Analyzing Financial Ratios
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Financial Performance Of Cherat Cement Company: The performance of Cherat Cement Company is the best among different cement Companies of Pakistan. Recent Statistic has Show that their significant growth has seen in recent year the reasons are export to Afghanistan and construction of dams. With production rate is rising 79% each and export growth rate of 110% show a good future for the company management and those who want to invest. Analyzing Financial Performance by Using Relevant Financial Ratio: 1. Return on Capital Employed: Formula: Return on Profit Employed= (Profit before Interest and Tax/Capital Employed) X 100 Rs.000 (In Million) Year Profit before I & T Capital Employed Return on profit employed 2004 573668 1432418 4.025% 2005 684007 1742471 39.25% 2006 718747 2112926 34.01% ( Figure-1) 2. Profit Margin: Formula: Profit Margin=Operating profit/Sales Year Operating Profit Sales Profit Margin 2004 592781 2084955 0.284 2005 718037 2400530 0.299 2006 799111 2434513 0.328 3. Goss Profit Ratio: Formula: Gross Profit Ratio= (Gross profit/sales) x 100 Year Gross profit Sales X 100 = Gross Profit Ratio 2004 715170 2084955 34.30% 1
Transcript of Analyzing Financial Ratios
Financial Performance Of Cherat Cement Company:The performance of Cherat Cement Company is the best among different cement Companies of Pakistan. Recent Statistic has Show that their significant growth has seen in recent year the reasons are export to Afghanistan and construction of dams. With production rate is rising 79% each and export growth rate of 110% show a good future for the company management and those who want to invest.
Analyzing Financial Performance by Using Relevant Financial Ratio:
1. Return on Capital Employed: Formula:
Return on Profit Employed= (Profit before Interest and Tax/Capital Employed) X 100
Rs.000 (In Million)
Year Profit before I & T Capital Employed Return on profit employed2004 573668 1432418 4.025%2005 684007 1742471 39.25%2006 718747 2112926 34.01%
( Figure-1)
2. Profit Margin: Formula:
Profit Margin=Operating profit/Sales
Year Operating Profit Sales Profit Margin2004 592781 2084955 0.2842005 718037 2400530 0.2992006 799111 2434513 0.328
3. Goss Profit Ratio: Formula:
Gross Profit Ratio= (Gross profit/sales) x 100
Year Gross profit Sales X 100 = Gross Profit Ratio2004 715170 2084955 34.30%
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2005 856408 2400530 35.67%2006 94563 2434513 3.88%
(Figure-3)
4. Profitability Ratio: Formula:
Profitability ratio = (net sales – cost of good sold)/net sales x 100
Year Net sales Cost of good sold
/Net sale X 100 =Profitability ratio
2004 2084955 1369785 0.34%2005 2400530 1544122 0.35%2006 2434513 1488882 0.38%
5. Net-Profit Ratio: Formula:
Net Profit Ratio =Net Profit/Sales X 100
Year Net Profit Sales X 100 = Net Profit Ratio
2004 425696 1369785 31.07%2005 512300 1544122 94.60%2006 53778 1488882 3.61%
6. Liability Ratio: Formula:
Liability ratio = Total debts/Total assets
Year Total debts Total assets Liability ratio2004 2182072 2182072 1
2005 449823 3202800 0.142006 3611889 3611889 1
7. Current Ratio: Formula:
Current Ratio = Current asset/Current liabilities
Year Current asset Current liabilities Current Ratio2004 9182072 369844 24.82005 1384495 449823 3.072006 1267950 516444 2.45
Comparing Data of two Competitor Organizations:Financial Ratio Analysis:
Ratio analysis involves methods of calculating and interpreting financial ratios to analyze and monitor the firm’s performance. The basic contributions to ratio analysis are the firm’s income statement and balance sheet.
Comparing data of year 2004 between Cherat Cement Company limited and Lucky Cement Company.
Ratio: Cherat Cement Company Lucky Cement Company.
Return on Profit Employed 4.025 2.029Profit Margin 0.284 6.46Gross Profit Ratio 34.30 9.95Profitability ratio 0.34 0.74Liability ratio 1 1Current Ratio 24.8 0.78
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