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Project
FINANCIAL RATIO ANALYSIS
Company
Sitara chemicals industries limited
Subject
Financial statement analysis
Group
BBA5th
Group members
M. Zia Ul Haq 105
M. Basharat 125
Hafiz Usman 113
M. Awais 116
Umar Ali 135
Submitted to
Mam Omera Zaffar

Banking & Finance

GC University Faisalabad
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Sitara chemicals industries limited

Introduction

SCIL was incorporated in 1981 and began producing

caustic soda in 1985, initially at a rate of 30 metric
tones Caustic a day. The plant’s capacity was gradually
increased over years to current level of 45 metric tones
a [Link] addition, various by-product facilities have
been added and expanded from time to time to cope
with growing demand. Company entered into Textile
Spinning Business in 1995. Its specialty chemicals and
export division was established in 2001 and agri
chemicals division in 2003.

FINANCIAL RATIOS

Financial analysis comparisons in which certain financial

Statement items are divided by one another to reveal their
logical interrelationships. Some financial ratios (such as net
sales to net worth ratio and net income to net sales ratio)
are called primary because they indicate the fundamental
causes underlying a firm's strengths and weaknesses. Others
(such as current assets to current liabilities ratio, and current
liabilities to net worth ratio) are called 'secondary' because
they depict the firm's competitive position and financial
structure as effects of the causes identified by the primary
ratios.
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FINANCIAL
STATEMENTS

1. BALANCE SHEET
Assets
NON-CURRENT ASSETS

(Rupees in 000)
Assets 2007 2008 2009
Property plant & 3,270,893,931 4824,079,425 5,137,619,082
equipment
Investment property 688,531,521 1,255,841,661 2,705,804,900
Long term investment 753,955,79 88,081,892 77,035,999
Long term loan & advances 261,307,473 542,906,320 10,657,699
Long term deposits 38960050 38,965,450 38,965,450

Total non current assets: 4335088554 6749874748

79700831330

CURRENT ASSETS
(Rupees in 000)

Current assets 2007 2008 2009

Stores, spare parts & loose 208,020,031 333,535,521 265,575,916
tools
Stock in trade 441,676,362 526,915,795 773,761,522
Trade debts 561,086,919 563,788,198 663,921,122
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Loans & advances 560,761,814 148,109,374 56,556,607

Tradedeposits&S.T 6,063,998 8,818,690 22,492,557
prepayments
Other receivables 11779,550 8,317,612 12,147,808
Investments 7399248 8,425,510 54,708,025
Cash & bank balances 252,694,526 240,942,737 294,164,537

Total current asset: 2,049,482,448 1,838,853,437

2,143,328,095
+ total non-current assets: 4335088554 6749874748
79700831330
total assets: 6,384,571,002 8,588,728,785
10,113,411,225
EQUITY
(Rupees in 000)

Equity & liabilities 2007 2008 2009

Share capital & reserves
Authorized share capital 300,000,000 600,000,000 600,000,000
Issued , subscribe & paid 185,535,990 204,089,590 204,089,590
up
Reserves 1,650,047,079 1,322,007,545 1,311,769,902
Unappropriated profits 899,931,916 1,446,129,495
1,835,583,069 2,426029,051 2,961,988,987

SURPLUS ON REVALUATION OF PROPERTY 1,075,357,757

PLANT AND EQUIPMENT

Liabilities
Non current liabilities
(Rupees in 000)
Non-current liabilities 2007 2008 2009
Long term financing 1,846,515,061 1,797,673,176 2,785,751,983
Long term murabaha 19,438,047 - -
Long term deposits 12,706,103 12,942,874 12,315,729
Deffered liabilities 577,527,348 957,679,334 1,003,595,790

