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FINANCIAL AND ECONOMIC ANALYSIS OF ACTIVITY PJSC "GAZPROM NEFT"
Abstract
The paper deals with financial standing of the company condition. It is characterized by a system indicators reflecting the presence, location, use of financial resources and all the financial and economic activity of the company. The main indicators of financial activity of the "Gazprom oil" enterprise are studied.
Keywords
finance, economy, analysis of activity, Gazprom, organization
AUTHORS
Julia Pavlovna Pavlova
Student, Kuban State Agrarian University. 13 Kalinina Str., Krasnodar, 350044, Russia.
E-mail: pavjulia@icloud.com
Tatiana Genrichovna Gurnovich
PhD, Professor, Kuban State Agrarian University. 13 Kalinina Str., Krasnodar, 350044, Russia.
Introduction
1.1 Actuality of the problem
Financial analysis is a process of selecting, evaluating, and interpreting financial data, along with other pertinent information, in order to formulate an assessment of a company's present and future financial condition and performance.
Analysis of financial and economic activity plays an important role in improving the economic efficiency of the organization in its management, in enhancing its financial standing. It is an economic science, which studies the economy of organizations and their
activities in terms of their assessment of the implementation of business plans, assess their property and financial condition and to identify untapped reserves of increase of efficiency of activity of the organizations.
Financial standing of the company condition is characterized by a system indicators reflecting the presence, location, use of financial resources and all the financial and economic activity of the company.
1.2 Explore importance of the problem
While financial statement analysis is an excellent tool, there are several issues to be aware of that can interfere with your interpretation of the analysis results. These issues are:
1. Comparability between periods. The company preparing the financial statements may have changed the accounts in which it stores financial information, so that results may differ from period to period. For example, an expense may appear in the cost of goods sold in one period, and in administrative expenses in another period.
2. Comparability between companies. An analyst frequently compares the financial ratios of different companies in order to see how they match up against each other. However, each company may aggregate financial information differently, so that the results of their ratios are not really comparable. This can lead an analyst to draw incorrect conclusions about the results of a company in comparison to its competitors.
3. Operational information. Financial analysis only reviews a company's financial information, not its operational information, so you cannot see a variety of key indicators of future performance, such as the size of the order backlog, or changes in warranty claims. Thus, financial analysis only presents part of the total picture.
Methodological Framework
2.1 Research methods
There are two key methods for analyzing financial statements. The first method is the use of horizontal and vertical analysis. Horizontal analysis is the comparison of financial information over a series of reporting periods, while vertical analysis is the proportional analysis of a financial statement, where each line item on a financial statement is listed as a percentage of another item. Typically, this means that every line item on an income statement is stated as a percentage of gross sales, while every line item on a balance sheet is stated as a percentage of total assets. Thus, horizontal analysis is the review of the results of multiple time periods, whiile vertical analysis is the review of the proportion of accounts to each other within a single period. The following links will direct you to more information about horizontal and vertical analyis:
• Horizontal analysis
• Vertical analysis
The second method for analyzing financial statements is the use of many kinds of ratios. You use ratios to calculate the relative size of one number in relation to another. After you calculate a ratio, you can then compare it to the same ratio calculated for a prior period, or that is based on an industry average, to see if the company is performing in accordance with expectations. In a typical financial statement analysis, most ratios will be within expectations, while a small number will flag potential problems that will attract the attention of the reviewer.
Financial analysis is an aspect of the overall business finance function that involves examining historical data to gain information about the current and future financial health
of a company. Financial analysis can be applied in a wide variety of situations to give business managers the information they need to make critical decisions. The ability to understand financial data is essential for any business manager. Finance is the language of business. Business goals and objectives are set in financial terms and their outcomes are measured in financial terms. Among the skills required to understand and manage a business is fluency in the language of finance—the ability to read and understand financial data as well as present information in the form of financial reports.
The finance function in business involves evaluating economic trends, setting financial policy, and creating long-range plans for business activities. It also involves applying a system of internal controls for the handling of cash, the recognition of sales, the disbursement of expenses, the valuation of inventory, and the approval of capital expenditures. In addition, the finance function reports on these internal control systems through the preparation of financial statements, such as income statements, balance sheets, and cash flow statements.
