Financial Ratio analysis Of Gul Ahmed Textile Ltd.

1. “FINANCIAL
RATIO
ANALYSIS”
GUL AHMED TEXTILE
MILL

2. FINANCIAL RATIOS:
• Financial ratios are mathematical comparisons of
financial statement accounts or categories.
• These relationships between the financial statement
accounts help investors, creditors, and internal
company management understand how well a
business is performing.

3. ACTIVITY RATIOS:
• Activity ratios also called efficiency ratios measure how
well companies utilize their assets to generate income.
• Efficiency ratios often look at the time it takes
companies to collect cash from customer or the time it
takes companies to convert inventory into cash.

4. “INVENTORY TURNOVER RATIO”
YEARS 2017 2016 2015 2014 2013
INVENTORY
TURNOVER
2.50 1.99 2.35 2.52 3.00
DOH 146 183 155 145 122
Revenue 39,904,322 32,274,556 33,354,784 33,012,724 30,201,588

5. “INVENTORY TURNOVER RATIO”
YEARS 2017 2016 2015 2014 2013
INVENTORY
TURNOVER
2.50 1.99 2.35 2.52 3.00
DOH 146 183 155 145 122
Revenue 39,904,322 32,274,556 33,354,784 33,012,724 30,201,588

6. “PAYABLES TURNOVER RATIO”
YEARS 2017 2016 2015 2014 2013
PAYABLES
TURNOVER
4.34 3.04 3.09 2.89 3.65
DPO 84 120 118 126 100

7. “WORKING CAPITAL,FIXED ASSET & TOTAL
ASSETS TURNOVER RATIO”
YEARS 2017 2016 2015 2014 2013
AVG
WORKING
CAPITAL
23.2 30.0 40.5 42.4 106.2
FIXED
ASSETS
TURNOVER
2.4 2.6 3.6 3.9 4.1
TOTAL
ASSETS
TURNOVER
1.08 1.00 1.33 1.35 1.42
Revenue 39,904,322 32,274,556 33,354,784 33,012,724 30,201,588

8. LIQUIDITY RATIOS:
• Liquidity ratios focuses on cash flow, measures a
company’s ability to meet its short term obligations.
• Liquidity measures how quickly assets are converted
into cash.

9. “LIQUIDITY RATIOS”
YEARS 2017 2016 2015 2014 2013
CURRENT
RATIO
1.11 1.08 1.05 1.06 1.05
QUICK
RATIO
0.19 0.14 0.13 0.09 0.20

10. “LIQUIDITY RATIOS”
YEARS 2017 2016 2015 2014 2013
CASH RATIO 0.014 0.016 0.0078 0.0076 0.0076
CASH
CONVERSION
CYCLE
88 87 55 41 50

11. SOLVENCY RATIOS:
• Solvency ratios, also called leverage ratios, measure a
company’s ability to sustain operations indefinitely by
comparing debt levels with equity, assets, and
earnings.
• Solvency ratios show a company’s ability to make
payments and pay off its long-term obligations to
creditors, bondholders, and banks.

12. “DEBT RATIOS”
YEARS 2017 2016 2015 2014 2013
DEBT TO
ASSET RATIO
0.54 0.56 0.49 0.45 0.53
DEBT TO
CAPITAL
RATIO
0.64 0.67 0.63 0.62 0.67

13. “DEBT RATIOS”
YEARS 2017 2016 2015 2014 2013
DEBT TO
EQUITY
RATIO
1.8 2.1 1.7 1.6 2.09
FINANCIAL
LEVERAGE
RATIO
3.50 3.59 3.55 3.76 3.92

14. “COVERAGE RATIOS”
YEARS 2017 2016 2015 2014 2013
INTEREST
COVERAGE
1.92 2.47 1.59 2.29 1.67

15. PROFITABILITY RATIOS:
• Profitability ratios compare income statement accounts
and categories to show a company’s ability to generate
profits from its operations.
• Profitability ratios focus on a company’s return on
investment in inventory and other assets. These ratios
basically show how well companies can achieve profits
from their operations.