Current liabilities
(Rupees in 000)
Current liabilities 2007 2008 2009
Trade & other payables 1,417,614,806 1,878,483,567 1,770,840,997
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Profit/financial charges 57,628,576 37,428,936 406,663,318

payable
Current portion of non 222,627,643 268,279,930 415,091,267
current liabities
Provision for taxation 368,638,456 116,915,760 46,848,662
Sales tax 26,291,893 17,940,800 3,766,466

2092,801,374 2,319,045,993
2,343,210,710
6,384,571,002 8,588,728,185
10,113,411,225

2. Income Statement:
(Rupees in 000)
Income statement 2007 2008 2009
Net sales 4,374,051,881 5,479,570,069 6,178,399,033
Cost of sales 3,289,672,158 3,924,285,790 4,216,643,662
Gross profit 1,084,379,723 1,555,284,279 1,961,755,371
Other operating income 29,617,604 64,557,333 27,419,688
1,113,997,327 1,619,841,612 1989,175,059
Distribution cost 54,814,588 71,549,434 68292,101
Administrative expenses 164,803,036 168,728,675 240,361,887
Other operating expenses 39,893,557 90,423,247 78900914
Finance cost 317,624,373 368,094,645 604,981,196
Share of loss of associates- (41,516) 1,745,441 8,744,825
net of tax
577,094,038 700,541,442 1,001,280,923
Profit before taxation 536,903289 919,300,170 987,894,136
Provision for taxation 163,863,404 296,954,801 357,439,095
Profit for the year 373,039,885 622,345,369 630,455,041

Common size analysis

Balance Sheet
Horizontal analysis
2007 2008 2009
Horizontal analysis
propety, plant & 100% 147.485% 157.07%
equipment
investment property 100% 182.39% 392.98%
long term investment 100% 116.82% 102.17%
long term loan & advance 100% 207.7% 4.07%
long term deposits 100% 100.01% 100.01%
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current assets 100% 160.33% 127.66%

stores, spare parts & loose 100% 119.22229% 175.18%
tools
stock in trade 100% 100.48% 137.90%
trade debts 100% 26.41% 10.085%
loans & advances 100% 145.42% 370.91%
trade deposits & S.T 100% 70.6% 103.12%
prepayments
other receivables 100% 113.86% 739.3%
Investments 100% 95.53% 116.411%
cash & bank balances 100% 89.722% 104.57%
100% 134.52% 158.40%

Equity & liabilities 2007 2008 2009

Share capital & reserves
Authorized share capital 100% 200% 200% 100%
Issued , subscribe & paid 100% 110% 110% 110.81%
up
Reserves 100% 80% 79.49% 111.96%
Unappropriated profits 100% 132.16% 161.36%
Non-current liabilities 100%
Long term financing 100% 97.35% 150.86%
134.52%
Long term murabaha 100% 0% 0%
Long term deposits 100% 101.86% 96.92 158.40%
Deffered liabilities 100% 165.82% 173.77
Current liabilities In 2008 the
Trade & other payables 100% 132.51% 124.91 current
Profit/financial charges 100% 64.94% 185.08
payable
assets
Current portion of non 100% 120.50% 186.45 decrease to
current liabities
Provision for taxation 100% 31.711% 12.70
Sales tax 100% 68.23% 14.32
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89.7222 % due to decrease in other receivables 70.6 % and loan &

advance 26.41 % , but in 2009 the current assets increase to 104.57 %
due to increase in stock in trade 175.18 % and trade debts 137.90 % and
trade deposits and short term prepayments 379.91 % and investment
739.3 %.
The non-current assets in 2008 increase to 155.70 % due to major
increase in long term loan and advancing 207.7 % and investment
property 182.39 %. In 2009 the total non-current assets increase to
183.85 % due to major increase in investment property 392.98 %.
So, in 2008 the total assets increase to 134.52 % due to increase in total
non-current assets and in 2009 the total assets increase to 158.40 % due
to increae in both non-current and current assets.

in 2008 the shareholder's equity increase to 132.16 % and in 2009 it increase 161.36 % due to increase in
un appropriate profit in 2008 and 2009 respectively.
In 2008 the non-current liabilities increase to 113.28 % due to major increase in deferred liabilities
165.82 % in 2009 the non-current liabilities increase to 155.57 % due to major increase in long term
financing 150.86 %.
In 2008 the current liabilities increase to 1110.81 % due to major increase in trade and other payable
132.51 % and current portion of non current liabilities. In 2009 the current liabilities increase to 1111.6
% due to major increase in profit/financial charges payable 185.08 % and current portion of non-current
liabilities 186.45 %.

