Royal Dutch Shell PLC financial performance analysis and ratios
In this paper we conduct a research on Royal Dutch Shell plc and its Edge on the global Market Title Background Industry Background Research aim, research questions or hypotheses and objectives Research Methodology Timescale Resources References Guidelines Please read carefully or you could end up penalising yourself. Below are some points to consider for your research proposal. • Background section: Review of Literature (no more than 2000 words) - Why is research that you are planning worth the effort? - Use of academic journals - Identify your area of research - Demonstrate your knowledge of the relevant literature - Clarify where your proposal fits into the debate in the literature - Identify gaps in existing literature - Show a clear link between the previous work that has been done in your field of research interest and the content of your proposal etc - Identify relevant academic theory, models, frameworks and concepts (SWOT, PORTER FIVE FORCES, PESTEL, FINANCIAL RATIOS etc) • Industry Background (no more than 250 words) - Place the research into context. - This should clarify further why the research is being done, under what conditions it is being done and what its impact is hoped to be. • Research aim, research questions or hypotheses and objectives (250 words) - What does this research aim to explore/find out?) - Research questions (no more than two) - Hypotheses (no more than two) - Objectives (Minimum 3 & Maximum 4) • Research Methodology (no more than 1500 words) - This section will detail how you intend to go about achieving your research objectives - It will explain your choice of research philosophy - It will also justify your choice of method in the light of these objectives - It will also clarify where you intend to carry out the research - It will also detail which sectors of the market you have chosen to research and why you chose these sectors - It will explain how your research will ensure validity and reliability - Justify the relationship between your research aim, research questions, research objectives and research methods - Discuss the appropriateness of triangulation to your research • Timescale - This section needs to be very detailed and realistic - You must produce a detailed schedule that illustrates weekly activities and allows time for unexpected delays
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Royal Dutch Shell PLC and Its Edge on the Global Market
The concept of financial analysis is a core indicator of the actual financial health of a given organization. The development of an accurate and dependable conceptual framework to be employed in the analysis of the global and corporate financial system has for quite a long time been an important issue in corporate accounting (Bodie & Merton,1990). An appropriate conceptual framework must be able to meet two main objectives: to effectively address the differences that exists in the institutional structures as well as to explain the main changes in the institutional structures over time. A review of extant literature has been dedicated to the concept of financial analysis. Most of these studies have dwelt on financial ratios. A study by Nenide, Pricer & Camp (2008) indicated that extant literature in accounting as well as finance indicate that the application of ratio calculations having multivariate analysis for the prediction of the performance levels of organizations is quite common. There is a however a general lack of a credible method of determining if the necessary sample assumptions can be adequately met in order for reliable conclusions to be arrived at by the researchers. Nenide, Pricer & Camp (2008) further indicated that the literature that describes the methods as well as theories for the evaluation as well as the prediction of the level of financial performance suggests that even though the method used are increasingly becoming complex very few expert researchers have the ability to adequately address the various problems that are directly related to the sample that is used. For instance, they noted that most of the ratio analysis techniques employ multivariate analysis that is basically pegged on the assumption of a somehow normally distributed set of financial ratios . Foster (1986) noted that when the distribution of the financial ratios is put under consideration, there is a need to comprehend the fact that the normality of the distribution of the dataset can effectively be skewed by the inherent errors in data recording, negative denominators as well as denominators that are approaching zero.
A negative denominator and numerator is indicated by Nenide, Pricer & Camp (2008) to yield a positive ratio calculation. The implication of this is that a company that has a negative owner's equity as well as a loss will automatically report a positive return on investment. This form of error is very common in financial calculation studies. It is therefore worthwhile to note that these systems of performance analysis are never accurate as means of predicting the financial performance of companies or for the prediction of the single ratios for a company's future as noted by Pricer and Johnson (1996). Their usage by analysts are however continually being employed for the understanding as well as forecasting of corporate performance. The main problem that is often encountered is based on a baseless belief that the raw financial data calculations on financial ratios would ultimately result in valid measures to be used in the prediction of future performance. This form of research is widely referred to as liquidity research as it began with the work of Beaver (1966) who tested the capacity of thirty standard accounting ratios. In this work however, we present a detailed a financial and business analysis of Royal Dutch Shell Plc from 1st January 2009 to 31st December 2011, using ExxonMobil one of its major competitors.
Research aim
The aim of this research is to conduct a financial and business analysis of Royal Dutch Shell Plc from 1st January 2009 to 31st December 2011, using ExxonMobil one of its major competitors.
Research objectives
To effectively review the operations of Royal Dutch Shell Plc and report on the business as well as financial performance of the company
To analyze the overall business and financial performance of both the corporations (Royal Dutch Shell Plc and ExxonMobil).
To perform an elaborate SWOT analysis of the company
To examine the various non-financial issue that affects the company such as socioeconomic and ethical considerations
To determine the various actions that can be effectively implemented in order to improve Royal Dutch Shell Plc's performance.
Research questions
How is Royal Dutch Shell Plc performing in comparison with its closes competitor ExxonMobil?
What is the performance of Royal Dutch Shell Plc according to investor perspective?