16. “RETURN ON SALES”
YEARS 2017 2016 2015 2014 2013
REVENUE
39,904,32
2
32,274,55
6
33,354,78
4
33,012,72
4
30,201,58
8
GROSS
PROFIT
MARGIN
17.66% 22.64% 18.2% 18.10% 15.71%

17. “RETURN ON SALES”
YEARS 2017 2016 2015 2014 2013
REVENUE
39,904,32
2
32,274,55
6
33,354,78
4
33,012,72
4
30,201,58
8
PRE TAX
MARGIN
2% 4% 2% 5% 3%

18. “RETURN ON SALES”
YEARS 2017 2016 2015 2014 2013
REVENUE
39,904,32
2
32,274,55
6
33,354,78
4
33,012,72
4
30,201,58
8
OPERATI
NG
PROFIT
MARGIN
4% 7% 6.% 8% 7%

19. “RETURN ON SALES”
YEARS 2017 2016 2015 2014 2013
REVENUE
39,904,32
2
32,274,55
6
33,354,78
4
33,012,72
4
30,201,58
8
NET
PROFIT
MARGIN
2% 4% 2% 4% 2%

20. “RETURN ON INVESTMENT”
YEARS 2017 2016 2015 2014 2013
REVENUE
39,904,32
2
32,274,55
6
33,354,78
4
33,012,72
4
30,201,58
8
OPERATI
NG ROA
5% 8% 9% 12% 11%

21. “RETURN ON INVESTMENT”
YEARS 2017 2016 2015 2014 2013
REVENUE
39,904,32
2
32,274,55
6
33,354,78
4
33,012,72
4
30,201,58
8
RETURN
ON
ASSET
2% 4% 2% 5% 4%

22. “RETURN ON INVESTMENT”
YEARS 2017 2016 2015 2014 2013
REVENUE
39,904,32
2
32,274,55
6
33,354,78
4
33,012,72
4
30,201,58
8
RETURN
ON
EQUITY
8% 14% 9% 20% 14%

23. “RETURN ON INVESTMENT”
YEARS 2017 2016 2015 2014 2013
REVENUE
39,904,32
2
32,274,55
6
33,354,78
4
33,012,72
4
30,201,58
8
RETURN
ON
TOTAL
CAPITAL
4.59% 6.97% 8.48% 10.95% 9.76%

24. VALUATION RATIOS
• It is used in investment decision making.
• It is a measure of how cheap or expensive a security
(or business) is, compared to some measure of profit
or value.
• A valuation ratio is calculated by dividing a measure
of price by a measure of value or vice versa.

25. “VALUATION RATIOS”
YEARS 2017 2016 2015 2014 2013
PRICE TO
EARNING
16.36 9.23 18.53 11.85 7.39
PRICE TO
SALES
3.66 3.33 3.38 3.54 1.19
PRICE TO
BOOK
VALUE
0.40 0.33 0.45 0.48 0.17

27. DUPONT ANALYSIS
• The Dupont Corporation developed this analysis in the
1920s.
• It is a financial ratio based on the return on equity
ratio that is used to analyse a company’s ability to
increase its return on equity.
• This model breaks down the return on equity ratio to
explain how companies can increase their return for
investors.

28. • The Dupont analysis looks at three main components of
the ROE ratio.
• Profit Margin
• Total Asset Turnover
• Financial Leverage
• Based on these three performances measures the
model concludes that a company can raise its ROE by
maintaining a high profit margin, increasing asset
turnover, or leveraging assets more effectively.

29. RETURN ON EQUITY
Net Income ÷
Average Shareholder’s Equity
RETURN ON ASSETS
Net Income ÷
Average Total Assets
LEVERAGE
Average Total Assets ÷
Average Shareholder’s Equity
NET PROFIT MARGIN
Net Income ÷
Revenue
TOTALASSET
TURNOVER
Revenue ÷
Average Total Assets
TAX BURDEN
Net Income ÷
EBT
INTEREST
BURDEN
EBT ÷
EBIT
EBIT MARGIN
EBIT ÷
Revenue

30. 2017 2016 2015 2014 2013
Return on Equity 8% 14% 9% 20% 14%
Return on Assets 2% 4% 2% 5% 4%
Leverage 3.50 3.59 3.55 3.76 3.92
Net Profit Margin 2% 4% 2% 4% 2%
Total Asset
Turnover
1.15 1.13 1.35 1.45 1.55
Tax Burden 1.01 0.85 0.77 0.82 0.83
Interest Burden 0.47 0.59 0.36 0.56 0.40
EBIT Margin 4.22% 6.95% 6.34% 8.05% 6.84%
“Gul Ahmed’s DuPont Analysis”

31. Conclusion:
• Overall, the trend in ROE did not result from a single aspect
of the company’s performance, but instead was a function
of all the components of DuPont i.e. increasing tax burden
ratio, unstable interest burden ratio, unstable operating
profits/EBIT margin, average efficiency, lower use of
leverage.
• Additional research on the causes of various changes is
required in order to develop expectations about the
company’s future performance.