Vertical analysis
2007 2008 2009
property, plant & 51.23% 54.86%
equipment 50.80%
investment property 10.78% 14.28% 26.75%
long term investment 1.18% 1.001% 0.761%
long term loan & advance 4.09% 6.17% 0.105%
long term deposits 0.61% 0.44% 0.3852%
current assets
stores, spare parts & loose 32.58% 3.79%
tools 2.62%
stock in trade 6.91% 5.99% 7.65%
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trade debts 8.78% 6.41% 6.56%

loans & advances 8.78% 4.01% 0.55%
trade deposits & S.T 0.09% .100%
prepayments 0.222%
other receivables 0.18% .09% 0.12%
investments 0.11% .09% 0.54290%
cash & bank balances 3.95% 2.74% 2.90%
100% 100% 100%

Equity & liabilities 2007 2008 2009

Share capital & reserves
Authorized share capital 4.69% 6.82% 5.93%
Issued , subscribe & paid 2.90% 2.32% 2.01% 28.70%
up 32.77%
Reserves 25.84% 25.73% 12.97% 111.96%
Unappropriated profits 28.75% 28.05% 14.29%
Contingence and
Non-current liabilities
Long term financing 28.92% 20.44% 29.28% commitments
Long term murabaha 0.30% - 0% 100%
Long term deposits .19% 0.14% 0.12% 100%
Deffered liabilities 9.04% 10.42% 9.92%
100%
Current liabilities
Trade & other payables 22.20% 21.36% 17.50%
Profit/financial charges 0.90% 0.42% 1.05%
payable
Current portion of non 3.48% 3.05% 4.104%
current liabities
Provision for taxation 5.77% 3.65% 0.46%
Sales tax 0.411% .20% 0.037%

Horizontal analysis

Income statement 2007 2008 2009

Net sales 100% 125.27% 141.25%
Cost of sales 100% 119.29% 128.178%
Gross profit 100% 143.42% 180.91%
Other operating income 100% 217.96% 92.57%
100% 145.40% 178.56%
Distribution cost 100% 130.52% 124.58%
Administrative expenses 100% 102.38% 145.84%
Other operating expenses 100% 226.66% 197.77%
Finance cost 100% 115.88% 190.47%
Share of loss of associates- 100% - -
net of tax
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121.39% 173.50%
Profit before taxation 100% 171.22% 183.99%
Provision for taxation 100% 181.22% 218.13%
Profit for the year 100% 166.83% 169.004%

Earning per share 100% 166.79%

168.98%

In 2008 the profit before operating expenses increase to 145.40 % due to major
increase in gross profit 143.42 % and other operating income. In 2009 the profit
before operating expense increase to 178.56 % due to major increase in gross
profit 180.91 %.
In 2008 the net profit increase to 166.83 % due to major increase in profit before
operating income 145.40 and profit before taxation 171.22 %. The net profit
increase to 169.004 % due to major increase in profit before operating expenses
178.56 % and profit before taxation 218.13 %. So that's why the earning per
share in 2008 increase to 166.79 % and in 2009 it increase to 168.98 % due to
major increase in net profit in 2008 166.83 % and in 2009 169.004 %
respectively.

