assigment # 2a

8/9/2019 assigment # 2a

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Shaheed Zulfikar Ali Bhutto Institute of

Sciences & Technology

Introduction to Business Finance

Assignment # 3

Submitted to

Syed Farhan Sheikh

Submitted by

Salma Omer

0926115

MBA D 2 A


2/28

D.G.Khan Cement Company Limited

Financial Statement Analysis

Sr.No.

Ratios Formulas Computationfor

Year 2009

Computationfor

Year 2008

Results ofYear 2009

Results ofYear 2008

1. Current Ratio Total Current

Asset/Total

CurrentLiabilities

13287592000

/

15834799000

19202591000

/

12054718000

0.8391 x 1.59295 x

2. Quick Ratio Cash +

Govt.Security

Receivables /

Total CurrentLiability

(243842000 +

908100000 ) /

15834799000

( 226372000

+ 782358000)

/

12054718000

0.07274 x 0.083679 x

3. Net Worth Total Assets

Total Liabilities

42723041000

-

21531599000

51992934000

-

21912677000

Rs.

21191442000

Rs.

30080257000

3. Leverage

Ratio

Total Liabilities

/ Net Worth

21531599000

/21191442000

21912677000

/30080257000

1.01605 x 0.72847 x

4. Gross Margin

Ratio

Gross Profit /

Net Sales

5679730000 /

18038209000

1915273000 /

12445996000

0.31487 x 0.15388 x

5. Net Profit

Margin Ratio

Net Profit / Net

Sales

525581000 /

18038209000

(53230000) /

12445996000

0.029137 x ( 0.004276 ) x

6. Inventory

Turn OverRatio

Cost of Good

Sold /Inventory

12358479000

/ 899836000

10530723000

/ 445856000

13.73414 x 23.6191 x

7. AccountsReceivable

Turn Over

Ratio

Net CreditSales / 365

Days

908100000 /365

782358000 /365

2487945.2054x

2143446.5753x

8. Return On

Investment(ROI)

Net Profit / Net

Worth

525581000 /

21191442000

(53230000) /

30080257000

0.02480 x (0.001769) x

9.

Return on

Assets (ROA)

Net Profit /

Total Asset

525581000 /

42723041000

(53230000) /

51992934000

0.01230 x (0.001023) x

Kohat Cement Company Limited


3/28


Sr.

No.

Ratios Formulas Computation

for

Year 2009

Computation

for

Year 2008

Results of

Year 2009

Results of

Year 2008

1. Current Ratio Total Current

Asset/TotalCurrent

Liabilities

1645675393 /

2946392234

1332629006 /

2016497901

0.5585 x 0.6608 x

2. Quick Ratio Cash +

Govt.SecurityReceivables /

Total Current

Liability

( 34371413 +

612373810 ) /2946392234

( 36994967 +

406020470 ) /2016497901

0.2195 x 0.2196 x

3. Net Worth Total Assets

Total Liabilities

8624894242 -

6353347077

7623920500 -

5294791353

Rs.

2271547165

Rs.

2329129147

4. Leverage

Ratio

Total Liabilities

/ Net Worth

6353347077 /

2271547165

5294791353 /

2329129147

2.7969 x 2.2732 x

5. Gross Margin

Ratio

Gross Profit /

Net Sales

804559290 /

3395580759

87401851 /

1371791931

0.2369 x 0.0637 x

6. Net Profit

Margin Ratio

Net Profit / Net

Sales

27092698 /

3395580759

(222439366) /

1371791931

0.00797 x (0.16215) x

7. Inventory

Turn Over

Ratio

Cost of Good

Sold /

Inventory

2591021469 /

139293693

1284390080 /

174317806

18.6011 x 7.3680 x

8. Accounts

ReceivableTurn Over

Ratio

Net Credit

Sales / 365Days

612373810 /

365

406020470 /

365

1677736.4657

x

1112384.8493

x

9. Return On

Investment(ROI)

Net Profit / Net

Worth

27092698 /

2271547165

(222439366) /

2329129147

0.0119 x 0.0955 x

10.Return onAssets (ROA)

Net Profit /Total Asset

27092698 /8624894242

(222439366) /7623920500

0.00314 x 0.02917 x


4/28

D.G. Khan Cement Company Limited

Comparison of Ratios for the Year 2008 & 2009


1. Current Ratio

Current ratio = Total Current Assets Total Current Liabilities

Interpretation Current Ratio:

Current ratio of DGKhan Cement in 2009 is less than that in 2008. This means that

either total current assets have decreases in 2009 or the total current liabilities haveincreased from 2008 to 2009. decreased current ratio is not a good sign for any

company as current assets cant meet currents liabilities.

