Financial Statement ANalysis of National Foods Limited Pakistan from 2005-2009

In the Name of Allah,

The Most Beneficent,The Most Merciful.

Read:In the Name of your Lord

Who Created, Created Man from a Clot.

Read:And your Lord is the most

Bounteous,Who taught by the pen,

The man that which he did not Know

Al-Quran

ALLAH DOSE NOT LOOK AT

1

YOUR FORMS AND POSSESSIONSBUT HE LOOKS AY YOUR

HEARTS AND DEEDS.

(MUSLIM)

Acknowledgement

All praises & humble thanks for Almighty ALLAH the most

beneficial most merciful potentially upon us to accomplish the

present report successful with all sincerity our gratitude to

Holy Prophet Mohammad (SAW) who is the source of

Enlightenment, guidance, wisdom and knowledge for the entire

Humanity in all sphere of life.

We would also like to pay gratitude to Mr. Muhammad Ali Wallana for providing this opportunity to apply our knowledge practically.

Thanks

2

From:

All group Members

3

NATIONAL FOODS LIMITED

4

Sr. #. TOPICS PAGE #.

1. Executive Summary 7-8

2. Introduction of National Foods 9

3. Liquidity Analysis 14

4. Activity Analysis 19

5. Profitability Analysis 27

6. Long Term Analysis 35

7. Investor Analysis 42

8. Composite Analysis 46

9. Conclusions and Recommendations 95-96

6

Sr. #. TOPICS PAGE #.

1. Summarized Balance Sheet 46

2. Summarized Income statement 49

3. Changes in Absolute Data 52

4. Horizontal Analysis 58

5. Common Size Analysis or Vertical Analysis 60

6. Activity Analysis 61

7. Liquidity Analysis 67

8. Profitability Analysis 71

9. Long Term Analysis 79

10. Investor Analysis 84

11. Composite Analysis 89

7

Sr# Description Data1 The Company National Foods Limited

2 Condensed Income Statement 2005 2006 2007 2008 2009

A. Net sales 1,533,879 1,847,700 2,391,058 3,061,746 3,758,706 B. Gross profit 397,152 571,263 818,484 985,777 1,126,451 C. Operating profit 57,021 133,393 213,285 285,691 308,677 D. Profit before tax 42,271 106,471 191,722 233,947 220,702 Net profit 30,653 70,364 129,292 156,546 139,4613 Condensed Balance Sheet 2005 2006 2007 2008 2009

A. Total current assets 475,727 595518 689,469 1,104,692 1,256,941 B. Total non-current assets 477,732 6568 691,476 1,106,700 1,258,950 C. Total fixed assets 226,575 365,874 493,444 635,325 614,004

Total assets 708,731 967960 1,188,458 1,746,655 1,911,776 A. Total short-term liabilities 435491 514710 626,815 1,033,710 1,115,911 B. Total non-current liabilities 11,808 11,467 35,357 70,758 3,027,687 Total long-term liabilities 78,331 526,177 662,172 1,104,468 4,143,598 Total owner's equity 525,630 1,052,354 1,324,344 2,208,936 655,386

Total liabilities and owner's equity 708,731 967960 1,188,458 1,746,655 1,911,776

4 Liquidity Ratio 2005 2006 2007 2008 2009 Current Ratio 1.09:1 1.16:1 1.09:1 1.07:1 1.12:1 Quick Ratio 0.26:1 0.43:1 0.33:1 0.33:1 0.36:1 Cash Flow From Operations Ratio 0.17 0.29 0.38 0.31 0.32 Working Capital Ratio 40,236,000 80,808,000 62,654,000 70,982,000 141,030,000 Operating Cycle(days) 134.05 121.56 115.24 131.45 137.815 Activity Ratio 2005 2006 2007 2008 2009 A/R Turnover(times) 20.21 20.78 22.29 16.47 14.08 Aging Of A/R(Days) 18.05 17.56 16.37 22.15 25.91 Inventory Turnover(Times) 3.15 3.49 3.69 3.33 3.25 Days Sale in Inventory(Days) 116 104 98 109 111 Working Capital Turnover(Times) 38.12 22.8 38.1 43.13 26.61 Current Asste Turnover(Times) 3.13 2.93 3.24 2.58 2.8 Fixed Assets Turnover(Times) 6.7 6.2 5.6 5.42 6.01 Total Asset Turnover(Times) 2.16 2.2 2.21 2.08 2.056 Prifitability Ratios 2005 2006 2007 2008 2009 Gross Profit Margin(%age) 26 31 34 32 30 Operating Profit Margin(%age) 3.7 7.2 8.9 9.3 8.2 Profit Befor Tax Margin(%age) 2.7 5.8 8 7.6 5.9 Net Profit Margin(%age) 2 3.8 5.4 5.1 3.7 Return On Assets(%age) 4.3 8.3 11.99 10.67 7.6

8

Return On Equity(%age) 16 33 42 35 24 Return On Investment(%age) 22 25 32 34 29 Operating Asset Turnover(%age) 8.58 1.83 23.28 21.05 17.44

Dupont Return on Operating Asset(%age)

2.6 1.3 2.04 1.2 1.4

7 Long term Analysis 2005 2006 2007 2008 2009 Time Interest Earned Ratio(times) 3.56 5.36 6.52 5.08 3.55 Debt Service Coverage Ratio(Times) 2.59 2.62 2.71 2.87 2.43 Fixed Charge Coverage Ratio(Times) 2.41 2.5 2.52 2.56 2.21 Debt Ratio(% age) 74.16 74.47 69.04 70.46 65.71 Debt Equity ratio 29.4 43.3 28 16.23 8.4 Fixed Assets Coverage Ratio(Times) 2.98 1.93 3.45 6.35 1.028 Investor Ratio 2005 2006 2007 2008 2009 Degree of Financial Leverage 1.34 1.25 1.11 1.22 1.39 Earning Per Share 7.21 16.55 23.4 28.32 4.21 Price Earning Ratio 17.34 6.71 8.89 12.82 20.67 Book Value Per Share 43.1 58.1 86.5 93.4 19.89 Composite Ratio 0.65 0.41 0.61 0.91 1.22

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Introduction of National Foods

National Foods was founded in 1970 and started out as a Spice company. 3

decades later it has diversified into a versatile Food Company with over 110

products and 165 and above SKUs (Stock Keeping Unit) for the domestic

market and over 100 different products for the international markets.

Competent Human Resources from within the company have fuelled

tremendous growth by excelling in Functional Management. Even after 3

decades the company's focal point still remains on Customer's needs through

Product development in line with the changing market trends.

In this innovative age of ever changing lifestyles, fuelled by the rampant

development of technology; consumers have been compelled to change their

eating habits. National Foods responds to this challenge of developing

innovative food products based on convenience and fast preparation in line with

modern lifestyles and yet retains traditional values through its impressive

collection of food products.

The brand delivers its ultimate promise by consistently delivering value to its

consumers. National Foods enriches family relationships by bringing people

together for family traditions, feasts, seasonal holidays and of course - everyday

life.

10

Mission

‘The primary objective of our social initiative is to improve the quality of life in Pakistan by eradicating illiteracy throughout Pakistan.

11

Vision

To be a Rs. 50 billion food company by the year 2020 in the

convenience food segment by launching products and services in the

domestic and international markets that enhance lifestyle and create value

for our customers through management excellence at all levels.

12

Founder’s Philosophy

National Foods must focus on customer’s needs and serve

them with quality products at affordable prices at their

doorsteps.

Our products must be pure and conform to international

standards.

Our research must continuously produce new

adventurous products scientifically tested, hygienically

produced in safe and attractive packaging.

We must create environment in our offices and factories

where talents are groomed and have opportunity to

advance in their careers.

We must prove to be recognized as good corporate

citizens, support good causes-charity and bear fair share

of taxes.

Reserves must be built, new factories created, sound

profits made and fair dividend paid to our stock holders

13

through building a reliable brand.

National Foods Ltd. must get itself recognized as leader

in Pakistan and abroad.

Core Values

Passion

We act with intense positive energy and are not afraid of taking risks. We challenge ourselves continuously and have pride for what we do and are good at it.

Customer Focus

We see the world through the eyes of our customers. We do everything possible that makes them happy.

People Centric

We put our people first. Treat them with respect and actively contribute towards their development.

Teamwork

Our roles are defined, not our responsibilities. We believe in going the extra mile to accomplish our goals. We coach and support each other ensuring everyone wins. We have a WE versus I mindset.

Leadership

We are a part of the solution…never the problem. We act like owners and have a positive influence on others.

Ethics

We don’t run our business at the cost of human or ethical values.

Excellence in Execution

We say…we do … we deliver. We talk with our actions. We strive for nothing but the best. Execution is the key to winning!

14

Accountability

We see, we act. We take full responsibility for our actions and results. We don’t blame others for our mistakes; we analyze them and correct them.

A. Liquidity Ratio1. Current Ratio

Current AssetsCurrent Liabilities

Years 2005 2006 2007 2008 2009Current assets 475,727,000 595,518,000 89,469,000 1,104,692,000 1,256,941,000

Current liabilities 435,491,000 514,710,000 626,815,000 1,033,710,000 1,115,911,000

Current Ratio

1.09

1.16

1.09

1.07

1.12

1.06

1.08

1.1

1.12

1.14

1.16

1.18

2005 2006 2007 2008 2009

Years

Val

ue

in R

atio

Series1

2005 2006 2007 2008 20091.09:1 1.16:1 1.09:1 1.07:1 1.12:1

15

Interpretation:

This ratio measures short term debt paying ability of a company. The ratio

tends to increase when current assets increase or liabilities fall and vice versa.

The ideal current ratio for a company is 2:1. When firm are not successful in

maintaining current ratio of 2 this indicates a decline in the liquidity of the firm.

The graph shows that ratio has increased in 2005 to 2006 because a new current

asset (i.e. Accrued interest/mark up) is added in 2006.the ratio than decreasing

from 2007 to 2008 because current liabilities are increased including short term

borrowings, provision for income tax that tend to decrease the current ratio.

