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GROUP MEMBERS NAME: SAQIB MANZOOR 5529
BILAL KHAN 5528
ZEESHAN HUSSAIN 5522
SUBJECT: FINANCIAL ANALYSIS
DATE: 24-12-2010
INSTRUCTER’S NAME: SIR MUHHMAD AHMED
GROUP PROJECT
FINANCIAL ANALYSIS OF
RAFHAN MAIZE PAKISTAN
LIMITED
Abbreviations Complete Words CDC Central Depository Company
CNIC Computerized National Identity Card
GDP Gross Domestic Profit/Product
QMS Quantity Management System
EMS Environment Management System
OHSAS Occupational Health And Safety Assessment Series
ERP Enterprise Resource Planning
CSP Consoler Sales Planning
MSP Managing Sales Performance
CSR Corporate Social Responsibility
ILO International Labor Organization
SECP Securities And Exchange Commission Of Pakistan
INC Incorporated
CEO Chief Executive Officer
CFO Chief Financial Officer
IT Information TechnologyIDPS Internally Displaced People
IMS Integrated Management System
KSE Karachi Stock Exchange
LSE Lahore Stock Exchange
IFAC International Federation Of Accountants
EPS Earnings Per Share
IAS International Accounting Standards
ITAT Income Tax Appellate TribunalIFRS International Financial Reporting Standards
IFAS Islamic Financial Accounting Standards
LIQUIDITY ANALYSIS
Net working Capital = Current Asset – Current Liabilities
= Rs.2531960 –Rs. 1036473
= Rs. 1495487
Interpretation:
This ratio tells us the net working capital of any company. The working capital of
RAFHAN MAIZE is Rs. 1495487 for the year of 2009.
Current Ratio = Current Assets / Current Liabilities
= 2531960 / 1036473
= 2.44
Interpretation:
The current ratio tells us that the company has Rs. 2.44 to pay its Rs. 1 currently
maturing obligation. The current ratio of RAFHAN MAIZE ltd. Is 2.44 for the year 2009 which
is less than the last year’s performances. But still it is very good for the company as the
theoretical bench mark of the current ratio is 2 and for the year 2009 it is very near about the
theoretical bench mark. The current ratio of RAFHAN MAIZE Ltd. tells us that the company is
maintaining its current assets and liabilities very well. According to last year’s performances, it
is decreasing due to recent recession but it is much better than the industry average.
Quick Ratio = Current Assets – Stock in trade / Current Liabilities
= 2531960 – 1166118 / 1036473
= 1.32
Interpretation:
The quick ratio tells us that the company has Rs. 1.32 in its current assets less
stock in trade to pay its Rs. 1 currently maturing obligation. Its theoretical bench mark for quick
ratio is from 1 to 1.5. Here we can see that its quick ratio is ranging between 1 to 1.5 and it is
very suitable for the company. The quick ratio of the RAFHAN MAIZE Ltd. For the year 2009
is 1.32.
Cash Ratio = Cash + Cash Equivalence / Current Liabilities
= 277972+315365+11840+22227+65029+673409 /1036473
= 1.31
Interpretation:
The cash ratio tells us that the company has how much cash and cash equivalence
to its currently maturing obligation. The cash ratio of RAFHAN MAIZE Ltd. For the year 2009
is 1.31. It tells us that the company has Rs. 1.31 cash to pay its Rs. 1 currently maturing
obligation. Cash ratio has a theoretical bench mark that is 0.5. By comparing with the theoretical
bench mark of the ratio it is clear that the company has lot more cash than it is required to
maintain and also it is possible that the cash is idle. So the company requires decreasing its cash
ratio a bit and investing its idle cash.
Defensive Interval Ratio = Cash + Short term investment + net Account Receivable /
Average Daily Expense
= 673409+11840+64601 / 25471.67
= 29.44 days
Average daily Expense = Cost of Goods Sold + Admin & Selling Expense / 365
= 8992742 + 304419 / 365
= Rs. 25471.67
Interpretation:
Defensive interval ratio tells us that, how many days the company can keep all its
processes at run by the present cash in the company. The defensive interval ratio of the
RAFHAN MAIZE Ltd. For the year 2009 is 30 days approximately. It means that the company
can run 30 days approximately by the present cash.