2. Quick Ratio

Quick Ratio = (Cash + Govt. Securities + Receivables) Total Current Liabilities

1. Current Ratio

0.8391

1.59295

00.2

0.4

0.6

0.8

11.2

1.41.6

1.8

1

2009

2008

Year

DGKC


5/28

Interpretation Quick Ratio:

Quick ratio of D.G.Khan Cement in 2009 is less than that in 2008. This means thateither total liquid assets have decreases in 2009 or the total current liabilities have

increased from 2008 to 2009. Decreased current ratio is not a good sign for any

company as their liquid assets cant meet currents liabilities.

3. Net Worth

Net Worth = Total Assets Total Liabilities

Interpretation Net Worth :

Net Worth of D.G.Khan Cement in 2009 is less than that in 2008. After going thoughthe values we find that total Liabilities have decreased in 2009 but assets also have

decreased considerably. Decreased net worth is not a good sign for any company.

2. Quick Ratio

2009, 0.07274

2008, 0.083679

0.066

0.068

0.07

0.072

0.074

0.076

0.078

0.080.082

0.084

0.086

1

2009

2008

Year

DGKC

3. Net Worth

2009,

21191442000

2008,

30080257000

0

5000000000

10000000000

15000000000

20000000000

25000000000

30000000000

35000000000

1 2

2009

2008

Year

Rs.

DGKC


6/28

4. Leverage Ratio

Leverage Ratio = Total Liabilities Net Worth

Interpretation Leverage Ratio:

Leverage ratio of D.G.Khan Cement in 2009 is more than that in 2008. having a

smaller value of leverage ratio is good for any company. So an increased leverage

ratio in 2009 is not a good sign for DQ Khan Cement Company. This shows the

extent that debt is used in a company's capital structure

5. Gross Margin Ratio

Gross Margin Ratio = Gross Profit / Net sales

Interpretation Gross Margin Ratio:

Gross Margin ratio of D.G.Khan Cement in 2009 is more than that in 2008. In this

case Gross profit has increased considerably in one year. This is a good sign for

4. Leverage Ratio

2009, 1.01605

2008, 0.72847

0

0.2

0.4

0.6

0.8

1

1.2

1 2

2009

2008

Year

DGKC


2009, 0.31487 2008, 0.15388

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

1

2009

2008

Year

x

DGKC

Year


7/28

D.G.Khan Cement Company. Having more gross margin ratio means it was more

profitable.

6. Net Profit Margin Ratio

Net Profit Margin Ratio = Net Profit / Net Sales

Interpretation of Net Profit Margin Ratio:

Net Profit Margin ratio of D.G.Khan Cement in 2009 is more than that in 2008. In

this case net profit has increased considerably in one year. This is a good sign for

D.G.Khan Cement Company. Having more net profit margin ratio means it was moreprofitable.

7. Inventory Turnover Ratio

Inventory Turnover Ratio = Cost of Goods Sold / Inventory


2009, 0.029137

2008, -0.004276-0.01

-0.005

00.005

0.01

0.015

0.02

0.025

0.03

0.035

1

2009

2008

Year

x

DGKC


8/28

Interpretation of Inventory Turnover Ratio:

Inventory Turnover ratio of D.G.Khan Cement in 2009 is less than that in 2008. In

this case net profit has increased considerably in one year. A higher value of

inventory ratio means that the company is efficiently managing and selling itsinventory. If a company has a low inventory turnover ratio, then there is a risk they

are holding old inventory which will be difficult to sell. This is not a good sign for

D.G.Khan Cement Company.

8. Accounts Receivable Turnover Ratio

Accounts Receivable Turnover Ratio = Net Credit Sales / 365 (days)

Interpretation of Accounts Receivable Turnover Ratio:

If accounts Receivable Turnover Ratio is high then this means customers are paying theirbills in time and this is a good sign for any org. so in 2009 Accounts Receivable TurnoverRatio has increased.

9. ROI (Return on Investment)

ROI = Net Profit / Net Worth

Year

Rs.

DGKC

DGKC


9/28

Interpretation of ROI:

ROI has increased in 2009 this means the company is utilizing its equity investmentefficiently.