2. Quick Ratio

Current Assets - Inventories Current Liabilities



Inventories 359,954,000 370,698,000 481,329,000 762,758,000 852,409,000

2005 2006 2007 2008 20090.26:1 0.43:1 0.33:1 0.33:1 0.36:1

16

Quick Ratio

0.26

0.43

0.33 0.330.36

0

0.1

0.2

0.3

0.4

0.5

2005 2006 2007 2008 2009

Years

Val

ue

in R

atio

Series1

Interpretation:

It measures short term debt paying ability including most liquid assets. The

ideal situation is 1:1.if firm is not able to maintain 1:1situation, it indicates a

decline in the liquidity of the firm. This ratio is increasing from 2005 to

2006 and than remains consistent in 2007 and 2008 and again increasing in

2009.The reason of increasing this ratio in 2006 (i.e. Accrued interest/mark

up) is added.

As we can see that current liabilities are increasing from 2005 to 2009 as

compared to current assets that are why this ratio is decreasing from 2005 to

2009.

3. Cash Flow From Operations Ratio

Operating Profit + Dep. +Non Cash ItemCurrent Liabilities

Years 2005 2006 2007 2008 2009


Operating Profit 57,021,000 133,393,000 213,285,000 285,691,000 308,677,000

Depreciation 16,350,000 19,894,000 24,747,000 36,229,000 50,906,000

Non Cash Items 0 0 0 0 0

2005 2006 2007 2008 20090.17 0.29 0.38 0.31 0.32

17

Cash Flow From Operations Ratio

0.17

0.29

0.38

0.31 0.32

00.050.1

0.150.2

0.250.3

0.350.4

2005 2006 2007 2008 2009

Years

Series1

Interpretation:

It measures the liquidity of the firm by comparing the cash flow from current

liabilities. Greater this ratio greater will be the liquidity of the firm. The ratio is

increasing from 2005 to 2007 and than decreasing in 2008 and in 2009.the

reason for the decrease in 2008 is due to increase in current liabilities.

4. Working Capital Ratio

Current Assets - Current Liabilities



2005 2006 2007 2008 200940,236,000 80,808,000 62,654,000 70,982,000 141,030,000

18

Working Capital Ratio

40,236,000

80,808,00062,654,000

70,982,000

141,030,000

020,000,00040,000,00060,000,00080,000,000

100,000,000120,000,000140,000,000160,000,000

2005 2006 2007 2008 2009

Years

Series1

Interpretation:

This ratio measures the short term solvency of business. It tells that how

much working capital a firm has for its operations. The ratio is increasing

from 2005 to 2006 and than decreasing in 2007 and increasing in

2009.greater this ratio lesser the chance of insolvency of the firm.

As we can see that the lesser chance of the firm insolvency in 2006 and in

2009 because the value of current liabilities is greater in 2006 as compared

to 2005 and in 2009 as compared to 2008.

5. Operating Cycle

A/R in Days + Inventory Turnover in days

Years 2005 2006 2007 2008 2009A/R in Days 18.05 17.56 16.37 22.15 25.91

Inventory Turnover in Days 116 104 98.87 109.3 111.9

2005 2006 2007 2008 2009134.05 121.56 115.24 131.45 137.81

19

Operating Cycle

137131

115

121134

30

60

90

120

150

2005 2006 2007 2008 2009

Years

Va

lue

s i

n D

ay

s

Interpretation:

It basically measures the time period b/w the acquisition of goods and final cash

realized resulting from cash and subsequent collections. lower the ratio lesser

will be time required to realize cash from ending inventory. the ratio is

decreasing from 2005 to 2007 and than increasing up to 2009.the firms highest

efficiency is in 2007.

B. Activity Ratio

1. Accounts Receivable Turnover Ratio

Net Credit SalesAverage Account Receivables

Years 2005 2006 2007 2008 2009Sales 1,533,879,000 184,700,000 2,391,058,000 3,061,746,000 3,758,706,000

20

A/R Turnover

20.21 20.7822.29

16.4214.08

0

5

10

15

20

25

2005 2006 2007 2008 2009

Years

Val

ue

in T

imes

Series1

Average account receivable 75,877,000 88,908,500 107,262,500 185,838,000 266,823,500

2005 2006 2007 2008 2009 20.21

20.78

22.29

16.47

14.08

Interpretation:

The ratio tends to increase when credit sales increase or account receivables

decreases and vice versa. This ratio measures how many times you convert your

account receivables into cash or net sales in a year. Greater this ratio greater the

efficiency of the firm. The graph shows that this ratio is increasing from 2005 to

2007 and than decreasing from 2008 to 2009, which shows greater efficiency

from 2005 to 2007 and lower efficiency in 2008 and 2009.

The lower efficiency of the firm in 2008 and in 2009 is due to because account

receivables are growing rapidly.

2. Aging of Account Receivable:

Average Gross receivableNet Sales/365

Years 2005 2006 2007 2008 2009Average Gross receivable

75,877,000 88,908,500 107,262,500 185,838,000 266,823,500

21

Net Sales/3654,202,408.219

5,062,191.781 655, 0843.83 8,388,345.205 10,297,824.66

2005 2006 2007 2008 2009

18.05

17.56 16.37 22.15 25.91

Aging of A/R

18.05 17.56 16.37

22.1525.91

0

5

10

15

20

25

30

2005 2006 2007 2008 2009

Years

Val

ue

in D

ays

Series1

Interpretation:

This ratio measures that how many days’ sales remain in form of account

receivable and how quickly firm converts account receivables into cash. Greater

this ratio lesser will be the firm efficiency. This ratio is decreasing from 2005 to

2007 and than increasing from 2008 to 2009.The decrease in this ratio is due to

the inefficiency of the firm.

The lower efficiency of the firm is due to because its average gross receivables

are increasing more rapidly in 2008 & 2009.

3: Inventory Turnover:

Cost of good sold Average inventory

22

Years 2005 2006 2007 2008 2009Cost of good sold

1,136,727,000 1,276,437,000 1,57 2,574,000 2,075,969,000 2,632,255,000

Average inventory 359,954,000 365,326,000 426,013,500 622,043,500 807,583,500

2005 2006 2007 2008 2009

3.15 3.49 3.69 3.33 3.25

Interpretation:

This ratio measures that how many times a firm converts its inventory into CGS

in a year. Greater this ratio higher will be the firm efficiency. The graph shows

that inventory turnover is high from 2005 to 2007 and than decreasing in 2008

& 2009 which is not favorable sign for company.

The reason behind the decrease in 2009 is that firm’s inventory has increased in

2008 and in 2009 and the company fails to convert its more inventories into

CGS.

4. Days sales in inventory:

23

Inventory Turnover

3.15

3.49

3.69

3.333.25

3.1

3.2

3.3

3.4

3.5

3.6

3.7

3.8

2005 2006 2007 2008 2009

Years

Val

ue

in T

imes

Series1

Average inventory CGS/365

Years 2005 2006 2007 2008 2009Average inventory

359,954,000 365,326,000 426,013,500 622,043,500 807,583,500CGS/365

3114320.548 3,497087.671 4,308,421.981 5,687,586.301 7,211,657.534

Interpretation:

This ratio measures that in how many days a company converts its inventory

into CGS. Greater this ratio lesser will be the efficiency of the firm. The

graph shows that ratio is decreasing from 2005 to 2007 and than increasing

from 2008 to 2009.So; firm is not efficient in 2008 &2009.

Here firm’s inventory has increased in 2008 and in 2009 and company daily

sales are not increasing as compared to last years, so, company fails to

convert its inventory into CGS.

5. Working Capital Turnover

2005 2006 2007 2008 2009

116 104 98.87 109.3 111.9

24

Days sales in inventory

116

104

98

109111

95

100

105

110

115

120

2005 2006 2007 2008 2009

Years

Day

s

Series1

Net Sales Working Capital

Years 2005 2006 2007 2008 2009Net Sales 1,533,879,000 1,847,700,000 2,391,058,000 3,061,746,000 3,758,706,000

Working Capital 40,236,000 80,808,000 62,654,000 70,982,000 141,030,000

2005 2006 2007 2008 2009

38.12 22.8 38.1 43.13 26.61

Working Capital Turnover Ratio

38.12

22.8

38.143.13

26.61

05

1015202530354045

2005 2006 2007 2008 2009

Years

Val

ue

in (

Tim

es)

Series1

Series2

Series3

Series4

Series5

Interpretation:

The ratio tends to increase when credit sales increase or account receivables

decreases and vice versa. It measures that how many times a firm converts its

working capital into net sales in a year. Greater this ratio greater will be the firm

efficiency. The graph shows that ratio is first decreasing from 2005 to 2006,

than increasing to 2008 and again decreasing in 2009.so.we can say that firm

efficiency is high in 2008.

6. Current Asset Turnover

CGS + Operating Expenses + Tax Current Assets

25

Years 2005 2006 2007 2008 2009CGS 1,136,727,000 1,276,437,000 1,572,574,000 2,075,969,000 2,632,255,000

Operating Expenses 340,131,000 437,870,000 605,199,000 700,086,000 817,774,000

Tax 11,618,000 36,107,000 62,430,000 77,401,000 81,241,000

Current Assets 475,727,000 595,518,000 89,469,000 1,104,692,000 1,256,941,000

2005 2006 2007 2008 2009

3.13 2.93 3.24 2.58 2.80

Current Asset Turnover

3.132.93

3.24

2.582.8

0

0.5

1

1.5

2

2.5

3

3.5

2005 2006 2007 2008 2009

Years

Val

ue

in (

Tim

es)

Series1

Series2

Series3

Series4

Series5

Interpretation:.

It measures how many current assets a firm has to fulfill its expenses or we can

say that how many times a firm uses its current assets to meet its expenses.

Greater this ratio higher the firm efficiency to meet its expenses. The highest

current assets turnover is in 2007 as shown in graph.

The reason behind low efficiency of company is that its expenses like CGS,

operating expenses and tax have increased in 2008 and in 2009.

7. Fixed Assets Turnover:

Net Sales______ Avg. Fixed assets

26

Years 2005 2006 2007 2008 2009Net Sales 1,533,879,000 1,847,700,000 2,391,058,000 3,061,746,000 3,758,706,000

Avg. Fixed Assets

226,575,000 296,224,500 429,659,000

564,384,500 624,664,500

2005 2006 2007 2008 2009

6.7 6.2 5.6 5.42 6.01

Fixed Asset Turnover

6.76.2

5.6 5.46

012345678

2005 2006 2007 2008 2009

Years

Val

ue

in T

imes

Series1

Interpretation:

It measures how efficiently firm uses its fixed assets to generate sales. Greater

this ratio greater will be the efficiency of the firm. The graph shows that ratio is

decreasing from 2005 to 2008 and than increasing in 2009.which shows higher

efficiency of the firm in 2009.