Finally, finance involves analyzing the data contained in financial statements in order to provide valuable information for management decisions. In this way, financial analysis is only one part of the overall function of finance, but it is a very important one. A company's accounts and statements contain a great deal of information. Discovering the full meaning contained in the statements is at the heart of financial analysis. Understanding how accounts relate to one another is part of financial analysis. Another part of financial analysis involves using the numerical data contained in company statements to uncover patterns of activity that may not be apparent on the surface.
2.2 Original source
The three main sources of data for financial analysis are a company's balance sheet, income statement, and cash flow statement:
1. The balance sheet outlines the financial and physical resources that a company has available for business activities in the future. It is important to note, however, that the balance sheet only lists these resources, and makes no judgment about how well they will be used by management. For this reason, the balance sheet is more useful in analyzing a company's current financial position than its expected performance.
The main elements of the balance sheet are assets and liabilities. Assets generally include both current assets (cash or equivalents that will be converted to cash within one year, such as accounts receivable, inventory, and prepaid expenses) and noncurrent assets (assets that are held for more than one year and are used in running the business, including fixed assets like property, plant, and equipment; long-term investments; and intangible assets like patents, copyrights, and goodwill). Both the total amount of assets and the makeup of asset accounts are of interest to financial analysts.
The balance sheet also includes two categories of liabilities, current liabilities (debts that will come due within one year, such as accounts payable, short-term loans, and taxes) and long-term debts (debts that are due more than one year from the date of the statement). Liabilities are important to financial analysts because businesses have same obligation to pay their bills regularly as individuals, while business income tends to be less certain. Long-term liabilities are less important to analysts, since they lack the urgency of short-term debts, though their presence does indicate that a company is strong enough to be allowed to borrow money.
2. In contrast to the balance sheet, the income statement provides information about a company's performance over a certain period of time. Although it does not reveal much about the company's current financial condition, it does provide indications of its future viability. The main elements of the income statement are revenues earned, expenses
incurred, and net profit or loss. Revenues consist mainly of sales, though financial analysts may also note the inclusion of royalties, interest, and extraordinary items. Likewise, operating expenses usually consists primarily of the cost of goods sold, but can also include some unusual items. Net income is the "bottom line" of the income statement. This figure is the main indicator of a company's accomplishments over the statement period.
3. The cash flow statement is similar to the income statement in that it records a company's performance over a specified period of time. The difference between the two is that the income statement also takes into account some non-cash accounting items such as depreciation. The cash flow statement strips away all of this and shows exactly how much actual money the company has generated. Cash flow statements show how companies have performed in managing inflows and outflows of cash. It provides a sharper picture of a company's ability to pay bills, creditors, and finance growth better than any other one financial statement.
2.3 Users of financial statement analysis
Financial statement analysis is an exceptionally powerful tool for a variety of users of financial statements, each having different objectives in learning about the financial circumstances of the entity.
There are a number of users of financial statement analysis. They are:
1. Creditors. Anyone who has lent funds to a company is interested in its ability to pay back the debt, and so will focus on various cash flow measures.
2. Investors. Both current and prospective investors examine financial statements to learn about a company's ability to continue issuing dividends, or to generate cash flow, or to continue growing at its historical rate (depending upon their investment philisophies).
3. Management. The company controller prepares an ongoing analysis of the company's financial results, particularly in relation to a number of operational metrics that are not seen by outside entities (such as the cost per delivery, cost per distribution channel, profit by product, and so forth).
4. Regulatory authorities. If a company is publicly held, its financial statements are examined by the Securities and Exchange Commission (if the company files in the United States) to see if its statements conform to the various accounting standards and the rules of the SEC.
Results
3.1. Analysis of the main indicators of the organization
Analysis of assets carried according to accounting statements. This data is collected over several years, in order to determine the dynamics of changes in the value of assets.
In analyzing the result economic activities of the organization established causes of loss, outlines ways to eliminate these reasons, we study the influence of individual factors on the amount of profit made recommendations for maximizing profits through the use of identified reserves of its growth and outlined ways to use them. We analyze the main indicators of financial and economic activity of PJSC "Gazprom Neft" (see Table 1).
