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ACTIVITY RATIOS

RECEIVABLE TURNOVER:

Receivables Turnover = Annual Sales / Average receivables

Receivable Turnover

2009 96.0745

2010 145.9704

INTERPRETATION

Receivables turnover shows receivables which are outstanding by making credit sales annually.

A higher receivables turnover ratio refers to a rapid collection. For FFC, the ratio is 96 times and

the ratio improved to 146 times in fiscal year 2010.

DAYS OF SALES OUTSTANDING :

Days of Sales Outstanding = 365 / Receivables Turnover

Days of SalesOutstanding

2009 2.5005

2010 3.7991

INTERPRETATION

This measures the number of days an organization has to wait for payments from debtors. In

fiscal year 2009 days of sales outstanding is 3and reached to 4 days in fiscal year 2010.

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INVENTORY TURNOVER:

Inventory Turnover = Cost of Goods Sold / Average Inventory

Inventory Turnover

2009 102.0192010 142.2704

INTERPRETATION

Inventory turnover ratio shows the number of times the inventory has been turned over during

the period so that inventory management see that whether inventory is in proper limit or not.

Required range of inventory differs from sector to sector. In FFC, inventory turnover for fiscal

year 2009 is 102 times while in 2010 it is improving and reached to 142 times.

DAYS OF INVEN TORY ON HAND:

Days of Inventory on hand = 365 / Inventory Turnover

Days of Inventory onHand

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2009 3.5778

2010 2.5655

INTERPRETATION:

Days of inventory on hand shows the required average number of days to sell the inventory of a

company. The inventory period of FFC in fiscal year 2009 is 3 days and in 2010 it decreased to

2 days.

PAYABLES TURNOVER:

Payables Turnover = Purchases / Average Trade Payables

Payables Turnover

2009 19.7475

2010 19.0594

INTERPRETATION:

It is short-term liquidity measure used to quantify the rate at which a company pays

off its suppliers.The measure shows investors how many times per period the company pays its

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average payable amount. The higher the payable turnover the better it is. However, in our

analysis this ratio is showing a declining trend from 19.7475 in 2009 to 19.0594 which is not a

favorable sign.

NUMBER OF DAYS OF PAYABLES:

Number of Days of Payables = 365 / Payables Turnover Ratio

Number of Days ofPayables

2009 18.4834

2010 19.1506

INTERPRETATION:

This shows the number of day the firm is taking to pay off its average payment amounts.

Since we have already seen in the previous ratio that the payables turnover is declining,

therefore it is clear that the number of days it take to pay off will also increase, as shown in the

graph, from 18 in 2009 to 19 in 2010.

TOTAL ASSETS TURNOVER

Total Assets Turnover = Revenues / Average Total Assets

Total AssetsTurnover

2009 1.0263

2010 1.0997

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INTERPRETATION:

Total assets turnover signifies the amount of sales made by Investment per PKR in Average

Total Assets of an organization. In FFC the activity shows an improving trend in its total assets

turnover ratio from 1.02 in 2009 to 1.09 in 2010.

FIXED ASSET TURNOVER

Fixed Asset Turnover = Revenues / Average Net Fixed Assets

Total AssetTurnover

2009 2.7064

2010 2.9989

INTERPRETATION:

The fixed-asset turnover ratio measures a company's ability to generate net sales from

fixed-asset investments - specifically property, plant and equipment - net of depreciation. A

higher fixed-asset turnover ratio shows that the company has been more effective in using the

investment in fixed assets to generate revenues. Thus we can see from the graph that our fixed

asset turnover ratio has increased from 2.7064 in 2009 to 2.9989 in 2010.

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WORKING CAPITAL TURNOVER :

Working Capital Turnover = Revenue / Average Working Capital

Working CapitalTurnover

2009 -14.3185

2010 -14.2649

INTERPRETATION:

The working capital turnover ratio is used to analyze the relationship between the money

used to fund operations and the sales generated from these operations. In a general sense, the

higher the working capital turnover, the better because it means that the company is generating a

lot of sales compared to the money it uses to fund the sales. As we can see that this ratio is

negative for FFC, this is surely not a positive sign for the firm.

LIQUIDITY RATIOS

CURRENT RATIO:

Current Ratio = Current Assets / Current Liabilities

Current Ratio

2008 0.82122009 0.8355

2010 0.837

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INTERPRETATION:

Current ratio illustrates the availability of current assets to meet the current liabilities

during an accounting period of 12 months. Financial year 2008, 2009 and 2010 shows an

increasing trend as current ratio is increasing continuously. However it is still not satisfying the

general acceptable benchmark level that is 1.5:1 to 2:1 of the current assets to current liabilities.