8. Total Assets turnover:

Net Sales______ Avg. Total Assets

27

Years 2005 2006 2007 2008 2009Net Sales 1,533,879,000 1,847,700,000 2,391,058,000 3,061,746,000 3,758,706,000

Avg. Total Assets708,731,000 838,345,500 1,078,209,000 1,467,556,500 1,829,215,500

2005 2006 2007 2008 2009

2.16 2.20 2.21 2.08 2.05

Interpretation:

This measures the activity of assets and firm ability to generate sales through

maximum use of total assets. Greater total assets turnover represents greater

efficiency of firm. The graph shows that ratio is increasing in 2005 to 2007 and

than decreasing from 2008 to 2009 which shows lower efficiency of firm in

2008 & 2009.

Lower efficiency of the firm is due to firm has not utilized its fixed assets in an

efficient way.

C. Profitability Ratio

1. Gross Profit Margin

28

Total Asset Turnover

2.16

2.2 2.21

2.082.05

2

2.05

2.1

2.15

2.2

2.25

2005 2006 2007 2008 2009

Years

Val

ue

in T

imes

Series1

Gross ProfitNet Sales

Years 2005 2006 2007 2008 2009Gross Profit 397,152,000 571,263,000 818,484,000 985,777,000 1,126,451,000

Net Sales 1,533,879,000 184,770,000 2,391,058,000 3,061,746,000 3,758,706,000

2005 2006 2007 2008 200926% 31% 34% 32% 30%

Interpretation:

The ratio tends to rise whenever cost of goods sold decreases and gross profit

rise and when sales decreases. Gross profit margin decline because of number of

29

Gross Profit Margin

26%31%

34% 32% 30%

0%5%

10%15%20%25%30%35%40%

2005 2006 2007 2008 2009

Years

Val

ues

in

% A

ge

Series1

Series2

Series3

Series4

Series5

factors like when selling prices have declined due to competition, when cost of

buying inventory increases more rapidly than selling prices, when sales are not

recorded (the cost of goods sold figure in relation to the sales figure is very

high).

Greater this ratio greater will be firm profitability. this ratio has increased from

2005 to 2007 and than decreased in 2008 and 2009.this ratio shows highest

profitability in 2007.

The reason behind decrease in 2008 and 2009 is that cost of good sold has

increased and gross profit has decreased,

2. Operating Profit Margin

Operating ProfitNet Sales

Years 2005 2006 2007 2008 2009

Operating Profit 57,021.000 133,393,000 213,285,000 285,691,000 308.677,000

Net Sales 1,533,879,000 184,770,000 2,391,058,000 3,061,746,000 3,758,706,000

2005 2006 2007 2008 20093.7% 7.2% 8.9% 9.3% 8.2%

30

Operating Profit Margin

3.70%

7.20%

9% 9.30%8.20%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

2005 2006 2007 2008 2009

Years

Val

ues

In

% A

ge Series1

Series2

Series3

Series4

Series5

Interpretation:

It measures the operating profit of firm. It measures profit remaining before

paying interest and taxes. A firm must at least earn operating profit to survive.

Greater this ratio greater will be the firm profitability. The graph shows that

operating profit margin has increased from 2005 to 2008 and than decreased in

2009.the firm largest profitability in 2008.

The decrease in 2009 is that firm’s operating expenses has increased and

operating profit has decreased. Moreover sales are not growing as compared to

last years.

3. Profit Before Tax Margin

Profit Before TaxNet Sales

Years 2005 2006 2007 2008 2009Profit Before Tax 42,271,000 106,471,000 191,722,000 233,947,000 220,702,000

Net Sales 1,533,879,000 184,770,000 2,391,058,000 3,061,746,000 3,758,706,000

2005 2006 2007 2008 20092.7% 5.8% 8.0% 7.6% 5.9%

31

Profit before Tax Margin

2.70%

5.80%

8.00% 7.60%

5.90%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

2005 2006 2007 2008 2009

Years

Val

ue

in %

Ag

e

Series1

Series2

Series3

Series4

Series5

Interpretation:

This ratio measures the profit of the firm before paying taxes. Greater this ratio

greater will be the profitability of firm. The graph shows that profit before tax

margin has increased from 2005 to 2007 and than decreased in next two years.

This ratio shows highest profitability in 2007.

The decrease in 2009 is that firm’s operating expenses has increased and

operating profit has decreased. Moreover sales are not growing as compared to

last years.

4. Net Profit Margin

Net Profit Net Sales

Years 2005 2006 2007 2008 2009Net Profit 30,653,000 70,364,000 129,292,000 156,546,000 139,461,000

Net Sales 1,533,879,000 184,770,000 2,391,058,000 3,061,746,000 3,758,706,000

2005 2006 2007 2008 20092.0% 3.8% 5.4% 5.1% 3.7%

32

Net Profit Margin

2.0%

3.8%

5.4%5.1%

3.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2005 2006 2007 2008 2009

Years

Val

ue

in %

Ag

e

Series1

Series2

Series3

Series4

Series5

Interpretation:

This ratio measures the net income generated by sales after paying all expenses.

This is desirable that this ratio to be high for more profitability we can see from

graph that ratio is increasing from 2005 to 2007 and than decreasing in 2008

and 2009.maximum profit is in 2007.

Net profit has decreased because company’s interest and tax expenses have

increased and firm’s sales are not growing so rapidly.

5. Return On Assets:

Net income Avg. total assets

Years 2005 2006 2007 2008 2009

Net income 30,653,000 70,364,000 129,292,000 156,546,000 139,461,000

Avg. total assets 708,731,000 838,345,500 1,078,209,000 1,467,556,500 1,829,215,500

2005 2006 2007 2008 20094.3% 8.3% 11.99% 10.67% 7.6%

33

Return On Assets

4.3

8.3

11.9910.67

7.6

0

5

10

15

2005 2006 2007 2008 2009

Years

Val

ue

in %

Ag

e

Series1

Interpretation:

This ratio measures the firm ability to utilize its assets to create profits by

comparing profits with assets that generate profits, higher this ratio greater will

be the firm profitability. The graph shows that return on assets has increased

from 2005 to 2007 and than decreased in 2008 and 2009.it means that firm has

generated maximum return on assets in 2007.

Here firm has not utilized its assets efficiently that’s why there is low

profitability in 2008 and 2009.

6. Return on equity:

Net Income – Preferred Dividend Average Total Equity

Years 2005 2006 2007 2008 2009Net Income 30,653,000 70,364,000 129,292,000 156,546,000 139,461,000

Preferred Dividend 0 0 0 0 0

Average Total Equity 183,101,000 247,089,000 367,880,000 515,925,000 655,386,000

2005 2006 2007 2008 2009 16% 33% 42% 35% 24%

Interpretation:

This measures the return to both common and preferred share holders.

34

Return On Equity

16

33

4235

24

0

10

20

30

40

50

2005 2006 2007 2008 2009

Years

Val

ue

In %

Ag

e

Series1

The graph shows the value increases from 2005 to 2007 and than decreasing

in 2008 and 2009, which is not favorable for the firm. The highest ROE is in

2007.

7. Return on Investment

Net Income + [(Interest)(1 – Tax Rate)] Average LTD + Average Equity

Years 2005 2006 2007 2008 2009Net Income 30,653,000 70,364,000 129,292,000 156,546,000 139,461,000

Interest Expenses 16,006,000 24,850,000 32,675,000 56,238,000 86,841,000

Tax Rate 0.35 0.35 0.35 0.35 0.35

Average LTD 6,000,000 132,500,000 166,000,000 121,500,000 80,000,000

Average Equity 183,101,000 215,095,000 307,484,500 441,902,500 585,655,500

2005 2006 2007 2008 2009

22% 25% 32% 34% 29%

Return On Investment

22 2532 34

29

010203040

2005 2006 2007 2008 2009

Years

Val

ues

In %

Ag

e

Series1

Interpretation:

This ratio measures the ability of the firm to reward those who provide the

long term debt and attract the providers of future funds.

It measures the earning performance of the firm without regard to the way

investment is financed. Higher this ratio higher the profitability of the firm.

It also indicates that how well a firm is utilizing its assets base.

35

8. Operating Assets Turnover:

Operating ProfitAvg. operating assets

Years 2005 2006 2007 2008 2009Operating Profit 57,021.000 133,393,000 213,285,000 285,691,000 308,677,000

Avg. operating assets

664,844,000

7,296,075,000 916,040,500 1,356,777,00 1,769,707,500

2005 2006 2007 2008 20098.58% 1.83% 23.28% 21.05% 17.44%

Operating Asset Turnover

8.58

1.83

23.2821.05

17.44

0

5

10

15

20

25

2005 2006 2007 2008 2009

Years

Vau

e in

% A

ge

Series1

Interpretation:

This ratio measures the ability of operating assets to generate sales. Greater this

ratio greater will be the ability of the firm to generate sales. This ratio is

increasing from 2005 to 2007 and than decreasing in 2008 and 2009.

It shows the firm’s low efficiency of operating assets to generate sales. Firm has

not utilized its operating assets efficiently to generate sales

36

9. Dupont Return On Operating Asset

Operating Profit margin x Total Asset turnover

Years 2005 2006 2007 2008 2009Operating Profit Margin 2 3.8 5.4 5.1 3.7

Total Asset turnover 2.16 2.20 2.21 2.08 2.05

2005 2006 2007 2008 20092.6% 1.3% 2.04% 1.2% 1.4%

Dupont Return on Operating Assets

1.41.22.04

1.3

2.6

1

2

3

4

5

2005 2006 2007 2008 2009

Years

valu

e in

% A

ge

Series1

Series2

Series3

Series4

Series5

Interpretation:

Assets, the net profit margin, the total assets turnover and return on assets

are usually reviewed together because of direct influence that net profit

margin and total assets turnover have return on assets. When these ratios are

reviewed together it is called the DuPont return on assets.

Greater this ratio greater will be the profitability of the firm. The graph

indicates that value increases from 2005 to 2007 and than decreasing in next

two years. Its shows low profitability of the firm in 2008 and 2009.

