This document presents the financial analysis of Ellcot Spinning Mills Ltd. for 2015 and 2016. It analyzes the company's liquidity, activity, profitability, solvency, and return on investment ratios. The liquidity ratios show the company was better able to pay current liabilities from current assets in 2015 compared to 2016. Inventory turnover improved in 2016 but debtors' turnover was similar both years. Profitability ratios showed higher net profits in 2016. Solvency ratios indicated more debt relative to equity in 2016. Return on investment was higher in 2015 than 2016.

2. PRESENTATION OF ADVANCE
ACCOUNTING

3. GROUP MEMBERS
Usman Ali (G.LEADER)
MUHAMMAD REHMAN
SHAHROZ SHAKEEL
OSAMA BASHIR TOOR
YASIR SADIQ

4. Ellcot Spinning Mills Ltd.

5. Liquidity Ratio
Activity Ratio
Profitability Ratio
Solvency Ratio
Return on investment Ratio

6. Liquidity Ratios
1. Current Ratios:
2015
=
=
= 2.68:1
2016
=
=
= 2.08:1

7. Interpret:
This company has better condition in both years (2015 &2016) and
can pay current liabilities from current assets. The bench mark is 2:1…
2.Liquid ratio:
2015
=
=
= 1.27:1
Working:
Liquid assets= current assets – stock in trade- Prepaid Exp
=1350263173 – 668865762-42242332
=639155079

8. 2016
=
=
= 0.89:1
Working:
Liquid assets= current assets – stock in trade –Prepaid Exp
=1649628054 – 738170879 –206010087
=705447088
Interpret:
The bench mark is 1:1 of liquid ratio. This company is able to
pay current liabilities from liquid assets in 2015 but not in 2016. The
company has not best condition in 2016 due to increase C.L.

9. 3. Absolute liquid ratio:
2015
=
=
= 0.3:1
Working:
Absolute liquid assets= cash+ bank+ MS
=148674604
2016
=
=
= 0.2:1

10. Working:
Absolute liquid assets= cash +bank +MS
=176195561
Interpret:
This company cannot pay current liabilities with absolute liquid assets
because bench mark is 0.5:1 and C.L is more as compare to cash.
Liquidity analysis:
. The overall condition of company is NOT better in liquidity
ratios.

11. Activity Ratios
1. Inventory turnover ratio:
2015
=
=
= 1.15 times
Working:
Average stock =
=
=3723986633

12. Inventory conversion period:
=
=
= 317 days
2016
=
=
= 5.7 times

13. Working:
Average stock=
=
= 703518321
Inventory conversion period:
=64 Days
Interpret:
In 2016, stock of the company is passing out 5.7 times in one year.
Stock is sale after 64 days. The condition of the company is not better in
stock turnover ratio in 2015.

14. 2.Debtors turnover ratio:
2015
=
=
= 32.3 times
Working:
Average receivable=
=
=142167809

15. Debtors’ conversion period:
=
=
=11.30 days
2016
=
=
= 34.06 times

16. Working:
Average receivable=
=
=124126209
Debtors’ conversion period:
=
=
=10.72 days
Interpret:
The company receive amount from its debtors 32 times in 2015 and 34
times in 2016 after 11 days and 10 days respectively. Its means the position of
the company is better in 2016 as compare to 2015. overall condition is better.

17. 3. Creditors’ turnover ratio:
2015
=
=
= 12.53 times
Working:
Average payables=
=
= 242538410

18. Creditors’ conversion period:
=
=
= 29 days
2016
=
=
= 11 times

19. Working:
Average payables=
=
= 255077198
Creditors’ conversion period:
=
=
= 33 days
Interpret:
In 2015, company pay to creditors 12 times after 26 days and in
2016, the payment to creditors is 11 times and payment made after 33 days.

20. 4. Working capital turnover ratio:
2015
=
=
= 7.22 times
Working:
Average working capital=
=
=594697343

21. Working#1:
Opening working capital=
= 1,338,341,840 - 506,375,067
=831966773
Working#2:
Closing working capital=
= 1,350,263,173 - 992, 835, 261
=357427912

22. 2016
=
=
= 6.56 times
Working:
Average working capital=
=
=606947149

23. Working#1:
Opening working capital=
= 1,350,263,173 - 992, 835, 261
=357427912
Working#2:
Closing working capital=
=1,649,628,054 - 793,161,667
=856466387
Activity ratio analysis:
The overall position of the company is best. It receives more from
debtors and pay less to creditors but in 2015 it cannot sale its stock more as
compare to 2016.