NET WORKING CAPITAL:

Net Working Capital = Current Assets Current Liabilities

Net Working Capital

2008 -21141302009 -2937118

2010 -3354441

INTERPRETATION:

It is a measure of both a company's efficiency and its short-term financial health.

Positive net working capital means that the company is able to pay off its short-term

liabilities. Negative net working capital means that a company currently is unable to meet its

short-term liabilities with its current assets, which is the case of FFC, hence it may be forced

into bankruptcy.

QUICK RATIO:

Quick Ratio = Current assets Inventory / Current Liabilities

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Quick Ratio

2008 0.799366

2009 0.8274277

2010 0.826701

INTERPRETATION:

Quick ratio illustrates the liquid assets which are available to meet the current liabilities

during an accounting period of twelve months. Quick ratio of FFC shows a significant increase

in fiscal year 2009 and a very negligible decrease in fiscal year 2010.

CASH RATIO:

Cash Ratio = Cash / Current Liabilities

Cash Ratio

2008 0.0788137

2009 0.2155945

2010 0.057783

INTERPRETATION:

The cash ratio is most commonly used as a measure of company liquidity. It can

therefore determine if, and how quickly, the company can repay its short-term debt. A strong

cash ratio is useful to creditors when deciding how much debt, if any, they would be willing to

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extend to the asking party. However, in the case of FFC, we observe a declining trend in the

ratio which is unfavorable. It falls from 0.21 in 2009 to 0.06 in 2010.

NET WORKING CAPITAL RATIO :

Net Working Capital Ratio = Net Working Capital / Total Assets

Net Working CapitalRatio

2008 -0.0662

2009 -0.0762

2010 -0.0779

INTERPRETATION:

In case of FFC, its current assets do not exceed its current liabilities, and then it may run

into trouble paying back creditors in the short term. The worst-case scenario is bankruptcy. A

declining working capital ratio over a longer time period could also be a red flag that warrants

further analysis.

SOLVENCY RATIOS

DEBT TO EQUITY:

Debt to Equity = Total Debt / Total Equity

Debt to Equity

2008 1.5982

2009 1.9468

2010 0.6772

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INTERPRETATION:

This ratio shows how many long-term funds are acquired by long-term loans. For FFC,

debt to equity ratio in Financial Year 2008 was 1.6 and in the succeeding year 2009 it was 1.94

and then it improved to 0.67 in Financial Year 2010. This level of dependency on loans is not

good. This shows that the risks of not being able to re-pay the debts or loans are high.

DEBT TO CAPITAL:

Debt to Capital = Total debt/ (Total Debt+ Total Shareholder's Equity)

Debt to Capital

2008 0.6151

2009 0.6607

2010 0.4038

INTERPRETATION:

The debt-to-capital ratio gives users an idea of a company's financial structure, or how it

is financing its operations, along with some insight into its financial strength. The higher the

debt-to-capital ratio, the more debt the company has compared to its equity. This tells

investors whether a company is more prone to using debt financing or equity financing. This

ratio has declined from 0.66 on 2009 to 0.40 in 2010 which shows a good sign for FFC.

TOTAL DEBT RATIO:

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Total Debt Ratio = Total Assets- Total Equity/ Total Assets

Total Debt Ratio

2008 0.61512009 0.6607

2010 0.6413

INTERPRETATION:

Since this ratio is showing a declining trend that means the debt of the company has been

reduced in comparison to its assets hence, this is a position indication for the firm. It has reduced

from 0.66 in 2009 to 0.64 in 2010.

DEBT TO ASSETS:

Debt to Assets = Total debt/ Total Assets

Debt to Assets

2008 0.6151

2009 0.6607

2010 0.2429

INTERPRETATION

It is a metric used to measure a company's financial risk by determining how much of the

company's assets have been financed by debt. This is a very broad ratio as it includes short- and

long-term debt as well as all types of both tangible and intangible assets. Declining trend in this

ratio is a positive term for FCC.