37

D. Long Term Analysis

1. Time Interest Earned Ratio

Earning before Interest and TaxInterest Expense

Years 2005 2006 2007 2008 2009EBIT 57,021.000 133,393,000 213,285,000 285,691,000 308.677,000

Interest expense 16,006,000 24,850,000 32,675,000 56,238,000 86,841,000

2005 2006 2007 2008 2009 3.56 5.36 6.52 5.08 3.55

Time Interest Earned Ratio

3.56

5.36

6.52

5.08

3.55

0

1

2

3

4

5

6

7

2005 2006 2007 2008 2009

Years

Val

ue

in T

imes

Series1

Series2

Series3

Series4

Series5

Interpretation:

This ratio indicates a firm’s long-term debt paying ability from the income

statement view.

The ratio tends to rise whenever earning before interest and tax increases and

when interest expense decreases and vice versa is also true. A relative high,

stable coverage of interest over the years indicates a good record. A low ratio

38

indicates a poor record of the company.

From the above table it can be seen that firm’s ratio has increased from the year

2005 to 2007 and the ratio shows a sharp decline in 2008 and 2009.

This sharp decrease in ratio is due to the increase in firm’s short term borrowing

which has increased 17.78% in 2007 to 30.71% in 2008 which has increased the

mark up that ultimately reduced its interest coverage ratio.

2. Debt Service Coverage Ratio

Earning before Interest and TaxInterest Expense + Current Maturity Of LTD

Years 2005 2006 2007 2008 2009EBIT 57,021.000 133,393,000 213,285,000 285,691,000 308.677,000


Current maturity Of LTD

6,000,000 26,000,000 46,000,000 43,000,000 40,000,000

2005 2006 2007 2008 2009 2.59 2.62 2.71 2.87 2.43

Debt Service Coverage ratio

2.592.62

2.71

2.87

2.432.4

2.5

2.6

2.7

2.8

2.9

2005 2006 2007 2008 2009

Years

Val

ue

in T

imes Series1

Series2

Series3

Series4

Series5

Interpretation:

This ratio measures that how much time a firm has earned after paying the

39

interest and current maturity of long term debt.

This ratio increases when EBIT increases, interest expense and current

maturity of long term debt decreases.

Greater the ratio, greater the ability of the firm to increase its earning before

interest and taxes after paying the debt.

As we can see from the graph that the debt service coverage ratio increases

from 2005

to 2008 and in 2009 there is a sharp decline.

This sharp decline is due to the reason that the firm has borrowed more in

2009 so interest expense increases from 1.84% in 2008 to 2.31% in 2009.

3. Fixed Charge Coverage Ratio

Earning before Interest and TaxInterest Expense + Current Maturity Of LTD + Rental or Lease Finance

Years 2005 2006 2007 2008 2009EBIT 57,021.000 133,393,000 213,285,000 285,691,000 308.677,000


Current maturity Of LTD

6,000,000 26,000,000 46,000,000 43,000,000 40,000,000

Lease Finance 1,627,000 2,306,000 6,041,000 12,341,000 12,510,000

2005 2006 2007 2008 2009 2.41 2.50 2.52 2.56 2.21

40

Fixed Charge Coverage Ratio

2.41

2.5 2.522.56

2.21

2.152.2

2.252.3

2.352.4

2.452.5

2.552.6

2005 2006 2007 2008 2009

Years

Val

ue

in T

imes

Series1

Series2

Series3

Series4

Series5

Interpretation:

This ratio is an extension of Time interest Earned ratio and indicates the

firm’s long term debt paying ability from the income statement view. It also

indicate the firm’s ability to cover fixed charges.

This ratio increases when earning before interest and taxes increases, and

when interest expense, current maturity of long term debt and rental lease

decreases. Greater this ratio, greater the ability of the firm to pay its fixed

charges

As we can see from the graph that the ratio is increasing from 2005 to 2008

and then there is the sharp decline in 2009.

The reason for this sharp decline is that the fixed cost of the company

increases from 2008 to 2009 like interest and lease finance.

4. Debt Ratio

Total Liabilities Total Assets

Years 2005 2006 2007 2008 2009Total Liabilities 525,630,000 720,871,000 820,578,000 1,230,730,000 1,256,390,000

Total Assets 708,731,000 967,960,000 1,188,458000 1,746,655,000 1,911,776,000

2005 2006 2007 2008 200974.16 74.47 69.04 70.46 65.71

41

Debt Ratio

74.16 74.4769.04 70.46

65.71

0

20

40

60

80

2005 2006 2007 2008 2009

Years

Val

ue

in %

Ag

e

Series1

Series2

Series3

Series4

Series5

Interpretation:

This ratio tells about risky ness of lending to the company. It measures the

percentage of assets financed by the creditors ,and it also help to determine

how well creditors are protected in case of insolvency.

This ratio decreases when total liabilities decreases and total assets

increases. Lower the ratio, greater will be the company position.

The graph shows that the ratio is decreasing from 2005 to 2007 and then

increases in 2008 and then again decreased in2009. The lowest debt ratio is

in 2009 because the firm has not taken so much debt in this year which is

the favorable sign for the company.

5. Debt Equity Ratio

Long Term Debt LTD + Equity

Years 2005 2006 2007 2008 2009LTD 76,000,000 189,000,000 143,000,000 100,000,000 60,000,000

Equity 183,101,000 247,089,000 367,880,000 515,925,000 655,386,000

2005 2006 2007 2008 2009

29.4:70.6 43.3:56.7 28:72 16.23:83.778.4:91.6

42

Debt Equity ratio

29.4

43.3

28

16.23

8.4

0

10

20

30

40

50

2005 2006 2007 2008 2009

Years

Val

ue

in r

atio

Series1

Interpretation:

This ratio determine the long term debt paying ability of the firm by

comparing the total debt with total shareholder’s equity.

This ratio increases when assets when long term debt increases and equity

decreases. Lower this ratio, greater will be the debt position of the company.

The ratio increases from 2005 to 2006 and then show a sharp decline in

2007, 2008 and in 2009. the lowest ratio is in the year 2009 which shows

that the company take low debt in this year for its operations while the

major portion is of the equity of the company. So in 2009 the company

position is very favorable. while in 2006 the company’s debt to equity ratio

is very high means that the company took highest debt in this year for its

operations which is not favorable for the company.

6. Fixed Asset Coverage Ratio

Net Fixed Assets Long term Debt

Years 2005 2006 2007 2008 2009Net Fixed Assets 226,575,000 365,874,000 493,444,000 635,325,000 614,004,000

Long Term Debt 76,000,000 189,000,000 143,000,000 100,000,000 60,000,000

2005 2006 2007 2008 20092.98 1.93 3.45 6.35 1.02

43

Fixed Asset Coverage Ratio

2.98

1.93

3.45

6.35

1.02

0

1

2

3

4

5

6

7

2005 2006 2007 2008 2009

Years

Val

ue

in T

imes

Series1

Series2

Series3

Series4

Series5

Interpretation:

This ratio shows the ability of the firm to pay its long term debt after selling the

fixed assets in case of liquidation.

This ratio increases when net fixed assets increases and the long term debt

decreases. Greater the ratio, greater will be the ability of the firm to pay its long

term debt from the fixed assets.

The graph indicates that the ratio increases from 2005 to 2008 and show a sharp

decline in 2009. The highest ratio is in the year 2008 which shows greater

ability of the firm to pay its long term debt in 2008.

The reason for sharp decline is that the fixed assets of the company has

decreased from 36.37% in 2008 to 32.11% in 2009 which is not favorable sign

for the company.

E. Investor Ratio

1. Degree Of Financial Leverage

Earning Before Interest and TaxesEarning Before Tax

Years 2005 2006 2007 2008 2009EBIT 57,021.000 133,393,000 213,285,000 285,691,000 308.677,000

EBT 42,271,000 106,471,000 191,722,000 233,947,000 220,702,000

2005 2006 2007 2008 2009 1.34 1.25 1.11 1.22 1.39

44

Interpretation:

The use of finances with fixed charges is known as financial leverage. Financial

leverage will be successful if the firm earn more on the borrowed funds than it

pays to use them. And vice versa

This ratio increases when earning before interest and taxes increases and

earning before taxes decreases. If earning before interest increases, the financial

leverage will be favorable. So greater ratio will be favorable for the company.

The graph shows that the leverage decreases from 2005 to 2007 and the start

increasing from 2008. the highest ratio is in 2009 that is 1.39 which is favorable

for the company. The reason for this increase is that the EBIT increased at faster

rate from 2008 as compared with EBT.

2. Earning Per Share

45

Degree Of Financial Leverage

1.341.25

1.111.22

1.39

00.20.40.60.8

11.21.41.6

2005 2006 2007 2008 2009

Years

Series1

Net Income – Preferred Dividend No. Of Common Stock Outstanding

Years 2005 2006 2007 2008 2009Net Income 30,653,000 70,364,000 129,292,000 156,546,000 139,461,000

Preferred Dividend 0 0 0 0 0

No. of C/S Outstanding 4,251,000 4,251,000 5,526,000 5,526,000 33,154,000

2005 2006 2007 2008 20097.21 16.55 23.40 28.32 4.21

Interpretation:

It is the amount of income earned on a share of common stock during an

accounting period.

46

Earning Per Share

7.21

16.55

23.4

28.32

4.21

0

5

10

15

20

25

30

2005 2006 2007 2008 2009

Years

Val

ue

in R

up

ees

Series1

This ratio increases when net income increases. Greater he earning per

share, more the investor are attracted towards the firm and more the firm get

funds for working. So greater ratio is a good sign.

The graph indicates that the earning per share increases from 2005 to 2008

and then show a sharp decline in 2009. The reason for this decline is that the

net income of the company decreases in 2009 while the number of share

outstanding increases in the same year so in this way the earning per share

decreases. This decrease in earning per share is not favorable for the

company because it looses the attraction of the company for the investor and

they will not be willing to purchase the shares of the company and in this

way company will not be able to generate more funds.

3. Price Earning Ratio

Market Price Per ShareEarning Per Share

Years 2005 2006 2007 2008 22009Market Price/Share 125 111 208 363 87

Earning/Share 7.21 16.55 23.4028.3

24.21

2005 2006 2007 2008 2009 17.34 6.71 8.89 12.82 20.67

Interpretation:

47

Price Earning Ratio

17.34

6.718.89

12.82

20.67

0

5

10

15

20

25

2005 2006 2007 2008 2009

Years

Val

ue

in T

imes

Series1

This ratio is considered as a gauge of the future earning power of the firm. It

measures how much the investors are willing to pay as price in relation to

earnings.

Companies having high growth opportunities have high P/E ratio.

