1. Term Paper
Financial Accounting II
Financial Analysisof EngroFoodsandNational FoodsLtd
2015
SyedHamza,
3/26/2015

2. Contents
Introduction .......................................................................................................................................2
Abstract.............................................................................................................................................5
Financial Statements...........................................................................................................................6
Engro-Foods Ltd. Financial Statements:...........................................................................................6
Engro-Foods 2014 Financial Statements: ......................................................................................6
Engro-Foods 2013 Financial Statements: ......................................................................................9
Engro-Foods 2012 Financial Statements: ....................................................................................12
Engro-Foods Horizontal Balance Sheet Comparative Analysis: ....................................................15
Engro-Foods Horizontal Income Statement Comparative Analysis: ..............................................17
Engro-Foods Vertical Balance Sheet:..........................................................................................20
Engro-Foods Vertical Income Statement:....................................................................................22
National Foods Ltd.: .....................................................................................................................24
National Foods 2014 Financial Statement: ..................................................................................24
National Foods 2013 Financial Statement: ..................................................................................27
National Foods 2012 Financial Statements:.................................................................................30
National Foods Horizontal Comparative Balance Sheet:...............................................................33
National Foods Horizontal Comparative Income Statement:.........................................................36
National Foods Vertical Balance Sheet: ......................................................................................38
National Foods Vertical Income Statement:.................................................................................40
National-Foods & Engro-Foods Condensed Common Size:.............................................................41
Income Statement:.....................................................................................................................41
Balance Sheet: ..........................................................................................................................42
Conclusion of Common Sized Financial Records:........................................................................43
Financial Ratios................................................................................................................................44
Engro-Foods:................................................................................................................................45
Solvency Analysis:....................................................................................................................45
Profitability Analysis:................................................................................................................45
National Foods: ............................................................................................................................48
Solvency Analysis:....................................................................................................................49
Profitability Analysis:................................................................................................................49

3. Introduction
HISTORY OF BOTH COMPANIES
Engro foods:
Engro Corporation is a Pakistani public multinational corporation based in Karachi with
subsidiaries involved in production of fertilizers, foods, chemicals, energy and petrochemicals.
Its major subsidiaries include Engro Fertilizers - which is one of the largest fertilizer
manufacturers of the world, Engro Foods which manufactures processes and markets dairy
products, frozen desserts and fruit drinks including the ice cream brand of OMORÉ. Other major
subsides include Sindh Engro Coal Mining Company, Engro Powergen Limited and Engro
Polymer & Chemicals Limited.
As a holding company its subsidiaries include:
 Engro Fertilizers Limited
 Engro Foods Limited
 Engro Eximp Private Limited
 Engro PowerGen Limited
 Engro Polymers and Chemicals Limited
 Engro Vopak Limited
 Elengy Terminal Pakistan Limited
It was 1957 when in search for oil by Pak Stanvac, an Esso/Mobil joint venture led to the
discovery of the Mari Gas field near Daharki Pakistan. Esso proposed the establishment of a urea
plant in that area which led to a fertilizer plant agreement signed in 1964. In the subsequent year,
Esso Pakistan Fertilizer Company Limited was incorporated, with 75% of the shares owned by
Esso and 25% by the general public. The construction of a urea plant commenced at Daharki in
1966 and production began in 1968. At US $43 million with an annual production capacity of
173,000 tons, it was the single largest foreign investment by a multinational corporation in
Pakistan at the time.
In 1978, it was decided to rename the company from Esso Fertilizer Company Limited to Exxon
Chemical Pakistan Limited.
In 1991, Exxon decided to divest its fertilizer business on a global basis. The employees of
Exxon Chemical Pakistan Limited, in partnership with leading international and local financial
institutions, bought out Exxon’s 75% equity. This was at the time and perhaps still is the most
successful employee buy-out in the corporate history of Pakistan. Renamed as Engro Chemical

4. Pakistan Limited, the Company has gone from strength to strength, reflected in its consistent
financial performance, growth of the core fertilizer business, and diversification into other
businesses.
It was year 1997 when Engro Chemical Pakistan limited decided to establish Engro Vopak
Terminal Limited on 50/50 partnership basis between Engro and Royal Vopack of Netherlands,
for handling bulk liquid chemical storage at Port Qasim Karachi. In that same year Engro Asahi
polymer Chemicals limited was established in a result of joint venture between Mitsubishi
Corporation and Asahi for the manufacturing and marketing of PVC resin.
Engro EXIMP was established in 2003, after which in 2005 Engro decided to diversify their
business more by venturing into the food business by establishing Engro Foods Limited.
Engro also ventured into the power generation business by setting up Engro Energy Limited in
2006, which later on was renamed as "Engro Powergen Limited" in 2008. It was established with
the basic aim to play Engro's part to tackle the energy crisis in the country.
In year 2007, Engro Asahi polymer divested its share in joint venture with Mitsubishi and the
company renamed as Engro Polymer and Chemicals Limited.
In 2010, keeping in view the immense diversification of Engro Chemical Pakistan Limited, it
was decided to rename the company as Engro Corporation as the holding company.
In the year 2011, Engro Corporation had a major global diversification with the acquisition of
US-based Company, Al Safa Halal.[1] This new business venture comes under Engro Foods
Canada Ltd and its subsidiary Engro Foods USA, LLC. Al Safa Halal targets 7 million
populations of Muslims in North America.
National Foods:

5. National Foods Limited is a Pakistani company founded in 1970, which started out as a spice
company. In 1988, National Foods became the certified vendor of McCormick, USA. In the
same year, National Foods, then a Private Limited company was converted into a Public Limited,
listed in all the three stock exchanges of Pakistan.
With a range of over 110 products in 13 major categories, National Foods is one of the largest
food companies.
The company was incorporated in Pakistan on February 19, 1970 as a private limited company
under the Companies Act, 1913 and subsequently converted into a public limited company under
the Companies Ordinance, 1984 by special resolution passed in the extra ordinary general
meeting held on March 30, 1988. The company is principally engaged in the manufacture and
sale of convenience based food products. It is listed on Karachi, Lahore and Islamabad Stock
Exchanges

6. Abstract
In this report, analysis of financial statements of Engro Foods Ltd and
National Foods Ltd is done to evaluate their current financial
performance. Horizontal analysis and vertical analysis over the years
2013 and 2014 is also done to see the trend of the performance of the
two companies using the data from their annual reports of 2013-2014.
Moreover intercompany, profitability and solvency analysis have also
been carried out to get a clearer picture of the true position of both the
companies.

