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a report of NISHAT MILLS PAKISTAN

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RATIO ANALYSIS PLAYS AN IMPORTANT ROLE IN BUSINESS GROWTH

RATIO ANALYSIS PLAYS AN IMPORTANT ROLE IN BUSINESS GROWTH

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  • 1.  IN THE NAME OF ALLAH THE PRAISEWORTHY, THEPASSIONATE WHOSE BLESSINGS MADE ITPOSSIBLE TO COMPLETE THIS TASK. WE ARE VERY MUCH THANKFULL TO THESECRETARY OF NML WHO HAS PROVIDED USALL THE INFORMATION REGARDING THEPROJECT. WE ARE HIGHLY THANKFULL TO OUR RESPECTEDMA’AM WHOSE GUIDEANCE AND CONSTANTENCOURAGEMENT HELPED US TO COMPLTETHIS RESEARCH REPORT.
  • 2.  We have tried to completelydescribe all the elements of the“NISHAT MILLS LIMITED” in this thisreport. We have tried to describe theratio analysis of “NISHAT MILLSLIMITED” in all types of last twoyears.
  • 3.  PRESENTED BYMUHAMMAD SALMANAWAIS UL HASSAN PRESENTED TOMS: AMMARA YASMIN DATE:
  • 4. INTRODUCTION OF“NISHAT MILLS LIMITED”VISIONMISSION
  • 5.  Liquidity Ratios1. Current Ratio2. Acid test (quick) Ratio3. Cash Ratio Debt Ratios1. Debt-to-Equity2. Debt-to-Total-Assets3. Total Capitalization Coverage Ratios1. Interest Coverage Ratio Activity Ratios1. Receivable turnover Ratio2. Average Collection Period(Receivable turnover in Days)3. Payable turnover Ratio4. Average Payable Period(Payable Turnover in Days)5. Inventory Turnover Ratio6. Average Age of Inventory7. Total Assets turnover ratio Profitability Ratios1. Gross Profit Margin2. Operating Profit Margin3. Net Profit Margin4. Return On Investment5. Return on Equity Market/Valuation Ratios1. Earning per share2. Price earning ratio3. Market price pershare/Book value pershare
  • 6.  FLAGSHIP COMPANY ESTABLISHED IN 1951. MOST MODERN , BIGGEST COMPOSIT UNIT IN PAKISTAN. PROFESSIONAL AND CLIENT ORIENTED MARKETINGSTRATEGIES. ISO-9001 AND IKO-TEX 100 CERTIFIED SA 800 CERTIFICATION IS CURRENTLY IN PROGRESS TOTAL EXPERTS FOR THE COMPANY IN THE YEAR 2000WERE 9.1 BILLION. DUE TO THE APPLICATION OFMANAGEMENT POLICIES CONSOLIDATION OFOPERATION A STRONG BALANCE SHEET AND EFFECTIVEMARKETING STRATEGY THE TREND IS EXPECTED TOCERTAIN IN THE YEARS OF COME. THE COMPANY’S PRODUCTION FACILITIES COMPRISES,SPINNING, WEAVING, PROCESSING, STITCHING ANDPOWER GENERATING.
  • 7.  To transform the Company into a modern anddynamic yarn, cloth and processed cloth andfinished product manufacturing Company thatis fully equipped to play a meaningful role onsustainable basis in the economy of Pakistan. To transform the Company into a modern anddynamic power generating Company that isfully equipped to play a meaningful role onsustainable basis in the economy of Pakistan.
  • 8.  To provide quality products to customersand explore new markets topromote/expand sales of the Companythrough good governance and foster asound and dynamic team, so as toachieve optimum prices of products ofthe Company for sustainable andequitable growth and prosperity of theCompany.