ACTIVITY / EFFICIENCY ANALYSIS
Operating fixed Assets Turnover ratio = Sales / Total Fixed Assets
= 11428104 / 2753216
= 4.15
Interpretation:
Operating fixed assets turn over ratio tells us that, how many times a year the
company selling its fixed assets successfully. The operating fixed asset ratio of the RAFHAN
MAIZE Ltd. For the year 2009 is 4.15 approximately. It means that the company has sold its
fixed assets 4.15 times in the year of 2009.
Total Assets Turnover ratio = Sales / Total Assets
= 11428104 / 5304524
= 2.15
Interpretation:
The total assets turnover ratio tells us that how many times the company is
successful to sell its assets. The total assets turnover ratio of the RAFHAN MAIZE Ltd. For the
year 2009 is 2.15 times which tells that the company converted its assets successfully in to sells
during the period.
Accounts Receivable Ratio in Times = Credit Sales / Average Account Receivable
= 11428104 / 64512
=177.14 Times
Account Receivable in Days = 365 * Average Account Receivable / Credit Sales
= 365 * 64512 / 11428104
= 2.06 Days
Interpretation:
Account receivable ratio tells us that after approximately how many days and how
many times the company is successful to convert its accounts receivables in to cash. The
accounts receivable ratio for the year 2009 of the RAFHAN MAIZE Ltd. Is 177.14 times and
2.06 days approximately. It means that the company is converted its accounts receivable in to
cash 177.14 times during the period and after approximately 2.06 days. No theoretical bench
mark is available for the accounts receivable ratio but it is as much better as much less in days.
And as much better as much greater in times. Here it is very good for the RAFHAN MAIZE
Company.
Accounts Payable Ratio in Times = Credit Purchases / Average Accounts Payable
= 6486348 / 170845.5
= 37.966 Times
Accounts Payable Ratio in Days = 365 * Average Accounts Payable / Credit Purchases
= 365 * 170845.5 /6486348
= 9.614 Days
Interpretation:
Accounts payable ratio tells us that after how many days during the year the
company has paid its accounts payables or how many times the company has paid its accounts
payable during the period. The accounts payable ratio of the RAFHAN MAIZE Ltd. For the year
2009 is 37.966 times and 9.614 days approximately. There is no theoretical bench mark available
for the accounts payable ratio. It is as much better as low in times and as much better as high in
no. of days. Here it is very good for the RAFHAN MAIZE Company as it pays its accounts
payables after 9.614 days approximately. So it means that it retains the cash in the organization
for a long time which can be use for progressive works in the organization.
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
= 8992742 /6439900
= 1.39 Times
Inventory Turnover Ratio = 365 * Average Inventory / Cost of Goods Sold
= 365 * 6439900 / 8992742
= 261.38 Days
Interpretation:
Inventory turnover ratio tells us that how times the company is successful to sell
its inventory or after how many days the company successfully selling its inventory. For the year
2009 the RAFHAN MAIZE Ltd. The inventory turnover ratio is 1.39 times and 261.38 days
approximately. It means that the company sells its inventory 1.39 times in the financial period
which is vary good for a production company and it shows very less chance of presence of
obsolete inventory.
Operating Cycles = Average Account Receivable + Average Inventory
= 2.06 + 261.38
= 263.44 Days
Interpretation:
Operating cycle tells us that how many days a company is completing its
operation which start from the purchase of raw material and the payment for that. For the year
2009 the operating cycle of the RAFHAN MAIZE Ltd. Is 263.44 days approximately. It tells that
the company pays for the raw material it purchased in 263.44 days. Shorter operating cycles tells
us better and efficient management of the company. Here it is 263.44 days so it looks very
appropriate to me for a food producing company.
Cash Conversion Cycle = Average Account Receivable + Average Inventory
– Average Accounts Payable
= 2.06+261.38-9.614
= 253.826 days
Interpretation:
Cash conversion ratio tells us that after how many days the company successfully
converted its cash from the process of purchasing raw material and payment for that and tills to
the payment of cash to its accounts payables.
DEBT RATIOS
Debt Ratio / Debt to Equity Ratio = Total Liabilities / Total Assets
= 5304524 / 5285176
= 1.00
Interpretation:
Debt ratio tells us about the degree of protection for advancing and granting a
loan. Here for the year of 2009 it is 1.00 for the RAFHAN MAIZE Ltd. Which is very good? Its
theoretical bench mark is 50% or 0.5 and here it is above than the 0.5 and assumes very well for
an organization.