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LONG TERM DEBT RATIO:

Long term Debt Ratio = Long Term Debt/ (Long Term Debt + Total Equity)

Long term DebtRatio

2008 0.3887

2009 0.3679

2010 0.3129

INTERPRETATION:

EQUITY MULTIPLIER:

Equity Multiplier = Total Assets/ Total Equity

Equity Multiplier

2008 2.5982

2009 2.9468

2010 2.7876

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INTERPRETATION:

Like all debt management ratios, the equity multiplier is a way of examining how

company uses debt to finance its assets also known as the financial leverage ratio or leverage

ratio. A higher equity multiplier indicates higher financial leverage, which means the company

is relying more on debt to finance its assets. Since this ratio has declined in 2010 in the case of

FFC, it is therefore a favorable outcome.

FINANCIAL LEVERAGE:

Financial Leverage = Average Total Assets/ Average Total Equity

Financial Leverage

2009 2.778

2010 2.8606

INTERPRETATION:

A leverage ratio summarizing the affect a particular amount of financial leverage has on

a company's earnings per share (EPS). The higher the degree of financial leverage, the more

volatile EPS will be, all other things remaining the same. This is our analysis the degree of

financial leverage is showing an increasing trend from the year 2009 to 2010.

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INTEREST COVERAGE:

Interest Coverage = EBIT/ Interest Payments

Interest Coverage

2008 15.3297

2009 14.8075

2010 19.8259

INTERPRETATION:

This ratio shows how many times funds are available for paying off the interest charges for the

year. The ratio is 15.32 in fiscal year 2008, 14.80 in 2009 and 19.82 in 2010. Fiscal year 2009

and 2010 signifies improving proficiency of CCF to pay off interest expenses.

CASH COVERAGE RATIO:

Cash Coverage Ratio = EBIT+ Depreciation/ Interest

Cash Coverage Ratio

2008 18.6694

2009 16.1151

2010 21.0737

INTERPRETATION:

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An accounting ratio that helps measure a company's ability to meet its obligations

satisfactorily. The better the assets "cover" the liabilities, the better off the company is. In this

regard the company shows a favorable position in 2010.

FIXED CHARGE COVERAGE:

Fixed Charge Coverage = EBIT+ Lease Payments/ (Interest Payments+ Lease Payments)

Fixed ChargeCoverage

2008 15.3297

2009 14.8075

2010 19.8259

INTERPRETATION:

A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest

and leases. This ratio has increased for the year 2010 in case of FFC thus, showing a positive

sign for the company.

PROFITABILITY RATIOS

NET PROFIT MARGIN :

Net Profit Margin = Net Income/ Revenue

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Net Profit Margin

2008 0.2133

2009 0.244

2010 0.2458

INTERPRETATION:

Profit margin is very useful when comparing companies in similar industries. A higher

profit margin indicates a more profitable company that has better control over its costs compared

to its competitors. Since the profit margin of FFC is showing an increasing trend from the past 3years, it is surely a good indication for the firm.

GRO SS PROFIT MARGIN :

Gross Profit Margin = Gross Profit/ Revenue

Gross Profit Margin

2008 0.4042009 0.4327

2010 0.436

INTERPRETATION:

Gross Profit Margin of FFC was 40.5% in 2008 and then it increased to 43.2% in fiscal

year 2009 and further increased to 43.6% in 2010. This is owing to the constant increase in sales

in the financial years.

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OPERATING PROFIT CHARGE :

Operating Profit Charge = Operating Income/ Revenue

Operating ProfitCharge

2008 0.3167

2009 0.3449

2010 0.3481

INTERPRETATION

This is the profit earned after deducting companys operating expenses incurred

during an accounting period. FFC shows continuously improving trend of operating profit

charge i.e. from 31.67% (in Financial Year 2008) to 34.49% (in Financial Year 2009) to

34.81% (in Financial Year 2010).

PRETAX MARGIN :

Pretax Margin = EBT/ Revenue

Pretax Margin

2008 0.3282

2009 0.6311

2010 0.3635

INTERPRETATION:

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It shows a company's earnings before tax as a percentage of total sales or revenues. The

higher the pre-tax profit margin, the more profitable the company. The trend of the pretax profit

margin is as important as the figure itself, since it provides an indication of which way the

company's profitability is headed. In case of FFC this ratio has declined from 0.63 in 2009 to

0.36 in 2010 which is not a positive indiactor.

RETURN ON ASSETS :

Return on Assets = Net Income/Average Total Assets

Return on Assets

2009 0.2504

2010 0.2703

INTERPRETATION

Return on Assets represents the return generated on average total assets of a company.

The higher the return on assets better it is. Return on Assets for FFC improves and it shows a

return of 25% in the Financial Year 2009 and increase that is 27% in 2010.