  • 9. ASSETS JUNE 30, 2010 JUNE 30, 2009NON-CURRENT ASSETSPROPERTY, PLANT AND EQUIPMENTINVESTMENT PROPERTIESLONG TERM INVESTMENTSLONTERM LOANSLONGTERM DEPOSITES AND PAYMENTS11,841,667132,55021,959,543489,80316,82334,449,38611,199,63541,04911,952,94912,36711,84823,217,848CURRENT ASSETSSTORES, SPARE PARTS AND LOOSE TOOLSSTACK IN TRADE (INVENTORIES)TRADE DEBTSLOANS AND ADVANCESSHORT TERM DEPOSITES AND PAYMENTSOTHER RECEIVABLES (A/R)ACCRUDE INTERESTSHORT TERM INVESTMENTSCASH AND BACK BALANCESTOTAL ASSETS688,8326,060,4412,041,256504,04631,912724,40716,9061,554,543110,58511,732,92846,182,314561,2514,092,5121,300,366462,02529,880323,000-1,414,310111,4948,294,83831,512,686
  • 10. EQUITY & LIABILITIES JUNE 30, 2010 JUNE 30, 2009SHARE CAPITAL AND RESERVESAUTHORISED SHARE CAPITALISSUED, SUBSCRIBED AND PAID UP SHARE CAPITALRESERVESTOTAL EQUITY11,000,0003,515,99927,860,31431,376,31311,000,0002,424,82716,905,94019,330,767NON-CURRENT LIABILITIESLONG TERM DEBTSDEFERRED TEX2,980,6941,256,8924,237,5862,334,411245,2432,579,654CURRENT LIABILITIESTRADE AND OTHER PAYABLES (A/P)ACCRUDE MARKEUPSHORT TERM BORROWINGSCURRENT PORTION OF LONG TERM FINANCINGPROVISION OF TAXATIONTOTAL LIABILITIESTOTAL EQUITY AND LIABILITIES2,139,321232,2476,649,4471,128,632418,767810,568,41514,806,00146,182,3141,309,958202,7777,342,600433,313313,9179,062,26512,181,91931,512,686
  • 11. Particulars JUNE 30, 2010 JUNE 30, 2009SALESCOST OF GOODS SOLDGROSS PROFITDISTRIBUTION COSTADMINISTRATIVE EXPENSESOTHER OPERATING EXPENSESOTHER OPRATING INCOMEPROFIT FROM OPERATIONSFINANCE COSTPROFIT BEFORE TAXATIONPROVISION FOR TAXATIONPROFIT AFTER TAXATIONEARING PER SHARE- BASIC AND DILUTED31,535,647(25,555,462)5,980,185(1,714,598)(545,166)(289,080)(2,548,844)3,431,341981,6504,412,991(1,126,922)3,286,069(370,608)2,915,46110.5023,870,379(19,518,838)4,351,541(1,315,630)(435,012)(191,608)(1,942,250)2,409,291599,0064,412,991(1,446,796)1,561,501(293,500)1,268,0016.23
  • 12.  Liquidity ratios are used tomeasure a firm ability to meetshort term obligations. They compare short termobligations with short term (orcurrent) resources available tomeet these obligations. From these ratios, much insight canbe obtained into the present cashsolvency of the firm.
  • 13. Current RatioCurrent AssetsCurrent LiabilitiesNISHAT MILLS LIMITEDPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Current Assets 11,732,928 8,294,838Current Liabilities 10,568,415 12,181,919JUNE 30, 2010 RS. JUNE 30, 2009 RS.11,732,92810,568,4151.11: 18,294,83812,181,919.86:1COMPARISON
  • 14. Acid-Test (Quick)Current Assets - InvCurrent LiabilitiesNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Current Assets 11,732,928 8,294,838Current Liabilities 10,568,415 12,181,919Inventory 6,060,441 4,092,512COMPARISONJUNE 30, 2010 RS. JUNE 30, 2009 RS.11,732,928 -6,060,44110,568,415.53:18,294,838-4,092,51212,181,919.43:1
  • 15. Cash RatioCashCurrent LiabilitiesNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Cash 110,585 111,494Current Liabilities 10,568,415 12,181,919JUNE 30, 2010 RS. JUNE 30, 2009 RS.110,58510,568,415.010:1111,49412,181,919.011:1COMPARISON
  • 16.  Strong current ratio and weak acid-test ratio indicates a potentialproblem in the inventories account. Note that this industry has arelatively high level of inventories.
  • 17. Balance Sheet RatiosFinancial Leverage RatiosShows the extent to which thefirm is financed by debt.
  • 18. PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Total Debts 13,549,109 11,936,676Stock Holders Equity 31,376,313 19,330,767JUNE 30, 2010 RS. JUNE 30, 2009 RS.13,549,10931,376,313.43:111,936,67619,330,767.61:1COMPARISONDebt-to-EquityTotal DebtShareholders’ EquityNish at MILLS LIMITED
  • 19. Debt-to-Total-AssetsTotal DebtTotal AssetsNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Total Debts 13,549,109 11,936,676Stock Holders Equity 46,182,314 31,512,686JUNE 30, 2010 RS. JUNE 30, 2009 RS.13,549,10946,182,314.29:111,936,67631,512,686.37:1COMPARISON
  • 20. Long Term DebtTotal CapitalizationNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Long Term Debts 2,980,694 2,334,411Stock Holders Equity 31,376,313 19,330,767JUNE 30, 2010 RS. JUNE 30, 2009 RS.2,980,69431,376,313.086:12,334,41119,330,767.107:1COMPARISON
  • 21. Income Statement RatiosCoverage RatiosRatios that relates thefinancial charges(interest) of a firm toits ability to service orcover them.
  • 22. Interest CoverageEBITInterest ChargesNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.EBIT 4,061,736 2,938,466Interest Expense 1,308,396 1,446,796JUNE 30, 2010 RS. JUNE 30, 2009 RS.4,061,7361,308,3963.10 :12,938,4661,446,7962.03:1COMPARISON
  • 23.  Ratios that measure howeffectively the firm is using itsassets are called Activity Ratios. Activity ratios, also known asEfficiency or Turnover Ratio,measure how effectively the firmis using its assets.
