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58619593 financial-analysis-final-thesis-fauji-cement-pioneer-cement-1

  1. 1. Zahoor Ahmad Page 1 24-06-2011
  2. 2. INDUS INSTITUTE OF HIGHER EDUCATION KARACHI. Financial Analysis of Cement Industry of Pakistan Fauji Cement & Pioneer Cement (Comparison With Kohat & Cherat Cement) (This thesis is submitted in partial fulfillment of requirements for the MBA. Degree in Finance). SUPERVISED BY: SIR. TARIQ MEHMOOD. FACULTY MEMBER. Email:tariqphdszabist@gmail.com SUBMITTED BY: Zahoor Ahmed IIHE/08E/2008 Email:zahoor_gr8@yahoo.com MBA (Finance) A PROJECT SUBMITTED TO THE FACULTY OF BUSINESS ADMINISTRATION. Zahoor Ahmad Page 2 24-06-2011
  3. 3. JUNE, 2011. INDUS INSTITUTE OF HIGHER EDUCATION KARACHI. Financial Analysis of Cement Industry of Pakistan (This thesis is submitted in partial fulfillment of requirements for the MBA. Degree in Finance). SUPERVISED BY: SIR. TARIQ MEHMOOD. FACULTY MEMBER. Email:tariqphdszabist@gmail.com SUBMITTED BY: Zahoor Ahmed IIHE/08E/2008 Email:zahoor_gr8@yahoo.com MBA (Finance) A PROJECT SUBMITTED TO THE FACULTY OF BUSINESS ADMINISTRATION. JUNE, 2011. Zahoor Ahmad Page 3 24-06-2011
  4. 4. ABSTRACT SUBMITTED BY: ZAHOOR AHMAD. DISCIPLINE: MBA (FINANCE). TITLE OF PROJECT REPORT: FINANCIAL ANALYSIS OF CEMENT INDUSTRY OF PAKISTAN. (Fauji Cement & Pioneer Cement Compare with Kohat & Cherat) MONTH OF SUBMISSION: JUNE , 2011. NAME OF PROJECT SUPERVISOR: SIR. TARIQ MEHMOOD. Zahoor Ahmad Page 4 24-06-2011
  5. 5. Faculty of Business Administration INDUS INSTITUTE OF HIGHER EDUCATION Karachi. Certificate I am pleased to certify that Mr. Zahoor Ahmed s/o Muhammad Maroof has satisfactorily carried out a research work, under my supervision on the topic of “Financial Analysis of Cement Industry of Pakistan. (Surway of two units): (2004 to 2008)” I further certify that his distinctive original research and his thesis is worthy of presentation to the Faculty of Business Administration, INDUS INSTITUTE OF HIGHER EDUCATION Karachi for the degree of MBA(Finance). Dean Business Administration: --------------------------- HOD Business Administration: ---------------------------- Supervisor: ------------------------------ Zahoor Ahmad Page 5 24-06-2011
  6. 6. ACKNOWLEDGEMENT God Almighty is worthy of all acknowledgments………….. No one can say that I am perfect, everyone should admit that without the help of ALLAH and His people a man can’t get anything so I bow my head before almighty Allah with gratitude. I am also very much thankful and presents salute to many individuals who have helped me in shaping this research paper I am gratitude to Almighty ALLAH, Who has given me strength and mentor to accomplish this mammoth task. I extend my thanks to SIR. TARIQ MEHMOOD for his candid guidance and continuous support and encouragement during the accomplishment of my Project Report on “Financial Analysis of Cement Industry of Pakistan (Survey of Two Units)”, which is compulsory for my degree of M.B.A (Finance). I am thankful to my teacher for giving me this opportunity and build up confidence. I hope this effort on my part will come up to your expectations. The last but not least, I would feel incomplete without thanking to my parents who pray for my brilliant success and bright future. By: Zahoor Ahmad. INDUS INSTITUTE OF HIGHER EDUCATION KARACHI. DATED: 10TH JUNE 2011. Zahoor Ahmad Page 6 24-06-2011
  7. 7. 2. Dedication I dedicate this research to our parents and teachers, who taught us to think, understand and express. I earnestly feel that without their inspiration, able guidance and dedication, I would not be able to pass through the tiring process of this research. Zahoor Ahmad Page 7 24-06-2011
  8. 8. 3. ABSTRACT The purpose of this research report is to evaluate, analyze and compare the financial statements of M/S Fauji Cement Company Limited & (Pioneer Cement Comparison with Kohat & Cherat Cement comparative analysis. I have chosen these two companies on the basis of their financial performance, they are also listed on all major stock exchanges of the country. After researching, surveying, observing, collection of data, I have arrived at the written analysis follows hereafter. As the requirement of the report, I have conducted a detailed study of the analysis the financial statements and ratios. On the basis of above information, I have arrived on specific recommendations from strategic management’s viewpoint. I have supported suggestions through strategic theories, matrices and exhibits, present in the report. The report includes the whole financial status of both the companies through which a reader can get the financial strengths & weakness of both the organizations. The fundamentals of the research is to build the reader’s capability to evaluate the financial data & information into projective manner as to compare the financial stability & growth with each other in consequence either for enhancement & for decrement. Pakistan currently has a per capita consumption of 120kg of cement, which is comparable to that for India at 135kg per capita but substantially below the World Average 270kg and the regional average of over 400kg for peers in Asia and over 600kg in the Middle East. Over the years a number of tax policy and administrative measures have been introduced to attract investment and facilitate growth of the cement industry. The Government has reduced central excise duty (CED) on cement in the budget for 2007-08 in order to boost construction activity. Zahoor Ahmad Page 8 24-06-2011
  9. 9. In Pakistan APCMA plays a significant role in projecting the cement industry to the Government and coordinating various activities in respect of formulation of Government policies for the cement industry. Cement demand is significantly affected by the Public Sector Development Program (PSDP), construction of dams, elevated and concrete roadways, residential construction as well as exports. Table Of Contents S.# Chapter Title Page 1 Acknowledgement 1 2 Dedication 2 3 Abstract 3 4 Chap-1 - 1.1 Introduction 7 5 1.2 Data 9 6 1.3 Problem Statement 10 7 1.4 Purpose of Study 10 8 1.5 Research objective 11 9 1.6 Limitation of research 12 10 Chap-2 - 2.1 Literature review 12 11 2.2 Growth of Cement Industry 13 12 2.3 Export & International Market 14 13 2.4 National Scenario 15 14 2.4.1 Production 15 15 Chap-3 – 3.1 Methodology (Theories) 17 16 3.2 Financial Analysis Procedure 17 17 3.2.1 Percentage Analysis 17 18 3.2.2 Trend Analysis (Horizontal Analysis) 17 Zahoor Ahmad Page 9 24-06-2011
  10. 10. 19 3.2.3 Common Size Statement – Vertical Analysis 17 20 3.2.4 Ratio Analysis 17 21 3.3 Data Collection Procedure 18 22 3.4 Analysis Procedure 18 23 3.5 Sample 20 24 3.6 Test of Analysis 21 25 Chap-4 – 4.1 Data analysis, results / findings and Discussion. 22 26 (1) - 4.2 Fauji Cement Company Limited. 22 27 4.3 Financial Analysis M/S Fauji Cement (Balance Sheet) 22 28 4.4 Income Statement 25 29 4.5 Balance Sheet Trend Analysis(Horizontal Analysis) 26 30 4.6 Balance Sheet Vertical Analysis 30 31 4.7 Income Statement Trend Analysis(Horizontal Analysis) 33 32 4.8 Income Statement (Vertical Analysis) 35 33 4.9 Ratio Analysis 37 34 4.9.1 Liquidity Ratio 37 35 4.9.2 Longterm Liquidity / Long Term Debt Paying Ability 42 36 4.9.3 Activity Ratio / Asset Turnover Ratio/ efficiency Ratio 45 37 4.9.4 Profitability Ratio 50 38 4.9.5 Financial Leverage Ratio. 60 39 4.9.6 Dividend Policy Ratio 61 40 4.9.7 Ratio Analysis Chart 63 41 4.9.8 Conclusion (Fauji Cement) 64 42 (2) - 4.2.1 Pioneer Cement Limited (Comparative Analysis with Kohat & Cherat Cement) 65 43 4.2.2 Five Years Horizental Analysis of Income Statement 65 Zahoor Ahmad Page 10 24-06-2011
  11. 11. 44 4.2.3 Five Years Horizental Analysis of Balance Sheet 67 45 4.2.4 Vertical Analysis of Income Statement 71 46 4.2.5 Vertical Analysis of Balance Sheet 73 47 4.2.6 Trend Analysis (Balance Sheet) 77 48 4.2.7 Trend Analysis (Income Statement) 80 49 4.3 Ratio Analysis 81 50 4.3.1 LiquidityRatios 81 51 4.3.2 Current Ratio 81 52 4.3.3 Quick Ratio 84 53 4.3.4 Turnover /Activity Ratio 86 54 4.3.5 DebtorsTurnoverRatioorReceivableTurnover 87 55 4.3.6 Total assets Turnover Ratio 89 56 4.3.7 FixedAssetsTurnoverRatio 91 57 4.4.1 Profitability Ratio 92 58 4.4.2 Gross Profit (GP) Ratio 93 59 4.4.3 Operating Profit ratio 94 60 4.4.4 Return on Assets 95 61 4.4.5 Return on Equity (ROE) Ratio 96 62 4.4.6 Debt Ratio 98 63 4.4.7 Debt Service Ratio Interest Coverage Ratio 100 64 4.5 General Ratio analysis 101 65 4.6 Company Analysis 103 66 Chap-5 - 5.1 Conclusion 104 67 Chap-6 – 6.1 Recommendation 105 68 6.2 Future Outlook 106 69 6.3 Bibliography (References) 107 Zahoor Ahmad Page 11 24-06-2011
  12. 12. Chapter.1 Introduction The research report is carried out as the analysis of cement industry of Pakistan by comparing the financial performance of two units (Fauji Cement Co. Ltd. & Pioneer Cement Ltd.) Analysis will be made for Profit and Loss A/c, Balance Sheet and Cash flow statement; the following financial ratios will also be analyzed. Balance Sheet Trend Analysis (Horizontal Analysis / Vertical Analysis). Income Statement Trend Analysis (Horizontal Analysis / Vertical Analysis). Ratio Analysis. FINANCIALANALYSIS Financial Analysis is the summary of all transactions that have occurred over a particular period. Financial Analysis refers to the assessment of a business to deal with the planning, budgeting, monitoring, forecasting, and improving of all financial details within an organization. These indicate a firm's financial health and stability. Two key financial statements are: BALANCE SHEET • A balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's financial condition”. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business' calendar year. Zahoor Ahmad Page 12 24-06-2011
  13. 13. • A standard company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first and typically in order of liquidity. Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities. INCOME STATEMENT Income statement (also referred as profit and loss statement (P&L), statement of financial performance, earnings statement, operating statement or statement of operations) • Is a company's financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as the "bottom line"). It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of various assets) and taxes. • The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported. • The important thing to remember about an income statement is that it represents a period of time. This contrasts with the balance sheet, which represents a single moment in time Horizontal Analysis The analysis is based on a year-to-year comparison of a firm's ratios, Vertical Analysis The comparison of Balance Sheet accounts either using ratios or not, to get useful information and draw useful conclusions RATIO ANALYSIS: A comparison of relationship among account balances. FINANCIAL RATIOS Financial Rations are helpful in analyzing the actual performance of the company compared to its financial objectives. They also provide insights into the firm’s performance compared to other firms in the industry. Ratio simply means one number expressed in Zahoor Ahmad Page 13 24-06-2011
  14. 14. term of another. A ratio is a statistical yardstick by means of which relationship between two or various figures can be compared or measured. The term accounting ratio is used to describe significant relationship between figures shown on a balance sheet, profit and loss account or in any other part of accounting organization. Accounting ratio thus shows the relationship between the accounting data. ACCOUNTING RATIOS The term "accounting ratios" is used to describe significant relationship between figures shown on a balance sheet, in a profit and loss account, in a budgetary control system or in any other part of accounting organization. Accounting ratios thus shows the relationship between accounting data. Ratios can be found out by dividing one number by another number. Ratios show how one number is related to another. It may be expressed in the form of co-efficient, percentage, proportion, or rate. ADVANTAGES OF RATIOS ANALYSIS Ratio analysis is an important and age-old technique of financial analysis. The following are some of the advantages of ratio analysis: SIMPLIFIES FINANCIAL STATEMENTS It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the business. INTER PERIOD COMPARISON It provide data for inter period comparison. FACILITATES INTER-FIRM COMPARISON It provides data for inter-firm comparison. Ratios highlight the factors associated with successful and unsuccessful firm. They also reveal strong firms and weak firms, overvalued and undervalued firms. HELPS IN PLANNING It helps in planning and forecasting. Ratios can assist management, in its basic functions of forecasting. Planning, co-ordination, control and communications. MAKES INTER-FIRM COMPARISON POSSIBLE Ratios analysis also makes possible comparison of the performance of different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future. Zahoor Ahmad Page 14 24-06-2011
