B.F Slides Ratio

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The Holy Prophet [s] said:"Verily, what will continue to reach a believer, after his death, from amongst his

actions and good deeds are: the knowledge which he taught and spread, the

righteous child whom he left behind, and the Holy script which he delivered as

heritage (transcribed, and made available)

" SUNAN-I-IBN-MAJEH, VOL. 1, P. 88.


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KHAWAR AZIZ(GL)

USMAN AZIZ

ADEEL HABIB BHATTIWAQAS AHMED

RABIA MANZOOR

ZAID AHMED KHAN JADOON

GROUP MEM ERS


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RATIOS AND IMPORTANCE

RATIOS ARE USED TO CALCULATE THE RATES OR

PERCENTAGE OF THE REQUIRED ITEMS IN FINANCIAL

STATEMENTS OR TRANSACTIONS. VARIOUS RATIOS

ARE CALCULATED WHICH GIVES A COMPARISON

THAT MAY PROVE MORE USEFUL THAN THE RAW

NUMBERS OF THEMSELVES


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RATIOS COMPARISON

Two types of ratio comparison

INTERNAL COMPARISON

EXTERNAL COMPARISON


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WE ARE TAKING ABBOTT PAKISTAN AS AN

EXAMPLE IN OUR RATIO ANALYSIS


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INTRODUCTION

Abbott Pakistan is part of the global healthcare

corporation of Abbott Laboratories, Chicago,

USA

Abbott Pakistan has leadership in the field of Pain

Management, Anesthesia, Medical Nutrition andAnti-Infectives


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SHARES AND SHAREHOLDERS

TOTAL SHARES AND SHAREHOLDERS

(AS AT DECEMBER 31, 2010)

TOTAL SHAREHOLDERS 2,844

TOTAL SHARES 97,900,300


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RATIO ANALYSIS

The ratios which are use to analyzed the financial

position of Abbott are as follows

LIQUDITY RATIO

ASSET MANAGEMENT RATIO

PROFITABILITY RATIOS

DEBT MANAGEMENT ( FINANCIALLEVERAGE) RATIO

MARKET VALUE RATIO


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LIQUDITY RATIO

Liquidity Ratios are used to measure a companys

ability meet its short-term obligations. They compare

short-term obligations with short-term resourcesavailable to meet these obligations

CURRENT RATIO QUICK RATIO


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CURRENT RATIO

CURRENT ASSETS

CURRENT LIABILITIES

Year 2010 Year 2009

3,856,673,000

1,762,700,0002.18

3,259,185,000

1,606,489,0002.02


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QUICK RATIO

CURRENT ASSETSINVENTORY

CURRENT LIABILITIES

Year 2010 Year 2009

3,856,673,000

(72,430,000+2,069,633,000)

1,762,700,000

0.97

3,259,185,000

(69,097,000+1,675,000,000

1,606,489,000

0.94


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ASSET MANAGEMENT RATIO

Asset Management Ratios are also called Activity Ratios. They

measure how effectively a company is using its assets. Normally,

it focuses primarily on how effectively the company is managing

two specific asset groups receivables and inventories and its totalassets in general

INVENTORY TURNOVER

FIXED ASSET TURNOVER

TOTAL ASSET TURNOVER


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INVENTORY TURNOVER

INVENTORY X DAYS IN YEAR

CGS

Year 2010 Year 2009

(72,430,000+2,069,633,000) x 365

7,308,663,000106.97

(69,097,000+1,675,000,000)

x 365

6,128,987,000

103.86


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FIXED ASSET TURNOVER

SALES

NET FIXED ASSETS

Year 2010 Year 2009

10,995,701,000

1,877,596,0005.8

8,431,080,000

1,662,785,0005.07


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TOTAL ASSET TURNOVER

ANNUAL SALES

TOTAL ASSETS

Year 2010 Year 2009

10,995,701,000

5,790,421,0001.89

8,431,080,000

4,964,576,0001.69


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PROFITABILITY RATIOS

Profitability Ratios are of two types those showing

profitability in relation to sales and those showing

profitability in relation to investment

NET PROFIT MARGIN ON SALES

GROSS PROFIT MARGIN RETURN ON INVESTMENT

RETURN ON EQUITY


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NET PROFIT MARGIN ON SALES

NET INCOME (PROFIT AFTER TAX)