Debt to Equity Ratio = Total Liabilities / Total Equity
= 5304524 / 4007730
= 1.323
Interpretation:
Debt to equity ratio tells us the ratio of the liabilities to the equity of the
organization. It is assumed good if it comes equal or 1. Here for the year 2009 the debt to equity
ratio of the RAFHAN MAIZE Ltd. Comes 1.323 which tells that the liabilities are greater than
the equity of the company. It is assumed to be good as very near to the theoretical bench mark.
Interest Payment / Coverage Ratio = Earnings before Interest and Taxation / Interest
= 2210202 / 48766
= 45.322
Interpretation:
Interest payment or coverage ratio tells us that how many times the company can
pay interest out of its profit. Here it is 45.322 for the year 2009 of the RAFHAN MAIZE Ltd. It
means that the company can pay the amount of interest from its profits more than 45.322 times.
PROFITABILITY ANALYSIS
Gross Profit Margin = Gross Profit / Sales * 100
= 2435362 / 11428104 * 100
= 21.31%
Interpretation:
Gross profit margin tells us that how much cash would remain in the company
after its cost of sales. It comes 21.31% for the year 2009 of the RAFHAN MAIZE Ltd. It tells
that the 21.31% of sales is left behind after paying all its costs.
Net Profit Margin = Net Profit / Sales * 100
= 1297080 / 11428104 * 100
= 11.35 %
Interpretation:
Net profit margin ratio tells us that how much cash left in the company after
paying all its costs, expenses, interests and taxes. Here it is 11.35% for the company RAFHAN
MAIZE for the year 2009. It tells that the net profit is 11.35% of total sales made by the
company during the financial period.
Return on investment / Assets = Net Income / Total Assets * 100
= 1297080 / 5285176 * 100
= 24.54 %
Interpretation:
Return on investment or assets tell us that in what ratio the investment is to assets
or in what ratio of assets the return is earned by the company. It is 24.54% for the year of 2009
of RAFHAN MAIZE Ltd. It tells that company earned 24.54% return on its assets.
Return on Equity = Net Profit / Equity * 100
= 1297080 / 4007730 * 100
= 32.36 %
Interpretation:
Return on equity tells us that in what ratio of equity the return is earned by the
company. It is 32.36% for the year of 2009 of the RAFHAN MAIZE Company.
Return on Assets = Net Profit / Total Assets
=1297080 / 5285176
= 0.24
Interpretation:
It tells us that in what ratio the profit is to total assets. It is 0.24 for the year 2009
of RAFHAN MAIZE Company.
INVESTMENT ANALYSIS
Earnings per Share = Net Profit / Total number of Ordinary Shares
= 1297080 /20000000
= Rs.0.064
Interpretation:
Earning per share tells us the amount of income earned on share of common stock
during an accounting period. Here it is Rs. 0.064. It means the holders of shares of common
stock earn Rs. 0.064 during the accounting period of 2008-09.
Price Earnings Ratio = Market Price per Share at 23-12-2010 / Earning per Share
= 2115.25 / 0.064
= 33050.78
Interpretation:
The ratio expresses the relationship between market price of share of common
stock and current earnings per share. Investor’s view is that price earning ratio as a hint or future
earning of the firm. The company with high ratio has the high growth opportunity or vice versa.
Here it is 33050.78 which show that it is very high to the earning per share and tells that the
company has a great opportunity of growth in its near future.