  15. 15. HELP IN INVESTMENT DECISIONS It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc 1.2. DATA. 1) I chose the cement sector of Fauji Cement for inter period analysis from 2004 to 2008 2) Three cement industries for their comparative financial analysis(Inter firm & inter period Analysis). We have collected the annual reports of our respective companies for five years (2004-2008) .The companies are as follows: • Pioneer Cement Ltd. • Kohat Cement Ltd. • Cherat Cement Ltd. 1.3 .Problem Statement Analysis will be made for Balance Sheet and Profit & loss A/c .the following financial statement analysis and ratio analysis will also be analyze. Trend analysis (Horizontal Analysis). Common size statement (Vertical Analysis) Ratio Analysis • Liquidity ratios. • Long term Liquidity / Long term Debt paying ability. • Activity ratios / Asset turnover ratios / Efficiency ratios. • Profitability ratios. • Financial leverage ratios. • Dividend policy ratios • Comparison will be made on the entire above ratio to find how good the business of the company is going. 1.4 Purpose of Study Zahoor Ahmad Page 15 24-06-2011
  16. 16. The purpose of the this research report is to extract the most out of the financial performance of the Cement Industry by comparing the performance of the surveying units (Fauji Cement Co. & Pioneer Cement Co. Ltd.Comparison with Kohat & Cherat). Fauji Cement analysis will be made by inter period analysis from 2004 to 2008 and the other same unit / sector is Pioneer Cement comparative analysis will be made by both inter period and inter firm analysis is comparison with kohat Cement & Cherat Cement. The main objective of this research is to find out the financially analysis of cement Industry of Pakistan and also the current position of the cement industry in comparison of highly developed and automated cement industry of the world and suggest the improvements needed to reach at the same level, in term of trading process, trading volume and automation as well in term of recognition as other the cement Industry have. Financial literacy for the business students is the secondary purpose of this report especially for those students who don’t select course related to the finance. 1.5. Research Objectives The objective of this study is to analyze the financial performance of the companies based on the financial ratio during the period of 2004 to 2008. Other objectives of this research report is to give the better investment opportunities to the investors as well as to give the opportunity to the students to learn and have some knowledge about the financial & comparative analysis of the industries. 1.6. Limitations of Report There are many performance measurements using financial ratio analysis. There might be difficult to use all the measure. This study will select a certain financial ratio only. So, different performance measurement will give different result. This study based on the data collected through annual report, there could be some error in the data sources, which could make the result not accurate. Zahoor Ahmad Page 16 24-06-2011
  17. 17. This study limited to Five years research period from 2004 to 2008 for the ratio analysis in order to determine the analysis and conclusion. This research report is only the comparison of financial performance of two units of the Cement Industry (i.e. Fauji Cement Co. Ltd. & Pioneer Cement compare with Kohat & Cherat.) and not the analysis of Cement Industry as a whole. Chapter .2 2.1 LITERATURE REVIEW Business Recorder reported that Pakistan’s cement exports witnessed a healthy growth of 65%, to over 6 million tons during 7 months of the current fiscal year mainly due to rise in international demand. The exports may reach to 11 million tons and earn approx $ 700 million during 2008-09 (PCMA, 2010). The statistics of All Pakistan Cement Manufacturers Association also showed that cement exports had mounted to over 6 million tons in 7 months as compared to 3.62 million tons of same period of last fiscal year, depicting an increase of 2.38 million tons (PCMA, 2010). Cement exports during January 2009 went up by 30% to 0.81 million tons as compared to 0.623 million tons in January 2008. However, slow construction activities in the country during the period badly upset domestic sale of cement, which depicted decline of 15%, to 10.77 million tons as compared to 12.59 million tons of last fiscal year (FCCL, 2010). On MoM basis, local dispatches of cement during January 2009 showed a decline of 8%, to 1.51 million tons from 1.65 million tons of January 2008. Overall dispatches, including export and local sales, reached 16.77 million tons during July to January of 2008-09 as against 16.20 million tons of last fiscal year, depicting an increase of 3%. By September 2009, after witnessing substantial growth in all three quarters of fiscal year (FY) 2008-09, cement sector concluded the fourth quarter with a handsome growth of 1,492 Zahoor Ahmad Page 17 24-06-2011
  18. 18. percent on yearly basis (PCCL, 2010). All Pakistan Cement Manufacturers Association’s report revealed on 29th September 2009. Higher retention prices (up 59 percent) and high rupee based export sales amid rupee depreciation (20 percent) drove profits up north. However, this growth is magnified, as FY2007-08 was an abnormally low profit period for the sector. Moreover, the performance is skewed towards large players with export potential as profitable companies in both years posted increase of just 109 percent, said analyst at JS Research Atif Zafar. He said that cumulative profitability of companies in FY09 stood at Rs 6.2 billion or $78.2 million as compared to Rs 386 million or $6.2 million depicting a massive growth of 1,492 percent (FCCL, 2010). Companies with profits in both the years posted 109 percent earnings improvement. Though total dispatches were down 2 percent, net sales grew by 55 percent to Rs 101.4 billion or $1.3 billion on the back of higher net retention prices (up 59 percent) and improved export based revenues. Cost of sales/tonne also rose by 33 percent on yearly basis amid higher realised coal prices and inflationary pressures, the analyst maintained. 2.2. Growth of Cement Industry Zahoor Ahmad Page 18 24-06-2011
  19. 19. Growth of cement industry is rightly considered a barometer for economic activity. In 1947, Pakistan had inherited 4 cement plants with a total capacity of 0.5 million tons. Some expansion took place in 1956-66 but could not keep pace with the economic development and the country had to resort to imports of cement in 1976-77 and continued to do so till 1994-95 (PCCA, 2010). The industry was privatized in 1990 which led to setting up of new plants. Although an oligopoly market, there exists fierce competition between members of the cartel today. The industry comprises of 29 firms (19 units in the north and 10 units in the south), with the installed production capacity of 44.09 million tons. The north with installed production capacity of 35.18 million tons (80 percent) whiles the south with installed production capacity of 8.89 million tons (20 percent), compete for the domestic market of over 19 million tons. There are four foreign companies, three armed forces companies and 16 private companies listed in the stock exchanges (PCCL, 2010). The industry is divided into two broad regions, the northern region and the southern region. The northern region has around 80 percent share in total cement dispatches while the units based in the southern region contributes 20 percent to the annual cement sales. Cement industry is indeed a highly important segment of industrial sector that plays a pivotal role in the socio-economic development. Since cement is a specialized product, requiring sophisticated infrastructure and production location. Mostly of the cement industries in Pakistan are located near/within mountainous regions that are rich in clay, iron and mineral capacity. Cement industries in Pakistan are currently operating at their maximum capacity due to the boom in commercial and industrial construction within Pakistan. The cement sector is contributing above Rs 30 billion to the national exchequer in the form of taxes (KCC, 2010). Cement industry is also serving the nation by providing job opportunities and presently more than 150,000 persons are employed directly or indirectly by the industry. The industry had exported 7.716 million tons cement during the year 2007-08 and had earned $450 million, while is expected to export 11.00 million tons of cement during 2008-09 and earn approximately $700 million. Zahoor Ahmad Page 19 24-06-2011
  20. 20. 2.3. Exports & International Markets The cement industry of Pakistan entered the export markets a few years back, and has established its reputation as a good quality product. Deregulation after accession of Pakistan to WTO is expected to open the window of competition from cheaper markets (Baughn, Bodie, and McIntosh, 2007). The recent acquisition of Chakwal Cement by an Egyptian giant, Orascom may be a beginning of such an entry in Pakistan by multinationals (Adekoya, 2003). New avenues for export of cement are opening up for the indigenous industry as Sri Lanka has recently shown interest to import 30,000 tons cement from Pakistan every month. If the industry is able to avail the opportunity offered, it may secure a significant share of Sri Lanka market by supplying 360,000 tons of cement annually (Adewuyi, 2002). In 2007, 130,000 tons cement was exported to India. In 2007, the exports to Afghanistan, UAE and Iraq touched 2.13 million tons. At present, the economies of major countries are facing recession, but Pakistan’s cement sector is still maintaining a healthy growth (Aigbedion, and Iyanyi, 2007). Cement export to India has already slowed after imposition of duty by Indian authorities. Export of Clinker and Cement (Qty/Tonnes ) |------------------Cement-------------------| |---Clinker---| Years Afghanistan India Other Countries Other Countries Total %age Via Land Via Sea & Land Via Sea Via Sea Incr/(Decr) 2001-2002 106,620 - - - 106,620 100.00% 2002-2003 430,322 - - 41,500 471,822 342.53% 2003-2004 1,118,293 - - - 1,118,29 3 137.02% 2004-2005 1,407,900 - 157,270 - 1,565,17 0 39.96% 2005-2006 1,413,994 - 91,165 - 1,505,15 9 -3.83% 2006-2007 1,725,526 - 1,071,928 390,973 3,188,42 7 111.83% 2007-2008 2,777,826 786,672 3,045,995 1,106,127 7,716,62 0 142.02% 2008-2009 3,201,953 669,700 6,567,042 942,137 11,380,83 0 47.48% Zahoor Ahmad Page 20 24-06-2011
  21. 21. 2.4. National Scenario. CEMENT INDUSTRY IN PAKISTAN 2.4.1 Production In Pakistan, there are 29 cement manufacturers that are playing a vital role in the building up the country’s economy and contribution towards growth and prosperity. After 2002-3, most of the cement manufacturers expanded their operations, and increased production. This sector has invested about $1.5 billion in capacity expansion over the last six years. The operating capacity of cement in 1991 was 7 million tons, which increased to become 18 million tons by 2005-06 and by end of 2007 rose to above 37 million tones, and currently the production capacity is 44.07 million tons. Cement production capacity in the north is 35.18 million tons (80 percent) while in the south it is only 8.89 million tons (20 percent). The cement manufacturers in 2007-08 added above eight million tons to the capacity and the total production was expected to exceed 45 million tons by the end of 2010. It may result in a supply glut of seven million tons in 2009 and 2010. Zahoor Ahmad Page 21 24-06-2011