7. Financial Statements
Engro-Foods Ltd. Financial Statements:
Engro-Foods 2014 Financial Statements:
ENGRO FOODS
PAKISTAN LIMITED
Balance Sheet
As at June 30, 2014
CURRENT ASSETS: Rs.
Stores And Spares 1157
Stock In Trade 1527032
Trade Debts-Unsecured 22325
Advances Unsecured 13259
Deposits Short Term Prepayments And Other Receivables 410517
Mark-Up Accrued 489
Short Term Investment 500000
Tax Refund Due From Government 445479
Cash And Bank Balances 539039
3459297
NON CURRENT ASSETS
Property Plant And Equipment 630754
Intangible Assets 9960
Long Term Investments 37823
Long Term Deposits And Prepayments 39216
717753
TOTAL ASSETS 4177050
CURRENT LIABILITIES
Trade And Other Payables 988890
Short Term Borrowings – Secured -
Provision For Taxation 311977
1300867
NON CURRENT LIABILITIES

8. Long Term Deposits 37823
Deferred Liability Employee Benefit 74211
Deferred Taxation 22849
134883
SHARE CAPITAL AND RESERVES
Authorized Share Capital 100000
Issued Subscribed And Paid Up Capital 75600
Reserves
Capital Reserves 483
Revenue Reserves 2665217
2665700
2741300
TOTAL EQUITY AND LIABILITIES 4177050

9. ENGRO-FOODS
PAKISTAN LIMITED
INCOME STATEMENT
For the Years Ended December 31, 2014
Rs'000
Sales 8329829
Less Cost Of Sales 4997901
GROSS PROFIT 3331928
Distribution Cost 1597220
Administration Expenses 468339
Other Operating Expenses 92660
2158219
Other Operating Income 55047
OPERATING PROFIT 1228756
Finance Cost (Interest Expense) 39735
Profit Before Taxation 1189021
Taxation 317728
PROFIT AFTER TAXATION 871293
Other Comprehensive Income -
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 871293
Earnings Per Share- Basic And Diluted Rs. 115.25

10. Engro-Foods 2013 Financial Statements:
ENGRO FOODS PAKISTAN LIMITED
Balance Sheet
As at June 30, 2013
CURRENT ASSETS: Rs.
Stores And Spares 768
Stock In Trade 1281862
Trade Debts-Unsecured 23735
Advances Unsecured 3191
Deposits Short Term Prepayments And Other Receivables 233399
Mark-Up Accrued 3851
Short Term Investment 350000
Tax Refund Due From Government 219393
Cash And Bank Balances 461249
2577448
NON CURRENT ASSETS
Property Plant And Equipment 582411
Intangible Assets -
Long Term Investments 35830
Long Term Deposits And Prepayments 34498
652739
TOTAL ASSETS 3230187
CURRENT LIABILITIES
Trade And Other Payables 924020
Short Term Borrowings – Secured -
Provision For Taxation 223316
1147336
NON CURRENT LIABILITIES
Long Term Deposits 35830
Deferred Liability Employee Benefit 69196
Deferred Taxation 17098
122124
SHARE CAPITAL AND RESERVES

11. Authorized Share Capital 100000
Issued Subscribed And Paid Up Capital 75600
Reserves
Capital Reserves 483
Revenue Reserves 1884644
1885127
1960727
TOTAL EQUITY AND LIABILITIES 3230187

12. ENGRO-FOODS
PAKISTAN LIMITED
INCOME STATEMENT
For the Years Ended December 31, 2013
Rs'000
Sales 6428490
Less Cost Of Sales 3756277
GROSS PROFIT 2672213
Distribution Cost 1367249
Administration Expenses 403640
Other Operating Expenses 65757
1836646
Other Operating Income 12638
OPERATING PROFIT 848205
Finance Cost (Interest Expense) 35183
Profit Before Taxation 813022
Taxation 227510
PROFIT AFTER TAXATION 585512
Other Comprehensive Income
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 585512
Earnings Per Share- Basic And Diluted Rs77.45

13. Engro-Foods 2012 Financial Statements:
ENGRO-FOODS
PAKISTAN LIMITED
Balance Sheet
As at June 30, 2012
CURRENT ASSETS: Rs.
Stores And Spares 555
Stock In Trade 1123487
Trade Debts-Unsecured 23735
Advances Unsecured 4191
Deposits Short Term Prepayments And Other Receivables 255112
Mark-Up Accrued 385
Short Term Investment 310000
Tax Refund Due From Government 194326
Cash And Bank Balances 413269
2325060
NON CURRENT ASSETS
Property Plant And Equipment 512480
Intangible Assets -
Long Term Investments 31830
Long Term Deposits And Prepayments 24498
568808
TOTAL ASSETS 2893868
CURRENT LIABILITIES
Trade And Other Payables 924020
Short Term Borrowings – Secured -
Provision For Taxation 213390
1137410
NON CURRENT LIABILITIES
Long Term Deposits 35830
Deferred Liability Employee Benefit 69196
Deferred Taxation 18000
123026
SHARE CAPITAL AND RESERVES

14. Authorized Share Capital 100000
Issued Subscribed And Paid Up Capital 75600
Reserves
Capital Reserves 4300
Revenue Reserves 1784044
1963994
TOTAL EQUITY AND LIABILITIES 3224380