VERTICAL ANALYSIS
Profit and Loss Account
Cost of sales = cost of sales / net sales × 100
= 8992742 /11428104 × 100
78.6%
Gross profit = gross profit / net sales × 100
= 2435362 / 11428104 × 100
21.3 %
Distribution cost = distribution cost / net sales × 100
= 116884 / 11428104 × 100
1.0%
Administrative expensive = administrative expensive / net sales × 100
= 187535 / 11428104 × 100
1.64%
Operating profit = operating profit / net sales × 100
= 2130943 / 11428104 × 100
18.6 %
Other operating income = other operating income / net sales × 100
= 79259 / 11428104 × 100
0.7 %
Finance cost = finance cost / net sales × 100
= 48766 / 11428104 × 100
0.4 %
Other operating expenses = other operating expenses / net sales × 100
= 149572 / 11428104 × 100
1.3 %
Profit before taxation = profit before taxation / net sales × 100
= 277864 /11428104 × 100
17.6%
Taxation = taxation / net sales × 100
= 714784 / 11428104 × 100
6.3%
Profit after taxation = profit after taxation / net sales × 100
= 1297080 / 11428104 × 100
11.3 %
Vertical Analysis
Balance sheet
Property, plant and equipment = property, plant and equipment / total assets × 100
= 1765365 / 5285176 × 100
33.3 %
Capital work in progress = capital work in progress / total assets × 100
= 987851 / 5285176 × 100
18 . 6 %
Employees retirement benefit = employees retirement benefit / total assets × 100
= 15784 / 5285176 × 100
0.3 %
Long term loans = long term loans / total assets × 100
= 3564 / 5285176 × 100
0.1 %
Stores and spares = stores and spares / total assets × 100
= 277972 / 5285176 × 100
5.2%
Stock in trade = stock in trade / total assets × 100
= 1166118 / 5285176 × 100
22 %
Trade debt = trade debt / total assets × 100
= 315365 / 5285176 × 100
5.9 %
Loans and advances = loans and advances / total assets × 100
= 11840 / 5285176 × 100
0.2 %
Trade deposits and pre payments = trade deposits and pre-payments / total assets × 100
= 22227 / 5285176 × 100
0.4 %
Other receivable = other receivables / total assets × 100
= 65029 / 5285176 × 100
1.2 %
Cash and bank balances = cash and bank balances / total assets × 100
= 673409 / 5285176 × 100
12. 7 %
Trade and other payables = trade and other payables / total liabilities × 100
= 734202 / 5304524 × 100
13. 8 %
Mark up accrued = mark up accrued / total liabilities × 100
= 8601 / 5304524 × 100
0 . 2 %
Provision for taxation = provision for taxation / total liabilities × 100
= 293670 / 5304524 × 100
5.5 %
Deferred taxation = deferred taxation / total liabilities × 100
= 260321 / 5304524 × 100
4. 9 %
Share capital = share capital / total liabilities × 100
=92364 / 5304524 × 100
1.74 %
Reserves = reserves / total liabilities × 100
= 3915366 / 5304524 × 100
73. 8 %
Horizontal Analysis
Profit and loss account
Sales = Current YearPrevious Year
×100
=1128104/10746826 × 100
=106%
Cost of sales = Current YearPrevious Year
×100
= 8992742 / 8005580 × 100
112 %
Distribution cost = Current YearPrevious Year
×100
= 116884 / 160563 × 100
73 %
Gross profit = Current YearPrevious Year
×100
= 2435362 / 2741246 × 100
89 %
Administrative expense = Current YearPrevious Year
×100
= 187535 / 165510 × 100
113 %
Operating profit = Current YearPrevious Year
×100
= 2130943 / 2415173 × 100
88%
Other operating income = Current YearPrevious Year
×100
= 79259 / 90911 ×100
87 %
Finance cost = Current YearPrevious Year
×100
= 48766 / 36123 × 100
135 %
Profit before taxation = Current YearPrevious Year
×100
= 2011864 / 2299065 × 100
88 %
Other operating expense = Current YearPrevious Year
×100
= 149572 / 170846 × 100
88 %
Profit after taxation = Current YearPrevious Year
×100
= 12970810 / 1492365 ×100
87 %
Taxation = Current YearPrevious Year
×100
= 714784 / 806700 × 100
89 %
Horizontal Analysis
Balance sheet
Non – current Assets :
Property plant and equipment = Current YearPrevious Year
×100
= 1765365 / 1553156 × 100
114 %
Capital work in progress = Current YearPrevious Year
×100
= 987851 / 503559 × 100
106 %
Employees retirement benefit = Current YearPrevious Year
×100
= 15784 / 71957 × 100
22 %
Long term loan secured = Current YearPrevious Year
×100
= 3564 / 791 × 100
451 %
Stores and spaces = Current YearPrevious Year
×100
= 277972 / 279768 × 100
99 %
Stock in trade = Current YearPrevious Year
×100
= 1166118 / 240606 × 100
48%