  22. 22. CHAPTER .3 3.1. Methodology: This study used a comparative analysis (horizontal analysis) as a methodology because it is most suitable and easy to interpret and compare the performance of this companion’s. I will begin by looking at the comparative ratios of the company for a Five -Years period by using trend analysis. Trend Analysis (Horizental) & ( Common size statement or Vertical) Ratio Analysis Zahoor Ahmad Page 22 24-06-2011
  23. 23. 3.2. FINANCIALANALYSIS PROCEDURE 3.2.1. PERCENTAGE ANALYSIS 3.2.2. TREND ANALYSIS - HORIZONTAL ANALYSIS For this purpose comparative financial statements are prepared horizontally. 3.2.3.COMON SIZE STATEMENT - VERTICAL ANALYSIS For this purpose comparative financial statements are prepared vertically. 3.2.4. RATIO ANALYSIS A comparison of relationship among account balances. The term accounting ratio is used to describe significant relationship between figures shown on a balance sheet, profit and loss account or in any other part of accounting organization. 1. Profitability its ability to earn income and sustain growth in both short-term and long-term. A company's degree of profitability is usually based on the income statement, which reports on the company's results of operations; 2. Solvency Its ability to pay its obligation to creditors and other third parties in the long-term; 3. Liquidity Its ability to maintain positive cash flow, while satisfying immediate obligations; 4. Stability The firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of both the income statement and the balance sheet, as well as other financial and non-financial indicators 3.3. Data Collection Procedures The data has been collected from the annual report of selected company from the web site of the respective company. Financial statement in the annual report will be used as a main source Zahoor Ahmad Page 23 24-06-2011
  24. 24. for financial ratio analysis. For this study, the financial statement for three years (2004 to 2008) will be used to get the result. I choose one industry of Fauji Cement for their financial analysis by inter period. And choose Pioneer Cement comparative analysis with kohat & Cherat Cement. Data has been collected from annual report (Balance Sheet & Income Statement) of five years 2004 to 2008 will be used to get the result. 3.4. Analysis Procedures The financial ratio will be used in the analysis of the performance for the companies. The selected company will be tested on the Trend Analysis / Vertical Analysis , profitability, liquidity and solvency; certain financial ratio will be used such as; Test of profitability Return on Assets (ROA) Return on Equity (ROE) Profit margin Earnings per share (EPS) The test profitability ratios as its self described which include that how a company or an organization can get its profitability factor enhance which influenced by its return on assets; equity; margin & earning per share. The whole mechanism directly proportional to the capability of firm or organization. Test of liquidity Current ratio Quick/ acid test ratio The test liquidity ratio defines that how quickly a firm or an organization transform its assets i.e. cash securities; inventory & others into the form of cash its also enable the decision maker to make corrective & proactive decisions which impact as increment in profitability of the organization or firm. Zahoor Ahmad Page 24 24-06-2011
  25. 25. Assets Turnover Ratio / Efficiency Ratio Receivable Turn Over Inventory Turn Over The asset turnover ratio also known as efficiency ratio, the main emphasize in both the ratio on the capability of how the company receivable convert quickly from the suppliers & the inventory in similar way. Financial Leverage Ratio Debt-equity ratio Debt-assets ratio Times Interest Earned The financial leverage ratios including debt-equity to asset & to time interest earned as a part from those it’s essential to conclude the financial stability of the organization which might be essential for the company’s whole structure including production, overhauling; forecasting & utilizing the parameters into growth & corrective measures. Dividend Policy Ratio Dividend Yield Payout Ratio 3.5. S a m p l e For this study, two companies, which are randomly selected, will be used as a sample for the test. Both companies are selected from the same sector. The names of the companies are as follows; a.Fauji Cement Company Ltd.(Inter Period Analysis). b.Pioneer Cement Comparative Analysis with Kohat Cement & Cherat Cement Company Ltd.(Inter Period & Inter firm Analysis). Zahoor Ahmad Page 25 24-06-2011
  26. 26. 3.6. TOOLS OF ANALYSIS Zahoor Ahmad Page 26 24-06-2011
  27. 27. . PERCENTAGE ANALYSIS: RATIO ANALYSIS: Chapter .4 4.1 Data Analysis , Results / Findings and Discussions. Zahoor Ahmad Page 27 24-06-2011
  28. 28. 4.2 Fauji Cement Company Ltd A longtime leader in the cement manufacturing industry, Fauji Cement Company, headquartered in Islamabad, operates a cement plant at Jhang Bahtar, Tehsil Fateh Jang, District Attock in the province of Punjab. The Company has a strong and longstanding tradition of service, reliability, and quality that reaches back more than 11 years. Sponsored by Fauji Foundation, the Company was incorporated in Rawalpindi in 1992. 4.3. Financial Analysis M/S Fauji Cement (Balance Sheet) Balance Sheet Fauji Cement Company Limited Balance Sheet As on December….. RS(000) 2004 2005 2006 2007 2008 CURRENT ASSETS 574460 117276 5 157938 2 195352 7 5294083 Cash and bank balances 197088 603110 847590 423133 3783909 Deposit accounts 137433 560177 798122 402907 3756611 Current accounts 21326 25840 49253 20048 27039 Collection accounts 38275 16831 0 0 0 Cash in hand 54 262 215 178 259 Advances, Deposits, prepayments and other receivables: 73583 46041 70340 858758 345567 To suppliers 34044 18148 31523 815588 15521 To employees 449 783 1639 621 2473 Due from associated undertaking - unsecured 1127 1125 3190 0 0 Deposits 1313 1486 1865 1795 5737 Prepayments 10606 4314 9937 3125 3966 Excise duty 9911 3057 0 0 0 Advance tax –net 0 7891 13874 13104 23302 Sales tax refundable -net 3774 0 0 0 82719 Derivative foreign currency options used as hedging instrument 0 0 0 0 84364 Interest accrued 2175 1002 5476 5077 14828 Prepaid arrangement fee for loans 0 0 0 11000 74670 Margin on letters of credit 0 0 0 0 29369 Other receivables- Considered goods 645 8235 2836 2084 7179 Others 9539 0 0 6364 1439 TRADE DEBTS 44789 107231 25475 19558 26927 Unsecured 23833 25021 27042 16117 4848 Considered goods 22266 23454 25475 7769 0 Zahoor Ahmad Page 28 24-06-2011
  29. 29. Considered doubtful 1567 1567 1567 8348 4848 Secure-considered goods 22523 83777 0 11789 26927 Less: Provision for doubtful debts -1567 -1567 -1567 -8348 -4848 STOCK IN TRADE 61600 55931 145090 183309 230089 Raw and packing material 15224 18469 28012 23931 31271 Work in process 27761 11624 93671 115221 152529 Finished goods 18615 25838 23407 44157 46289 STORES, SPARES AND LOOSE TOOLS 197400 360452 490887 468769 907591 Stores 71837 107633 198485 61997 415358 Spares 118324 244514 280183 394046 478579 Loose tools 7239 8305 12219 12726 13654 DEFERRED TAX ASSETS - NET 570039 337140 0 0 0 LONG TERM DEPOSITS 36600 46611 46611 46611 46611 Islamabad Electric Supply Company Limited 21600 21600 21600 21600 21600 Sui Northern Gas Pipelines Limited 15000 25011 25011 25011 25011 LONG TERM ADVANCES - Considered goods 0 9000 9000 8100 7200 Sui Northern Gas Pipelines Limited 0 0 0 9000 8100 Less: Amount receivables within 12 months shown under current assets 0 0 0 -900 -900 FIXED ASSETS - Tangible: 472925 4 465827 2 456311 5 439245 0 7106599 Property, Plant and equipment 472925 4 465827 2 456311 5 439245 0 7106599 Total Assets 591035 3 622378 8 619810 8 640068 8 12454493 CURRENT LIABILITIES 372116 120694 6 126719 8 144228 7 2454761 Current portion of long term financing: 86508 552995 550000 550000 550000 Short term borrowings - secured: 0 308876 236353 375510 1378365 Markup accrued: 13132 69357 59771 48330 33186 Trade and other payables: 272476 275718 421074 468447 493210 Creditors 45651 45969 59763 81766 65997 Accrued liabilities 63425 67119 63470 118828 174692 Retention money 10819 10533 12843 11986 15517 Security deposits 25462 28982 37986 39051 36916 Advances from customers 23121 42444 58744 67770 41344 Workers' (Profit) Participation Fund 0 39949 93562 41483 24413 Workers' Welfare fund 0 0 0 16085 25362 Sales tax payable- net 22304 31300 39235 32599 0 Excise duty payable 58 3537 10264 8582 57629 Other liabilities 81636 5885 9052 40708 45323 Zahoor Ahmad Page 29 24-06-2011
  30. 30. Compensated absences 0 0 33990 3626 3686 Unclaimed dividend 0 0 2165 5963 2331 NON - CURRENT LIABILITIES 359910 3 256721 8 164829 4 122319 5 715751 Retention money payables: 0 0 0 0 18129 Deferred tax liability - net: 0 0 215381 339918 363154 Deferred liability 40264 45213 7912 8277 9468 Long term financing: 355883 9 252200 5 142500 1 875000 325000 Loans from banking companies - Secured: Habib Bank Limited 916667 598485 431818 265152 MCB Bank Limited 916667 598485 431818 265152 United Bank Limited 458333 299243 215909 132576 Bank Al Falah Limited 458333 299243 215909 132576 NIB Bank Limited 0 0 129546 79544 PICIC Commercial Bank Limited 275000 179545 0 0 Loan from related party: Fauji Foundation- Unsecured 50000 0 0 0 Total Liabilities 397121 9 377416 4 291549 2 266548 2 3170512 Less: amount payable within 12 months shown under current liabilities -552995 -550000 -550000 -550000 SHARE CAPITAL AND RESERVES 193913 4 244962 4 328261 6 373520 6 9283981 Reserves: 0 0 0 -459216 1864094 Accumulated loss - 225528 8 - 174479 8 -911806 0 0 Share capital: 419442 2 419442 2 419442 2 419442 2 7419887 Total Liabilities + Owner's Equity 591035 3 622378 8 619810 8 640068 8 12454493 Zahoor Ahmad Page 30 24-06-2011
  31. 31. 4.4. Income Statement Fauji Cement Company Limited Income Statement For the Year Ended June…… RS(000) 2004 2005 2006 2007 2008 Sales 324726 2 392136 2 568345 5 478003 6 4749217 Less: Government Levies -951031 - 107621 9 - 139731 7 - 131675 3 - 1203315 Net Sales 229623 1 284514 3 428613 8 346328 3 3545902 Less: Cost of sales 155540 7 176356 7 209502 7 237178 8 2887790 Raw material Consumed 115164 136819 205751 235379 227413 Packing material consumed 155487 147994 182873 221116 281916 Stores and spares consumed 5285 6573 6052 11171 10914 Spares written off 0 0 18528 931 0 Salaries, wages and benefits 91289 87091 142070 133780 133451 Rent, rates and taxes 952 1378 2562 2213 5284 Insurance 14920 18078 12689 12363 12221 Fuel consumed 564591 699818 843909 979044 1441919 Power consumed 310041 332383 393785 431609 451419 Depreciation 243056 251981 261566 276244 290477 Others 63185 72538 104859 110238 85730 156397 0 175465 3 217464 4 241408 8 2940744 Add: Opening work-in- process 5817 27761 11624 93671 115221 Less: Closing work-in- process -27761 -11624 -93671 -115221 -152529 Cost of goods manufactured 154202 6 177079 0 209259 7 239253 8 2903436 Add: Opening finished goods 31996 18615 25838 23407 44157 Less: Closing finished goods -18615 -25838 -23408 -44157 -46289 Zahoor Ahmad Page 31 24-06-2011