Vertical analysis

Income statement 2007 2008 2009

Net sales 100% 100% 100%
Cost of sales 75.20% 71.61% 68.24%
Gross profit 24.79% 28.38% 31.75%
Other operating income 0.67% 1.17% 0.4437%
25.46%% 29.50% 32.19%
Distribution cost 1.253% 1.3057% 11.05%
Administrative expenses 3.76% 30.79% 3.8903%
Other operating expenses 0.9120% 1.6501% 1.2770%
Finance cost 7.2615% 6.7175% 9.7918%
Share of loss of associates-net of 0.038% 0.1415%
tax
13.19% 12.78% 16.206%
Profit before taxation 12.27% 16.77% 15.98%
Provision for taxation 3.7462% 5.4193% 5.785%
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Profit for the year 8.5284% 11.35% 10.20%

Earning per share 18.28% 30.49 %

30.89%

NOW WE CALCULATE THE FINANCIAL RATIOS

1) Current ratio/2:1 ratio/working capital ratio:

It shows ability of firm to cover current liabilities with current

assets.
It is derived by following formula:
Current ratio = current assets/current liabilities

CALCULATION: (Rupees in 000)

2007 2008 2009

Current assets 2049482448 1838853437 2143328095
Current liabilities 2092801374 2319045993 2343210710
Current ratio = 2049482448/ 1838853437/ 2143328095/
current assets/current liabilities 2092801374 2319045993 2343210710
Current ratio = 0.979 0.7929 0.91469

T he ratio is low. This calculation shows that the firm has less ability to pay the
liabilities with current assets. This situation is unfavorable for creditors. But this
ratio must be crude measure because it does not take into account the liquidity of
each component of the current assets.

2) Quick ratio/liquid ratio/acid test ratio:

It shows the relation ship between
quick assets and the current liabilities.
It’s derived by following formula:
Quick ratio = quick assets/current liabilities
And
Quick assets = current assets – (stock + prepaid expenses)
Quick assets treatment in Sitara Textile.
Quick assets = current assets – (loose tools + stock in trade)
(NOTE)
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(Stock and prepaid expenses are not early convert able in

cash therefore are not included in quick ratio)
CALCULATION:
(Rupees in 000)
2007 2008 2009
Quick assets 1399786055 978402121 1103990657
Current liabilities 2092801374 2319045993 2343210710
Quick ratio= 1399786055/ 978402121/ 1103990657/
Quick assets/current liabilities 2092801374 2319045993 2343210710
Quick ratio 0.66 0.4218 0.4711

The usual guideline for this ratio is 1.00. But for some industries which may
sll only on cash not on account receivable for these companies the
artio can be low than 1.00 still have adequate liquidity. This calculation
shows that the ratio is gradually decreasing so Company has not enough quick
assets to pay their current liabilities .

3) Cash ratio/absolute ratio:

This ratio shows the relationship between absolute current
assets which are totally liquid and current liabilities. It’s
derived by following formula:
Absolute ratio = absolute current assets/current liabilities
And
Absolute current assets = cash + bank + marketable
securities
CALCULATION:
(Rupees in 000)
2007 2008 2009
Absolute current assets 252694526 240942737 294164537
Current liabilities 2092801374 2319045993 2343210710
Absolute ratio= Absolute current 252694526/ 240942737/ 294164537/
assets/ current liabilities 2092801374 2319045993 2343210710
Cash ratio/absolute ratio: 0.120 0.103 0.1255

4) T his ratio is very low and shows that company has no much
absolute cash in hand and bank to pay their current liabilities
Coverage ratio:
The ratio that relate the financial charges of a firm to its ability to service,
or cover them.
1:Time interest earned or interest coverage ratio:
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Earning before interest and taxes divided by interest charges. It iondicates the
firm’s ability to cover interest charges.
This ratio includes a firm's long term debt paying ability from the income
statement view.
It is derived as
Times interest earned= profit before taxation+financing
cost/financing cost

CALCULATION:
(Rupees in 000)
2007 2008 2009
Profit before taxation 536903289 919300170 657439095
Financing cost 317624373 368094645 60498196
Times interest earned= 536903289+31 919300170+36 657439095+604
PBT+FC/FC 7624373 8094645 98196
/317624373 /368094645 /60498196
Times interest earned 0.269344101 3.497455974 1.590826785

.
More the ratio means more the times company is paying interest. More rstio will
come is beneficial for the creditors. But in sitara chemicals this ratio is very low
which is not a good sign for creditors.