Based on the accounting statements, share non-current assets increased in 2015 in relation to 2011 by 306.1%, or 621.1 billion rub., while the share of current assets - .. 7.4% or 39.6 billion rub. There is a general tendency to increase the assets of PJSC "Gazprom neft" in 2015 with respect to 2011 by 89.3% or 660.7 billion rub.
Table 1. Basic indicators financial and economic activity of PJSC "Gazprom Neft",
ths. rub.
Indicators 2011 2012 2013 2014 2015 Absolute and relative deviation in 2015 by 2011, ±
ths. rub. ths. rub. ths. rub. ths. rub. ths. rub. ths. rub. %
Revenue from sales of goods and services 824385284 1129875141 1178063787 1249467114 1272981108 448595824 125,8
Prime cost of sales of goods and services 652901291 764099211 820138131 851124055 1020658612 367756721 156,3
Gross profit 171483993 365775930 357925656 398343059 252322496 80839503 147,1
The level of gross profit, % 20,8 32,4 30,3 31,9 19,8 -1,0 -
Commercial costs 56062787 284302141 258450958 298366226 206620311 150557524 368,6
Management costs 9694954 13638359 15175631 20354789 23104119 13409165 238,3
Sales profit 105726252 67835430 84299967 79622044 22598066 -83128186 21,3
Profitability of sales, % 12,8 6,0 7,2 6,4 1,8 -11,0 -
Other income 536386559 140125500 42235879 10218820 34460865 -501925694 6,4
Other expenditure 539481106 142568704 48966538 86339691 100681794 -528799312 18,7
Before tax income 96305722 96869985 82088622 36606012 22270062 -74035660 23,1
Net profit 76608243 84505249 67139724 14131483 16145750 -60462493 21,1
The level of net profit, % 9,3 7,5 5,7 1,1 1,3 -8,0 -
The level of gross profit decreased in 2015 relative to 2011 by 1%. The highest rate was in 2012 and amounted to 32.4%. cost effectiveness profitability of sales in 2015 relative to 2011 decreased by 11.0% and reached the lowest figure for the entire study period. The level of net profit in 2015 compared with 2011 decreased by 8.0%. However, the lowest figure was in 2014 and was 1.1%, while in 2015 it increased by 0.2% and reached 1.3% at the year end. The largest indicator of the level of net profit was in 2011 and amounted to 9.3%.
The level of net profit reflects is how profitable the company operates, or how profitable its sales. The calculation of net profit helps managers assess the level of profitability of the enterprise. Profitability ratio can be calculated in relation to the total income of the organization for the selected period of time to the volume of sales. But net profit reveals the prices that put the company employees and their ability to support a
high level of income and expenditure. The net profit is used to evaluate the effectiveness of the institution, check the selected strategy and profitability.
Paying capacity and liquidity are the main characteristics of the financial condition of the organization. It is necessary to distinguish between the paying capacity of the company, that is the expected ability to eventually repay the debt, and liquidity of the company, that is the sufficiency of available cash and other funds to pay debts at the moment.
3.2 Calculating the coefficient of total liquidity and the coefficient of quick and urgent liquidity of PJSC "Gazprom Neft"
Liquidity balance is defined as the degree of coverage of liabilities of the organization of its assets, the term of transformation in that money matches maturity obligations.
The company is considered to be liquid if it can repay its short-term creditor debts due to the implementation of current (circulating) assets. The company can be liquid to a greater or lesser extent as current assets include diverse types, which are marketable and illiquid assets.
The coefficient of total liquidity of PJSC "Gazprom Neft" at the end of 2015 is 1,125. Meaning of this ratio is considered to be below normal, since it is not included in the range of 1.5 to 2.5, therefore, PJSC "Gazprom Neft" illiquid.
The quick and immediate liquidity of PJSC "Gazprom Neft", equal to 1,070 and 1,090, respectively, indicate that the cash and future revenues from current activities cover the current debts of the organization.
The coefficient of total liquidity of PJSC "Gazprom Neft" at the end of 2015 is 1,125. Meaning of this ratio is considered to be below normal, since it is not included in the range of 1.5 to 2.5, therefore, PJSC "Gazprom Neft" illiquid.
The coefficient of quick and immediate liquidity of PJSC "Gazprom Neft", equal to 1,070 and 1,090, respectively, indicate that the cash and future revenues from current activities cover the current debts of the organization.