What is Royal Dutch Shell Plc's dividend policy?
What is the performance of Royal Dutch Shell Plc in regard to debt finance?
What are the various non-financial issues that are affecting the performance of Royal Dutch Shell Plc?
What are the actions that should be undertaken in order to improve Royal Dutch Shell Plc's performance?
Hypotheses
Royal Dutch Shell Plc's business and financial performance has generally been better than ExxonMobil's over the years.
The recent financial crisis has a very negative impact on the performance of Royal Dutch Shell Plc.
Literature review
The Royal Dutch Shell plc a company which is also referred to as Shell is a major oil and gas company that is headquartered in the city of Hague, Netherlands but with its legally registered offices located in London, U.K (Shell,2012). The company is one of the global largest and independent oil and gas corporations in regard to market capitalization, the operating cash flow as well as oil and gas production quantities (Shell,2011, p.2). The company is also engaged in rigorous oil and gas exploration as well as marketing, production and the marketing of liquefied natural gas, the development of power plants as well as the manufacturing, the marketing as well as the shipping of oil products and other forms of petrochemicals (Datamonitor,2006). The company has several vertically integrated operations and is known to be the world's greatest single-brand retail network. As a consequence of its geographically dispersed locations, it is susceptible to geopolitical instability as well as weather disturbances.
SWOT Analysis
Strengths
Has a dominant market position
Has vertically integrated operations
Steady financial position
Has a highly diversified revenue stream
Strong exploration in technological prowess
Weaknesses
There is a decline in global oil reserves
Legal proceedings
Opportunities
An ever increasing LNG demand
Petrochemical demand in China
Strategic mergers and acquisitions'
Joint venture in China
Threats
Disruptions as a result of hurricanes
Political instability in Libya, Nigeria, Iraq, Iran and other OPEC countries.
Industry Background
The global petroleum industry is marked with stiff competition and uncertain realities of demand shortage as well as stringent regulations. In order to fully comprehend the actual performance of a company within this industry, it is critical that a rigorous financial and business analysis be conducted. The best picture is however created by comparing the performance of a given company with that of its closes competitor. In this case, conduct a financial and business analysis of Royal Dutch Shell Plc from 1st January 2009 to 31st December 2011, using ExxonMobil as its major competitor.
Research Methodology
The research approach
This research will be based on the financial ratio and trend analysis from the point-of-view of various stakeholders. Triangulation technique will be employed. Guion (2002) noted that triangulation is a method that is employed by qualitative researchers in the checking as well as establishment of the validity of their studies. This research will employ the five various types of triangulations that is data triangulation, theory triangulation, investigator triangulation, environmental triangulation as well as methodological triangulation.
The work will cover the following parameters;
Growth
Growth is a very good sign of operational success. This is because it leads to an improvement in the business and financial position and performance.
Earning ratio
These ratios are important in the measure of performance of a given entity, a manager as well as the efficiency of various asset types.
Risk ratios
Risk is noted to exist whenever the actual outcome from a given project could assume any possibility and therefore it becomes very impossible to predict the possible outcomes.
Investor ratios
The dividends as well as EPS ratio are important to the current as well as potential investors in the process of making an economic decision.
Cash Flow analysis
The cash flow analysis will involve the evaluation of Royal Dutch Shell Plc's cash flow position to pay any of form of dividend as well as to carry on any kind of new investment.
An evaluation of Royal Dutch Shell Plc's future prospects as well as growth strategy. This research will evaluate Royal Dutch Shell Plc's future prospects as well as the company's marketing strategy that is currently being employed by the company in order to maintain as well as improve its market share.
Information gathering
The information to be used in this research will be sourced from primary and secondary sources. The primary sources for information comprises of data that will be collected by investigators via interviews and questionnaires (Duval,2005). The secondary sources of data comprises of data that is gathered from various sources that are readily available to everyone.
Information on the company will also be sourced from annual reports, interim reports as well as the internet. Secondary information will be sourced from books and journals.
The methods to be used for data collection
The correct interpretation of financial statements is an integral element of this research. The researcher will therefore embark on a research work that will involve the use of both secondary and primary data sources.
Validity and reliability of the instruments used in the research
Reliability
Reliability is the degree of consistency that exists between two different measures of the same item as noted by Mehrens and Lehman (1987). This construct is important in the measurement of how stable, trustworthy, dependable or consistent a given test is as noted by Worthen et al., (1993).
Validity on the other hand is the measure of the level of truthfulness of a given test (Mehrens and Lehman, 1987)
Limitations
The potential limitations to this research are;
Lack of sufficient time for research since the process is time consuming with a lot of time spent in the collection of data from books and articles
As a student, it is not easy to afford the paid websites that contains some of the necessary financial information
Timescale
Activity
Date of submission
Research Proposal
28th of February
Literature review
15th of March
Data Gathering
30th of March
Data Analysis
5th of April
Conclusion as well as implications
20th of April
Recommendations
39th of April
Date of final submission
5th of May
Resources
Some of the resources that will be used include;
Laptops
Statistical analysis software
Financial statement from both companies
Accounting and financial calculation text books
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