10. ROA (Return on Assets)

ROA = Net Profit / Total Assets

Interpretation of ROA:

The higher the return on assets ratio, the more efficiently the company is using its assetbase to generate sales. Since DG Khan Cement has a higher ROA in 2009 it is a good

sign.



COMPARISON OF RATIOS FOR THE YEAR 2008 & 2009

1. Current Ratio


Kohat Cement

DGKC


10/28


Current ratio of Kohat Cement in 2009 is less than that in 2008. This means that

either total current assets have decreases in 2009 or the total current liabilities have

increased from 2008 to 2009. decreased current ratio is not a good sign for any

company as current assets cant meet currents liabilities.

2. Quick Ratio



Quick ratio of Kohat Cement in 2009 is less than that in 2008. This means that either

total liquid assets have decreases in 2009 or the total current liabilities have increased

from 2008 to 2009. Decreased current ratio is not a good sign for any company as

their liquid assets cant meet currents liabilities.

1. Current Ratio

0.5585

0.6608

0.5

0.52

0.54

0.56

0.58

0.6

0.620.64

0.66

0.68

1

2009

2008

Year

Kohat Cement

2. Quick Ratio

0.2195

0.2196

0.21944

0.21946

0.21948

0.2195

0.21952

0.21954

0.21956

0.21958

0.2196

0.21962

1

2009

2008

Year

Kohat Cement


11/28

3. Net Worth



Net Worth of Kohat Cement in 2009 is less than that in 2008. After going though thevalues we find that total Liabilities have decreased in 2009 but assets also have

decreased considerably. Decreased net worth is not a good sign for any company.

4. Leverage Ratio



Leverage ratio of Kohat Cement in 2009 is more than that in 2008. Having a smaller

value of leverage ratio is good for any company. So an increased leverage ratio in

3. Net Worth

2271547165

2329129147

2240000000

2250000000

2260000000

2270000000

2280000000

2290000000

2300000000

2310000000

2320000000

2330000000

2340000000

1

2009

2008

Year

Kohat Cement

4. Leverage Ratio

2.7969

2.2732

0

0.5

1

1.5

2

2.5

3

1

2009

2008

Year

Kohat Cement


12/28

2009 is not a good sign for Kohat Cement Company. This shows the extent that debt

is used in a company's capital structure




Gross Margin ratio of Kohat Cement in 2009 is more than that in 2008. In this caseGross profit has increased considerably in one year. This is a good sign for Kohat

Cement Company. Having more gross margin ratio means it was more profitable.




5. Gross Margin Ratio0.2369

0.0637

0

0.05

0.1

0.15

0.2

0.25

1

2009

2008

Year

Kohat Cement

6. Net Profit Margin Ratio0.00797

-0.16215-0.18

-0.16

-0.14

-0.12

-0.1

-0.08

-0.06

-0.04

-0.02

00.02

1

2009

2008

Year

Kohat Cement


13/28

Net Profit Margin ratio of Kohat Cement in 2009 is more than that in 2008. In this

case net profit has increased considerably in one year. This is a good sign for Kohat

Cement Company. Having more net profit margin ratio means it was more profitable.




Inventory Turnover ratio of Kohat Cement in 2009 is more than that in 2008. A

higher value of inventory ratio means that the company is efficiently managing andselling its inventory. If a company has a low inventory turnover ratio, then there is a

risk they are holding old inventory which will be difficult to sell. This is a good sign

for Kohat Cement Company.




18.6011

7.368

0

2

4

68

10

12

14

16

18

20

1

2009

2008

Year

Kohat Cement


14/28


If accounts Receivable Turnover Ratio is high then this means customers are paying their

bills in time and this is a good sign for any org. so in 2009 Accounts Receivable Turnover

Ratio has increased.




ROI has decreased in 2009 this means the company is not utilizing its equity investment

efficiently.


8. Accounts Receivable TurnoverRatio

1677736.466

1112384.849

0200000

400000

600000

800000

1000000

12000001400000

1600000

1800000

1

2009

2008

Year

Kohat Cement


0.0119

0.0955

0

0.02

0.04

0.06

0.08

0.1

0.12

1

2009

2008

Year

Kohat Cement


15/28



The higher the return on assets ratio, the more efficiently the company is using its asset

base to generate sales. Since Kohat Cement has a lower ROA in 2009 it is not a good

sign.