15. ENGRO-FOODS
PAKISTAN LIMITED
INCOME STATEMENT
For the Years Ended December 31, 2012
Rs'000
Sales 5128490
Less Cost Of Sales 3190462
GROSS PROFIT 1938028
Distribution Cost 1135349
Administration Expenses 403640
Other Operating Expenses 61111
1600100
Other Operating Income 13452
OPERATING PROFIT 341380
Finance Cost (Interest Expense) 35183
Profit Before Taxation 306197
Taxation 2275
PROFIT AFTER TAXATION 303922
Other Comprehensive Income
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 303922
Earnings Per Share- Basic And Diluted Rs65.55

16. Engro-Foods Horizontal Balance
Sheet Comparative Analysis:
ENGRO FOODS
PAKISTAN LIMITED
Comparative
Horizontal
Balance Sheet
As at June 30, 2014 &
2013
Increase/ (Decrease)
2014(000) 2013(000) Amount Percentage
CURRENT ASSETS
Stores And Spares 1157 768 389 50.651
Stock In Trade 1527032 1281862 245170 19.126
Trade Debts-Unsecured 22325 23735 -1410 (5.940)
Advances Unsecured 13259 3191 10068 315.512
Deposits Short Term Prepayments And Other
Receivables 410517 233399 177118 75.886
Mark-Up Accrued 489 3851 -3362 (87.3019)
Short Term Investment 500000 350000 150000 42.857
Tax Refund Due From Government 445479 219393 226086 103.050
Cash And Bank Balances 539039 461249 77790 16.865
3459297 2577448 881849 34.214
NON CURRENT ASSETS
Property Plant And Equipment 630754 582411 48343 8.3
Intangible Assets 9960 - 9960
Long Term Investments 37823 35830 1993 5.562
Long Term Deposits And Prepayments 39216 34498 4718 13.676
717753 652739 65014 9.96
TOTAL ASSETS 4177050 3230187 946863 29.312
CURRENT LIABILITIES
Trade And Other Payables 988890 924020 64870 7.020
Short Term Borrowings – Secured - -

17. Provision For Taxation 311977 223316 88661 39.702
1300867 1147336 153531 13.381
NON CURRENT LIABILITIES
Long Term Deposits 37823 35830 1993 5.562
Deferred Liability Employee Benefit 74211 69196 5015 7.247
Deferred Taxation 22849 17098 5751 33.635
134883 122124 12759 10.447
SHARE CAPITAL AND RESERVES
Authorized Share Capital 100000 100000 0
Issued Subscribed And Paid Up Capital 75600 75600 0
Reserves 0
Capital Reserves 483 483
Revenue Reserves 2665217 1884644 780573 41.417
2665700 1885127
2741300 1960727
TOTAL EQUITY AND LIABILITIES 4177050 3230187 946863 29.312
Interpretation: Comparative Balance Sheet Engro Foods
National-Foods Company's current assets have increased from 8% to 15% of total assets. This
change is because of increase in supplies, merchandise inventory and cash as percentage of total
assets. Noncurrent assets have decreased on the other hand from 92% to 85% due to decrease in
long term investment and fixed assets percentage of the total assets. Current liabilities have also
increased from 15% to 17% of total stockholders' equity and liabilities. While long term
liabilities have decreased from 63% to 56% mostly due to decrease in long term financing. Stock
holders' equity has increased as well from 37% to 44% of total stockholders' equity and
liabilities. This shows that the company has more cushions now especially in case of current
liabilities than in 2010 as current assets increased in greater percentage. Hence it is in a better
condition to get more short term loans in 2011. However, long term assets and liabilities are still
in the same position as both decreased by the same amount. Though, the company's position
looks better than in 2010 as stockholders' equity has increased as well.

18. Engro-Foods Horizontal Income Statement Comparative Analysis:
ENGRO-FOODS
PAKISTAN LIMITED
Comparative Horizontal
Income Statement
For the Years Ended December 31, 2014 and 2013
2014 2013 Increase/ (Decrease)
Rs'000 Rs'000 Amount Percentage
Sales 8329829 6428490 1901339 29.57675908
Less Cost Of Sales 4997901 3756277 1241624 33.05464427
GROSS PROFIT 3331928 2672213 659715 24.68796462
Distribution Cost 1597220 1367249 229971 16.81997939
Administration Expenses 468339 403640 64699 16.02888713
Other Operating Expenses 92660 65757 26903 40.91275454
2158219 1836646 321573 17.50870881
Other Operating Income 55047 12638 42409 335.5673366
OPERATING PROFIT 1228756 848205 380551 44.86545116
Finance Cost (Interest Expense) 39735 35183 4552 12.93806668
Profit Before Taxation 1189021 813022 375999 46.24708802
Taxation 317728 227510 90218 39.65452068
PROFIT AFTER TAXATION 871293 585512 285781 48.80873492
Other Comprehensive Income -
Total Comprehensive Income For The Year 871293 585512 285781 48.80873492
EARNINGS PER SHARE- BASIC AND
DILUTED RS. 115.25 RS77.45 37.8 48.80568108

20. Interpretation: Comparative Income Statement Engro Foods
Income statement shows that the company's sales have increased by 18% hence supporting that
the increase in current assets such as merchandise inventory was favorable to the company.
However, this has caused a greater increase in the cost of goods sold of 19% hence the sales may
not have a favorable effect on the operating performance. On the other hand net income shows a
70% increase since 2013, hence supporting that the company is doing better than in 2013.
However, administrative expense, operating expense and financing costs have increased by 16%,
16% and 40% respectively which does not bode well about the future of the company especially
as most of the increase is due to increase in salaries, wages and benefits in case of operating and
administrative expenses. Though, large amounts of donations are also included in administrative
expenses. Hence, further study is needed to assess whether Fauji Cement Company is doing well
or not.