  32. 32. 155540 7 176356 7 209502 7 237178 8 2901304 Less: Own consumption capitalized 0 0 0 0 -13514 155540 7 176356 7 209502 7 237178 8 2887790 Gross profit 740824 108157 6 219111 1 109149 5 658112 Other income 42744 11216 43323 73835 107574 Distribution cost: 20416 21333 31694 40645 53383 Salaries, wages and benefits 12011 11085 21388 20651 18791 Export freight and other charges 0 0 0 0 24482 Traveling and entertainment 1034 1857 1488 705 1127 Vehicle running and maintenance expenses 0 0 0 2745 1641 Rent, rates and taxes 1144 1172 1112 1353 1468 Repairs and maintenance 411 872 625 173 288 Printing and stationery 509 640 403 416 545 Depreciation 781 734 1083 1746 2704 Others 4526 4973 5595 12856 2337 Administrative expenses: 39535 42292 66627 71302 76495 Salaries, wages and benefits 21817 21835 35663 42439 41153 Traveling and entertainment 2053 3319 4769 3487 7483 Vehicle running and maintenance expenses 0 0 0 2385 2145 Insurance 312 356 532 594 602 Rent, rates and taxes 1064 1250 4302 5934 6465 Repairs and maintenance 711 1110 2304 960 590 Printing and stationery 856 868 1463 1941 1318 Depreciation 1969 3568 3883 5464 9475 Others 10753 9986 13711 8098 7264 Other Operating expenses: 533 40493 94127 58098 34290 Audits' remuneration 533 544 565 530 600 Workers' (Profit) Participation Fund 0 39949 93562 41483 24413 Workers' Welfare Fund 0 0 0 16085 9277 Finance Cost: 204222 229633 264296 207105 146954 Fee and charges on loans 11615 10564 500 500 500 Interest/mark-up on long term finance 57324 175784 254030 200642 129928 Interest/mark-up on long term loan from related party 873 3185 456 0 0 Interest on short term 0 4352 1095 779 11609 Zahoor Ahmad Page 32 24-06-2011
  33. 33. borrowings and other charges Interest on Workers' Profit Participation Fund 0 0 2972 93 0 Guarantee commission 111947 32201 483 972 665 Bank charges and commission 4557 3547 4760 4119 4252 Foreign exchange risk insurance(FERI) contract 17906 0 0 0 0 Amortization of deferred cost 762152 0 0 0 0 Net profit before taxation -243290 759041 177769 0 788180 454564 Less: Taxation 557439 -248548 -573951 -141857 -40966 Net profit after taxation 314149 510493 120373 9 646323 413598 4.5 . Balance Sheet (Trend Analysis) Formula Trend Analysis (Horizontally)= 100X BaseYear rCurrentYea Trend Analysis (Horizontally= %15.204100 574460 1172765 =X Fauji Cement Company Limited Balance Sheet (Trend Analysis) As on December….. RS(000) 2004 2005 2006 2007 2008 CURRENT ASSETS 100.00 % 204.15% 274.93% 340.06% 921.58% Cash and bank balances 100.00 % 306.01% 430.06% 214.69% 1919.91% Deposit accounts 100.00% 407.60% 580.74% 293.17% 2733.41% Current accounts 100.00% 121.17% 230.95% 94.01% 126.79% Collection accounts 100.00% 43.97% 0.00% 0.00% 0.00% Cash in hand 100.00% 485.19% 398.15% 329.63% 479.63% Advances, Deposits, prepayments and other receivables: 100.00 % 62.57% 95.59% 1167.06% 469.63% To suppliers 100.00% 53.31% 92.59% 2395.69% 45.59% To employees 100.00% 174.39% 365.03% 138.31% 550.78% Due from associated undertaking – unsecured 100.00% 99.82% 283.05% 0.00% 0.00% Zahoor Ahmad Page 33 24-06-2011
  34. 34. Deposits 100.00% 113.18% 142.04% 136.71% 436.94% Prepayments 100.00% 40.68% 93.69% 29.46% 37.39% Excise duty 100.00% 30.84% 0.00% 0.00% 0.00% Advance tax –net 100.00% 175.82% 166.06% 295.30% Sales tax refundable –net 100.00% 0.00% 0.00% 0.00% 2191.81% Derivative foreign currency options used as hedging instrument 100.00% Interest accrued 100.00% 46.07% 251.77% 233.43% 681.75% Prepaid arrangement fee for loans 100.00% 678.82% Margin on letters of credit 100.00% Other receivables- Considered goods 100.00% 1276.74% 439.69% 323.10% 1113.02% Others 100.00% 0.00% 0.00% 66.72% 15.09% TRADE DEBTS 100.00 % 239.41% 56.88% 43.67% 60.12% Unsecured 100.00 % 104.98% 113.46% 67.62% 20.34% Considered goods 100.00% 105.34% 114.41% 34.89% 0.00% Considered doubtful 100.00% 100.00% 100.00% 532.74% 309.38% Secure-considered goods 100.00% 371.96% 0.00% 52.34% 119.55% Less: Provision for doubtful debts 100.00% 100.00% 100.00% 532.74% 309.38% STOCK IN TRADE 100.00 % 90.80% 235.54% 297.58% 373.52% Raw and packing material 100.00% 121.32% 184.00% 157.19% 205.41% Work in process 100.00% 41.87% 337.42% 415.05% 549.44% Finished goods 100.00% 138.80% 125.74% 237.21% 248.67% STORES, SPARES AND LOOSE TOOLS 100.00 % 182.60% 248.68% 237.47% 459.77% Stores 100.00% 149.83% 276.30% 86.30% 578.20% Spares 100.00% 206.65% 236.79% 333.02% 404.46% Loose tools 100.00% 114.73% 168.79% 175.80% 188.62% DEFERRED TAX ASSETS – NET 100.00 % 59.14% 0.00% 0.00% 0.00% LONG TERM DEPOSITS 100.00 % 127.35% 127.35% 127.35% 127.35% Islamabad Electric Supply Company Limited 100.00% 100.00% 100.00% 100.00% 100.00% Sui Northern Gas Pipelines Limited 100.00% 166.74% 166.74% 166.74% 166.74% LONG TERM ADVANCES – Considered goods 100.00% 100.00% 90.00% 80.00% Sui Northern Gas Pipelines Limited 100.00% 90.00% Less: Amount receivables within 12 months shown under current assets 100.00% 100.00% FIXED ASSETS – Tangible: 100.00 % 98.50% 96.49% 92.88% 150.27% Zahoor Ahmad Page 34 24-06-2011
  35. 35. Property, Plant and equipment 100.00% 98.50% 96.49% 92.88% 150.27% Total Assets 100.00 % 105.30% 104.87% 108.30% 210.72% CURRENT LIABILITIES 100.00 % 324.35% 340.54% 387.59% 659.68% Current portion of long term financing: 100.00 % 639.24% 635.78% 635.78% 635.78% Short term borrowings – secured: 100.00% 76.52% 121.57% 446.25% Markup accrued: 100.00 % 528.15% 455.16% 368.03% 252.71% Trade and other payables: 100.00 % 101.19% 154.54% 171.92% 181.01% Creditors 100.00% 100.70% 130.91% 179.11% 144.57% Accrued liabilities 100.00% 105.82% 100.07% 187.35% 275.43% Retention money 100.00% 97.36% 118.71% 110.79% 143.42% Security deposits 100.00% 113.82% 149.19% 153.37% 144.98% Advances from customers 100.00% 183.57% 254.07% 293.11% 178.82% Workers’ (Profit) Participation Fund 100.00% 234.20% 103.84% 61.11% Workers’ Welfare fund 100.00% 157.67% Sales tax payable- net 100.00% 140.33% 175.91% 146.16% 0.00% Excise duty payable 100.00% 6098.28% 17696.55% 14796.55 % 99360.34% Other liabilities 100.00% 7.21% 11.09% 49.87% 55.52% Compensated absences 100.00% 10.67% 10.84% Unclaimed dividend 100.00% 275.43% 107.67% NON – CURRENT LIABILITIES 100.00 % 71.33% 45.80% 33.99% 19.89% Retention money payables: 100.00% Deferred tax liability – net: 100.00% 157.82% 168.61% Deferred liability 100.00 % 112.29% 19.65% 20.56% 23.51% Long term financing: 100.00 % 70.87% 40.04% 24.59% 9.13% Loans from banking companies – Secured: Habib Bank Limited 100.00% 65.29% 47.11% 28.93% MCB Bank Limited 100.00% 65.29% 47.11% 28.93% United Bank Limited 100.00% 65.29% 47.11% 28.93% Bank Al Falah Limited 100.00% 65.29% 47.11% 28.93% NIB Bank Limited 100.00% 61.40% PICIC Commercial Bank Limited 100.00% 65.29% 0.00% 0.00% Loan from related party: Fauji Foundation- Unsecured 100.00% 0.00% 0.00% 0.00% Zahoor Ahmad Page 35 24-06-2011
  36. 36. Less: amount payable within 12 months shown under current liabilities 100.00% 99.46% 99.46% 99.46% SHARE CAPITAL AND RESERVES 100.00 % 126.33% 169.28% 192.62% 478.77% Reserves: 100.00% -405.93% Accumulated loss 100.00 % 77.36% 40.43% 0.00% 0.00% Share capital: 100.00 % 100.00% 100.00% 100.00% 176.90% Total Liabilities + Owner’s Equity 100.00 % 105.30% 104.87% 108.30% 210.72% 4.6. Balance Sheet (Vertical Analysis) Formula Common Size Statement(Vertically)= 100 . X TotalAsset Item Example:- Vertical Analysis = %72.9100 5910353 574460 =X Zahoor Ahmad Page 36 24-06-2011
  37. 37. Fauji Cement Company Limited Balance Sheet (Vertical Analysis) As on December….. RS(000) 2004 2005 2006 2007 2008 CURRENT ASSETS 9.72% 18.84% 25.48% 30.52% 42.51% Cash and bank balances 3.33% 9.69% 13.67% 6.61% 30.38% Deposit accounts 2.33% 9.00% 12.88% 6.29% 30.16% Current accounts 0.36% 0.42% 0.79% 0.31% 0.22% Collection accounts 0.65% 0.27% 0.00% 0.00% 0.00% Cash in hand 0.00% 0.00% 0.00% 0.00% 0.00% Advances, Deposits, prepayments and other receivables: 1.24% 0.74% 1.13% 13.42% 2.77% To suppliers 0.58% 0.29% 0.51% 12.74% 0.12% To employees 0.01% 0.01% 0.03% 0.01% 0.02% Due from associated undertaking – unsecured 0.02% 0.02% 0.05% 0.00% 0.00% Deposits 0.02% 0.02% 0.03% 0.03% 0.05% Prepayments 0.18% 0.07% 0.16% 0.05% 0.03% Excise duty 0.17% 0.05% 0.00% 0.00% 0.00% Advance tax -net 0.00% 0.13% 0.22% 0.20% 0.19% Sales tax refundable -net 0.06% 0.00% 0.00% 0.00% 0.66% Derivative foreign currency options used as hedging instrument 0.00% 0.00% 0.00% 0.00% 0.68% Interest accrued 0.04% 0.02% 0.09% 0.08% 0.12% Prepaid arrangement fee for loans 0.00% 0.00% 0.00% 0.17% 0.60% Margin on letters of credit 0.00% 0.00% 0.00% 0.00% 0.24% Other receivables- Considered goods 0.01% 0.13% 0.05% 0.03% 0.06% Others 0.16% 0.00% 0.00% 0.10% 0.01% TRADE DEBTS 0.76% 1.72% 0.41% 0.31% 0.22% Unsecured 0.40% 0.40% 0.44% 0.25% 0.04% Considered goods 0.38% 0.38% 0.41% 0.12% 0.00% Considered doubtful 0.03% 0.03% 0.03% 0.13% 0.04% Secure-considered goods 0.38% 1.35% 0.00% 0.18% 0.22% Less: Provision for doubtful debts -0.03% -0.03% -0.03% -0.13% -0.04% STOCK IN TRADE 1.04% 0.90% 2.34% 2.86% 1.85% Raw and packing material 0.26% 0.30% 0.45% 0.37% 0.25% Work in process 0.47% 0.19% 1.51% 1.80% 1.22% Finished goods 0.31% 0.42% 0.38% 0.69% 0.37% STORES, SPARES AND LOOSE TOOLS 3.34% 5.79% 7.92% 7.32% 7.29% Stores 1.22% 1.73% 3.20% 0.97% 3.34% Spares 2.00% 3.93% 4.52% 6.16% 3.84% Zahoor Ahmad Page 37 24-06-2011
  38. 38. Loose tools 0.12% 0.13% 0.20% 0.20% 0.11% DEFERRED TAX ASSETS - NET 9.64% 5.42% 0.00% 0.00% 0.00% LONG TERM DEPOSITS 0.62% 0.75% 0.75% 0.73% 0.37% Islamabad Electric Supply Company Limited 0.37% 0.35% 0.35% 0.34% 0.17% Sui Northern Gas Pipelines Limited 0.25% 0.40% 0.40% 0.39% 0.20% LONG TERM ADVANCES - Considered goods 0.00% 0.14% 0.15% 0.13% 0.06% Sui Northern Gas Pipelines Limited 0.00% 0.00% 0.00% 0.14% 0.07% Less: Amount receivables within 12 months shown under current assets 0.00% 0.00% 0.00% -0.01% -0.01% FIXED ASSETS - Tangible: 80.02% 74.85% 73.62% 68.62% 57.06% Property, Plant and equipment 80.02% 74.85% 73.62% 68.62% 57.06% Total Assets 100.00 % 100.00 % 100.00 % 100.00 % 100.00% CURRENT LIABILITIES 6.30% 19.39% 20.44% 22.53% 19.71% Current portion of long term financing: 1.46% 8.89% 8.87% 8.59% 4.42% Short term borrowings - secured: 0.00% 4.96% 3.81% 5.87% 11.07% Markup accrued: 0.22% 1.11% 0.96% 0.76% 0.27% Trade and other payables: 4.61% 4.43% 6.79% 7.32% 3.96% Creditors 0.77% 0.74% 0.96% 1.28% 0.53% Accrued liabilities 1.07% 1.08% 1.02% 1.86% 1.40% Retention money 0.18% 0.17% 0.21% 0.19% 0.12% Security deposits 0.43% 0.47% 0.61% 0.61% 0.30% Advances from customers 0.39% 0.68% 0.95% 1.06% 0.33% Workers' (Profit) Participation Fund 0.00% 0.64% 1.51% 0.65% 0.20% Workers' Welfare fund 0.00% 0.00% 0.00% 0.25% 0.20% Sales tax payable- net 0.38% 0.50% 0.63% 0.51% 0.00% Excise duty payable 0.00% 0.06% 0.17% 0.13% 0.46% Other liabilities 1.38% 0.09% 0.15% 0.64% 0.36% Compensated absences 0.00% 0.00% 0.55% 0.06% 0.03% Unclaimed dividend 0.00% 0.00% 0.03% 0.09% 0.02% NON - CURRENT LIABILITIES 60.89% 41.25% 26.59% 19.11% 5.75% Retention money payables: 0.00% 0.00% 0.00% 0.00% 0.15% Deferred tax liability - net: 0.00% 0.00% 3.47% 5.31% 2.92% Deferred liability 0.68% 0.73% 0.13% 0.13% 0.08% Long term financing: 60.21% 40.52% 22.99% 13.67% 2.61% Loans from banking companies - Secured: Habib Bank Limited 0.00% 14.73% 9.66% 6.75% 2.13% MCB Bank Limited 0.00% 14.73% 9.66% 6.75% 2.13% United Bank Limited 0.00% 7.36% 4.83% 3.37% 1.06% Zahoor Ahmad Page 38 24-06-2011
  39. 39. Bank Al Falah Limited 0.00% 7.36% 4.83% 3.37% 1.06% NIB Bank Limited 0.00% 0.00% 0.00% 2.02% 0.64% PICIC Commercial Bank Limited 0.00% 4.42% 2.90% 0.00% 0.00% Loan from related party: Fauji Foundation- Unsecured 0.00% 0.80% 0.00% 0.00% 0.00% Less: amount payable within 12 months shown under current liabilities 0.00% -8.89% -8.87% -8.59% -4.42% SHARE CAPITAL AND RESERVES 32.81% 39.36% 52.96% 58.36% 74.54% Reserves: 0.00% 0.00% 0.00% -7.17% 14.97% Accumulated loss -38.16% -28.03% -14.71% 0.00% 0.00% Share capital: 70.97% 67.39% 67.67% 65.53% 59.58% Total Liabilities + Owner's Equity 100.00 % 100.00 % 100.00 % 100.00 % 100.00% 4.7. Income Statement (Trend Analysis) Fauji Cement Company Limited Income Statement (Trend Analysis) For the Year Ended June…… RS(000) Zahoor Ahmad Page 39 24-06-2011
