Azerbaijan state economics university

Debt to Equity Ratio

The ratio is a comparison between the firms’ total debt and total equity. BP debt to equity ratio indicates the percentage of the company financing which comes from investors and creditors[ CITATION Alf12 \l 1033 ]. A higher debt in comparison to equity gives the impression that the company is financed more by creditors to shareholder financing. Thus in light of this, a higher debt to equity ratio means that the company is more risky than when it has a lower debt to equity ratio. A lower debt to equity ratio indicates the company is financially stable.X	Quick Ratio
	Amounts in US$ Millions
Year's	2013	2012	2011	2010
Total liabilities	175,283	180,714	180,586	176,371
Total Equity	130,407	119,752	112,482	95,891
Debt to Equity Ratio	1.34	1.51	1.61	1.84

BP’s debt to equity ratio reveals a decreasing financial trend which indicates that the company reduces its dependence in debt while enhance it financing using the company’s equity[ CITATION Ala12 \l 1033 ]. In the year 2010, the company shows higher dependence on debt of 1.84 while in 1.61 in 2011. In 2012 BP reveal debt dependence of 1.51 while in 2013 the company decreases it dependence in debt while uses it equity to finances its investment. However, this shows that BP’s management is competent enough in lessening the debt financing risk and utilizing there equity.

Conclusion

BP’s financial ratio analysis describes that the company’s management are sensitive in enhancing the company’s profitability, liquidity, efficiency as well as substantiating the company’s sustainable financial measures. According to the profitability ratios describe by the company’s profit margin as well as the return on assets indicates that the company has substantive profitability growth towards 2013. The efficiency ratio’s indicates an improving financial ability to increase the amount of cash available to meet the financial obligations. Liquidity financial ratio’s indicates that BP’s company management has restructures its operation to improves its financial ability to meet the current obligations. Capital structure ratio accentuates a substantive measures to increase the dependence on the internal equity reliability as compared to the debt.

Reference list

CITATION Car13 \l 1033 : , (James Reeve, 2013),
CITATION Tho09 \l 1033 : , (Ittelson, 2009),
CITATION Nex07 \l 1033 : , (Earl, 2007),
CITATION Ali13 \l 1033 : , (Alisdair McGregor, 2013),
CITATION Cha10 \l 1033 : , (Gibson, 2010 ),
CITATION Alf12 \l 1033 : , (Alfredson, 2012),
CITATION Cho08 \l 1033 : , (Chordia, 2008),
CITATION Ala12 \l 1033 : , (Alali, 2012),