21. Engro-Foods Vertical Balance Sheet:
ENGRO-FOODS
PAKISTAN LIMITED
Vertical Balance Sheet
December 31, 2014, and 2013
2014
(Percent)
2013
(Percent)
Current Assets
Stores And Spares 0.027698974 0.023775713
Stock In Trade 36.5576663 39.68383255
Trade Debts-Unsecured 0.534468105 0.734787181
Advances Unsecured 0.317424977 0.09878685
Deposits Short Term Prepayments And Other
Receivables 9.827916831 7.22555691
Mark-Up Accrued 0.011706827 0.119219104
Short Term Investment 11.97017034 10.83528601
Tax Refund Due From Government 10.66491902 6.791959722
Cash And Bank Balances 12.90477729 14.2793281
82.81674866 79.79253214
Non-Current Assets
Property Plant And Equipment 15.10046564 18.03025645
Intangible Assets 0.238445793
Long Term Investments 0.905495505 1.109223707
Long Term Deposits And Prepayments 0.9388444 1.067987705
17.18325134 20.20746786
Total Assets 100 100
Current Liabilities
Trade And Other Payables 23.67436349 28.60577422
Short Term Borrowings – Secured
Provision For Taxation 7.468835662 6.9134078
31.14319915 35.51918202
Non-Current Liabilities
Long Term Deposits 0.905495505 1.109223707
Deferred Liability Employee Benefit 1.776636622 2.142167001
Deferred Taxation 0.547012844 0.5293192

22. 3.229144971 3.780709909
Share Capital And Reserves
Authorized Share Capital 2.394034067 3.095796002
Issued Subscribed And Paid Up Capital 1.809889755 2.340421777
Reserves
Capital Reserves 0.011563185 0.014952695
Revenue Reserves 63.80620294 58.3447336
65.62765588 60.70010807
Total Equity And Liabilities 100 100
Interpretation: Comparison Balance Sheet Engro Foods
The above illustration of the balance sheet depicts that the current assets as a percentage of total
assets have decreased from 40 percent in 2013 to 30 percent in 2014. Cause of this fall, as visible
from the calculations can be largely attributed to the 16 percent reduction in the investments
(stated in terms of the total assets). 3 percent contraction in the cash balances also contributes to
one of the factors, apart from the other components that only changed by minute amounts.
Noncurrent assets on the other hand experienced a rise, when stated in terms of the total assets.
However, the total liabilities as a percentage of the total liabilities and stockholders’ equity
increased by 1 percent, whereas the stockholder’s equity suffered a reduction of the same amount
from 2013-2014.
Even though, it might appear from the outlook, that the liabilities have increased, which goes
against the company, and the stockholders equity has also reduced, adding to it further, and even
a 1 percent change matters a lot, but, coming to a conclusion based on these results is not
practical, other statements need to be considered too. Some accountants might take the above
change positively too, depending upon how well the company is doing in terms of its profits, so
that is what needs to be taken in to account.

23. Engro-Foods Vertical Income Statement:
ENGRO-FOODS
PAKISTAN LIMITED
Vertical Income Statement
December 31, 2014, and 2013
2014 2013
Sales 100 100
Less Cost Of Sales -60.000 -58.432
GROSS PROFIT 40.000 41.568
Distribution Cost 19.175 21.269
Administration Expenses 5.622 6.279
Other Operating Expenses 1.112 1.023
25.910 28.570
Other Operating Income 0.661 0.197
OPERATING PROFIT 14.751 13.194
Finance Cost (Interest Expense) 0.477 0.547
PROFIT BEFORE TAXATION 14.274 12.647
Taxation 3.814 3.539
PROFIT AFTER TAXATION 10.460 9.108
Other Comprehensive Income
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR 10.460 9.108

24. Interpretation: Comparative Income Statement Engro
The above comparative income statement for Engro-Foods indicates that the net income as a
percentage of the net sales of the company has decreased by 5 percent (from 13 percent in 2013
to 8 percent on 2014), even though the company is still incurring profits. This decrease has
mainly occurred because of the rise in the costs of merchandise sold which has brought about a 6
percent reduction in the gross profit (as a % of net sales), the expenses deducted later. The
expenses also take up a large portion of the net sales, leaving the company with lower profits.
This clearly shows that the company’s financial position is worse off compared to the previous
year, and if this trend continues, losses might be incurred too.

25. NationalFoods Ltd.:
National Foods 2014 Financial Statement:
NATIONAL FOODS
PAKISTAN LIMITED
Balance Sheet
As at June 30, 2014
NON-CURRENT ASSETS Rs.
Property, Plant And Equipment 1425169
Long Term Loans 1450
Long Term Deposits 12875
TOTAL NON-CURRENT ASSETS 1439494
CURRENT ASSETS
Stores, Spares And Loose Tools 50972
Stock In Trade 1358128
Trade Debts 897675
Loans And Advances 317585
Trade Deposits And Prepayments 6105
Other Receivables 224949
Cash And Bank Balances 247951
TOTAL CURRENT ASSETS 3103365
TOTAL ASSETS 4542859

26. EQUITY AND LIABILITES
Share Capital And Reserves 0
Share Capital 120288
Reserves 1579538
1699826
NON-CURRENT LIABILITIES
Long Term Financing-Secured 214263
Liabilities Against Assets Subject To
Finance Lease 26262
Long Term Deposits 880
Deferred Liabilities 225641
TOTAL NON CURRENT LIABILITES 467046
CURRENT LIABILITIES
Trade And Other Payables 1033217
Interest And Mark Up Accrued 40362
Short Term Borrowings Secured 1119143
Long Term Financing Secured 78762
Liabilities Against Assets Subject To
Finance Lease 10070
Provision For Taxation 94433
TOTAL CURRENT LIABILITES 2375987
TOTAL EQUITY AND LIABILITES 4542859

