Financial Analysis and Management of Baron Oil Plc and Aminex Oil

Running head: FINANCIAL ANALYSIS AND MANAGEMENT
Financial analysis and management
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1FINANCIAL ANALYSIS AND MANAGEMENT
Table of Contents
Introduction:...............................................................................................................................2
Background of company:...........................................................................................................2
Five year comparative financial performance analysis of Baron Plc and Aminex Oil using
ratios:..........................................................................................................................................2
Analysis of profitability position:..............................................................................................2
Analysis of liquidity position:....................................................................................................2
Analysis of efficiency position:.................................................................................................2
Analysis of capital structure:......................................................................................................2
Financial strength and weakness of the companies:..................................................................2
Limitation of analysis:................................................................................................................2
Conclusion:................................................................................................................................2
References:.................................................................................................................................2
Appendix:...................................................................................................................................2

2FINANCIAL ANALYSIS AND MANAGEMENT
Introduction:
The report is prepared to demonstrate the financial performances of companies over a
period of time using tool of ratio analysis. For the purpose of analysis, two companies listed
on the London stock exchange have been chosen from oil and gas sector that is Baron Oil Plc
and Aminex Oil. For the purpose of analysis, the liquidity, efficiency, solvency and
profitability position of the companies have been analysed. In addition to this, the return
generated to the shareholders has also been evaluated using ratio that would help in
determining the financial strength and weakness and trends of share price movement. Later
part of report depicts the limitation of the analysis and assumptions that have been made
while computing the ratios.
Background of company:
Baron Oil Plc is an organization that is engaged in the exploration of oil and gas that
have been incorporated and headquartered in United Kingdom. Exploration acreage is owned
by the company in Peru and UK. The results and performance of oil and gas companies is
influenced by the price of oil that is dependent upon the factors that impacts the demand and
supply in the world. Such factors cause fluctuations in the oil prices from year to year. Baron
Oil Plc has a market capitalization of 4.129 million (Baron Oil Plc 2019). In recent years,
direction of company has been changed to exploration prospects that are medium compared
to capital intensive, deep water and high risk projects. There is potential on part of company
to provide a considerable lift in the value of shareholders. Aminex Plc on other hand is a
company that is engaged in production of upstream oil and gas that intends to deliver on its
strategy to budget and time. There is increased investment on part of the group in the

3FINANCIAL ANALYSIS AND MANAGEMENT
evaluation and exploration of assets (Ali et al. 2015). The company develop, explore and
produces gas and oil reserves through its subsidiaries.
Five year comparative financial performance analysis of Baron Plc and Aminex Oil
using ratios:
Analysis of profitability position:
The profitability position of the companies have been analysed by the computation of
net profit margin, return on equity and return on total assets. Profitability ratio helps in
measuring the performance of company in terms of its ability to earn profit. An entity
experiences variation in their net product margin due to several factors. It can be seen from
the table that the net profit margin generated by Baron Oil Plc has reduced year on year from
161.24% in year 2013 to a negative value of -210.88% in year 2016 and thereafter to zero in
year 2017. This decline in the net profit margin is attributable to continuous and increasing
loss arising from the business. The negative value indicates the worse performance of
company. On other hand, net profit margin of Aminex Plc is comparatively better as against
Baron Oil Plc. Although, the figure declined continuously year on year from 1578.38% in
year 2014 to 51.26% in year 2016 and 34.34% in year 2017 respectively, the situation is
better than its competitor.
The total assets of Baron Oil have generated negative return for the consecutive four
year with the current figure standing at -29.20% in year 2017. This negative figure is
indicative of the fact that the assets of the company have not been effectively utilized to
generate profit. Now, looking at the figures of Aminex Plc, ratio is recorded at -17.85% in
year 2013 which increased to 7.08% in year 2014. There was further decline in the figure to
3.90 in year 2015 and thereafter to 1.95% in year 2017. This fall in the value depicts that the