Financial leverage (debt) ratios:

To assess the extent to which the firm is using the borrowed money
5) Debt ratio:
The debt ratio indicates the firm’s long-term debt-paying
ability. It is computed as follows:
Debt ratio= total liabilities/total assets
CALCULATION:
(Rupees in 000)
2007 2008 2009
Total liabilities 4548987933 4225429977 6144874212
Total assets 6384571002 8588728185 5489511225
Debt ratio= 4548987933/ 4225429977/ 6144874212/
Total liabilities/total assets 6384571002 8588728185 5489511225
Debt ratio: 0.712 0.4919 1.11938
71.2% 49.1% 111.9%

The minimum debt ratio is more beneficial for the company, in because you have
more assets than liabilities.
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2007 debt ratio of sitara chemical is 71.2% because it's total assets are more
than the total liabilities, companies total assets increase and total liability
decrease in 2008 that's why it's ratio decreased by 49.1%, and in 2009
companies total liabilities increases and total assets decreases which results the
debt ratio increases to 111.9%, hence the companies debt ratio in 2008 indicates
that it can meet their liabilities easily, but in 2009 it's liabilities increase so debt
ratio increase.

6) Debt to equity ratio:

The debt/equity ratio is another
computatoion that determines the
entitiy's long term debt paying ability. This computation
compares the total debt with the total shareholder's equity.
The debt/equity ratio also helps determine how well creditors
protected in case of insolvency.
It’s derived by:
Debt to equity ratio = total debts or total liabilities /share
holders equity
Total debts = short term debt + long term debt

CALCULATION:
(Rupees in 000)
2007 2008 2009
Total debt 4548987933 4225429977 6144874212
Shareholder’s equity 1835583069 2426029051 2961988987
Debt to equity ratio: 4548987933/ 4225429977/ 6144874212/
Total debt//shareholders equity 1835583069 2426029051 2961988987
Debt to equity ratio: 2.478 1.7417 2.0745
247.8% 174.17% 207.45%

The lower this ratio is better the companies' debt position. This ratio in 2007 is
247.8% and decreases in 2008 with the value of 174.17% it means that the lower
amount of funds come from the outsider than the shareholders equity. And in
2009 increases with the value of 207.45% because more amount of financing
come from the outsider than the shareholders equity. So debt to equity ratio of
the year 2008 is more beneficial for the company as compare to other year's
ratio.

7) Debt to tangible asset:

The debt to tangible net worth ratio determines the entities
long term debt paying ability. This ratio also indicates how
well creditors are protected in case of firm's insolvency. As
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with the debt ratio and the debt/equity ratio from the
perspective of long term debt paying ability, it is better to
have a lower ratio.
It’s derived by
Debt to tangible assets= total liabilities/shareholders equity-
intangible assets

CALCULATION:
(Rupees in 000)
2007 2008 2009
Total liabilities 4548987933 4225429977 6144874212
Shareholder’s equity-intangible 1835583069 2426029051 2961988987
assets
Debt to tangible asset; 4548987933/ 4225429977/ 6144874212/
Total liabilities/ Shareholder’s 1835583069 2426029051 2961988987
equity-intangible assets
Debt to tangible asset: 2.478 1.7417 2.0745
247.8% 174.17% 207.45%

Because no tangible asset is there that's why it's same as debt to shareholder's
equity.