27. NATIONAL-FOODS
PAKISTAN LIMITED
INCOME STATEMENT
For the Years Ended December 31, 2014
Rs.
Sales 9421408
Cost Of Sales 8127972
Gross Profit 1293436
Less Operating Expenses
Distribution Cost 269522
Administrative Expenses 329829
Other Operating Expenses 48074
Finance Cost (Interest Expense) 177727
Other Operating Income -19648
805504
Profit Before Taxation 487932
Taxation 159827
Profit After Taxation 328105
Earnings Per Share (Eps) 2.72
Profit For The Year 328105

28. National Foods 2013 Financial Statement:
NATIONAL FOODS
PAKISTAN LIMITED
Balance Sheet
As at June 30, 2013
Rs.
NON CURRENT ASSETS
Property, Plant And Equipment 1023725
Long Term Loans 2270
Long Term Deposits 8225
TOTAL NON CURRENT ASSETS 1034220
CURRENT ASSETS
Stores, Spares And Loose Tools 27826
Stock In Trade 1253241
Trade Debts 793032
Loans And Advances 189053
Trade Deposits And Prepayments 4863
Other Receivables 140688
Cash And Bank Balances 208445
TOTAL CURRENT ASSETS 2617148
TOTAL ASSETS 3651368

29. EQUITY AND LIABILITES
SHARE CAPITAL AND RESERVES
Share Capital 120288
Reserves 1401796
1522084
NON-CURRENT LIABILITIES
Long Term Financing-Secured 142073
Liabilities Against Assets Subject To
Finance Lease 36344
Long Term Deposits 740
Deferred Liabilities 152767
TOTAL NON CURRENT LIABILITES 331924
CURRENT LIABILITES
Trade And Other Payables 787250
Interest And Mark Up Accrued 15703
Short Term Borrowings Secured 703174
Long Term Financing Secured 60000
Liabilities Against Assets Subject To
Finance Lease 8962
Provision For Taxation 222271
TOTAL CURRENT LIABILITES 1797360

30. NATIONAL-FOODS
PAKISTAN LIMITED
INCOME STATEMENT
For the Years Ended December 31, 2013
2013
Rs (000)
Sales 7680237
Cost Of Sales 6086613
GROSS PROFIT 1593624
LESS OPERATING
EXPENSES
Distribution Cost 179308
Administrative Expenses 270830
Other Operating Expenses 65312
Finance Cost (Interest Expense) 160425
Other Operating Income -18239
657636
PROFIT BEFORE
TAXATION 935988
Taxation 275162
PROFIT AFTER TAXATION 660826
EARNINGS PER SHARE
(EPS) 5.49

31. National Foods 2012 Financial Statements:
NATIONAL FOODS
PAKISTAN LIMITED
Balance Sheet
As at June 30, 2012
Rs.
NON CURRENT ASSETS
Property, Plant And Equipment 1009070
Long Term Loans 2300
Long Term Deposits 8000
TOTAL NON CURRENT ASSETS 1019370
CURRENT ASSETS
Stores, Spares And Loose Tools 27826
Stock In Trade 1250000
Trade Debts 793032
Loans And Advances 189053
Trade Deposits And Prepayments 4800
Other Receivables 140688
Cash And Bank Balances 108445
TOTAL CURRENT ASSETS 2513844
TOTAL ASSETS 3533214

32. EQUITY AND LIABILITES
SHARE CAPITAL AND RESERVES
Share Capital 120288
Reserves 1401796
1522084
NON-CURRENT LIABILITIES
Long Term Financing-Secured 142073
Liabilities Against Assets Subject To
Finance Lease 35000
Long Term Deposits 740
Deferred Liabilities 150099
TOTAL NON CURRENT LIABILITES 327912
CURRENT LIABILITES
Trade And Other Payables 768790
Interest And Mark Up Accrued 12279
Short Term Borrowings Secured 689412
Long Term Financing Secured 60000
Liabilities Against Assets Subject To
Finance Lease 8962
Provision For Taxation 211165
TOTAL EQUITY AND LIABILITES 3651368

33. NATIONAL-FOODS
PAKISTAN LIMITED
INCOME STATEMENT
For the Years Ended December 31, 2012
Rs (000)
Sales 7155237
Cost Of Sales 5065505
GROSS PROFIT 2089732
LESS OPERATING
EXPENSES
Distribution Cost 165890
Administrative Expenses 265780
Other Operating Expenses 65312
Finance Cost (Interest Expense) 160425
Other Operating Income 19850
637557
PROFIT BEFORE
TAXATION 1452175
Taxation 275162
PROFIT AFTER TAXATION 1177013
EARNINGS PER SHARE
(EPS) 3.99

34. National Foods Horizontal
Comparative Balance Sheet:
NATIONAL FOODS
PAKISTAN LIMITED
Comparative
Horizontal
Balance Sheet
As at June 30, 2014 &
2013
2014 2013
Rs (000) Rs (000) Rs. Change %
NON CURRENT ASSETS
Property, Plant And Equipment 1425169 1023725 401444 39.21404674
Long Term Loans 1450 2270 -820 -(36.12334802)
Long Term Deposits 12875 8225 4650 56.53495441
TOTAL NON CURRENT ASSETS 1439494 1034220 405274 39.18644002
CURRENT ASSETS
Stores, Spares And Loose Tools 50972 27826 23146 83.18119744
Stock In Trade 1358128 1253241 104887 8.369260182
Trade Debts 897675 793032 104643 13.19530612
Loans And Advances 317585 189053 128532 67.98728399
Trade Deposits And Prepayments 6105 4863 1242 25.53979025
Other Receivables 224949 140688 84261 59.89210167
Cash And Bank Balances 247951 208445 39506 18.95272134
TOTAL CURRENT ASSETS 3103365 2617148 486217 18.57812397