This ratio increases when market price per share increases. Greater the ratio

Lesser will be the ability of the firm to increase its future earnings.

The graph shows that the ratio is high in 2005 and then shows a great

decline in 2006 and start increasing from 2007. the highest price earning

ratio is in 2009 which is the not favorable sign for the company to attract the

investors.

4. Book Value Per Share

Shareholder Equity – Preferred Equity No. Of Common Stock Outstanding

Years 2005 2006 2007 2008 2009Shareholder Equity 183,101,000 247,089,000 367,880,000 515,925,000 655,386,000

Preferred Equity 0 0 0 0 0

No. of C/S Outstanding 4,251,000 4,251,000 5,526,000 5,526,000 33,154,000

2005 2006 2007 2008 200943.1 58.1 86.5 93.4 19.8

48

Book Value Per Share

43.1

58.1

86.593.4

19.8

0

20

40

60

80

100

2005 2006 2007 2008 2009

Years

Val

ue

in R

up

ees

Series1

Interpretation:

This ratio indicates the value of the company inside the company.

It indicates the amount of shareholder equity that relates to each share of

outstanding common stock.

The book value increases if the company have earned the premium and

when retained earning increases. Greater the ratio, better will be the

condition of the company.

The graph shows that the book value increases from 2005 to 2008 and then

decline sharply in 2009. The highest book value per share is in 2007and

decrease in 2009 is not a favorable sign for the company. The reason for this

decrease is that the increase in number of share is more as compared to

Equity.

Rs. In Thousands

49

Particulars 2005 2006 2007 2008 2009Assets Current assets Cash and bank balances 5,579 83,025 18,146 13,496 15,205

Trade debts 75,877 101,940 112,585 259,091 274,556

Stock in trade

Raw material 91,662 109,346 163,939 301,738 356,650

Packing material 68,487 59,219 74,501 85,646 82,932

Work in progress 119,740 97,603 139,695 213,773 235,844

Finished goods 76,766 101,067 98,872 154,102 171,551

Total stock in trade 356,655 367,235 477,007 755,259 846,977

Store,spare parts and loose tools 3,299 3,463 4,322 7,499 5,432

Accrued interest/mark up NIL 1,637 NIL NIL NIL

Advances 14,029 13,586 11,794 18,965 29,044

Trade deposit and prepayments 1,822 4,290 2,520 2,333 6,660

Other receivables 913 1,063 25,393 1,199 2,632

Tax refunds adjustable with government 17,553 19,279 37,702 46,850 76,435

Total current assets 475,727 595518 689,469 1,104,692 1,256,941

Non-current assets

Long term deposits 2,139 2,504 2,766 4,444 5,163

Intangibles 4,290 4,064 2,779 2,194 35,668

Total non-current assets 6,429 6568 5,545 6,638 40,831

Fixed assets(property,plants,equipments)

Fixed assets at cost 327,909 353,976 532,564 805,439 875,622

Accumulated depreciation (145,221) (161,691) (189,868) (240,925) (309,823)

Book value 182,688 192,285 342,696 564,514 565,799

Work in progress 43,887 173,589 150,748 70,811 48,205

Total fixed assets 226,575 365,874 493,444 635,325 614,004

Total assets 708,731 967,960 1,188,458 1,746,655 1,911,776

Particulars 2005 2006 2007 2008 2009

Liabilities and Owner's equity

Short-term liabilities

Short-term borrowing 270,718 195,925 211,272 536,341 485,536

Trade 29,407 16,472 38,886 35,811 43,781

Other payables 111,051 228,516 276,432 333,754 416,845

Accrued interest/mark up 4,688 8,491 10,184 17,186 17,764

Current maturity of:

Long term financing 6,000 26,000 46,000 43,000 40,000Liabilities against assets subject to financial lease 1,627 2,306 6,041 12,341 12,510

50

Adjustables with government NIL NIL NIL 13,277 17,475

Provision for income tax 12,000 37,000 38,000 42,000 82,000

Total short-term liabilities 435491 514710 626,815 1,033,710 1,115,911

Non-current liabilities

Deffered tax 11,808 11,467 35,357 70,758 59,999

Retirement benefits obligations NIL NIL NIL NIL 6,780

Total non-current liabilities 11,808 11,467 35,357 70,758 66,779

Long-term liabilities

Long term financing 76,000 189,000 143,000 100,000 60,000Liabilities against assets subject to financial lease 2,331 5,694 15,406 26,262 13,700

Total long-term liabilities 78,331 194,694 158,406 126,262 73,700

Owner's equity

Paid up capital 42,505 42,505 42,505 55,257 331,542

Share premium-capital reserve 6102 6102 6,102 6102 NIL

Unapproperiated profit 134,494 198,482 319,273 454,566 323,844

Total owner's equity 183,101 247,089 367,880 515,925 655,386

Total liabilities and owner's equity 708,731 967960 1,188,458 1,746,655 1,911,776

51

National Food LimitedSummarized Income Statement

For The Year Ended On June 30Rs. In thousands

Particulars 2005 2006 2007 2008 2009

Net sales 1,533,879 1,847,700 2,391,058 3,061,746 3,758,706

Cost of production

Raw material 973,109 1,058,595 1,266,725 1,759,371 2,204,724

Labour and wages 96,841 124,578 157,545 178,716 210,879

Depriciation 16,350 19,894 24,747 36,229 50,906

Overhead 66,230 97,671 121,362 156,883 183,195

Total cost of production 1,152,530 1,300,738 1,570,379 2,131,199 2,649,704

Inventory adjustment (15,803) (24,301) 2195 (55,230) (17,449)

Cost of good sold (1,136,727) (1,276,437) (1,572,574) (2,075,969) (2,632,255)

Gross profit 397,152 571,263 818,484 985,777 1,126,451

Operating expenses

General admn expenses (51,842) (73,112) (91,297) (129,868) (152,110)

Selling expenses (288,289) (364,758) (513,902) (570,218) (665,664)

Total operating expenses (340,131) (437,870) (605,199) (700,086) (817,774)

Operating profit 57,021 133,393 213,285 285,691 308,677

Other operating income/expense 4,069 5,629 25,553 22,123 16,223

Financial cost or interest expenses (16,006) (24,850) (32,675) (56,238) (86,841)

Total financial&other expense/income (11,937) (19,221) (7,122) (34,115) (70,618)

Profit before workers fund and taxes 45,084 114,172 206,163 251,576 238,059

Workers fund (2,813) (7,701) (14,441) (17,629) (17,357)

Profit before tax 42,271 106,471 191,722 233,947 220,702

Taxes (11,618) (36,107) (62,430) (77,401) (81,241)

Net profit 30,653 70,364 129,292 156,546 139,461

52

Changes In Absolute Data w.r.t Base YearSummarized Balance Sheet

As of June 30 Rs. In Thousands Rs. in Thousands

Particulars 2005 2006 2007 2008 2009Assets Current assets Cash and bank balances 5,579 77,446 12,567 7,917 9,626Trade debts 75,877 26,063 36,708 183,214 198,679Stock in trade 356,655 10,580 120,352 398,604 490,322Store,spare parts and loose tools 3,299 164 1,023 4,200 2,133Accrued interest/mark up NIL 1,637 NIL NIL NILAdvances 14,029 (443) (2,235) 4,936 15,015Trade deposit and prepayments 1,822 2,468 698 511 4,838Other receivables 913 150 24,480 286 1,719Tax refunds adjustable with government 17,553 1,726 20,149 29,297 58,882Total current assets 475,727 119791 213,742 628,965 781,214Non-current assets Long term deposits 2,139 365 627 2,305 3,024Intangibles 4,290 (226) (1,511) (2,096) 31,378Total non-current assets 6,429 139 (884) 209 34,402Fixed assets(property,plants,equipments) Fixed assets at cost 327,909 26,067 204,655 477,530 547,713Accumulated depreciation 145,221 16,470 44,647 95,704 164,602 Book value 182,688 9,597 160,008 381,826 383,111Work in progress 43,887 129,702 106,861 26,924 4,318Total fixed assets 226,575 139,299 266,869 408,750 387,429

Total assets 708,731 2,592,229 479,727 1,037,924 1,203,045

Particulars 2005 2006 2007 2008 2009Liabilities and Owner's equity Short-term liabilities Short-term borrowing 270,718 (74,793) (59,446) 265,623 214,818Trade 29,407 (12,935) 9,479 6,404 14,374Other payables 111,051 117,465 165,381 222,703 305,794Accrued interest/mark up 4,688 3,803 5,496 12,498 13,076Current maturity of: Long term financing 6,000 20,000 40,000 37,000 34,000Liabilities against assets subject to financial lease 1,627 679 4,414 10,714 10,883Adjustables with government NIL NIL NIL 13,277 17,475Provision for income tax 12,000 25,000 26,000 30,000 70,000Total short-term liabilities 435,491 79,219 191,324 598,219 680,420Non-current liabilities Deffered tax 11,808 (341) 23,549 58,950 48,191Retirement benefits obligations NIL NIL NIL NIL 6,780Total non-current liabilities 11,808 (341) 23,549 58,950 48,191Long-term liabilities

53

Long term financing 76,000 113,000 67,000 24,000 -16,000Liabilities against assets subject to financial lease 2,331 3,363 13,075 23,931 11,369Total long-term liabilities 78,331 116,363 80,075 47,931 -4,631Owner's equity Paid up capital 42,505 0 0 12,752 289,037Share premium-capital reserve 6102 0 0 0 NILUnapproperiated profit 134,494 63,988 184,779 320,072 189,350Total owner's equity 183,101 63,988 184,779 332,824 472,285

Total liabilities and owner's equity 708,731 259229 479,727 1,037,924 1,203,045

54

Changes in absolute DataSummarized Income StatementFor The year Ended On June 30

Rs. In thousands

Particulars 2005 2006 2007 2008 2009

Net sales 1,533,879 313,821 857,179 1,527,867 2,224,827Cost of production Raw material 973,109 85,486 293,616 786,262 1,231,615Labour and wages 96,841 27,737 60,704 81,875 105,038Depriciation 16,350 3,544 8,397 19,949 34,556Overhead 66,230 31,441 55,132 90,653 116,965Total cost of production 1,152,530 148,208 417,849 978,739 1,488,174Inventory adjustment 15,803 8,498 -13608 39,427 1,646 Cost of good sold 1,136,727 139,710 435,847 939,242 1,495,528