  40. 40. 2004 2005 2006 2007 2008 Sales 100.00% 120.76% 175.02% 147.20% 146.25% Less: Government Levies 100.00% 113.16% 146.93% 138.46% 126.53% Net Sales 100.00 % 123.90% 186.66% 150.82% 154.42% Cost of sales 100.00 % 113.38% 134.69% 152.49% 185.66% Raw material Consumed 100.00% 118.80% 178.66% 204.39% 197.47% Packing material consumed 100.00% 95.18% 117.61% 142.21% 181.31% Stores and spares consumed 100.00% 124.37% 114.51% 211.37% 206.51% Spares written off 100.00% 5.02% 0.00% Salaries, wages and benefits 100.00% 95.40% 155.63% 146.55% 146.19% Rent, rates and taxes 100.00% 144.75% 269.12% 232.46% 555.04% Insurance 100.00% 121.17% 85.05% 82.86% 81.91% Fuel consumed 100.00% 123.95% 149.47% 173.41% 255.39% Power consumed 100.00% 107.21% 127.01% 139.21% 145.60% Depreciation 100.00% 103.67% 107.62% 113.65% 119.51% Others 100.00% 114.80% 165.96% 174.47% 135.68% 100.00% 112.19% 139.05% 154.36% 188.03% Add: Opening work-in-process 100.00% 477.24% 199.83% 1610.30% 1980.76% Less: Closing work-in-process 100.00% 41.87% 337.42% 415.05% 549.44% Cost of goods manufactured 100.00 % 114.84% 135.70% 155.16% 188.29% Add: Opening finished goods 100.00% 58.18% 80.75% 73.16% 138.01% Less: Closing finished goods 100.00% 138.80% 125.75% 237.21% 248.67% 100.00% 113.38% 134.69% 152.49% 186.53% Less: Own consumption capitalized 100.00% 100.00% 113.38% 134.69% 152.49% 185.66% Gross profit 100.00 % 146.00% 295.77% 147.34% 88.84% Other income 100.00 % 26.24% 101.35% 172.74% 251.67% Distribution cost: 100.00 % 104.49% 155.24% 199.08% 261.48% Salaries, wages and benefits 100.00% 92.29% 178.07% 171.93% 156.45% Export freight and other charges 100.00% Traveling and entertainment 100.00% 179.59% 143.91% 68.18% 108.99% Vehicle running and maintenance expenses 100.00% 59.78% Rent, rates and taxes 100.00% 102.45% 97.20% 118.27% 128.32% Repairs and maintenance 100.00% 212.17% 152.07% 42.09% 70.07% Printing and stationery 100.00% 125.74% 79.17% 81.73% 107.07% Depreciation 100.00% 93.98% 138.67% 223.56% 346.22% Zahoor Ahmad Page 40 24-06-2011
  41. 41. Others 100.00% 109.88% 123.62% 284.05% 51.63% Administrative expenses: 100.00 % 106.97% 168.53% 180.35% 193.49% Salaries, wages and benefits 100.00% 100.08% 163.46% 194.52% 188.63% Traveling and entertainment 100.00% 161.67% 232.29% 169.85% 364.49% Vehicle running and maintenance expenses 100.00% 89.94% Insurance 100.00% 114.10% 170.51% 190.38% 192.95% Rent, rates and taxes 100.00% 117.48% 404.32% 557.71% 607.61% Repairs and maintenance 100.00% 156.12% 324.05% 135.02% 82.98% Printing and stationery 100.00% 101.40% 170.91% 226.75% 153.97% Depreciation 100.00% 181.21% 197.21% 277.50% 481.21% Others 100.00% 92.87% 127.51% 75.31% 67.55% Other Operating expenses: 100.00 % 7597.19 % 17659.85 % 10900.19 % 6433.40% Audits' remuneration 100.00% 102.06% 106.00% 99.44% 112.57% Workers' (Profit) Participation Fund 100.00% 234.20% 103.84% 61.11% Workers' Welfare Fund 100.00% 57.67% Finance Cost: 100.00 % 112.44% 129.42% 101.41% 71.96% Fee and charges on loans 100.00% 90.95% 4.30% 4.30% 4.30% Interest/mark-up on long term finance 100.00% 306.65% 443.15% 350.01% 226.66% Interest/mark-up on long term loan from related party 100.00% 364.83% 52.23% 0.00% 0.00% Interest on short term borrowings and other charges 100.00% 25.16% 17.90% 266.75% Interest on Workers' Profit Participation Fund 100.00% 3.13% 0.00% Guarantee commission 100.00% 28.76% 0.43% 0.87% 0.59% Bank charges and commission 100.00% 77.84% 104.45% 90.39% 93.31% Foreign exchange risk insurance(FERI) contract 100.00% 0.00% 0.00% 0.00% 0.00% Amortization of deferred cost 100.00 % 0.00% 0.00% 0.00% 0.00% Net profit before taxation 100.00 % -311.99% -730.69% -323.97% -186.84% Less: Taxation 100.00% -44.59% -102.96% -25.45% -7.35% Net profit after taxation 100.00 % 162.50% 383.17% 205.74% 131.66% Zahoor Ahmad Page 41 24-06-2011
  42. 42. 4.8. Income Statement (Vertical Analysis) Fauji Cement Company Limited Income Statement (Vertical Analysis) For the Year Ended June…… RS(000) 2004 2005 2006 2007 2008 Sales 100.00 % 100.00 % 100.00 % 100.00 % 100.00% Less: Government Levies -29.29% -27.45% -24.59% -27.55% -25.34% Net Sales 70.71% 72.55% 75.41% 72.45% 74.66% Less: Cost of sales 47.90% 44.97% 36.86% 49.62% 60.81% Raw material Consumed 3.55% 3.49% 3.62% 4.92% 4.79% Packing material consumed 4.79% 3.77% 3.22% 4.63% 5.94% Stores and spares consumed 0.16% 0.17% 0.11% 0.23% 0.23% Spares written off 0.00% 0.00% 0.33% 0.02% 0.00% Salaries, wages and benefits 2.81% 2.22% 2.50% 2.80% 2.81% Rent, rates and taxes 0.03% 0.04% 0.05% 0.05% 0.11% Insurance 0.46% 0.46% 0.22% 0.26% 0.26% Fuel consumed 17.39% 17.85% 14.85% 20.48% 30.36% Power consumed 9.55% 8.48% 6.93% 9.03% 9.51% Depreciation 7.48% 6.43% 4.60% 5.78% 6.12% Others 1.95% 1.85% 1.84% 2.31% 1.81% 48.16% 44.75% 38.26% 50.50% 61.92% Add: Opening work-in-process 0.18% 0.71% 0.20% 1.96% 2.43% Less: Closing work-in-process -0.85% -0.30% -1.65% -2.41% -3.21% Cost of goods manufactured 47.49% 45.16% 36.82% 50.05% 61.14% Add: Opening finished goods 0.99% 0.47% 0.45% 0.49% 0.93% Less: Closing finished goods -0.57% -0.66% -0.41% -0.92% -0.97% 47.90% 44.97% 36.86% 49.62% 61.09% Less: Own consumption capitalized 0.00% 0.00% 0.00% 0.00% -0.28% 47.90% 44.97% 36.86% 49.62% 60.81% Gross profit 22.81% 27.58% 38.55% 22.83% 13.86% Other income 1.32% 0.29% 0.76% 1.54% 2.27% Distribution cost: 0.63% 0.54% 0.56% 0.85% 1.12% Salaries, wages and benefits 0.37% 0.28% 0.38% 0.43% 0.40% Export freight and other charges 0.00% 0.00% 0.00% 0.00% 0.52% Traveling and entertainment 0.03% 0.05% 0.03% 0.01% 0.02% Zahoor Ahmad Page 42 24-06-2011
  43. 43. Vehicle running and maintenance expenses 0.00% 0.00% 0.00% 0.06% 0.03% Rent, rates and taxes 0.04% 0.03% 0.02% 0.03% 0.03% Repairs and maintenance 0.01% 0.02% 0.01% 0.00% 0.01% Printing and stationery 0.02% 0.02% 0.01% 0.01% 0.01% Depreciation 0.02% 0.02% 0.02% 0.04% 0.06% Others 0.14% 0.13% 0.10% 0.27% 0.05% Administrative expenses: 1.22% 1.08% 1.17% 1.49% 1.61% Salaries, wages and benefits 0.67% 0.56% 0.63% 0.89% 0.87% Traveling and entertainment 0.06% 0.08% 0.08% 0.07% 0.16% Vehicle running and maintenance expenses 0.00% 0.00% 0.00% 0.05% 0.05% Insurance 0.01% 0.01% 0.01% 0.01% 0.01% Rent, rates and taxes 0.03% 0.03% 0.08% 0.12% 0.14% Repairs and maintenance 0.02% 0.03% 0.04% 0.02% 0.01% Printing and stationery 0.03% 0.02% 0.03% 0.04% 0.03% Depreciation 0.06% 0.09% 0.07% 0.11% 0.20% Others 0.33% 0.25% 0.24% 0.17% 0.15% Other Operating expenses: 0.02% 1.03% 1.66% 1.22% 0.72% Audits' remuneration 0.02% 0.01% 0.01% 0.01% 0.01% Workers' (Profit) Participation Fund 0.00% 1.02% 1.65% 0.87% 0.51% Workers' Welfare Fund 0.00% 0.00% 0.00% 0.34% 0.20% Finance Cost: 6.29% 5.86% 4.65% 4.33% 3.09% Fee and charges on loans 0.36% 0.27% 0.01% 0.01% 0.01% Interest/mark-up on long term finance 1.77% 4.48% 4.47% 4.20% 2.74% Interest/mark-up on long term loan from related party 0.03% 0.08% 0.01% 0.00% 0.00% Interest on short term borrowings and other charges 0.00% 0.11% 0.02% 0.02% 0.24% Interest on Workers' Profit Participation Fund 0.00% 0.00% 0.05% 0.00% 0.00% Guarantee commission 3.45% 0.82% 0.01% 0.02% 0.01% Bank charges and commission 0.14% 0.09% 0.08% 0.09% 0.09% Foreign exchange risk insurance(FERI) contract 0.55% 0.00% 0.00% 0.00% 0.00% Amortization of deferred cost 23.47% 0.00% 0.00% 0.00% 0.00% Net profit before taxation -7.49% 19.36% 31.28% 16.49% 9.57% Less: Taxation 17.17% -6.34% -10.10% -2.97% -0.86% Net profit after taxation 9.67% 13.02% 21.18% 13.52% 8.71% Zahoor Ahmad Page 43 24-06-2011
  44. 44. 4.9. Ratio Analysis 4.9.1. Liquidity Ratio Current ratio = bilitiesCurrentLia etsCurrentAss Fauji Cement Company Limited Liquidity Ratio Analysis 2004 2005 2006 2007 2008 CURRENT RATIO 1.54 0.97 1.25 1.35 2.16 CURRENT ASSETS 574460 1172765 1579382 1953527 5294083 CURRENT LIABILITIES 372116 1206946 1267198 1442287 2454761 liquidity Ratio 1.54 0.97 1.25 1.35 2.16 0.00 0.50 1.00 1.50 2.00 2.50 2004 2005 2006 2007 2008 Years Ratios Current Ratio The amount of Current Assets in the year 2004 was Rs.574460 and the amount of current liabilities in the first year 2004 was Rs.372116 and current ratio was 1.54 in the year 2004. Zahoor Ahmad Page 44 24-06-2011
  45. 45. And the amount current assets increases to Rs.1172765 in the year 2005 with an increment of Rs.598305 and the amount of current liabilities becomes Rs.1206946 in the year 2005 with increment of Rs.834830 and current ratio becomes 0.97 in the year 2005. And the amount of current assets increases to Rs.1579382 in the year 2006 with an increment of Rs.406617 and the amount current liabilities becomes Rs.1267198 in the year 2006 with increment of Rs.60252 and the current ratio becomes 1.25 in the year 2006. The amount of current assets increases to Rs.1953527 in the year 2007 with an increment of Rs.374145 and the amount of current liabilities becomes Rs.1442287 in the year 2007 with increment of Rs.175089 and current ratio becomes 1.35 in the year 2007. And the amount of current assets increases to Rs.5294083 in the year 2008 with an increment of Rs.3340556 and the amount of current liabilities becomes Rs.2454761 in the year 2008 with increment of Rs.1012474 and the current ratio becomes 2.16 in the year 2008. Net Working Capital = current assets – current liabilities Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Net Working Capital 202344 -34181 312184 511240 2839322 CURRENT ASSETS 574460 1172765 1579382 1953527 5294083 CURRENT LIABILITIES 372116 1206946 1267198 1442287 2454761 Zahoor Ahmad Page 45 24-06-2011
  46. 46. Liquidity Ratio 202344 -34181 312184 511240 2839322 -500000 0 500000 1000000 1500000 2000000 2500000 3000000 2004 2005 2006 2007 2008 Years NetWorkingCaptical Net Working Capital The amount of Current Assets in the year 2004 was Rs.574460 and the amount of current liabilities in the first year 2004 was Rs.372116 and Net Working Capital was 202344 in the year 2004. And the amount current assets increases to Rs.1172765 in the year 2005 with an increment of Rs.598305 and the amount of current liabilities becomes Rs.1206946 in the year 2005 with increment of Rs.834830 and Net Working Capital becomes -34181 in the year 2005. And the amount of current assets increases to Rs.1579382 in the year 2006 with an increment of Rs.406617 and the amount current liabilities becomes Rs.1267198 in the year 2006 with increment of Rs.60252 and the Net Working Capital becomes 312184 in the year 2006. And the amount of current assets increases to Rs.1953527 in the year 2007 with an increment of Rs.374145 and the amount of current liabilities becomes Rs.1442287 in the year 2007 with increment of Rs.175089 and Net Working Capital becomes 511240 in the year 2007. And the amount of current assets increases to Rs.5294083 in the year 2008 with an increment of Rs.3340556 and the amount of current liabilities becomes Rs.2454761 in the year 2008 with increment of Rs.1012474 and the Net Working Capital becomes 2839322 in the year 2008. Acid ratio = bilitiesCurrentLia InventoryetCurrentAss )( − Fauji Cement Company Limited Zahoor Ahmad Page 46 24-06-2011
  47. 47. Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Acid Ratio 1.38 0.93 1.13 1.23 2.06 CURRENT ASSETS 574460 1172765 1579382 1953527 5294083 STOCK IN TRADE 61600 55931 145090 183309 230089 CURRENT IABILITIES 372116 1206946 1267198 1442287 2454761 Liquidity Ratio 1.38 0.93 1.13 1.23 2.06 0.00 0.50 1.00 1.50 2.00 2.50 2004 2005 2006 2007 2008 Years Ratio Acid Ratio The amount of Current Assets in the year 2004 was Rs.574460 and the amount of current liabilities in the first year 2004 was Rs.372116 and the amount of Stock In Trade in the first year 2004 was Rs.61600 due to witch the Acid Ratio becomes 1.38 in the year 2004 And the amount current assets increases to Rs.1172765 in the year 2005 with an increment of Rs.598305 and the amount of current liabilities becomes Rs.1206946 in the year 2005 with increment of Rs.834830 and the amount of Stock In Trade decreases to Rs.55931 in the year 2005 with decrement of Rs.5669 and the Acid Ratio becomes 0.93 in 2005. And the amount of current assets increases to Rs.1579382 in the year 2006 with an increment of Rs.406617 and the amount current liabilities becomes Rs.1267198 in the year 2006 with increment of Rs.60252 and the amount of Stock In Trade increases to Rs.145090 in the year 2006 with increment of Rs.55931 and the Acid Ratio becomes 1.13 in 2006. The amount of current assets increases to Rs.1953527 in the year 2007 with an increment of Rs.374145 and the amount of current liabilities becomes Rs.1442287 in the year 2007 with Zahoor Ahmad Page 47 24-06-2011