8) Fixed asset to internal fund:

It is derived as
Fixed asset to internal fund= fixed asset/ shareholder's
equity

CALCULATION:
(Rupees in 000)
2007 2008 2009
Fixed asset 4335088554 6749874748 79700831330
Shareholder's equity 1,835,583,069 2,426029,051 2,961,988,987
Fixed asset to internal fund= 2.3616 2.782272844 26.90787565
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Fixed asset/shareholders' equity

236% 278% 2690%

More this ratio is beneficial for the company because it means that more is invested
in fixed assets through internal funds but as higher the ratio decreases the liquidity
of firm and increase the credit risk.

9) Net profit margin:

A commonly used profit measure is return on sales, often
termed net profit margin. If a company reports that it earned
6% last year, this statistic usually means that its profit was
6% of sales.
It is derived as
Net profit margin= net income/net sale

CALCULATION:
(Rupees in 000)
2007 2008 2009
Net income 163863404 296954801 357439095
Net sale 563903289 919300170 987894136
Net profit margin= 163863404/ 296954801/ 357439095/
Net income/net sale 563903289 919300170 987894136
Net profit margin: 0.29 0.323 0.36
29% 32.3% 36%

Th e net profit margin gradually increases from 2007 to 2009 means company is
generating 0.29, 0.32, 0.36 rupee income through its 1.00 rupee of sale.

10).Operating income margin:

Operating profit for a certain period divided by revenues for
that period. Operating profit margin indicates how effective a
company is at controlling the costs and expenses associated
with their normal business operations.
A ratio used to measure a company's pricing strategy and
operating efficiency.

Calculated as:
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Operating margin is a measurement of what proportion of a

company's revenue is left over after paying for variable costs
of production such as wages, raw materials, etc. A healthy
operating margin is required for a company to be able to pay
for its fixed costs, such as interest on debt.
Also known as "operating profit margin" or "net profit
margin".

CALCULATION: (Rupees in 000)

2007 2008 2009

Operatin income 29617604 64557333 27419688
Net sale 563903289 919300170 987894136
Operating income/ net sale 29617604/ 64557333/ 27419688/
563903289 919300170 987894136
Operating income margin 0.052522 0.070224432 0.027755

This ratio increases in 2008 due to increases in operating income and net sales
in 2008 and it decreases in 2009 due to huge decrease in operating income.
The company has an operating margin of 5.2%in 2007, 7 % in 2008, and 2.7 % in 2009 this means that it
makes 0.052522 rupees in 2007, 0.0702244 rupees in 2008 and 0.027755 rupees in 2009(before interest
and taxes) for every rupee of sales.

11).Return on assets:
It's measures the firm's ability to utilize its assets to create
profits by comparing profits with the assets that generate
the profits compute the return on assets as
it is derived as net income/average total assets

CALCULATION:
(Rupees in 000)
2007 2008 2009
Net income 380335811.6 639856592.8 663403025.6
Average total asset 6384571002 6384571002+8 10113411225+8588
588728185 728185
/2 = /2 = 9351069703
7486649594

Return on assets= 380335811.6/ 639856592.8/ 663403025.6/

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Net income/A.T assets 6384571002 7486649594 9351069703

Return on assets: 0.059571083 0.085466347 0.070944078

It shows that company generates good earnings from invested capital.

The company has an return on assets is 5.9%in 2007, 8.5 % in 2008, and 7.09 % in 2009 this means that it
makes 0.0595 rupees in 2007, 0.085466 rupees in 2008 and 0.070944078rupees in 2009(before interest
and taxes) for every rupee of sales. So it means that company is at good in generating income from assets
in 2008.

12).Return on operating asset

CALCULATION:
(Rupees in 000)
2007 2008 2009
operating income 29617604 64557333 27419688
Average operating asset 8513859275 6929958925.5 93021510759.5
Operating income/ 29617604/ 64557333/ 27419688/
Average operating asset 8513859275 6929958925.5 93021510759.5
Return on operating asset 0.00347875 0.0009317 0.00029476

It's good in 2007 because in this year company is generating 0.00347875

operating income with the help 1 rupee of operating asset.
.

