provides a comprehensive analysis about the company. It highlights the key financial parameters of the company by focusing on ratio analysis. Our analysis mainly derives from Imperials fiscal 2005 annual report and its past two years data. In addition, based on the revenue ranking among the industry, the major competitor, Shell Canada Limited has been chosen to facilitate comparison. The purposes of this report are to analyze the company's financial performance and to determine whether to buy its stock or not.RATIO ANALYSISThis section will analyze Imperial's performance through market value, profitability and efficiency, earning quality, safety and risks ratios established from its annual financial reports and FPInformat.ca. These ratios will be compared with those of the integrated oil & gas industry average and...

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