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Fertilizer Industry Analysis

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Industry Specific Ratios of Fertilizer Industry
1. CASH FLOW FROM OPERATIONS TO SALES
This ratio measures the operating cash flow of the company to its sales revenue. It indicates the ability of a company to generate cash from its sales or the ability of a company to turn its sales into cash.
As operating cash flows increase, ideally, it should be with the increase in sales; however, if variations in operating cash flows are not corresponding to the changes in sales revenue, this may be either because of the change in terms of sales or inefficient or ineffective management of trade receivables.

2. INVESTMENT/MARKET RATIOS:
Investment to Market ratios allow the financial analyst to recognise how other investors are responding to owning a share …show more content…
The first key indicator is core cash flow. The oil and gas exploration requires huge amounts of debt as the cost or expense of setting up, running and maintenance of large plants can be met via high levels of debt. Without future cash flows an oil and gas producer could have financial flexibility problems in long run and it would become difficult to survive in the industry. Therefore to avoid financial issues cash flows must increase making the companies to cover its debt. Free cash flow, cash flow from operations and core cash flow are paid particular attention for the oil and gas industry. The ability of company to finance capital needs internally versus externally must be adequate as the timing of projects depend on it. 1. FREE CASH FLOW YIELD:
Free cash flow yield= Free cash flow yield/Market Capitalization
Market Capitalization =stock price ×total number of shares outstanding
Free cash flow yield= Free cash flow yield/Enterprise …show more content…
• To calculate production to reserves the amount of natural gas and oil are divided by the amount of reserves.
• Since natural gas is usually quantified by billions of cubic feet (Bcf), and oil by MMBbls (one million barrels), another calculation needs to be done to convert Bcf to MMBoe (Barrels of oil equivalent). Divide the Bcf by 6 Mcf /BBl.; add this number to MMBbls to get MMBoe.

2. RESERVE LIFE INDEX:

Reserve Life Index =1/ (Production/Reserves)

• The Reserve Life Index (RLI) is the reciprocal of the Production to Reserves Ratio.
• It shows how long reserves will last at the current production rate with no additions to reserves.
• This ratio can be indifferent as long RLI in years, may mean resource would be produced over a long period of time and also if a company is lacking the ability to develop this resource, it would have a long RLI.

3. RESERVE-REPLACEMENT RATIO (%):

Reserve-Replacement Ratio (%) = Increase in Reserves + Production/Production

• This ratio shows whether a company is increasing reserves or depleting them as the company must have the means to produce oil and

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