24. Profitability Ratios
1. Gross profit Ratios:
2015
=
=
= 6.36%
2016
=
=
= 5.80%

25. Interpret:
In 2015, gross profit is 6.36% of net sales in 2015. In 2016, 5.8.0%
gross profit of net sales. Its means the company gains more profit in 2016
due to the less cost of goods sold.
2. Operating profit Ratios:
2015
=
=
= 3.28%

26. 2016
=
=
= 2.61%
Interpret:
The operating profit is 3.28% of sales in 2015 and 2.61% in 2016. Its
means the position of the company is better in 2015 because the profit is
more earns in 2015.

27. 3. Operating Ratios:
2015
=
=
= 96.90%
2016
=
=
= 97.50%

28. 4. Net profit Ratios:
2015
=
= 100
=1.18%
2016
=
=
= 1.68%

29. Interpret:
This company earns more net profit after tax in 2016 as compare to
2015. Its means the profit for distribution to share holders is more in 2016.
The earnings per share in 2015 are less as compare to 2016. The condition
of the company is improved in 2016.
Solvency Ratios
Total Debt to equity Ratios:
2015
=
=
= 0.71:1

30. 2016
=
=
= 1.02:1
Interpret:
The position of the company is more better in 2015 as compare to
2016. In 2015 the company has 0.71 debts and 1 equity. Its means the
company can pay debts from its equity. But in 2016, debts are more than
equity. Its means the company gain more liabilities in 2016.

31. Interest coverage Ratios:
2015
=
=
= 2.49 times
2016
=
=
= 2.16 times

32. Interpret:
In 2015, the company can pay 2.49 times interest from its profit
before interest and tax. In 2016, company can pay 2.16 times its interest. Its
means the condition of the company in 2015 is better in paying interest as
compare to 2016.
SOLVENCY RATIOs:
2015
=
=
= 41.75%

33. 2016
=
=
= 88%
Proprietary Ratios:
2015
=
=
= 58.24%

34. 2016
=
=
= 85.9%
Interpret:
In both years the condition of the company is not best. The general
bench mark of proprietary ratio is 50%. Both years the ratio is above 50%.

35. Fixed assets Ratios:
2015
=
=
= 0.55:1
Working#1:
Long term fund =equity + long term liabilities
=1,384,686,918 + 489,922,118
=1874609036

36. 2016
=
=
= 0.59:1
Working#2:
Long term fund =equity + long term liabilities
= 1,418,481,699 + 658,652,262
=2077133961

37. Interpret:
The general bench mark of this ratio is 50%. In case, the both years
position of company is best because both years the fixed assets is above
50% of long term fund.
Reserve to capital Ratios:
2015
=
=
= 11.57

38. 2016
=
=
= 11.88
Interpret:
The reserve of the company is more, if the company suffers loss, it
can recover these loss with reserves.

39. Earning per share:
2015 2016
= =
= =
= 4.96 per share = 6.50 per share
Interpret:
The earning per share increase in 2016 as compare to 2015.

40. Return on investment Ratios
Return on capital Employed:
2015
=
=
= 8.83%
Capital employed=C.A-C.L+F.A-Non operating assets
=1,350,263,173-502,913,143+1,027,259,006-170,494,039
=1704114997

41. 2016
=
=
= 5..64%
Capital employed= C.A-C.L+F.A-Non operating assets
=1,649,628,054-793,161,667+1,220,667,574-119,964,290
=1957169671
Interpret:
The condition of the company is not better in return on
capital employed. In 2015, the company has earned only 8.83% from its capital
employed and in 2016 5.64%.

42. Return on shareholder fund:
2015
=
=
= 3.92%
2016
=
=
= 5.02%

43. Interpret:
In 2015, the company pay return on shareholder fund is 3.92%
and in 2016 is 5.02%. The condition of the company improve as compare to
2015 with 2016.