Financial Analysis British Petroleum (Bp) Till 2006

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Financial Statement Analysis: A company 's financial statements and ratios are good indicators of its performance over the years. This report specifically compares the ratios for 2004 and 2005, with some additional insight into 2003, 2002, and 2001. The current ratio has increased by 0.0534 from 0.9900 to 1.434. As the current ratio is a measure of liquidity and ability to meet short-term debt requirements, BP was more able to meet their short term debt obligations in 2005 than 2004. From 2001 to 2003 the current ratios were 1.0767, 0.9733, and 0.9600 respectively. In 2001, 2002, and 2004, BP 's current liabilities were greater than current assets, indicating that BP may have faced some difficulty in meeting short-term debt…show more content…
A decrease in TAT is a negative sign as it means that assets are turning over into revenues at a slower rate. The industry average for TAT is considerably higher than that of BP, 1.7. This shows that the industry is doing a better job than BP of turning assets into revenue. BP"s debt ratio in 2005 decreased by 0.0196, from 0.6129 in 2004. The debt ratio indicates how reliant the company is on debt financing of assets. A decrease in debt ratio is good because it shows that the company is becoming less reliant on debt as a source of asset financing. The general trend has been up for BP 's debt ratio, showing an increase reliance on debt to finance activities. This can be good for stockholders because it gives them more leverage by magnifying expected earnings. Also, debt for a company is not always negative, if it is being used to further develop the companies profitability prospects, it can be positive. The times interest earned (TIE) ratio has increased by 18.4476 for BP. TIE shows how much of a company 's earnings are available to make interest payments. A high TIE ratio shows that the company can afford to make interest payments at the going interest rate. A low TIE ratio shows that the company will not react well to increasing interest rates. Over the past 3 years, the TIE ratio has increased from 22.3866 in 2003, to 38.7617 in 2004, and finally to 57.2093 in 2005. The industry average for TIE ratios is 30.23 in
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