SALES

Year 2010 Year 2009

1,176,944,000

10,995,701,0000.10

609,072,000

8,431,080,0000.07


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GROSS PROFIT MARGIN

NET SALESCGS

NET SALES

Year 2010 Year 2009

3,687,038,000

10,995,701,0000.335

2,321,131,000

8,431,080,0000.275


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RETURN ON INVESTMENT

NET INCOME

TOTAL ASSETS

Year 2010 Year 2009

1,176,944,000

5,790,421,0000.203

609,072,000

4,964,576,0000.122


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RETURN ON EQUITY

NET PROFIT AFTER TAXPREFERRED DIVIDEND

COMMON EQUITY

Year 2010 Year 2009

1,176,944,000 - 0

39125390.3008

609,072,0000

3,238,460,0000.188


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DEBT MANAGEMENT

( FINANCIAL LEVERAGE) RATIO

These Ratios show the extent to which the assets

of the company are being financed by debt in

respect to equity

DEBT EQUITY RATIO

DEBT TO TOTAL ASSET RATIO GEARING RATIO


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DEBT EQUITY RATIO

TOTAL DEBT

SHAREHOLDERS EQUITY

Year 2010 Year 2009

0

3,912,539,0000/100

0

3,238,460,0000/100


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DEBT TO TOTAL ASSET RATIO

TOTAL DEBT

TOTAL ASSETS

Year 2010 Year 2009

0

5,790,421,0000/100

0

4,964,576,0000/100


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GEARING RATIO

LONG TERM DEBT

TOTAL CAPITALIZATIONYear 2010 Year 2009

0

0 + 3,912,539,0000/100

0

0 + 3,238,460,0000/100


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MARKET VALUE RATIO

The market value ratios represent those ratios which are

related to the earning per share, market price and book

value of the shares

EARNING PER SHARE

BOOK VALUE PER SHARE

COVERAGE RATIO


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EARNING PER SHARE

NET INCOME

NUMBER OF COMMON SHARES OUTSTANDING

Year 2010 Year 2009

1,176,944,000

97,900,302,00012.02

609,072,000

97,900,302,0006.22


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BOOK VALUE PER SHARE

COMMON EQUITY

NUMBER OF COMMON SHARES OUTSTANDING

Year 2010 Year 2009

979,003,000

97,900,30010

979,003,000

97,900,30010


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COVERAGE RATIO

EBIT

INTEREST CHARGES

Year 2010 Year 2009

1,744,787,000

3,530494.27

878,503,000

2,525347.92


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RECOMMENDATIONS

From the ratio analysis, we can see the Abbott Pakistan

has been improving its operations, controlling its

expenses and efficiently using its fixed and overallassets to generate income. This indicates that the

companys financial position and performance was

good during the year 2010.


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RECOMMENDATIONS

One such area is the liquidity condition of the company in light of

Quick Ratio. Quick ratio reveals that the company can pay its 97% of

current liabilities with the help of its cash and cash-equivalent assets

The current ratio of the company is 2.18 while the quick ratio is

0.97 which means that there are a lot of inventories on hand before

they are converted into receivables through sale

It is recommended that Abbott Pakistan should work to make its

sales department more efficient so as to increase the sales of

inventories in a shorter time period. This can be done through

motivating sales personnel and pointing out weak areas in the sales

department


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RECOMMENDATIONS

Another weak area that is pointed out in Ratio Analysis is

the Inventory Turnover ratio. The inventory turnover in days

has increased from 104 to 107 during the last year. This means

the time to convert inventories into accounts receivables hasincreased. This problem can be attributed to the sales

department of the company

Abbott Pakistan, it is advisable to improve the efficiency ofits sales department because this is not only affecting inventory

turnover but the quick ratio as well


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