Above table shows the calculation of ratio analysis of BP and Shell. Ratio analysis helps in analysing financial performance of company by taking data from financial statement of company. With help of ratio analysis insights of company’s profitability, liquidity and solvency is easily ascertained.

Profitability ratio is calculated for ascertaining how well company is generating profit from its operations. Net profit ratio, return on assets are common example of profitability ratio (Haralayya 2021). Based on calculation of net profit ratio it has been seen Shell company has NP ratio of 5% whereas BP has NP ratio of 2% which indicates that Shell company is carrying its operation and providing value to shareholder more efficiently as compared to BP. Based on return on assets ratio it has been seen that ROA of Shell company is 4% whereas ROA of BP is 1% which indicates that Shell company is making maximum use of assets in generating more revenue as compared to BP. Therefore, based on profitability ratio it can be said that profitability position of Shell company is better in comparison with BP.

Liquidity ratio is calculated for ascertaining how well company is meeting its short-term debt obligations when they are becoming due (Ghasemi, M. and Ab Razak 2016). Current ratio and quick ratio are common examples of liquidity ratio. Based on calculation of current ratio it has been seen Shell company has CR of 1.16 (Shell 2021) whereas BP has CR of 1.03 which indicates that Shell company is paying its creditors and meeting current liabilities more effectively as compared to BP. Based on quick ratio it has been seen that QR of Shell company is 0.86 whereas QR of BP is 0.73 which indicates that Shell company has more quick assets and assets are also converted quickly into cash as compared to BP. Therefore, it can be said that liquidity position of Shell is better in comparison with BP.

Solvency ratio is calculated for ascertaining how well company is meeting its long-term debt obligations and carrying its operations in future. Debt ratio and debt equity ratio are common example of solvency ratio (Ibendahl 2016). Based on calculation of debt ratio it has been seen Shell company has DR of 53% whereas BP has DR of 66% which indicates that Shell company has less risk and it is in position to meet its liabilities effectively. Based on DE ratio it has been seen that DE of Shell company is 112% whereas DE of BP is 193% (BP 2021) which indicates that in Shell company lower amount of financing is done via debt as compared to BP. Therefore, it can be said that solvency position of Shell is better in comparison with BP.

Therefore, based on ratio analysis it can be concluded that financial health and performance of Shell company is better as compared to BP as Shell company is carrying its operations efficiently and effectively and meeting its debt obligations and also generating profit.