  48. 48. increment of Rs.175089 and the amount of Stock In Trade becomes Rs.183309 in the year 2007 with increment of Rs.38219 and the Acid Ratio becomes 1.23 in 2007. And the amount of current assets increases to Rs.5294083 in the year 2008 with an increment of Rs.3340556 and the amount of current liabilities becomes Rs.2454761 in the year 2008 with increment of Rs.1012474 and the amount of Stock In Trade becomes Rs.230089 in the year 2008 with increment of Rs.46780 and Acid Ratio becomes 2.06 in 2008. Cash ratio = bilitiescurrentlia uritiesmarketablentcashequilecash )sec&( + Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Cash Ratio 0.53 0.50 0.67 0.29 1.54 Cash and bank balances 197088 603110 847590 423133 3783909 CURRENT LIABILITIES 372116 1206946 1267198 1442287 2454761 Liquidity Ratio 0.53 0.50 0.67 0.29 1.54 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2004 2005 2006 2007 2008 Years Ratio Cash Ratio The amount of Cash and bank balances in the year 2004 was Rs.197088 and the amount of current liabilities in the first year 2004 was Rs.372116 due to which the Cash Ratio becomes 0.53 in the year 2004. Zahoor Ahmad Page 48 24-06-2011
  49. 49. And the amount of Cash and bank balances increases to Rs.603110 in the year 2005 with an increment of Rs.406022 and the amount of current liabilities becomes Rs.1206946 in the year 2005 with increment of Rs.834830 and Cash Ratio becomes 0.50 in the year 2005. And the amount of Cash and bank balances increases to Rs.847590 in the year 2006 with an increment of Rs.244480 and the amount current liabilities becomes Rs.1267198 in the year 2006 with an increment of Rs.60252 and the Cash Ratio becomes 0.67 in the year 2006. The amount of Cash and bank balances decreases to Rs.423133 in the year 2007 with decrement of Rs.424457 and the amount of current liabilities becomes Rs.1442287 in the year 2007 with an increment of Rs.175089 and Cash Ratio becomes 0.29 in the year 2007. And the amount of Cash and bank balances increases to Rs.3783909 in the year 2008 with an increment of Rs.3360776 and the amount of current liabilities becomes Rs.2454761 in the year 2008 with an increment of Rs.1012474 and the Cash Ratio becomes 1.54 in the year 2008. 4.9.2. Long Term Liquidity / Long Term Debt Paying Ability Debt/equity ratio = sequityrshareholde litiestotalliabi ' Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Debt/Equity Ratio 3.05 2.54 1.89 1.71 1.34 Total Liabilities 5910353 6223788 6198108 6400688 12454493 SHARE CAPITAL AND RESERVES 1939134 2449624 3282616 3735206 9283981 Zahoor Ahmad Page 49 24-06-2011
  50. 50. Debt Ratio 3.05 2.54 1.89 1.71 1.34 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 2004 2005 2006 2007 2008 Years Ratios Debt/Equity Ratio The amount of Total liabilities in the first year 2004 was Rs.5910353 and the amount of SHARE CAPITAL AND RESERVES was Rs.1939134 due to which Debt/Equity Ratio becomes 3.05 in the year 2004. And the amount of Total liabilities becomes Rs.6223788 in the year 2005 with an increment of Rs.313435 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.2449624 in the year 2005 with an increment of Rs.510490 and the Debt/Equity Ratio becomes 2.54 in the year 2005. And the amount of Total liabilities becomes Rs.6198108 in the year 2006 with decrement of Rs.25680 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.3282616 in the year 2006 with an increment of Rs.832992 and the Debt/Equity Ratio becomes 1.89 in the year 2006. And the amount of Total liabilities becomes Rs.6400688 in the year 2007 with an increment of Rs.202580 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.3735206 in the year 2007 with an increment of Rs.452590 and the Debt/Equity Ratio becomes 1.71 in the year 2007. And the amount of Total liabilities becomes Rs.12454493 in the year 2008 with an increment of Rs.6053805 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.9283981 in the year 2008 with an increment of Rs.5548775 and the Debt/Equity Ratio becomes 1.34 in the year 2008. Zahoor Ahmad Page 50 24-06-2011
  51. 51. Debt to tangible net worth = )int'( etsangibleasssequityrshareholde litiestotalliabi − Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Debt to tangible net worth 3.05 2.54 1.89 1.71 1.34 Total Liabilities 591035 3 6223788 619810 8 640068 8 12454493 SHARE CAPITALAND RESERVES 193913 4 2449624 328261 6 373520 6 9283981 Intangible assets 0 0 0 0 0 Debt Ratio 3.05 2.54 1.89 1.71 1.34 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 2004 2005 2006 2007 2008 Years Ratios Debt to tangible net worth The amount of Total liabilities in the first year 2004 was Rs.5910353 and the amount of SHARE CAPITAL AND RESERVES was Rs.1939134 due to which Debt/Equity Ratio becomes 3.05 in the year 2004. And the amount of Total liabilities becomes Rs.6223788 in the year 2005 with an increment of Rs.313435 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.2449624 in the year 2005 with an increment of Rs.510490 and the Debt/Equity Ratio becomes 2.54 in the year 2005. Zahoor Ahmad Page 51 24-06-2011
  52. 52. And the amount of Total liabilities becomes Rs.6198108 in the year 2006 with decrement of Rs.25680 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.3282616 in the year 2006 with an increment of Rs.832992 and the Debt/Equity Ratio becomes 1.89 in the year 2006. And the amount of Total liabilities becomes Rs.6400688 in the year 2007 with an increment of Rs.202580 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.3735206 in the year 2007 with an increment of Rs.452590 and the Debt/Equity Ratio becomes 1.71 in the year 2007. And the amount of Total liabilities becomes Rs.12454493 in the year 2008 with an increment of Rs.6053805 and the amount of SHARE CAPITAL AND RESERVES becomes Rs.9283981 in the year 2008 with an increment of Rs.5548775 and the Debt/Equity Ratio becomes 1.34 in the year 2008. 4.9.3. Activity Ratio Day’s Sales in account receivable = )365/(netsales eceivablessaccountraveragegro Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Day's Sales in account receivable 7.12 13.76 2.17 2.06 2.77 TRADE DEBTS 44789 107231 25475 19558 26927 Net Sales 2296231 2845143 4286138 3463283 3545902 Zahoor Ahmad Page 52 24-06-2011
  53. 53. Activity Ratio 7.12 13.76 2.17 2.06 2.77 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 2004 2005 2006 2007 2008 Years Ratios Day's Sales in account receivable The amount of Trade debts in the year 2004 was Rs.44789 and the amount of Net Sales in the first year 2004 was Rs.2296231 and the Day's Sales in account receivable becomes 7.12 in the year 2004. And the amount Trade debts increases to Rs.107231 in the year 2005 with an increment of Rs.62442 and the amount of Net Sales becomes Rs.2845143 in the year 2005 with increment of Rs.548912 and the Day's Sales in account receivable becomes 13.76 in the year 2005. And the amount Trade debts decreases to Rs.25475 in the year 2006 with decrement of Rs.81756 and the amount of Net Sales becomes Rs.4286138 in the year 2006 with increment of Rs.1440995 and the Day's Sales in account receivable becomes 2.17 in the year 2006. And the amount Trade debts decreases to Rs.19558 in the year 2007 with decrement of Rs.5917 and the amount of Net Sales becomes Rs.3463283 in the year 2007 with decrement of Rs.8228885 and the Day's Sales in account receivable becomes 2.06 in the year 2007. And the amount Trade debts increases to Rs.26927 in the year 2008 with increment of Rs.7369 and the amount of Net Sales becomes Rs.3545902 in the year 2008 with increment of Rs.82619 and the Day's Sales in account receivable becomes 2.77 in the year 2008. Account receivable turn over= ablesountreceivaverageacc netsales Fauji Cement Company Limited Zahoor Ahmad Page 53 24-06-2011
  54. 54. Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Account Receivable Turn Over 51.27 26.53 168.25 177.08 131.69 Net Sales 2296231 284514 3 428613 8 346328 3 3545902 TRADE DEBTS 44789 107231 25475 19558 26927 Activity Ratio 51.27 26.53 168.25 177.08 131.69 0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00 160.00 180.00 200.00 2004 2005 2006 2007 2008 Years Ratios Account Receivable Turn Over The amount of Trade debts in the year 2004 was Rs.44789 and the amount of Net Sales in the first year 2004 was Rs.2296231 and the Account Receivable Turn Over becomes 5.27 in the year 2004. And the amount Trade debts increases to Rs.107231 in the year 2005 with an increment of Rs.62442 and the amount of Net Sales becomes Rs.2845143 in the year 2005 with increment of Rs.548912 and the Account Receivable Turn Over becomes 26.53 in the year 2005. And the amount Trade debts decreases to Rs.25475 in the year 2006 with decrement of Rs.81756 and the amount of Net Sales becomes Rs.4286138 in the year 2006 with increment of Rs.1440995 and the Account Receivable Turn Over becomes 168.25 in the year 2006. And the amount Trade debts decreases to Rs.19558 in the year 2007 with decrement of Rs.5917 and the amount of Net Sales becomes Rs.3463283 in the year 2007 with decrement of Rs.8228885 and the Account Receivable Turn Over becomes 177.08 in the year 2007. And the amount Trade debts increases to Rs.26927 in the year 2008 with increment of Rs.7369 and the amount of Net Sales becomes Rs.3545902 in the year 2008 with increment of Rs.82619 and the Account Receivable Turn Over becomes 131.69 in the year 2008. Zahoor Ahmad Page 54 24-06-2011
  55. 55. Day’s sales in inventory = )365/(CGS ntiryendinginve Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Day's sales in inventory 14.46 11.58 25.28 28.21 29.08 STOCK IN TRADE 61600 55931 145090 183309 230089 Cost of sales 1555407 1763567 2095027 237178 8 2887790 Activity Ratio 14.46 11.58 25.28 28.21 29.08 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 2004 2005 2006 2007 2008 Years Ratios Day's sales in inventory The amount of Stock In trade in the year 2004 was Rzs.61600 and the amount of Cost of sales in the first year 2004 was Rs.1555407 and the Day's sale in inventory was 14.46 in the year 2004. And the amount Stock in trade decreases to Rs.55931 in the year 2005 with decrement of Rs.5669 and the amount of Cost of sales becomes Rs.1763567 in the year 2005 with an increment of Rs.208160 and the Day's sale in inventory becomes 11.58 in the year 2005. And the amount Stock in trade increases to Rs.145090 in the year 2006 with an increment of Rs.89159 and the amount of Cost of sales becomes Rs.2095027 in the year 2006 with an increment of Rs.331460 and the Day's sale in inventory becomes 25.28 in the year 2006. And the amount Stock in trade increases to Rs.183309 in the year 2007 with an increment of Rs.38219 and the amount of Cost of sales becomes Rs.2371788 in the year 2007 with an increment of Rs.276761 and the Day's sale in inventory becomes 28.21 in the year 2007. Zahoor Ahmad Page 55 24-06-2011
  56. 56. And the amount Stock in trade increases to Rs.230089 in the year 2008 with an increment of Rs.46780 and the amount of Cost of sales becomes Rs.2887790 in the year 2008 with an increment of Rs.516002 and the Day's sale in inventory becomes 29.08 in the year 2008. Inventory turn over = entoryaverageinv CGS Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Inventory turnover 61.46 79.34 85.08 70.21 63.86 Cost of sales 1555407 1763567 2095027 2371788 2887790 STOCK IN TRADE 61600 55931 145090 183309 230089 Activity Ratio 61.46 79.34 85.08 70.21 63.86 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 2004 2005 2006 2007 2008 Years Ratios Inventory turnover The amount of Stock In trade in the year 2004 was Rs.61600 and the amount of Cost of sales in the first year 2004 was Rs.1555407 and the Inventory turnover was 61.46 in the year 2004. And the amount Stock in trade decreases to Rs.55931 in the year 2005 with decrement of Rs.5669 and the amount of Cost of sales becomes Rs.1763567 in the year 2005 with an increment of Rs.208160 and the Inventory turnover becomes 79.34 in the year 2005. And the amount Stock in trade increases to Rs.145090 in the year 2006 with an increment of Rs.89159 and the amount of Cost of sales becomes Rs.2095027 in the year 2006 with an increment of Rs.331460 and the Inventory turnover becomes 85.08 in the year 2006. And the amount Stock in trade increases to Rs.183309 in the year 2007 with an increment of Rs.38219 and the amount of Cost of sales becomes Rs.2371788 in the year 2007 with an increment of Rs.276761 and the Inventory turnover becomes 70.21 in the year 2007. Zahoor Ahmad Page 56 24-06-2011