Gross profit 397,152 174,111 421,330 588,625 729,299Operating expenses General admn expenses 51,842 21,270 39,455 78,026 100,268 Selling expenses 288,289 76,469 225,613 281,929 377,375 Total operating expenses 340,131 97,739 265,068 359,955 477,643

Operating profit 57,021 76,372 156,264 228,670 251,656Other operating income/expense 4,069 1,560 21,484 18,054 12,154Financial cost or interest expenses 16,006 8,844 16,669 40,232 70,835

Total financial&other expense/income 11,937 7,284 (4,815) 22,178 58,681

Profit before workers fund and taxes 45,084 69,088 161,079 206,492 192,975Workers fund 2,813 4,888 11,628 14,816 14,544

Profit before tax 42,271 64,200 149,451 191,676 178,431Taxes 11,618 24,489 50,812 65,783 69,623

Net profit 30,653 39,711 98,639 125,893 108,808

55

Horizontal Analysis w.r.t Base YearSummarized Balance Sheet

As of June 30

Rs. In Thousands % Age

Particulars 2005 2006 2007 2008 2009Assets Current assets Cash and bank balances 100 1,488 325 242 273Trade debts 100 134 148 341 362Stock in trade Raw material 100 119 179 329 389Packing material 100 87 109 125 121Work in progress 100 82 117 179 170Finished goods 100 132 129 201 223Total stock in trade 100 103 134 212 237Store,spare parts and loose tools 100 105 131 227 165Accrued interest/mark up 100 0 NIL NIL NILAdvances 100 97 84 135 207Trade deposit and prepayments 100 235 138 128 366Other receivables 100 116 2,781 131 288Tax refunds adjustable with government 100 110 215 267 435Total current assets 100 125 145 232 264Non-current assets Long term deposits 100 117 129 208 241Intangibles 100 95 65 51 831Total non-current assets 100 102 86 103 635Fixed assets(property,plants,equipments) Fixed assets at cost 100 108 162 246 267Accumulated depreciation 100 111 131 166 213 Book value 100 105 188 309 310Work in progress 100 395 343 161 110Total fixed assets 100 161 218 280 271

Total assets 100 137 168 246 270

Particulars 2005 2006 2007 2008 2009Liabilities and Owner's equity Short-term liabilities Short-term borrowing 100 72 78 198 179Trade 100 56 132 122 149Other payables 100 206 249 300 375Accrued interest/mark up 100 181 217 366 379Current maturity of: Long term financing 100 433 767 717 667Liabilities against assets subject to financial lease 100 142 371 758 769Adjustables with government NIL NIL NIL 0 0

56

Provision for income tax 100 308 317 350 683Total short-term liabilities 100 118 144 237 256Non-current liabilities Deffered tax 100 97 299 599 508Retirement benefits obligations NIL NIL NIL NIL 0Total non-current liabilities 100 97 299 599 508Long-term liabilities Long term financing 100 249 188 131 79Liabilities against assets subject to financial lease 100 244 661 1,127 588Total long-term liabilities 100 248 202 161 94Owner's equity Paid up capital 100 100 100 130 780Share premium-capital reserve 100 100 100 100 0Unapproperiated profit 100 147 237 338 241Total owner's equity 100 135 201 282 358

Total liabilities and owner's equity 100 136 168 246 270

57

Horizontal Analysis Summerized Income Statement For The year Ended On june 30

Rs. In thousands

Particulars 2005 2006 2007 2008 2009

Net sales 100 120 156 200 245Cost of production Raw material 100 109 130 181 227Labour and wages 100 128 162 184 217Depriciation 100 122 151 221 140Overhead 100 147 183 237 277Total cost of production 100 112 136 185 230Inventory adjustment 100 154 14 349 110 Cost of good sold 100 112 138 183 232

Gross profit 100 1,538 206 248 284Operating expenses General admn expenses 100 141 176 251 293 Selling expenses 100 127 178 198 231 Total operating expenses 100 129 178 178 240

Operating profit 100 234 374 501 541Other operating income/expense 100 138 628 544 28Financial cost or interest expenses 100 155 204 351 542

Total financial&other expense/income 100 161 60 286 592

Profit before workers fund and taxes 100 253 457 558 528Workers fund 100 273 513 627 617

Profit before tax 100 252 454 553 522Taxes 100 310 537 666 699

Net profit 100 229 422 511 455

58

Vertical Analysis Summerized Balance Sheet For the Year Ended On June 31

Rs. In Thousands % Age

Particulars 2005 2006 2007 2008 2009Assets Current assets Cash and bank balances 0.78 8.60 1.53 0.77 0.79Trade debts 10.70 10.50 9.47 14.83 14.36Stock in trade Raw material 12.90 11.30 13.79 17.27 18.65Packing material 9.66 6.10 6.27 4.90 4.34Work in progress 16.89 10.10 11.75 12.23 12.34Finished goods 10.80 10.40 8.31 8.82 8.97Total stock in trade 50.30 37.90 40.14 43.24 44.30Store,spare parts and loose tools 0.46 0.35 0.36 0.43 0.28Accrued interest/mark up NIL 0.20 NIL NIL NILAdvances 1.90 1.40 9.96 1.08 1.52Trade deposit and prepayments 0.26 0.44 0.21 0.13 0.35Other receivables 0.20 0.11 2.14 0.07 0.14Tax refunds adjustable with government 2.50 1.99 3.17 2.68 6.08Total current assets 67.10 61.52 58.01 63.24 65.74Non-current assets Long term deposits 0.30 0.26 0.23 0.25 0.27Intangibles 0.61 0.42 0.23 0.13 1.86Total non-current assets 0.91 0.68 0.46 0.38 2.13Fixed assets(property,plants,equipments) Fixed assets at cost 46.30 36.57 44.81 46.11 45.80Accumulated depreciation 0.21 16.70 15.97 13.79 16.20Book value 25.80 19.86 28.83 32.32 29.59Work in progress 6.20 17.93 12.68 4.05 2.52Total fixed assets 31.90 37.79 41.52 36.37 32.11Total assets 100 100 100 100 100

Particulars 2,005 2,006 2,007 2,008 2,009Liabilities and Owner's equity Short-term liabilities Short-term borrowing 38.19 20.24 17.78 30.71 25.40Trade 4.15 1.70 3.27 2.05 2.29Other payables 15.67 23.61 23.26 19.11 21.80Accrued interest/mark up 0.66 0.88 0.86 0.98 0.93Current maturity of: Long term financing 0.85 2.69 3.87 2.46 2.09Liabilities against assets subject to financial lease 0.23 0.24 0.51 0.71 0.65

59

Adjustables with government NIL NIL NIL 0.76 0.91Provision for income tax 1.69 3.82 3.19 2.40 4.28Total short-term liabilities 61.44 53.17 52.74 59.18 58.37Non-current liabilities Deffered tax 1.66 1.18 2.97 4.05 3.14Retirement benefits obligations NIL NIL NIL NIL 0.35Total non-current liabilities 1.66 1.18 2.97 4.05 3.49Long-term liabilities Long term financing 10.72 19.53 12.03 5.73 3.14Liabilities against assets subject to financial lease 0.33 0.59 1.29 1.50 0.72Total long-term liabilities 10.89 20.12 13.32 7.23 3.86Owner's equity Paid up capital 5.99 4.39 3.57 3.16 17.34Share premium-capital reserve 0.86 0.63 0.51 0.35 NILUnapproperiated profit 18.98 20.50 26.86 26.02 16.94Total owner's equity 25.83 25.52 30.94 29.53 34.28Total liabilities and owner's equity 100 100 100 100 100

Vertical analysis

60

Summerized Income Statement For The year Ended On june 30

% AgeParticulars 2,005 2,006 2,007 2,008 2,009Net sales 100 100 100 100 100Cost of production Raw material 63.44 57.29 52.98 57.46 58.66Labour and wages 6.31 6.74 6.59 5.84 5.62Depriciation 1.07 1.08 1.03 1.18 1.35Overhead 4.32 5.29 5.08 5.12 4.87Total cost of production 75.14 70.40 65.68 69.60 70.50Inventory adjustment 1.03 1.32 0.09 1.80 0.46Cost of good sold 74.10 69.08 65.77 67.80 70.03

Gross profit 25.89 30.92 34.23 32.19 29.97Operating expenses General admn expenses 3.38 3.96 3.82 4.24 4.05Selling expenses 18.79 19.74 21.49 18.62 17.71Total operating expenses 22.17 23.70 25.31 22.86 21.76Operating profit 3.72 7.22 8.92 9.33 8.21Other operating income/expense 0.27 0.30 1.07 0.72 0.43Financial cost or interest expenses 1.04 1.34 1.37 1.84 2.31

Total financial&other expense/income 0.78 1.04 0.29 1.11 1.88Profit before workers fund and taxes 2.94 6.18 8.62 8.22 6.33Workers fund 0.18 0.42 0.60 0.58 0.46Profit before tax 2.76 5.76 8.02 7.64 5.87Taxes 0.76 1.95 2.61 2.53 2.16

Net profit 1.99 3.81 5.41 5.11 3.71

Activity Ratios:

61

Account Receivable turnover:

Formula is:

Account Receivable turnover = Net Sales /Avg.trade receivables

For 2005:s Account Receivable turnover = 1,533,879,000 /75,877,000

=20.21 times

For 2006: Account Receivable turnover = 1,847,700,000 /88,908,500

=20.78 timesFor 2007:Account Receivable turnover =2,391,058,000 /107,262,500

=22.29 timesFor 2008:Account Receivable turnover =3,061,746,000 /185,838,000

=16.47 times

For 2009: Account Receivable turnover = 3,758,706,000 / 266,823,500

=14.08 times

Aging of Account Receivable:

Formula is:

Aging of Account Receivable =Avg. gross Rec net sales /365

For 2005:

Aging of Account Receivable = 75,877,000______ 1,533,879,000 /365

= 75,877,000___ 4,202,408.219 =18.05 daysFor 2006:

Aging of Account Receivable = 101,940,000 +75,877,000 /2 1,847,700,000 /365

62

=88,908,500 /5,062,191.781 =17.56 days

For 2007:Aging of Account Receivable = 112,585,000 +101,940,000/2

2,391,058,000 /365

=107,262,500 /655, 0843.83 =16.37 days

For 2008:

