BP Oil Company Profit and its Relevance

Running Head: PROFIT AND ITS RELEVANCE
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BP Oil Company
Profit and its Relevance

PROFIT AND ITS RELEVANCE
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Contents
Introduction:...............................................................................................................................2
Factors affecting Profit:..........................................................................................................2
Why there is variance in cash and profit:...........................................................................2
Limitations of financial statements:.......................................................................................3
Price Earning Ratio:............................................................................................................3
Accounting Policies:...........................................................................................................3
Conclusion:................................................................................................................................4
Bibliography...............................................................................................................................5

PROFIT AND ITS RELEVANCE
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Introduction:
In this paper the concept of profit and its elusiveness with regard to the market factors
and the variability of its internal funds have been discussed. A company cannot be said
profitable on the basis of a single abstract rather it will depend upon a list of factors and
variables like market forces, supply and demand, business cycle, volume of sales and a lot
more (Acosta, 2015).
Factors affecting Profit:
Generally oil companies like BP oil, are influenced more by the exterior factors rather
than interior ones, like refining margins, demand for oil, oil price, geological prospects,
capital cost and environmental policy.
In alignment of these factors the two major concerns are being assessed below.
Why there is variance in cash and profit:
A lot of cash waves out of the company for buying equipment, machinery, leasing
premises and hiring employees to operate such technology and funds would have been ceased
by the time the revenue has been generated. This bridge of ‘expansion’ and ‘spending’ is the
crucial period in business (Nicholls & Orsmond, 2015).
After analysing the annual report of the BP Oil Company it states that the company’s
overall revenue is fluctuating. In the year 2015 it has been decreased from (7918) to (430) in
2016 yet the finance costs have increased gradually from 1,347 to 1,675 so even after setting
off the losses the cost to the company is robustly elevated (Oil, 2017).
As long as enough cash is available, company can expand comfortably to a more profitable
business rather than succumbing to panic.