  57. 57. And the amount Stock in trade increases to Rs.230089 in the year 2008 with an increment of Rs.46780 and the amount of Cost of sales becomes Rs.2887790 in the year 2008 with an increment of Rs.516002 and the Inventory turnover becomes 63.86 in the year 2008 Total asset turn over = alassetsaveragetot netsales Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Total asset turnover 0.39 0.46 0.69 0.54 0.28 Net Sales 2296231 2845143 4286138 3463283 3545902 Total Assets 5910353 6223788 6198108 6400688 12454493 ActivityRatio 0.39 0.46 0.69 0.54 0.28 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 2004 2005 2006 2007 2008 Years Ratios Total asset turnover The amount of Net Sales in the year 2004 was Rs.2296231 and the amount of Total Assets in the first year 2004 was Rs.5910353 and Total asset turnover was 0.39 in the year 2004. And the amount Net Sales increases to Rs.2845143 in the year 2005 with an increment of Rs.548912 and the amount of Total Assets becomes Rs.6223788 in the year 2005 with increment of Rs.313435 and Total asset turnover becomes 0.46 in the year 2005. And the amount Net Sales increases to Rs.4286138 in the year 2006 with an increment of Rs.1440995 and the amount of Total Assets becomes Rs.6198108 in the year 2006 with decrement of Rs.25680 and Total asset turnover becomes 0.69 in the year 2006. And the amount Net Sales decreases to Rs.3463283 in the year 2007 with decrement of Rs.822855 and the amount of Total Assets becomes Rs.6400688 in the year 2007 with increment of Rs.202580 and Total asset turnover becomes 0.54 in the year 2007. Zahoor Ahmad Page 57 24-06-2011
  58. 58. And the amount Net Sales increases to Rs.3545902 in the year 2008 with an increment of Rs.82619 and the amount of Total Assets becomes Rs.12454493 in the year 2008 with increment of Rs.6053805 and Total asset turnover becomes 0.28 in the year 2008. 4.9.4. Profitability Gross profit margin = netsales tgrossprofi Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Gross profit margin (%) 32.26% 38.01% 51.12% 31.52% 18.56% Gross profit 740824 1081576 2191111 1091495 658112 Net Sales 2296231 2845143 4286138 3463283 3545902 Profitability Ratio 32.26% 38.01% 51.12% 31.52% 18.56% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 2004 2005 2006 2007 2008 Years Ratios Gross profit margin The amount of Gross Profit in the year 2004 was Rs.740824 and the amount of Net Sales in the first year 2004 was Rs.2296231 and Gross Profit Margin was 32.26% in the year 2004. And the amount of Gross Profit increases to Rs.1081576 in the year 2005 with an increment of Rs.340752 and the amount of Net Sales becomes Rs.2845143 in the year 2005 with increment of Rs.548912 and the Gross Profit Margin becomes 38.01% in the year 2005. And the amount of Gross Profit increases to Rs.2191111 in the year 2006 with an increment of Rs.1109535 and the amount of Net Sales becomes Rs.4286138 in the year 2006 with increment of Rs.1440995 and the Gross Profit Margin becomes 51.12% in the year 2006. Zahoor Ahmad Page 58 24-06-2011
  59. 59. And the amount of Gross Profit decreases to Rs.1091495 in the year 2007 with decrement of Rs.1099616 and the amount of Net Sales becomes Rs.3463283 in the year 2007 with decrement of Rs.822855 and the Gross Profit Margin becomes 31.52% in the year 2007. And the amount of Gross Profit decreases to Rs.658112 in the year 2008 with decrement of Rs.433383 and the amount of Net Sales becomes Rs.3545902 in the year 2008 with increment of Rs.82619 and the Gross Profit Margin becomes 18.56% in the year 2008. Operating income margin = netsales ncomeoperatingi Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Operating income margin (%) 1.70% 34.75% 47.64% 28.74% 16.96% Operating Profit 39068 988673 2041984 995285 601518 Net Sales 2296231 2845143 4286138 346328 3 3545902 Profitability ratio 1.70% 34.75% 47.64% 28.74% 16.96% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 2004 2005 2006 2007 2008 Years Ratios Operating income margin The amount of Operating Profit in the year 2004 was Rs.39068 and the amount of Net Sales in the first year 2004 was Rs.2296231 and Operating Income Margin was 1.70% in the year 2004. And the amount of Operating Profit increases to Rs.988673 in the year 2005 with an increment of Rs.949605 and the amount of Net Sales becomes Rs.2845143 in the year 2005 with increment of Rs.548912 and the Operating Income Margin becomes 34.75% in the year 2005. Zahoor Ahmad Page 59 24-06-2011
  60. 60. And the amount of Operating Profit increases to Rs.2041984 in the year 2006 with an increment of Rs.1053311 and the amount of Net Sales becomes Rs.4286138 in the year 2006 with increment of Rs.1440995 and the Operating Income Margin becomes 47.64% in the year 2006. And the amount of Operating Profit decreases to Rs.995285 in the year 2007 with decrement of Rs.1046699 and the amount of Net Sales becomes Rs.3463283 in the year 2007 with decrement of Rs.822855 and the Operating Income Margin becomes 28.74% in the year 2007. And the amount of Operating Profit decreases to Rs.601518 in the year 2008 with decrement of Rs.393767 and the amount of Net Sales becomes Rs.3545902 in the year 2008 with increment of Rs.82619 and the Operating Income Margin becomes 16.96% in the year 2008 Net profit margin = netsales netincome Fauji Cement Company Limited Liquidity Ratios Analysis 2004 2005 2006 2007 2008 Net profit margin 13.68% 17.94% 28.08% 18.66% 11.66% Net profit after taxation 314149 510493 1203739 646323 413598 Net Sales 2296231 2845143 4286138 346328 3 3545902 Zahoor Ahmad Page 60 24-06-2011
  61. 61. Profitability Ratio 13.68% 17.94% 28.08% 18.66% 11.66% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 2004 2005 2006 2007 2008 Years Ratios Net profit margin The amount of Net Profit after taxation in the year 2004 was Rs.314149 and the amount of Net Sales in the first year 2004 was Rs.2296231 and Net Profit Margin was 13.68% in the year 2004. And the amount of Net profit after taxation increases to Rs.510493 in the year 2005 with an increment of Rs.196344 and the amount of Net Sales becomes Rs.2845143 in the year 2005 with increment of Rs.548912 and the Net Profit Margin becomes 17.94% in the year 2005. And the amount of Net profit after taxation increases to Rs.1203739 in the year 2006 with an increment of Rs.693246 and the amount of Net Sales becomes Rs.4286138 in the year 2006 with increment of Rs.1440995 and the Net Profit Margin becomes 28.08% in the year 2006. And the amount of Net profit after taxation decreases to Rs.646323 in the year 2007 with decrement of Rs.557416 and the amount of Net Sales becomes Rs.3463283 in the year 2007 with decrement of Rs.822855 and the Net Profit Margin becomes 18.66% in the year 2007. And the amount of Net profit after taxation decreases to Rs.413598 in the year 2008 with decrement of Rs.232725 and the amount of Net Sales becomes Rs.3545902 in the year 2008 with increment of Rs.82619 and the Net Profit Margin becomes 11.66% in the year 2008 Return on asset = alassetsaveragetot netincome Zahoor Ahmad Page 61 24-06-2011
  62. 62. Fauji Cement Company Limited Ratio Analysis 2004 2005 2006 2007 2008 Return on asset (%) 5.32% 8.20% 19.42% 10.10% 3.32% Net profit after taxation 314149 510493 1203739 646323 413598 Total Assets 5910353 6223788 6198108 6400688 12454493 Profitability Ratio 5.32% 8.20% 19.42% 10.10% 3.32% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 2004 2005 2006 2007 2008 Years Ratios Return on asset The amount of Net Profit after taxation in the year 2004 was Rs.314149 and the amount of Total Assets in the first year 2004 was Rs.5910353 and the Return on asset was 5.32% in the year 2004. And the amount of Net profit after taxation increases to Rs.510493 in the year 2005 with an increment of Rs.196344 and the amount of Total Assets becomes Rs.6223788 in the year 2005 with increment of Rs.313435 and the Return on asset becomes 8.20% in the year 2005. And the amount of Net profit after taxation increases to Rs.1203739 in the year 2006 with an increment of Rs.693246 and the amount of Total Assets becomes Rs.6198108 in the year 2006 with decrement of Rs.25680 and the Return on asset becomes 19.42% in the year 2006. And the amount of Net profit after taxation decreases to Rs.646323 in the year 2007 with decrement of Rs.557416 and the amount of Total Assets becomes Rs.6400688 in the year 2007 with increment of Rs.202580 and the Return on asset becomes 10.10% in the year 2007. And the amount of Net profit after taxation decreases to Rs.413598 in the year 2008 with decrement of Rs.232725 and the amount of Total Assets becomes Rs.12454493 in the year 2008 with increment of Rs.6053805 and the Return on asset becomes 3.32% in the year 2008 Zahoor Ahmad Page 62 24-06-2011
  63. 63. Return on sales to fixed assets = etsalfixedassaveragetot netsales Fauji Cement Company Limited Ratio Analysis 2004 2005 2006 2007 2008 Return on Sales to fixed assets 0.49 0.61 0.94 0.79 0.50 Net Sales 2296231 2845143 4286138 346328 3 3545902 FIXED ASSETS - Tangible 4729254 4658272 4563115 439245 0 7106599 Profitability Ratio 0.49 0.61 0.94 0.79 0.50 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 2004 2005 2006 2007 2008 Years Ratios Return on Sales to fixed assets The amount of Net Sales in the year 2004 was Rs.2296231 and the amount of Fixed Assets in the first year 2004 was Rs.4729254 and the Return on Sales to fixed assets was 0.49 in the year 2004. And the amount Net Sales increases to Rs.2845143 in the year 2005 with an increment of Rs.548912 and the amount of Fixed Assets becomes Rs.4658272 in the year 2005 with decrement of Rs.70982 and the Return on Sales to fixed assets becomes 0.61 in the year 2005. And the amount Net Sales increases to Rs.4286138 in the year 2006 with an increment of Rs.1440995 and the amount of Fixed Assets becomes Rs.4563115 in the year 2006 with decrement of Rs.95157 and the Return on Sales to fixed assets becomes 0.94 in the year 2006. And the amount Net Sales decreases to Rs.3463283 in the year 2007 with decrement of Rs.822855 and the amount of Fixed Assets becomes Rs.4392450 in the year 2007 with decrement of Rs.170665 and the Return on Sales to fixed assets becomes 0.79 in the year 2007. Zahoor Ahmad Page 63 24-06-2011
  64. 64. And the amount Net Sales increases to Rs.3545902 in the year 2008 with an increment of Rs.82619 and the amount of Fixed Assets becomes Rs.7106599 in the year 2008 with increment of Rs.2714149 and the Return on Sales to fixed assets becomes 0.50 in the year 2008 Return on total equity = alequityaveragetot ndtockdividepreferredsredeemablenetincome − Fauji Cement Company Limited Ratio Analysis 2004 2005 2006 2007 2008 Return on total equity 16.20% 20.84% 36.67% 17.30% 4.45% Net profit after taxation 314149 510493 1203739 646323 413598 SHARE CAPITAL AND RESERVES 193913 4 2449624 3282616 3735206 9283981 Profitability Ratio 16.20% 20.84% 36.67% 17.30% 4.45% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 2004 2005 2006 2007 2008 Years Ratios Return on total equity The amount of Net Profit after taxation in the year 2004 was Rs.314149 and the amount of Share Capital and Reserves in the first year 2004 was Rs.1939134 and the Return on total equity was 16.20% in the year 2004. And the amount of Net profit after taxation increases to Rs.510493 in the year 2005 with an increment of Rs.196344 and the amount of Share Capital and Reserves becomes Rs.2449624 in the year 2005 with increment of Rs.510490 and the Return on total equity becomes 20.84% in the year 2005. Zahoor Ahmad Page 64 24-06-2011