35. TOTAL ASSETS 4542859 3651368 891491 24.41526025
EQUITY AND LIABILITES
SHARE CAPITAL AND RESERVES
Share Capital 120288 120288 0 0
Reserves 1579538 1401796 177742 12.67959104
1699826 1522084 177742 11.67754211
NON-CURRENT LIABILITIES
Long Term Financing-Secured 214263 142073 72190 50.81190656
Liabilities Against Assets Subject To Finance
Lease 26262 36344 -10082 -27.74047986
Long Term Deposits 880 740 140 18.91891892
Deferred Liabilities 225641 152767 72874 47.70271066
Total Non-Current Liabilities 467046 331924 135122 40.70871645
CURRENT LIABILITIES
Trade And Other Payables 1033217 787250 245967 31.24382344
Interest And Mark Up Accrued 40362 15703 24659 157.0336878
Short Term Borrowings Secured 1119143 703174 415969 59.15591305
Long Term Financing Secured 78762 60000 18762 31.27
Liabilities Against Assets Subject To Finance
Lease 10070 8962 1108 12.36331176
Provision For Taxation 94433 222271 -127838 (57.51447557)
TOTAL CURRENT LIABILITES 2375987 1797360 578627 32.19316108

36. TOTAL EQUITY AND LIABILITES 4542859 3651368 891491 24.41526025
Interpretation: Comparative Balance Sheet National Foods
From the balance sheet given above it can be seen that total assets of National Foods increased
by 20% while total liabilities have increased by only 7% and stock holders' equity increased by
42%. Assets have increased largely due to increase in fixed assets, merchandise inventory and
supplies in 2014. Cash has also increased by 40% which might be due to the fact that long term
notes receivables have decreased by 17%, this shows a positive sign to good collection
procedures of the company however notes receivable in the current assets have increased by
51%, the increase is in those that are considered secure hence company seems to have good
credit system. Liabilities have increased mostly due to increase in short term notes payable,
current portion of long term financing and increase in deferred vacation pay expense.
Stockholders equity has largely increased due to 69% increase in subordinated loans and total
reserves in 2014. Hence, company seems to be in better shape than in 2013 though further
analysis is needed to reach conclusions.

37. National Foods Horizontal Comparative Income Statement:
NATIONAL FOODS
PAKISTAN LIMITED
Comparative Horizontal
Income Statement
For the Years Ended December 31, 2014 and 2013
2014 2013
Rs (000) Rs (000) Rs Change %
Sales 9421408 7680237 1741171 22.67079779
Cost Of Sales 8127972 6086613 2041359 33.53850491
GROSS PROFIT 1293436 1593624 -300188 (18.8368147)
LESS
OPERATING
EXPENSES
Distribution Cost 269522 179308 90214 50.31231178
Administrative
Expenses 329829 270830 58999 21.78451427
Other Operating
Expenses 48074 65312 -17238 (26.3933121)
Finance Cost
(Interest Expense) 177727 160425 17302 10.78510207
Other Operating
Income -19648 -18239 -1409 7.725204233
805504 657636 147868 22.48477881
PROFIT BEFORE
TAXATION 487932 935988 -448056 (47.8698445)
Taxation 159827 275162 -115335 (41.9153081)
0

38. PROFIT AFTER
TAXATION
328105 660826 -332721 (50.3492599)
EARNINGS PER
SHARE (EPS) 2.72 5.49 -2.77 (50.4553734)
Interpretation: Comparative Income Statements National Foods
From the statement of National-Foods Company above it can be seen that in the year 2011 the
company's net income increased from 5% to 7% of the net sales. This increase is mainly owed to
decrease in selling expenses and income tax expense and gives a positive image to the company.
However, gross profit of the company has decreased by 1% of net sales which is a large amount.
This is due to increase in cost of goods sold as percentage of net sales from that of the last year.
Administrative expense and finance cost has increased in percentage of net sales as well, hence
this does not give a good image of the company's administration and more cost minimizing
strategies need to be pursued by the company in future to get higher returns.

39. National Foods Vertical Balance Sheet:
NATIONAL-FOODS
PAKISTAN LIMITED
Vertical Balance Sheet
December 31, 2014, and 2013
ASSETS 2014 2013
CURRENT ASSETS
Cash And Bank Balances 5.458 5.709
Stores, Spares And Loose Tools 1.122 0.762
Stock In Trade 29.896 34.323
Trade Debts 19.760 21.719
Loans And Advances 6.991 5.178
Trade Deposits And Prepayments 0.134 0.133
Other Receivables 4.952 3.853
TOTAL CURRENT ASSETS 68.313 71.676
NON CURRENT ASSETS
Property, Plant And Equipment 31.372 28.037
Long Term Loans 0.032 0.062
Long Term Deposits 0.283 0.225
TOTAL NON CURRENT ASSETS 31.687 28.324
TOTAL ASSETS 100 100
EQUITY AND LIABILITIES
CURRENT LIABILITIES
Trade And Other Payables 22.744 21.560
Interest And Mark Up Accrued 0.888 0.430
Short Term Borrowings Secured 24.635 19.258
Long Term Financing Secured 1.734 1.643
Liabilities Against Assets Subject To Finance Lease 0.222 0.245
Provision For Taxation 2.079 6.087
TOTAL CURRENT LIABILITES 52.302 49.224
NON-CURRENT LIABILITIES
Long Term Financing-Secured 4.716 3.891

40. Liabilities Against Assets Subject To Finance Lease 0.578 0.995
Long Term Deposits 0.019 0.020
Deferred Liabilities 4.967 4.184
TOTAL NON-CURRENT LIABILITIES 10.281 9.090
SHARE CAPITAL AND RESERVES
Share Capital 2.648 3.294
Reserves 34.770 38.391
37.418 41.685
TOTAL EQUITY AND LIABILITES 100 100