OPERATING RETURN ON ASSETS :

Operating Return on Assets = Operating Income/ Average Total Assets

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Operating Return onAssets

2009 0.354

2010 0.3828

INTERPRETATION:

This ratio is used to compare a businesss performance among other industry members.

The ratio can be used internally by the company's analysts, or by potential and current investors.

A high operating return on assets ratio can indicate that a higher return is to be expected. Since

this ratio is increasing from the year 2009 to 2010 in case of FFC, we can expect a higher return.

RETURN ON TOTAL CAPITAL :

Return on Total Capital = EBIT/ Average Total Capital

Return on Total

Capital2009 0.4503377

2010 0.6584872

INTERPRETATION:

When the return on total capital is greater than the cost of capital, the company is

creating value; when it is less than the cost of capital, value is destroyed.This ratio has increased

from0.45 in 2009 to 0.66 in 2010, thus showing a positive position of the company FFC.

http://en.wikipedia.org/wiki/Cost_of_capitalhttp://en.wikipedia.org/wiki/Cost_of_capital

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RETURN ON EQUITY :

Return on Equity = Net Income/ Average Total Equity

Return on Equity

2009 0.6956

2010 0.7731

INTERPRETATION

This ratio measures how many rupees are generated by one rupee of equity invested into

the business. During Financial Year 2009 and 2010, the return on Equity increased well,

reaching the highest level of 77.31% in Financial Year 2009 which was much higher than the

previous Financial Year.

EARNINGS PER SHARE:

Earnings per Share

2008 9.62

2009 13

2010 16.25

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INTERPRETATION:

This is the measure of earnings made by the organization for every ordinary share during

an accounting period. As per the ratio analysis of three Financial Years (2008 to 2010); EPS rose

from PKR 9.62 to PKR 13 to PKR 16.25 which quite decently reciprocated shareholders

requirements.

PRICE EARNING RATIO:

Price Earning Ratio = Price per Share/ Earnings per Share

Price Earning Ratio

2008 1.0395

2009 0.7692

2010 0.6154

INTERPRETATION:

In general, a high P/E suggests that investors are expecting higher earnings growth in the

future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole

story by itself. It's usually more useful to compare the P/E ratios of one company to other

companies in the same industry, to the market in general or against the company's own historical

P/E. In our analysis we see that this ratio is declining over the past 3 years thus, we cannot

expect any growth as compared to competitors.

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MARKET TO BOOK RATIO:

Market to Book Ratio = Market Value Per Share/ Book Value Per Share

Market to BookRatio

2008 5.873

2009 10.293

2010 12.586

INTERPRETATION:

This ratio is used to compare a stock's market value to its book value. A lower P/B ratio

could mean that the stock is undervalued. However, it could also mean that something is

fundamentally wrong with the company. Since this ratio is constantly increasing from the past 3

years, we can say that is a good sign for FFC.

DU PONT IDENTITY:

Du Pont Identity = ROE= Profit Margin* Total Asset Turnover* Equity Multiplier

Du Pont Identity

2008 0

2009 0.7379

2010 0.7534

INTERPRETATION:

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DuPont analysis tells us that ROE is affected by three things:

- Operating efficiency, which is measured by profit margin

- Asset use efficiency, which is measured by total asset turnover

- Financial leverage, which is measured by the equity multiplier

DuPont analysis helps locate the part of the business that is underperforming. In our analysis we

can see that it has slightly increased from 2009 to 2010.

DIVIDEND PAYOUT RATIO :

Dividend Payout Ratio = Cash Dividends/ Net Income

Dividend PayoutRatio

2008 1.0768

2009 0.7308

2010 0.9631

INTERPRETATION:

This ratio shows what potion of our net income we pay out as dividend. The higher the

dividend ratio the lower the addition to retained earnings. Thus, in case of FFC, the dividend

payout ratio has increased from 0.73 in 2009 to 0.96 in the year 2010, indicating that it pays out

almost all of its net income in the form of dividends.

CAPITAL INTENSITY RATIO

Capital Intensity Ratio = Total Assets/ Sales

Capital IntensityRatio

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2008 1.0433

2009 1.066

2010 0.9596

INTERPRETATION:

This ratio shows how much assets the company requires to generate the sale of $1, thus,

we can see a positive sign in FFC because its capital intensity ratio has decreased in the year

2010, showing that it requires less assets not to generate sales of $1.