  65. 65. And the amount of Net profit after taxation increases to Rs.1203739 in the year 2006 with an increment of Rs.693246 and the amount of Share Capital and Reserves becomes Rs.3282616 in the year 2006 with increment of Rs.832992 and the Return on total equity becomes 36.67% in the year 2006. And the amount of Net profit after taxation decreases to Rs.646323 in the year 2007 with decrement of Rs.557416 and the amount of Share Capital and Reserves becomes Rs.3735206 in the year 2007 with increment of Rs.452590 and the Return on total equity becomes 17.30% in the year 2007. And the amount of Net profit after taxation decreases to Rs.413598 in the year 2008 with decrement of Rs.232725 and the amount of Share Capital and Reserves becomes Rs.9283981 in the year 2008 with increment of Rs.5548775 and the Return on total equity becomes 4.45% in the year 2008 Earning Per Common Share = dingtsmonshareouagenoofcomweightaver ividendpreferreddnetincome tan − Fuji Cement Company Limited Ratio Analysis 2004 2005 2006 2007 2008 Earning per common share 0.85 1.38 3.25 1.73 0.85 Net profit after taxation 31414 9 51049 3 120373 9 64632 3 413598 No. of common shares 37074 3 37074 3 370743 37447 3 489456 Profitability Ratio 0.85 1.38 3.25 1.73 0.85 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 2004 2005 2006 2007 2008 Years Ratios Earning per common share Zahoor Ahmad Page 65 24-06-2011
  66. 66. The amount of Net Profit after taxation in the year 2004 was Rs.314149 and the Number of common shares in the first year 2004 was 370743 and the Earning per common share was 0.85 in the year 2004. And the amount of Net profit after taxation increases to Rs.510493 in the year 2005 with an increment of Rs.196344 and the Number of common shares becomes 370743 in the year 2005 and the Earning per common share becomes 1.38 in the year 2005. And the amount of Net profit after taxation increases to Rs.1203739 in the year 2006 with an increment of Rs.693246 and the Number of common shares becomes 370743 in the year 2006 and the Earning per common share becomes 3.25 in the year 2006. And the amount of Net profit after taxation decreases to Rs.646323 in the year 2007 with decrement of Rs.557416 and the Number of common shares becomes 374473 in the year 2007 with increment of 3730 and the Earning per common share becomes 1.73 in the year 2007. And the amount of Net profit after taxation decreases to Rs.413598 in the year 2008 with decrement of Rs.232725 and the Number of common shares becomes 489456 in the year 2008 with increment of 114983 and the Earning per common share becomes 0.85 in the year 2008 Price/earning ratio = DilutedEPS onShareicePerCommMarket Pr Fauji Cement Company Limited Ratio Analysis 2004 2005 2006 2007 2008 Price/earning ratio 18.89 10.48 6.75 13.1 7 20.91 Market price 14.15 12.76 19.3 8 20.0 9 16.06 Earning per share - Diluted 0.75 1.22 2.87 1.53 0.77 Zahoor Ahmad Page 66 24-06-2011
  67. 67. Profitability Ratio 18.89 10.48 6.75 13.17 20.91 0.00 5.00 10.00 15.00 20.00 25.00 2004 2005 2006 2007 2008 Years Ratios Price/earning ratio The market price in the year 2004 was Rs.14.15 and the Earning per share in the first year 2004 was 0.75 and Price/earning ratio was 18.89 in the year 2004. And the market price decreases to 12.76 in the year 2005 with decrement of 1.39 and the Earning per share becomes 1.22 in the year 2005 with increment of 0.47 and the Price/earning ratio becomes 10.48 in the year 2005. And the market price increases to 19.38 in the year 2006 with increment of 6.62 and the Earning per share becomes 2.87 in the year 2006 with increment of 1.65 and the Price/earning ratio becomes 6.75 in the year 2006. And the market price increases to 20.09 in the year 2007 with increment of 0.71 and the Earning per share becomes 1.53 in the year 2007 with decrement of 1.34 and the Price/earning ratio becomes 13.17 in the year 2007. And the market price decreases to 16.06 in the year 2008 with decrement of 4.03 and the Earning per share becomes 0.77 in the year 2008 with decrement of 0.76 and the Price/earning ratio becomes 20.91 in the year 2008. 4.9.5. Finencial Leverage Ratio - Analysis for Investor Degree of financial leverage = ITchandeinEB tincomechangeinne % % Zahoor Ahmad Page 67 24-06-2011
  68. 68. Fauji Cement Company Limited Ratio Analysis 2004 2005 2006 2007 2008 Degree of financial leverage 0.20 0.68 0.56 0.70 Net profit after taxation 314149 51049 3 1203739 64632 3 413598 Net profit before taxation -243290 75904 1 1777690 78818 0 454564 Ratio Analysis 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 2004 2005 2006 2007 2008 Years Ratios Degree of financial leverage Percentage of earnings Retained Percentage of earnings retained = Net income –All dividends / Net income It is better for trend analysis if non recurring items are remove. 4.9.6. Dividend Policy Ratio Dividend payout Ratio The dividend payout ratio measures the portion of current earnings per common share being paid out in dividends. Dividend payout = Dividend per common share / Diluted earnings per share Zahoor Ahmad Page 68 24-06-2011
  69. 69. Dividend yield The dividend yield indicates the relationship between the dividends per common share and the market price per common share. Dividend yield = Dividend per common share / market price per common share Book Value per Share It indicates the amount of shareholder’s equity that relates to each share of outstanding common stock. Book value per share= Total shareholder’s equity-preferred stock equity/Number of common share outstanding Book value is of limited use to the investment analyst since it is based on Historical cost. When market value is below book value, investors view the company as lacking potential. A market value above book value indicates that investors view the company as having enough potential to be worth more than the un recovered cost. Book Value Per Share (Amounts in Rs. “000”) 2003 2004 2005 2006 2007 Total Shareholder's Equity 1,624,98 6 1,939,13 4 2,449,62 4 3,282,61 6 3,735,206 Preferred Stock Equity 486,992 486,992 486,992 486,992 486,992 No. of Common Stock O/S 370743 370743 370743 370743 370743 Book Value Per Share 3.07 3.92 5.29 7.54 8.76 3.07 3.92 5.29 7.54 8.76 0.00 2.00 4.00 6.00 8.00 10.00 2003 2004 2005 2006 2007 Years BookValurPerShare Series1 The book value per share is increasing in the coming years. The reason of that rise is that the total common shareholder’s equity is increasing in the coming years. That is very good for the investors to earn more on their investments. The owners of the cement company are increasing as compared to the base year Zahoor Ahmad Page 69 24-06-2011
  70. 70. 4.9.7. Ratio Analysis charts. 2004 2005 2006 2007 2008 Net Working Capital 202344 -34181 312184 511240 2839322 Current Ratio 1.54 0.97 1.25 1.35 2.16 Acid Ratio 1.38 0.93 1.13 1.23 2.06 Cash Ratio 0.53 0.50 0.67 0.29 1.54 Debt/Equity Ratio 3.05 2.54 1.89 1.71 1.34 Debt to tangible net worth 3.05 2.54 1.89 1.71 1.34 Day's Sales in account receivable 7.11948623 6 13.7565370 2 2.16940635 1 2.06124362 3 2.771750319 Account Receivable Turn Over 51.2677443 1 26.5328403 2 168.248792 9 177.077564 2 131.6857429 Day's sales in inventory 14.4553804 9 11.5758658 4 25.2778842 5 28.2098505 4 29.08192251 Inventory turnover 61.4639611 2 79.3434561 6 85.0841489 7 70.2086318 2 63.85666586 Zahoor Ahmad Page 70 24-06-2011
  71. 71. Net profit margin 13.68% 17.94% 28.08% 18.66% 11.66% Total asset turnover 0.39 0.46 0.69 0.54 0.28 Return on asset 5.32% 8.20% 19.42% 10.10% 3.32% Operating income margin 1.70% 34.75% 47.64% 28.74% 16.96% Return on Sales to fixed assets 0.48553767 7 0.61077219 2 0.93930089 4 0.78846270 3 0.498959066 Return on total equity 16.20% 20.84% 36.67% 17.30% 4.45% Gross profit margin 32.26% 38.01% 51.12% 31.52% 18.56% Degree of financial leverage 0.20 0.68 0.56 0.70 Earning per common share 0.85 1.38 3.25 1.73 0.85 Price/earning ratio 18.89 10.48 6.75 13.17 20.91 4.9.8. Conclusion From the above information we conclude that cement sector in one of the prosperous sector in the Pakistan’s economy. The potential investors should take their chances investing in the cement sector through stock exchanges. The Fauji cement country has proved itself as one of the leading cement factories of the country. The trade mark of Fauji Foundation gives a sign of credibility in the minds of the investors. Since Pakistan is a developing country and for expanding infrastructure and developmental projects, the need of the cement is very obvious. Fauji cement has been providing 63% of the cement in the country as well as exporting to countries like Afghanistan and Bangladesh. I foresee growth in earrings of cement companies in the years to come. Similarly the said position will be with FCC. I expect positive earnings of FCCL in the coming years; currently we maintain our stance by recommend “BUY” on FCCL. Zahoor Ahmad Page 71 24-06-2011
  72. 72. 4.2.1. Pioneer Cement Comparative Analysis (Compare with Kohat & Cherat Cement) PIONEER CEMENT LIMITED 4.2.2. FIVE YEARS HORIZONTAL ANALYSIS OF INCOME STATEMENT Zahoor Ahmad Page 72 24-06-2011
  73. 73. ANALYSIS: Sales of the Company has shown increasing trend and has increased up to 40% in 2004,55% in 2005 and 50% in 2006 and 2% in 2007 and 55% in 2008 and respective from previous years Cost of sales has also shown an increasing trend. In 2004 it is 31%, 2005 it increased 47%, in 2006 in increased 34%, 52% increase in 2007 and 54% in 2008 from respective years cost of sale increase more than increase in sales which result there is loss in 2007. The major reason of this increase in cost was the plant shutdown due to irregular power supply of WAPDA and increase in prices of diesel and empty bags. Gross profit of the company has also shown a increasing trend in from 2004 to 2005 up to 2006 respectively and then decrease and got loss in 2007 and then gross profit increase 61% in 2008 Zahoor Ahmad Page 73 24-06-2011 PIONEER CEMENT COMPANY LIMITED FIVE YEAR POSITION OF INCOME SATEMENT For the year ended June 30 2008 2007 2006 2005 2004 Net Sales 55% 2% 50% 55% 40% Cost of goods sold 54% 52% 34% 47% 31% Gross Profit 61% -74% 83% 74% 73% Administrative And Selling expenses 293% 25% -15% 55% 19% Operating Operating/Loss - 124% -84% 107 % 80% 91% Other operating expenses 1997 % -88% 13% 123% -5% Other operating income 162% -84% 162% -65% 19% Profit/loss from operations - 189% -84% 120 % 45% 84% Financial & Other Voluntary separation scheme charges 13% -286% 63% 3% 28% Profit/loss before taxation 211% -120% 137 % 65% 56% Taxation 333% -135% 316% -133% -44% Profit/loss after taxation 92% -114% 104 % -22% 87%
  74. 74. company cost of sale increases but sale decrease, in 2007 gross profit decreases -74% and it was 61% in 2008.Selling and distribution expenses also increases in 2008 as 293% and 25% in 2007 respectively. This decrease in gross profit was due to the increase in cost of goods sold and also administrative and selling expenses which cause company got loss. Operating profit showing increasing trend from 2004 to 2006 as 91%, 80% and 107% respectively and then it decrease in 2007 and 2008 as -84% and -124% which show big loss in the year of 2008. Finance cost Decrease in 2007 as 286% and increased in 2008 as 13% which is not at higher side but it is at higher side in 2004 to 2006 as 63% for expansion of new grey and white cement plants. There is a great increase in 2008 which cause the loss of the company. Profit before tax shows decrease in 2007 as 120% and increase in 2008 as 211% and company got loss in 2008. Profit after tax decreased in 2007 by 114% and it was increase 92% in 2008. Company management tries to expand its operations so it needs more finds that were got from short and long term financing. Due to economic crises and dispute with unionized permanent workers, company faces losses. Company is good for long term benefits, because it had declared bonus shares for last five years. It had a great capacity to produce cement and they are improving technology. They had implemented Enterprise Resource Planning software to increase the efficiency and for better management planning. 4.2.3. HORIZONTAL ANALYSIS OF BALANCE SHEET BALANCE SHEET As at June 30 2008 2007 2006 2005 2004 EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVE Authorized Share Capital 0% 0% 0% 0% 0% Issue Subscribed & Paid Up Capital 18% 5% 5% 62% 26% Reserves -22% -43% 847% -118% -28% 10% -10% 43% 197% -2% Surplus on Revaluation of fixed assets-net of tax 290% -5% -4% - - NON-CURRENT LIABILITIES Zahoor Ahmad Page 74 24-06-2011 BALANCE SHEET

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