The current ratio of PJSC "Gazprom Neft" is 1.125, which is normal and describes the enterprise as a solvent.
3.3 Assessment of the effectiveness of use of current assets
Assessment of the effectiveness of use of current assets long-term liabilities and short-term liabilities is based on turnover rates and duration of turnover (Table. 2).
Table 2. Assessment of efficiency indicators of use of circulating assets
Indicators 2011 2012 2013 2014 2015 Absolute and relative deviation in 2015 by 2011, ±
Coefficient asset turnover 1,259 1,512 1,424 1,240 0,990 -0,269
Coefficient consolidation 0,794 0,661 0,702 0,806 1,010 0,216
Coefficient receivables turnover 1,920 3,401 6,174 5,891 5,578 3,658
Coefficient of turnover of creditor indebtedness 8,143 10,313 10,569 6,902 6,362 -1,781
Current assets turnover period 290 241 256 294 369 79
Receivables turnover period 190 107 59 62 65 -125
Creditor indebtedness turnover period 45 34 35 53 57 12
According Table 2, we can conclude that in 2015 production of PJSC "Gazprom Neft" has not made even one full revolution. The coefficient in 2015 was 0.990 times that 0,269 fewer than in 2011. The greatest values were observed in 2012 and is 1,512 times.
Consolidation ratio describes the average size of the cost of of current assets per 1 ruble of sales volume. In 2015, 1 ruble of sales volume accounted 1,010 rubles of current assets, which is 0,216 rubles more than in 2011.
Receivables turnover ratio indicates how many times, on average, turned into cash within one year receivables. In 2015, the average accounts receivable turned into cash 5.578 times, which is 3,658 times more than in 2011. The largest component of this factor accounts for 2013 and is 6,174 times.
Turnover ratio of accounts receivable shows how much speed is needed to pay bills. In 2015, it is necessary for the payment 6,362 of revolutions invoices that turnover 1,781 less than in 2011. The largest number of turns for the payment of invoices for the year was in 2013 and amounted to 10,569 of revolutions.
The duration of current assets turnover characterizes the duration of turnover of current assets, showing the average residence time of current assets in the process of circulation in days. In 2015, the duration of turnover of current assets was more than a year and amounted to 369 days, 79 days longer than in 2011.
Receivables turnover ratio shows the average number of days required for payment of receivables. In 2015, it took 65 days of payment of receivables that by 125 days less than in 2011.
Term payables turnover shows the average period of repayment of debts of the enterprise (with the exception of liabilities to banks and other loans). In 2015, it took 57 days to return the debt to the enterprise, which is 12 days longer than in 2011. The lowest term debt repayment accounts for 2012 and amounts to 34 days.
Discussions
Benjamin Graham and David Dodd first published their influential book "Security Analysis" in 1934. A central premise of their book is that the market's pricing mechanism for financial securities such as stocks and bonds is based upon faulty and irrational analytical processes performed by many market participants. This results in the market price of a security only occasionally coinciding with the intrinsic value around which the price tends to fluctuate. Investor Warren Buffett is a well-known supporter of Graham and Dodd's philosophy.
The Graham and Dodd approach is referred to as Fundamental analysis and includes: 1) Economic analysis; 2) Industry analysis; and 3) Company analysis. The latter is the primary realm of financial statement analysis. On the basis of these three analyses the intrinsic value of the security is determined.
Investors typically are attempting to understand how much cash the company will generate in the future and its rate of profit growth, relative to the amount of capital
deployed. Analysts may modify ("recast") the financial statements by adjusting the underlying assumptions to aid in this computation. For example, operating leases (treated like a rental transaction) may be recast as capital leases (indicating ownership), adding assets and liabilities to the balance sheet. This affects the financial statement ratios.
Recasting financial statements requires a solid understanding of accounting theory. Once the cash flow in future years is projected, a discount rate or interest rate will be applied to measure the value of the company and its stock or debt.
Conclusion
Financial analysts typically have finance and accounting education at the undergraduate or graduate level. Persons may earn the Chartered Financial Analyst (CFA) designation through a series of challenging examinations.
In this way, we can conclude that, in spite of worsening economic situation in the country, the main indicators of financial activity of PJSC "Gazprom oil" are above average.
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