41. National Foods Vertical Income Statement:
NATIONAL-FOODS
PAKISTAN LIMITED
Vertical Income Statement
December 31, 2014, and 2013
2014 2013
Sales 100% 100%
Cost Of Sales 86% 79%
GROSS PROFIT 14% 21%
Distribution Cost 3% 2%
Admin And Other Expense 4% 4%
Financial Cost 2% 2%
Other Income 0% 0%
Total Net Expense 9% 9%
NET PROFIT BEFORE TAXATION 5% 12%
Provision For Taxation 2% 4%
NET PROFIT AFTER TAX 3% 9%

42. National-Foods & Engro-Foods Condensed Common Size:
Income Statement:
NATIONAL-FOODS AND ENGRO-FOODS
PAKISTAN LIMITED
CONDENSED COMMON-SIZE INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2014
Sales
ENGRO
100
NATIONAL
100
Less Cost Of Sales 60.000 86.27
GROSS PROFIT 40.000 13.73
Distribution Cost 19.175 2.86
Administration Expenses 5.622 4.015
Other Operating Expenses 1.112 -
Other Operating Income 0.661 2
Finance Cost (Interest Expense) 0.477 1.9
Profit Before Taxation 14.274 5.2
Taxation 3.814 1.7
Profit After Taxation 10.460 3.5
Other Comprehensive Income
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR 10.460 8.604

43. Balance Sheet:
NATIONAL-FOODS AND ENGRO-FOODS
PAKISTAN LIMITED
CONDENSED COMMON-SIZE BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 2014
CURRENT ASSETS
NATIONAL
68.313
ENGRO
82.816
TOTAL NON-CURRENT ASSETS 31.687 17.183
TOTAL ASSETS
100 100
EQUITY AND LIABILITIES
CURRENT LIABILITIES 52.302 31.143
NON-CURRENT LIABILITIES 10.281 3.229
SHARE CAPITAL AND RESERVES 37.418 65.627
TOTAL EQUITY AND LIABILITIES 100 100

44. Conclusionof Common Sized FinancialRecords:
The common-size analysis indicates that National-Foods and Engro-Foods are very different
food manufacturing companies. The gross profit for National-Foods was 40 percent of sales,
which is much better than the gross profit as a percentage of sales for Engro-Foods i.e. 13
percent. There is a difference of 27 points, which is present because of a greater cost of sales
percentage of Engro-Foods, since there is not much difference in their prices. National-Foods are
selling, general, and administrative expenses are at about 25 percent of sales, while Engro-
Foods’s is only seven percent of sales. National-Foods can be evaluated to be more efficient by
looking at its ratios, horizontal, and vertical analysis, and it operates on a low-cost structure.
However, it spends more in marketing and advertisement than Engro-Foods, therefore it has
greater expenses. The total comprehensive income for the year is also higher as a percentage of
sales for National-Foods than for Engro-Foods. This is another factor that proves National-Foods
to be more efficient.
The common-size balance sheet also shows that most of the total assets of National-Foods
comprise of current assets. Even though same is the case with Engro-Foods, the percentage of
National-Foods is higher by 14 points. This indicates that National-Foods have a higher liquidity
than Engro-Foods. Moreover, the current liabilities of Engro-Foods as the percentage of total
liabilities and equity are higher than that of National-Foods. This again points towards National-
Foods having higher solvency and liquidity, and being able to run its day to day transactions
more easily.

45. Financial Ratios
Financial ratios are ratios that express a relationship between two
countable variables of the company. A good analyst can deduce the
situation of the company through financial ratios, since they show a
wide range of aspects and enable us to see their evolution in time. All
users of a corporations information, whether internal or external, show
keen interest in its ability to cover up its obligations, known as solvency,
and its capability to ear positive net income (profits), also known as its
profitability.
Financial ratios can therefore, be broadly divided in to these categories.
Using them as main headings, we have also tried to further analyze both
the cement manufacturing companies’ situations, by calculating all ratios
that me under them, interpretations of which are briefed below:

46. Engro-Foods:
2014 2013
Solvency Analysis:
Current Position Analysis:
Working Capital 2,158,430 1,430,112
Current Ratio 2.65 2.46
Quick Ratio 1.48 1.15
Ratio of fixed Assets to long term liabilities 5.32 5.34
Ratio of Total liabilities to Total Stock holders'
Equity 0.53 0.56
Number of times Interest Charges Earned 30.92 24.11
Accounts Receivable Turnover 373.12 370.89
Number of Days' Sales in Receivables 0.99 1
Inventory Turnover 3.56 2.94
Number of Days' Sales in Inventory 102.7 124.19
Profitability Analysis:
Ratio of net sales to assets 2.27 2.35
Rate earned on total assets 33.20% 31%
Rate earned on Stock holders' Equity (%) 44.80% 34.48%
Rate earned on Common Stock holders' Equity (%) 37.06% 27.74%
Earnings per share on Common Stock 115.25 77.45
Price earnings ratio 5.73 12.64
Dividends per share 11.94RS 8RS
Dividends yield 1.81% 0.81%

47. Interpretation:
Solvency Analysis:
Starting from the solvency measures, which are listed separately under
its heading in the table on the previous page. The increase in the
working capital from 2013 to 2014 shows that the current assets of this
company exceed its current liabilities, but the gap between them is
significant, which means that the assets have increased, therefore the
company has more capital available to settle its short term debts.
Another form of expressing the relationship between current assets and
current liabilities is that of the current ratio (also known as the working
capital ratio), increase in which again indicates the same benefit as was
with the working capital. The quick ratio has also increased from 1.15 to
1.48, which supports the above stated statement that Engro Food’s
ability to retire its short term debts have been strengthened.
When, under the heading of solvency, it comes to analyzing the accounts
receivables, the increase in the accounts receivables (from 370 to 373 in
2014) turnover indicates that there has been slight improvement in the
credit department and collection procedures which is also backed up the
reduction in the accounts receivables on the balance sheet and the
decrease in the number of days’ sales in receivables (from 1 to 0.99).
The inventory turnover has also increased which is a result of the
increase in costs of merchandise sold mainly, along with the decrease in