13).Total asset turnover:

Total asset turnover measures the activity of assets and the
ability of firms to generate sales through the use of the
assets compute total asset turnover as follows
Total asset turnover: net sale/average total assets

CALCULATION:
(Rupees in 000)
2007 2008 2009
Net sale 4374051881 5479570069 6178399033
Average total assets 6384571002 7486649594 9351069703

Total asset turnover= 4374051881/ 5479570069/ 6178399033/

Net sale/A.T assets 6384571002 7486649594 9351069703

Total asset turnover: 0.068509831 0.731912185 0.66071575

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this ratio for the year 2008 is more benefitial for the company because in 2008
this ratio is high comparatively as other years. Means companies assets rapidly
sold out in 2008 than other years.
14).Operating asset turnover:

CALCULATION:
(Rupees in 000)
2007 2008 2009
Net sales 4374051881 5479570069 6178399033
Average operating asset 8513859275 692995892705 93021510759.5
Net sales/ 4374051881/ 5479570069/ 6178399033/
Average operating asset 8513859275 692995892705 93021510759.5
Operating asset turnover 0.513756 0.0079 0.06641

It indicates that how sales generate from the operating assets. so it is good in
2007.

DuPont analysis for net:

In about 1919, the DuPont company began to use a particular approach to ratio
analysis to evaluate the firm’s effectiveness because neither the net profit margin
nor the total asset turnover ratio by itself provide the adequate measure of overall
effectiveness. The net profit margin ignore the utilization of assets and asset
turnover ignores profitability on sales
DuPont analysis= net income/net sale x net sale / average
total asset.

CALCULATION:
(Rupees in 000)
2007 2008 2009
Net income 373039885 622345369 630455041
Net sale 4374051881 5479570069 6178399033
Average total asset 6384571002 7486649594 9351069703

DuPont analysis= 29% x 32% x 36%

net income/net sale x 0.068509831 0.731912185 0.66071575
net sale / average total asset.
DuPont analysis for net 1.9865 23.40 23.7852
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In 2007 the net profit margin and asset turnover is low so answer is low, but in
2008 and 2009 there is little difference because in 2008 net profit margin is low
and asset turnover is little bit high but in 2009 the the net profit margin is little bit
high and asset turnover is little bit low that’s why there is small difference in 2008
and 2009

DuPont analysis for operating:

DuPont analysis= operating income/net sale x net sale /
average operating asset.

CALCULATION:
(Rupees in 000)
2007 2008 2009
Operating income 29617604 64557333 27419688
Net sale 4374051881 5479570069 6178399033
Average operating asset 3154587712 7404910860 93021510759.5

DuPont analysis= 5.25% x 7.02% x 2.77% x

Operating income/net sale x net 0.513756 0.0079 0.06641
sale / average operating asset.
DuPont analysis for operating 2.697219 0.055458 0.1839

In 2007, however the operation income margin is low as compare to other years
but operating asset turnover is high in 2007 that’s why the answer in 2007 is high
in 2007.

15).Day's sales in receivable:

The number of days sales in receivables relates the amount

of receivables to the average daily sale on account.
It is computed as
Days sales in receivable= gross receivables/ net sales/ 365

CALCULATION:
(Rupees in 000)
2007 2008 2009
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Gross recievables 575549526 575910383 678854345

Net sales/365 11983703.78 15012520.74 16927120.64
Days sales in receivable= 575549526/ 575910383/ 678854345/
Gross receivables/net sales.365 11983703.78 15012520.74 16927120.64
Days sales in recievables 48.027 38.36 40.10

16).Account receivable turnover:

It is computed as
Account receivable turnover= net sale/ average gross
receivables