&D.G. Khan Cement Company Limited

Comparison of Ratios for the Year 2008

1. Current Ratio


10. ROA

0.00314

0.02917

0

0.005

0.01

0.015

0.02

0.025

0.03

0.035

1

2009

2008

Year

Kohat Cement


16/28


Current ratio of DG Khan Cement is more than that of Kohat Cement in 2008. Lower

current ratio is not a good sign for Kohat Cement as D.G. Khan Cement has highercurrent ratio. This means D.G. Khan Cements current assets can meet currents

liabilities efficiently than Kohat cement can.

2. Quick Ratio



Quick ratio of DGKC is less than that of Kohat Cement in 2008. Lower Quick ratio isnot a good sign for D.G. Khan Cement. This means Kohat Cements liquid assets can

meet currents liabilities efficiently than D.G. Khan Cement can.

1. Current Ratio

0.6608

1.59295

00.2

0.4

0.6

0.8

11.2

1.4

1.6

1.8

1

Kohat Cement

Company Limited

D.G.Khan Cement

Company Limited

Year 2008

2. Quick Ratio0.2196

0.083679

0

0.05

0.1

0.15

0.2

0.25

1

Kohat CementCompany Limited

D.G.Khan CementCompany Limited

Year 2008


17/28

3. Net Worth



Net Worth of D.G.Khan Cement is greater than that of Kohat Cement in 2008.

Decreased net worth is not a good sign for any company. So D.G. Khan Cement is

more reliable in terms of net worth than Kohat cement.

4. Leverage Ratio



Leverage ratio of D.G.Khan Cement is less than that of kohat cement in 2008. Having

a smaller value of leverage ratio is good for any company. So an increased leverage

3. Net Worth

2329129147

30080257000

0

5000000000

10000000000

15000000000

20000000000

25000000000

30000000000

35000000000

1



Year 2008

Rs.

4. Leverage Ratio

2.2732

0.72847

0

0.5

1

1.5

2

2.5

1



Year 2008


18/28

ratio is not a good sign for Kohat cement Company. So D.G. Khan Cement is more

reliable in terms of Leverage Ratio than Kohat cement.




Gross Margin ratio of D.G.Khan Cement is more than that of Kohat cement in 2008.

This is a good sign for D.G.Khan Cement Company. Having more gross margin ratiomeans it was more profitable. So D.G. Khan Cement is more reliable in terms of

Gross Margin Ratio than Kohat cement.




0.0637

0.15388

00.02

0.04

0.06

0.080.1

0.12

0.14

0.16

0.18

1



Year 2008


19/28


Net Profit Margin ratio of D.G.Khan Cement in 2009 is more than that of Kohat

Cement in 2008. This is a good sign for D.G.Khan Cement Company. Having morenet profit margin ratio means it was more profitable. So D.G. Khan Cement is more

reliable in terms of Net Profit Margin Ratio than Kohat cement.




Inventory Turnover ratio of D.G.Khan Cement is more than that of Kohat cement in

2008. A higher value of inventory ratio means that the company is efficiently


-0.16215

-0.004276

-0.18

-0.16

-0.14

-0.12

-0.1

-0.08

-0.06

-0.04

-0.02

0

1

Kohat Cement

Company Limited


Year 2008


7.368

23.6191

0

510

15

20

25

1

Kohat Cement

Company Limited

D.G.Khan Cement

Company Limited

Year 2008


20/28

managing and selling its inventory. If a company has a low inventory turnover ratio,

then there is a risk they are holding old inventory which will be difficult to sell. So

D.G. Khan Cement is more reliable in terms of Inventory Turnover Ratio than Kohatcement.



Interpretation of Accounts Receivable Turnover Ratio:If accounts Receivable Turnover Ratio is high then this means customers are paying

their bills in time and this is a good sign for any org. So D.G. Khan Cement is more

reliable in terms of Accounts Receivable Turnover Ratio than Kohat cement.




1112384.849

2143446.575

0

500000

1000000

1500000

2000000

2500000

1

Kohat Cement

Company Limited

D.G.Khan Cement

Company Limited

Year 2008


21/28


ROI has increased this means the company is utilizing its equity investment

efficiently. So D.G. Khan Cement is more reliable in terms of ROI than Kohatcement.




The higher the return on assets ratio, the more efficiently the company is using its

asset base to generate sales. So D.G. Khan Cement is more reliable in terms of ROA

than Kohat cement.