Aging of Account Receivable = 259,091,000 +112,585,00 3,061,746,000/365

=185,838,000 /8,388,345.205 =22.15 days

For 2009: Aging of Account Receivable = 2,745,556,000 + 259,091,000 /2 3,758,706,000 /365

=266,823,500 /10,297,824.66 =25.91 days

Inventory Turnover:

Formula is:Inventory Turnover = CGS /Avg.inventory

For 2005:

Inventory Turnover = 1,136,727,000 359,954,000 =3.15 times

For 2006:

Inventory Turnover = 1,276,437,000 365,326,000 =3.49 times

63

For 2007: Inventory Turnover =1,57 2,574,000

426,013,500 =3.69 times

For 2008:Inventory Turnover = 2,075,969,000 622,043,500 =3.33 times For 2009: Inventory Turnover =2,632,255,000 807,583,500 =3.25 times

Days Sales in Inventory:

Formula is:Days Sales in Inventory = Avg. inventory CGS /365 For 2005:

Sales Days in Inventory = 359,954,000______ 1,136,727,000 /365 =359,954,000 /3114320.548 =116 days For 2006:

Sales Days in Inventory = 365,326,000______ 1,276,437,000 /365 =365,326,000 /3,497,087.671 =104 daysFor 2007: Sales Days in Inventory = 426,013,500_______ 1,572,574,000 /365 = 426,013,500 /4,308,421.981 = 98.87 days

64

For 2008:Sales Days in Inventory = 622,043,500___ 2,075,969 /365 = 622,043,500 /5,687,586.301 =109.3 daysFor 2009:Sales Days in Inventory = 807,583,500______ 2,632,255,000 /365

= 807,583,500 7,211,657.534 = 111.9 days

Working Capital Turnover: Formula is:

Working Capital Turnover = Net Sales /working Capital

For 2005:

Working Capital Turnover = 1,533,879,000___________ 475,727,000 – 435, 491,000 = 38.12 timesFor 2006:Working Capital Turnover = 1,847,700,000___________ 595,518,000 - 514,710,000 = = 22.8 times

For 2007:

Working Capital Turnover = 2,391,058,000____________ 689,469,000 – 6,269,815,000 = 38.1 times

For 2008: Working Capital Turnover = 3,061,746,000______________ 1,104,692,000 – 1,033,710,000 = 43.13 times

For 2009: Working Capital Turnover = 3,758,706,000_____________ 1,256,941,000 – 1,115,911,000 = 26.65 times

65

Current Assets Turnover:

Formula is: CGS +Operating expenses +tax = Current Assets For 2005:Current Assets turnover = 1,136,727,000 + 340,131,000 + 11,618,000 475,727,000 = 1,488,476,000 475,727,000 = 3.128 times For 2006:Current Assets turnover = 1,276,437,000 + 437,870,000+ 36,107,000 595,518,000 = 1,750,414,000 595,518,000 = 2.93 times For 2007:Current Assets turnover = 1,572,574,000 + 605,199,000+ 62,430,000 689,469,000 = 2,240,203,000 689,469,000 = 3.24 times

For 2008:Current Assets turnover = 2,075,969,000+ 700,086,000+ 77,401,000 1,104,692,000 = 2,853,456,000 1,104,692,000 = 2.58timesFor 2009:Current Assets turnover = 2,632,255,000 + 817,774,000+ 81,241,000 1,256,941,000 = 3,531,270,000 1,256,941,000 = 2.80times

66

Fixed Assets Turnover:

Formula is:

Fixed Assets Turnover = Net Sales______ Avg.Fixed assetsFor 2005:Fixed Assets Turnover = 1,533,879,000 226,575,000 = 6.7times

For 2006:Fixed Assets Turnover = 1,847,700,000 296,224,500 = 6.2timesFor 2007:Fixed Assets Turnover = 2,391,058,000 429,659,000 = 5.6times

For 2008:Fixed Assets Turnover = 3,061,746,000 564,384,500 = 5.42times

For 2009:Fixed Assets Turnover = 3,758,706,000 624,664,500 = 6.01timesTotal Assets turnover:

Formula is:

Total Assets Turnover = Net Sales___ Avg.total assets

For 2005:

Total Assets Turnover = 1,533,879,000 708,731,000 = 2.16times

67

For 2006:

Total Assets Turnover = 1,847,700,000 838,345,500 = 2.20timesFor 2007:Total Assets Turnover =2,391,058,000 1,078,209,000 =2.21timesFor 2008:Total Assets turnover =3,061,746,000 1,467,556,500 =2.08 times For 2009;Total Assets Turnover =3,758,706,000 1,829,215,500 =2.05 times

Liquidity Ratios:Current Ratio:

Formula is:

Current Ratio = Current Assets__ Current liabilitiesFor 2005:Current Ratio = 475,727,000 435,491,000 = 1.09: 1For 2006:Current Ratio = 595,518,000 514,710,000 = 1.16: 1

For 2007:Current Ratio = 689,469,000 626,815,000 = 1.09: 1For 2008:Current Ratio = 1,104,692,000 1,033,710,000 = 1.07: 1

For 2009:

68

Current Ratio = 1,256,941,000 1,115,911,000 = 1.12: 1

Acid Test Ratio:

Formula is:

Acid Test Ratio = Current Assets –Inventories Current Liabilities

For 2005:Acid Test Ratio = 475,727,000-359,954,000 435,491,000 =115,773,000 435,491,000 =0.26:1For 2006:Acid Test Ratio = 595,518,000-370,698,000 514,710,000 =224,820,000 514,710,000 =0.43:1 For 2007:Acid Test Ratio = 689,469,000-481,329,000 626,815,000 =208,140,000 626,815,000 =0.33:1 For 2008:Acid Test Ratio = 1,104,692,000-762,758,000 1,033,710,000 =341,934,000 1,033,710,000 =0.33:1 For 2009:Acid Test Ratio = 1,256,941,000-852,409,000 1,115,911,000 =404,532,000 1,115,911,000 =0.36:1

69

Cash Flow From operating Ratio:

Formula Is:

Cash Flow From operating Ratio = Operating profit +Deprecation +non-cash items Current LiabilityFor 2005: Cash Flow From operating Ratio = 57,021,000 +16,350,000 434,591,000 = 73,371,000_ 434,591,000 = 0.17

For 2006:Cash Flow From operating Ratio = 133,393,000 +19,894,000 514,710,000 = 153,287,000_ 514,710,000 = 0.29For 2007: Cash Flow From operating Ratio = 213,285,000 +24,747,000 626,815,000 = 238,032,000_ 626,815,000 =0.38 For 2008: Cash Flow from operating Ratio = 285,691,000 +36,229,000 1,033,710,000 = 321,920,000_ 1,033,710,000 = 0.31For 2009: Cash Flow From operating Ratio = 308,677,000 +50,906,000 1,115,911,000 = 359,583,000_ 1,115,911,000 = 0.32 Working Capital:

Formula is:

Working Capital = Current Assets – current Liabilities

70

For 2005:

Working Capital = 475,727,000 – 434,591,000 = 40,236,000 For 2006:

Working Capital = 595,518,000 – 514,710,000 = 80,808,000

For 2007:Working Capital = 689,469,000 – 626,815,000 = 62,654,000

For 2008:Working Capital = 1,104,692,000 – 1,033,710,000 = 70,982,000

For 2009:Working Capital = 1,256,941,000 – 1,115,911,000 = 141,030,000

Operating Cycle:

Formula is:

Operating Cycle =Account receivables in days + inventory turnover in days

For 2005:

Operating Cycle = 18.05 + 116 =134.05 days

For 2006:

Operating Cycle = 17.56 + 104 =121.56 days

For 2007:

71

Operating Cycle = 16.37 + 98.87 = 115.24 days

For 2008:

Operating Cycle = 22.15 + 109.3 = 131.45days

For 2009:

Operating Cycle = 25.91+ 111.9 = 137.81days

Profitability Ratios:Gross Profit margin:

Formula is:

Gross profit margin = gross profit *100 Net sales

For 2005: Gross profit margin = 397,152,000 *100 1,533,879,000 =26%

For 2006:Gross profit margin = 571,263,000 *100 184,770,000 =31% For 2007:Gross profit margin = 818,484,000 *100 2,391,058,000 =34%For 2008:

Gross profit margin = 985,777,000 *100 3,061,746,000 =32%

For 2009:

72

Gross profit margin = 1,126,451,000 *100 3,758,706,000 =30%

Operating Profit margin:

Formula is;

Operating Margin = Operating profit *100 Net sales For 2005:Operating profit margin = 57,021,000 *100 1,533,879,000 =30.7%

For 2006:

Operating profit margin = 133,393,000 *100 1,847,700,000 =7.2%For 2007:

Operating profit margin = 213,285,000 *100 2,391,058,000 =8.9%

For 2008:

Operating profit margin = 285,691,000 *100 3,061,746,000 =9.3%For 2009;

Operating profit margin = 308,677,000 *100 3,758,706,000 =8.2%

Profit before Tax margin;

Formula is:

Profit before tax = profit before tax * 100

73

Net Sales

For 2005:

Profit before Tax = 42,271,000 * 100 1,533,879,000

=2.7%

For 2006:Profit before Tax = 1,06,471,000 * 100 1,847,700,000 = 5.8%For 2007:Profit before Tax = 191,722,000 * 100 2,391,058,000 = 8.0%

For 2008:Profit before Tax = 233.947,000 * 100 3,061,746,000 = 7.6%For 2009:Profit before Tax = 220,702,000 * 100 3,758,706,000 = 5.9%

Net Profit margin;

Formula is:

Net profit margin = Net profit * 100 Net sales

For 2005:Net profit margin = 30,653,000 * 100 1,533,879,000 =2.0%For 2006:Net profit margin = 70,364,000 * 100 1,847,700,000 =3.8%For 2007:Net profit margin = 129,292,000 * 100 2,391,058,000

74

=5.4%For 2008:Net profit margin = 156,546,000 * 100 3,061,746,000 =5.1%

For 2009:Net profit margin = 139,461,000 * 100 3,758,706,000 =3.7%

Return on Assets:

Formula is;

Return on assets = Net income * 100 Avg.total assets

For 2005:Return on assets = 30,653,000 * 100 708,731,000 = 4.3%

For 2006:Return on assets = 70,364,000 * 100 838,345,500 = 8.3%

For 2007:Return on assets = 129,292,000 * 100 1,078,209,000 = 11.99%



75

Operating Assets Turnover:

Formula is ;