CALCULATION:
(Rupees in 000)
2007 2008 2009
Net sale 4374051881 5479570069 6178399033
Average gross receivables 310390645 575729954.5 627382364
Account receivable turnover= 4374051881/ 5479570069/ 6178399033/
Net sales/A.G. receivables 310390645 575729954.5 627382364
Account receivable turnover 7 times 9.52 times 9.1 times

17).Account receivable turnover in days:

It is computed as
Account receivable turnover in days= average gross
receivable/net sale/365

CALCULATION:
(Rupees in 000)
2007 2008 2009
Average gross receivables 310390645 575729954.5 627382364
Net sale/365 11983703.78 15012520.74 16927120.64
Account receivable turnover in 310390645/ 575729954.5/ 627382364/
days= 11983703.78 15012520.74 16927120.64
average gross receivable/net
sale/365
Account receivable turnover in 45 38 39
days
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According to Days sales in receivables 38 in 2008 that is minimum in those three years
lower the days sales in receivable, higher the liquidity, account receivable turnover is
9.52 times in 2008 which is maximum as compare to 2007 and 2009 and receivable
turnover in days is 38 days in 2008 so the liquidity of inventory is good in 2007 as
compared to 2007 and 2009.

18).Days sales in inventory:

It is derived as
Days sales in inventory= ending inventory/CGS/365
CALCULATION:
(Rupees in 000)
2007 2008 2009
Ending inventory 649696393 860451316 1039337438
CGS/365 9012800 10751467 11522448
Days sales in inventory= 649696393/ 860451316/ 1039337438/
ending inventory/CGS/365 9012800 10751467 11522448
Days sales in inventory= 72 80 90

19).Inventory turnover:
It is computed as
Inventory turnover= CGS/ average inventory

CALCULATION:
(Rupees in 000)
2007 2008 2009
CGS 3289672158 3924285790 4216643662
average inventory 633421752 1510147709 949894377
Inventory turnover= 3289672158/ 3924285790/ 4216643662/
CGS/ average inventory 633421752 1510147709 949894377
Inventory turnover= 5.06 times 4.56 times 4.102 times

20).Inventory turnover in days:

It is computed as
Inventory turnover in days= average inventory/CGS/365
CALCULATION:
(Rupees in 000)
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2007 2008 2009

Average inventory 633421752 1510147709 949894377
CGS/365 9012800 10751467 11552448
Inventory turnover in days= 633421752/ 1510147709/ 949894377/
average inventory/CGS/365 9012800 10751467 11552448

Inventory turnover in days= 70 days 140 days 83 days

According to Days sales in inventory is 70 in 2007 that is minimum in those three years
lower the days sales in inventory, higher the liquidity, Inventory turnover is 5.06 times in
2007 which is maximum as compare to 2008 and 2009 and Inventory turnover in days is
70 days in 2007 so the liquidity of inventory is good in 2007 as compared to 2008 and
2009.

Operating cycle:
It represents the period of time elapsing between the
equisition of goods and final cash realization resulting from
sales and subsequent collections.
It is derived as
Operating cycle= account receivable turnover in days x inventory turnover in days.
2007 2008 2009
Account receivable turnover in days 45 38 39
Inventory turnover in days= 70 days 140 days 83 days
Operating cycle= account receivable 45+7 38+14 39+83
turnover in days x inventory turnover 0 0
in days.
Operating cycle: 115 178 122

The lower the operating cycle means that you are

completing your operations rapidly. So, in 2007 the lowest
operating cycle hence company can complete its operations
in 2007

21).Working capital ratio:

It is computed as

Working capital= Current assets – current liabilities

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2007 2008 2009

Current assets 2,049,482,448 1,838,853,437 2,143,328,095
Current liabilities 2092,801,374 2,319,045,993 2,343,210,710
Working capital=
Current assets – current liabilities
Working capital= -43318926 -480192556 -199882615

In all these yaers, company current liabilities are grater than its current asssets so
the company is nat in position to pay itts current liabilities withits current assets.

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