Trade debts = Current YearPrevious Year
×100
= 315365 / 343604 × 100
92 %
Loans and advances = Current YearPrevious Year
×100
= 11840 / 24498 × 100
48 %
Trade deposits and S.T payments = Current YearPrevious Year
×100
= 22227 / 26256 × 100
85 %
Other receivables = Current YearPrevious Year
×100
= 65029 / 63995 × 100
102 %
Cash and cash balances = Current YearPrevious Year
×100
= 673409 / 13730 × 100
4905 %
Trade and other payables = Current YearPrevious Year
×100
= 734202 / 765924 × 100
96 %
Mark up accrued = Current YearPrevious Year
×100
= 8601 / 8552 × 100
101 %
Provision for taxation = Current YearPrevious Year
×100
= 298670 / 205502 × 100
43 %
Deferred taxation = Current YearPrevious Year
×100
= 260321 / 235273× 100
111%
Share capital = Current YearPrevious Year
×100
= 92364 / 92364 × 100
100%
Reserves = Current YearPrevious Year
×100
= 3915366 / 3486077 × 100
112%
EFN =
[Current AssetsCurrent Sales×∆Sales ][Current LiabilitiesCurrent Sales
×∆ Sales]− [Projected Sales× Profit Margin ] [ 1−Dividend Payout ]
EFN = [2531960/11428104 × 681278][1036473/11428104 × 681278] –
[2109382 × 21.3][1−7.27]
EFN = 9326424854 – 12265845.39
EFN = Rs. 9314159009
Corporate Overview:
Q: 1 what is the industry?
Rafhan Maize Products Co. Ltd. manufactures and sells food ingredients and industrial products in Pakistan. The company primarily offers industrial starches, liquid glucose, dextrose, dextrin, and gluten meals. Its products also include corn, maize, modified, oxidized, cationic, and specialty starches; corn flour; powder glues; powder/liquid adhesives; dextrose monohydrate; corn syrup and liquid glucose; maltose and golden syrup; liquid caramel color; hydrol; maize gluten meals/feeds; corn germ meals; maize bran; maize oil cake; and maize steeping liquor. Rafhan products serve various industries, such as confectionery, processed foods, sweet-meats, syrups and squashes, brewing, food, baking, beverages, pharmaceutical, fermentation, tanning, chemicals, confectionery, bakery, poultry feeds, livestock feeds, aqua feeds, cattle feeds and other livestock feedings, poultry, cattle, fish feeds, and antibiotics. The company is headquartered in Faisalabad, Pakistan. Rafhan Maize Products Co. Ltd. operates as a subsidiary of Corn Products International, Inc.
Q: 2 what is the relative size and significance?
The size of this industry is huge and still growing. Its highly significant industry as its having huge profits and high growth rate.
Q: 3 what are the largest companies in the industry?
The largest companies in the industry are NESTLE PAKISTAN, UNI LEVER LTD, NATIONAL FOODS.
Q: 4 what is the geographic presence in this industry (local, U.S only, multi national or global)
This company is geographically present in Pakistan and conducting its operations locally.
Q: 5 how does the business cycle affect this industry?
Q: 6 brief historical perspective on this company?
Ans: Since 1953, Rafhan Maize has been the premier provider of refined corn-based products and ingredients in Pakistan. The company has focused on defending and reinventing traditional markets through delivering the right products at the right prices. Rafhan Maize has the capacity and capability to produce a wide range of food, industrial and animal nutrition and health ingredients.
Important segments of diverse customers' base include textile, paper, food and confectionery, baking, pharmaceutical, livestock feed and edible oil refiners.
Q:7 what is the primary focus of operations ?
The primary focus of operations is the industrial business, animal nutrition and health business, food business, exports and raw material.
Q: 8 what is the most important strategy used by this company?
e.g. {low cost producer, product differentiation, quality or service}?
Ans: They mainly focus on the quality of products and services they provide to their customers.
Q: 9 what are the major the operating segments?
Rafhan maize operations are split between consumers and businesses. It has expanded its products for business purposes.
Q: 10 what is the forecast for this company (over 1 to 5 years)?
This company is showing considerable growth in sales and earning per share for the last 10 years so we can say that this company will be a going concern in the next year.