9. ROI

0.0955

-0.001769-0.02

0

0.02

0.04

0.06

0.08

0.1

0.12

1

Kohat Cement

Company Limited

D.G.Khan Cement

Company Limited

Year 2008

10. ROA

0.02917

-0.001023-0.005

00.005

0.01

0.015

0.02

0.025

0.03

0.035

1

Kohat Cement

Company Limited

D.G.Khan Cement

Company Limited

Year 2008


22/28


&

D.G.Khan Cement Company Limited


COMPARISON OF RATIOS FOR THE YEAR 2009

1. Current Ratio



Current ratio of DG Khan Cement is more than that of Kohat Cement in 2009. Lower

current ratio is not a good sign for Kohat Cement as D.G. Khan Cement has higher

current ratio. This means D.G. Khan Cements current assets can meet currentsliabilities efficiently than Kohat cement can.

2. Quick Ratio


1. Current Ratio

0.5585

0.8391

00.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1



Year 2009


23/28


Quick ratio of DG Khan Cement is less than that of Kohat Cement in 2009. This

means D.G. Khan Cements liquid assets can meet currents liabilities less efficientlythan Kohat cement can.

3. Net Worth



2. Quick Ratio

0.2195

0.07274

0

0.05

0.1

0.15

0.2

0.25

1



Year 2009

3. Net Worth

2271547165

21191442000

0

5000000000

10000000000

15000000000

20000000000

25000000000

1



Year 2009

Rs.


24/28

Net Worth of D.G.Khan Cement is greater than that of Kohat Cement in 2009.

Decreased net worth is not a good sign for any company. So D.G. Khan Cement ismore reliable in terms of net worth than Kohat cement.

4. Leverage Ratio



Leverage ratio of D.G.Khan Cement is less than that of kohat cement in 2009. Having

a smaller value of leverage ratio is good for any company. So an increased leverage

ratio is not a good sign for Kohat cement Company. So D.G. Khan Cement is morereliable in terms of Leverage Ratio than Kohat cement.



4. Leverage Ratio

2.7969

1.01605

0

0.5

1

1.5

2

2.5

3

1

Kohat Cement

Company Limited

D.G.Khan Cement

Company Limited

Year 2009


25/28


Gross Margin ratio of D.G.Khan Cement is more than that of Kohat cement in 2009.

This is a good sign for D.G.Khan Cement Company. Having more gross margin ratio

means it was more profitable. So D.G. Khan Cement is more reliable in terms of

Gross Margin Ratio than Kohat cement.




Net Profit Margin ratio of D.G.Khan Cement is more than that of Kohat Cement in

2009. This is a good sign for D.G.Khan Cement Company. Having more net profit


0.2369

0.31487

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

1



Year 2009


0.00797

0.029137

0

0.005

0.01

0.015

0.02

0.025

0.03

0.035

1

Kohat Cement

Company Limited

D.G.Khan Cement

Company Limited

Year 2009


26/28

margin ratio means it was more profitable. So D.G. Khan Cement is more reliable in

terms of Net Profit Margin Ratio than Kohat cement.



Inventory Turnover ratio of D.G.Khan Cement is less than that of Kohat cement in2008. A higher value of inventory ratio means that the company is efficiently

managing and selling its inventory. If a company has a low inventory turnover ratio,

then there is a risk they are holding old inventory which will be difficult to sell. SoKohat Cement is more reliable in terms of Inventory Turnover Ratio than D.G. Khan

cement.




18.6011

13.73414

0

2

4

68

10

12

14

16

18

20

1


D.G.Khan Cement

Company Limited

Year 2009


27/28


If accounts Receivable Turnover Ratio is high then this means customers are paying

their bills in time and this is a good sign for any org. So D.G. Khan Cement is morereliable in terms of Accounts Receivable Turnover Ratio than Kohat cement.




ROI has increased this means the company is utilizing its equity investmentefficiently. So D.G. Khan Cement is more reliable in terms of ROI than Kohat

cement.


1677736.466

2487945.205

0

500000

1000000

1500000

2000000

2500000

3000000

1



Year 2009

9. ROI

0.0119

0.0248

0

0.005

0.01

0.015

0.02

0.025

0.03

1

Kohat Cement

Company Limited

D.G.Khan Cement

Company Limited

Year 2009


28/28




The higher the return on assets ratio, the more efficiently the company is using its assetbase to generate sales. So D.G. Khan Cement is more reliable in terms of ROA than

Kohat cement

10. ROA

0.00314

0.0123

0

0.002

0.004

0.006

0.008

0.01

0.012

0.014

1

Kohat Cement

Company Limited

D.G.Khan Cement

Company Limited

Year 2009

Documents

assigment # 2a