  • 24. Receivable TurnoverAnnual Net SalesReceivablesNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Sales 32,554,012 23,870,379Accounts Receivables 2,041,256 1,300,366COMPARISONJUNE 30, 2010 RS. JUNE 30, 2009 RS.32,554,0122,041,25615.94 times23,870,3791,300,36618.35 times
  • 25. Average Collection PeriodDays in the YearReceivable TurnoverorReceivables * Days in the yearAnnual Credit salesNishat mills limitedJUNE 30, 2010 RS. JUNE 30, 2009 RS.36515.9422.58 days36518.3519.16 days
  • 26. Payable Turnover (PT)Annual Credit PurchasesAccounts PayableNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Purchases 7,405,307 5,517,538Accounts Payable 2,139,321 1,309,958JUNE 30, 2010 RS. JUNE 30, 2009 RS.7,405,3072,139,3213.46 times5,517,5381,309,9584.21 timesCOMPARISON
  • 27. PT in DaysDays in the YearPayable TurnoverOrAccounts payable * Days in the yearAnnual Credit PurchasesNishat mills limitedJUNE 30, 2010 RS. JUNE 30, 2009 RS.3653.46105.49 days3654.1288.59 days
  • 28. Inventory TurnoverCost of Goods SoldAvg. InventoryNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Cost of Goods Sold 25,555,462 19,518,838Inventory 6,060,441 4,092,512COMPARISONJUNE 30, 2010 RS. JUNE 30, 2009 RS.25,555,4626,060,4414.12 times19,518,8384,092,5124.762 times
  • 29. PT in DaysDays in the YearInventory TurnoverOrAvg Inventory * Days in the yearCGSNishat mills limitedJUNE 30, 2010 RS. JUNE 30, 2009 RS.3654.12685 days3654.76975 days
  • 30. Total Asset TurnoverNet SalesTotal AssetsNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Sales 31,535,647 23,870,379Total Assets 46,182,314 31,512,686JUNE 30, 2010 RS. JUNE 30, 2009 RS.31,535,64746,182,314.6823,870,37931,512,686.75COMPARISON
  • 31. Ratios that relate profits to salesand investment are calledprofitability ratios.OrProfitability ratios measures thathow much profit the firm generates.Income Statement/Balance Sheet RatiosProfitability Ratios
  • 32. Gross Profit MarginGross ProfitNet SalesNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Gross Profit 5,980,185 4,351,541Net Sales 31,535,647 23,870,379JUNE 30, 2010 RS. JUNE 30, 2009 RS.5,980,18531,535,64718.96%4,351,54123,870,37918.22%COMPARISON
  • 33. Operating Profit MarginEBITNet SalesNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Operating Profit 4,412,991 3,008,297Net Sales 31,535,647 23,870,379JUNE 30, 2010 RS. JUNE 30, 2009 RS.4,412,99131,535,64713.99%3,008,29723,870,37912.60%COMPARISON
  • 34. Net Profit MarginNet Profit after TaxesNet SalesNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Net Profit 2,915,461 1,268,001Net Sales 31,535,647 23,870,379JUNE 30, 2010 RS. JUNE 30, 2009 RS.2,915,46131,535,6479.24%1,268,00123,870,3795.31%COMPARISON
  • 35. Return on InvestmentNet Profit after TaxesTotal AssetsNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Net Profit After tax 2,915,461 1,268,001Total Assets 46,182,314 31,512,686JUNE 30, 2010 RS. JUNE 30, 2009 RS.2,915,46146,182,3146.39%1,268,00131,512,6864.023%COMPARISON
  • 36. Return on EquityNet Profit after TaxesShareholders’ EquityNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Net Profit after Tax 2,915,461 1,268,001S.H.E 31,376,313 19,330,767JUNE 30, 2010 RS. JUNE 30, 2009 RS.2,915,46131,376,3139.29%1,268,00119,330,7676.55%COMPARISON
  • 37. The ratios which shows the risk andpotential earning of a businessinvestment.These ratios are not calculated from thefinancial reports only, since they mayinvolve market data such as shareprices.It is also known as a Valuation Ratios orShareholders ratios.
  • 38. Earning per shareNet Profit after TaxesTotal number of sharesNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Net Profit After tax 2,915,461 1,268,001Total No. of Shares 351,599,848 242,482,654COMPARISONJUNE 30, 2010 RS. JUNE 30, 2009 RS.2,915,461351,599,848.oo81,268,001242,482,654.005
  • 39. Price earning ratioMarket price per shareEarning per shareNishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Market Price 57.47 30.5Earning / Share 10.50 6.23JUNE 30, 2010 RS. JUNE 30, 2009 RS.57.4710.505.4730.56.234.89COMPARISON
  • 40. M/BMarket price per shareBook value per shareNishat mills limitedJUNE 30, 2010 RS. JUNE 30, 2009 RS.57.4710.505.47PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS.Mkt. /share 57.47Book Value/ Share 10.50 6.23COMPARISON
  • 41. 2010 2009Current ratio 1.11 0.86Gearing ratio 25.53 34.34Gross profit % 18.96 18.23Net profit % (before tax) 10.42 06.54Earnings per share 10.50 06.23Proposed dividend % 25.00 20.00
  • 42. CONCLUSION