48. the number of days’ sales in inventories which presents a positive
picture of the company. Furthermore, the ratio of fixed assets to long
term liabilities has also decreased, at the same time, the ratio of total
liabilities to total stockholders’ equity has decreased, which shows that
the claims of creditors are reduced as compared to the owners’ equity. It
is of immense importance because when, if ever, the company is unable
to meet its obligations, the creditors will not take it over. And, as the
number of times interest charges earned has increased significantly,
from 24.11 to 30.92, which clearly indicates that the company has
gained strength. Nevertheless, these measures are still not enough, so we
need to consider profitability ratios as well.
Profitability Analysis:
Now, considering Engro Foods profitability, the decrease in the ratio of
net sales to assets (from 2.35 to 2.27) points towards the company’s
decreased efficiency in utilizing its assets to their maximum , the rate
earned on total assets has increased which shows that the profitability of
the assets has improved. The rate earned on stockholders equity has
reduced which leaves the company with a leverage of 12.11 (as of
2011). The rate earned on common stockholder’s equity has risen
illustrating that higher rate of profits are earned by the common
stockholders, although preferred stocks are not present, supported by the
increased earnings per share in 2014 (77.45 to 115.25). A lower price

49. earnings ratio provides information about the lack of investors’
expectations about the future. Moreover, the higher dividends per share
and a higher dividend yield ratio specify that the market price of shares
has also increased. In short, the company’s ability to make profit and
progress has been enhanced during this year, also visible from the higher
net income, and this goes in favor of its reputation
National Foods:

50. 2014 2013
Solvency Analysis:
Current Position Analysis:
Working Capital 727378 819788
Current Ratio 1.31 1.46
Quick Ratio 0.71 0.74
Ratio of fixed Assets to long term liabilities 3.08 3.115
Ratio of Total liabilities to Total Stock holders'
Equity 0.267 0.237
Number of times Interest Charges Earned 3.75 6.83
Accounts Receivable Turnover 238.0 212.0
Number of Days' Sales in Receivables 2.2 2.6
Inventory Turnover 4.09 5.04
Number of Days' Sales in Inventory 89.12 72.43
Profitability Analysis:
Ratio of net sales to assets 3.29 2.29
Rate earned on total assets 16.20% 25%
Rate earned on Stock holders' Equity (%) 19.30% 51.60%
Rate earned on Common Stock holders' Equity (%) 19.30% 51.60%
Earnings per share on Common Stock 27.27RS 54.95RS
Price earnings ratio 8.8 4.18
Dividends per share 12.51RS 14.75RS
Dividends yield 5.20% 6.40%

51. Interpretation:
SolvencyAnalysis:
Solvency analysis of a company shows a company's ability to satisfy its liabilities.
The ability of the company to satisfy its current liabilities can be seen from current
position analysis. National Foods current position analysis shows that its working
capital was positive both in 2013 and 2014 hence meaning that its current assets
were greater than its current liabilities. However, the working capital decreased
from 2013 to 2014. Current ratio has also decreased from 1.46 to 1.31 in
2014.While quick ratio has also fallen from 0.74 to 0.71. This shows that the
company is in an unfavorable position in 2014 to get short term credit than in 2013
and its instant debt paying ability has diminished. Also, as the company's quick
ratio is below 1 it does not provide a satisfactory cushion to the current liabilities
and company needs to further improve these ratios for debt security. Ratio of fixed
assets to long term liabilities has fallen in 2014. However as it are greater than 2 it
is quite satisfactory and company seems in a good position to borrow from long
term creditors and has leverage. Ratio of total liabilities to total Stockholders'
equity has increased in 2014 from 0.237 to 0.367. This shows that the controlof
the stockholders over the company has slightly increased over claims of creditors.
Number of times Interest Charges Earned have declined in 2014 from 6.83 to 3.75.
This is not good for the company as it shows that the guarantee of interest
payments being made on continuing basis has declined if earnings decrease. Hence
it decreases creditor’s confidence making it difficult to get loans. Accounts
receivable turnover has increased from 212 to 238 in 2014, while number of days
sales' in receivables have decreased to 2.2 from 2.6. This indicates that account
receivables collection has improved, as has the time receivables, are left
outstanding. Inventory turnover decreased from 5.04 to 4.09 for National Foods in

52. 2014 while, number of days' sales in inventory on the other hand increased. This
shows that company's inventory management has becomeinferior since 2013 as
inventory stockhas increased as have costof goods sold and it takes more days to
buy and sell inventory in 2014. Overall, in terms of solvency the company's
position has declined from 2013, though there is room for improvement.
Profitability Analysis:
Profitability analysis shows the ability of the business to earn profits. This depends
to a large extent on how effectively and efficiently resources are utilized. Ratio of
net sales to assets is a measure of utilization of assets. It can be seen that ratio of
net sales to assets of National Foods Companyhas increased in 2014 from 2.29 to
3.29. However the rate earned on total assets has decreased from 25% to 16.20%.
Hence showing that the company is now not better at utilizing its assets in 2014
than in 2013. Rate earned on stockholders' equity decreased from 51.30% to
19.30% as well in 2014, giving the company less leverage. Hence, the company is
now earning lower amounts on assets acquired with creditors' funds than the
interest paid to the creditors. Rate earned on common stockholders' equity has also
fallen from 2013, as have the earnings per share on common stock. Hence,
showing that the company's common stockholders have less leverage now than in
2013 shedding a negative light on the company. National FoodsCompany's price
earnings ratio has increased in 2014 mainly due to decrease in market price per
share. Dividends have been given to common stock has also fallen. This does not
look good for the company as it decreases investors’ confidence as they would not
be getting reduced. Hence, it would be good for the company to declare more

53. dividends. Overall, however the company's profitability has decreased in 2014 and
its looks in a worse position than in 2013.