Operating assets turnover = operating income____ Avg.operating assets For 2005:Operating assets turnover = 57,021,000_____________ 664,844,000 =57,021,000__ 664,844,000 =0.085%For 2006:Operating assets turnover = 133,393,000_____________ 664844000 + 794,371,000/2 =133,393,000__ 1,459,215,000/2 = 133,393,000 7,296,075,000 =0.18%

For 2007:Operating assets turnover = 213,285,000_____________ 1,037,710,000 + 794,371,000/2 =213,285,000 1,832,085,000/2 = 213,285,000 916,040,500 =0.23%

For 2008:Operating assets turnover = 285,691,000_____________ 1,037,710,000 + 1,675,844,000/2 =285,691,000 2,713, 554,000/2 = 285,691,000 135,677,700 =0.21%

For 2009:Operating assets turnover = 308,677,000____________ 1,675,844,000 + 1,863,571,000/2 =308,677,000 3,539,415,000/2 = 308,677,000

76

1,769,707,500 =0.17%

Return On Equity:

Return On Equity = Net Income – Preferred Stock

Dividend Average

Total Equity

For 2005

= 30,653,000 - 0

183,101,000

= 16%

For 2006

= 70,364,000 - 0

215,095,000

= 33%

For 2007

= 129,292,000 - 0

307,484,500

= 42%

For 2008

= 156,546,000 - 0

441,902,500

= 35%

For 2009

= 139,461,000 - 0

585,655,500

77

= 24%

Return On Investment:

Return On Investment = Net Income + [(Interest) (1 –

Tax Rate)]

Average LTD + Average

Equity

For 2005

=30,653,000 + [(16,006,000)(1 - 0.35)]

6,000,000 + 183,101,000

= 30,653,000 + 10,403,900

189,101,000

= 22%

For 2006

= 70,364,000 + [(24,850,000) (1 –

0.35)]

132,500,000 + 215,095,000

= 70,364,000 + [16,152,500]

347,595,000

= 25%

For 2007

= 129,292,000 + [(32,675,000) (1 – 0.35)]

166,000,000 + 307,484,500

= 129,292,000 + [21,238,750]

473,484,500

78

= 32%

For 2008

= 156,546,000 + [(56,238,000) (1 – 0.35)]

121,500,000 + 441,902,500

= 156,546,000 + [36,554,700]

563,402,500

= 34%

For 2009

= 139,461,000 + [(86,841,000) (1 – 0.35)]

80,000,000 + 585,655,500

= 139,461,000 + [56,446,650]

665,655,500

= 29%

Dupont Return on assets:

Formula is;

DuPont return on assets = operating profit margin * operating assets turnover

For 2005:

DuPont return on assets = 30.7 * 0.085 = 2.6%

For 2006:

DuPont return on assets = 7.2 * 0.18 = 1.3%

For 2007:Dupont return on assets = 8.9 * 0.23 = 2.04%

79

For 2008:DuPont return on assets = 9.3* 0.21 = 1.2%

For 2009:DuPont return on assets = 8.2* 0.17 = 1.4%

Long Term Analysis:

Time interest earned ratio;

Formula is:

Time interest earned ratio = earning before interest and tax Interest expenseFor 2005:Time interest earned ratio = 57,021,000 16,006,000 =3.56times

For 2006:

Time interest earned ratio = 133,393,000 24,850,000 =5.36timesFor 2007:Time interest earned ratio = 213,285,000 32,675,000 =6.52times

For 2008:Time interest earned ratio = 285,691,000 56,238,000 =5.08timesFor 2009:Time interest earned ratio = 308,677,000 86,841,000

80

=3.55times

Debt Service Coverage ratio:

Formula is:

Debt Service Coverage ratio = Earning before interest and tax Interest exp + current maturity Of long term debtFor 2005:

Debt Service Coverage ratio = 57,021,000___________ 24,850,000 + 6,000,000 = 57,021,000 22,006,000 =2.59timesFor 2006:

Debt Service Coverage ratio = 133,393,000_________ 24,850,000 + 26,000,000 = 133,393,000 50,850,000 =2.62times

For 2007:

Debt Service Coverage ratio = 213,285,000_________ 32,675,000 + 46,000,000 = 213,285,000 32,675,000 =2.71times

For 2008:

Debt Service Coverage ratio =285,691,000_________ 56,238,000 + 43,000,000 = 285,691,000 99,238,000 =2.87timesFor 2009:

Debt Service Coverage ratio =308,677,000_________ 86,841,000 + 40,000,000 = 308,677,000 126,841,000

81

=2.43times

Fixed charge coverage ratio;

Formula is:

Fixed charge coverage ratio = Earning before interest and tax Interest exp+current maturity of LTD +rental or lease finance

For 2005;Fixed charge coverage ratio = 57,021,000___________________ 16,006,000 + 6000,000 +1627,000 = 57,021,000 23,633,000 = 2.41For 2006;Fixed charge coverage ratio = 133,393,000___________________ 24,850,000 + 26,000,000 +2,306,000 = 133,393,000 53,156,000 = 2.50For 2007;Fixed charge coverage ratio = 213,285,000___________________ 32,675,000 + 46,000,000 +6,041,000 = 213,285,000 84,716,000 = 2.52

For 2008;Fixed charge coverage ratio = 285,691,000___________________ 56,238,000 + 43,000,000 +12,341,000 = 285,691,000 111,579,000 = 2.56

For 2009;Fixed charge coverage ratio = 308,677,000___________________ 86,841,000 + 40,000,000 +12,510,000 = 308,677,000 139,351,000 = 2.21

82

Debt ratio:

Formula is:

Debt ratio = Total liabilities *100 Total assets For 2005:

Debt ratio = 525,630,000 *100 708,731,000 = 74.16%

For 2006:

Debt ratio = 720,871,000 *100 967,960,000 = 74.47%For 2007:

Debt ratio = 820,578,000 *100 118,458,000 = 69.04%For 2008:

Debt ratio = 1,230,730,000 *100 1,746,655,000 = 70.46%

For 2009:

Debt ratio = 1,256,390,000 *100 1,911,776,000 = 65.71%

Debt Equity Ratio:

Formula is:

Debt Equity Ratio = Long term debt LTD + equity

For 2005;

83

Debt Equity Ratio = 76,000,000_____________ 76,000,000+ 183,101,000 = 76,000,000 259,101,000 =29.4:70.6For 2006;

Debt Equity Ratio = 189,000,000 189,000,000+ 247,089,000 = 189,000,000 259,101,000 = 43.3:56.7

For 2007;Debt Equity Ratio = 143,000,000 143,000,000+ 367,880,000 = 143,000,000 510,880,000 = 28:72

For 2008;

Debt Equity Ratio = 100,000,000 100,000,000+ 515,925,000 = 100,000,000 615,925,000 = 16.23:83.77

For 2009;

Debt Equity Ratio = 60,000,000 60,000,000+655,386,000 = 60,000,000 715,386,000 = 8.4:91.6

Fixed Assets Coverage Ratio:

Formula is:

Fixed Charge Coverage Ratio = Net fixed assets Long term debtFor 2005:Fixed Charge Coverage Ratio = 226,575,000 76,000,000

84

= 2.98For 2006:Fixed Charge Coverage Ratio = 365,874,000 189,000,000 = 1.93For 2007:Fixed Charge Coverage Ratio = 493,444,000 143,000,000 = 3.45For 2008:Fixed Charge Coverage Ratio = 635,325,000 100,000,000 = 6.35

For 2009:Fixed Charge Coverage Ratio = 614,004,000 60,000,000 = 1.02

Investor Ratios:

Financial Leverage Effect

Financial Leverage Effect = Operating Income

Net Income

For 2005

= 57,021,000

30,653,000

= 1.86

For 2006

= 133,393,000

70,364,000

= 1.89

For 2007

= 213,285,000

85

129,292,000

= 1.65

For 2008

= 285,691,000

156,546,000

= 1.82

For 2009

= 308,677,000

139,461,000

= 2.21

Degree of Financial Leverage = Earning Before Interest

and Tax Earning

Before Tax

For 2005

= 57,021,000

42,271,000

= 1.34

For 2006

= 133,393,000

106,471,000

= 1.25

For 2007

= 213,285,000

191,722,000

86

= 1.11

For 2008

= 285,691,000

233,947,000

= 1.22

For 2009

= 308,677,000

220,702,000

= 1.39

Earning Per Share:

EPS = Net Income – Preferred Dividend

No. of Common Stock

Outstanding

For 2005

= 30,653,000 - 0

4,251,000

= 7.21 Rs.

For 2006

= 70,364,000 - 0

4,251,000

= 16.55 Rs.

For 2007

= 129,292,000 - 0

5,526,000

= 23.40 Rs.

For 2008

= 156,546,000 - 0

87

5,526,000

= 28.32 Rs.

For 2009

= 139,461,000 - 0

33,154,000

= 4.21 Rs.

Price-Earning Ratio:

Price-Earning Ratio = Market Price per Share

Earning Per Share

For 2005

= 125

7.21

= 17.34 Times

For 2006

= 111

16.55

= 6.71 Times

For 2007

= 208

23.40

= 8.89 Times

For 2008

= 363

28.32

88

= 12.82 Times

For 2009

= 87

4.21

= 20.67 Times

=

Book Value Per Share:

Book Value Per Share = Stockholder Equity – Preferred

Equity No. of Common

Stock Outstanding

For 2005

= 183,101,000 - 0

4,251,000

= 43.1 Rs.

For 2006

= 247,089,000 - 0

4,251,000

= 58.1 Rs.

For 2007

= 367,880,000 - 0

4,251,000

= 86.5Rs.

For 2008

= 515,925,000 - 0

5,526,000

89

= 93.4 Rs.

For 2009

= 655,386,000- 0

33,154,000

= 19.8 Rs.

Composite Or Expended Analysis

Multivariate Model:

Z-Score = 0.012X1 + 0.014X2 + 0.033X3 + 0.066X4

+0.010X5

X1 = Working CapitalTotal Assets

For 2005

= 40,236,000708,731,000

= 0.057

For 2006

= 80,808,000

967,960,000

= 0.083

For 2007

= 62,654,000

1,188,458,000

= 0.053

For 2008

= 70,982,000

90

1,746,655,000

= 0.041

For 2009

= 141,030,000

1,911,776,000

= 0.074

X2 = Retained EarningsTotal Assets

For 2005

= 140,596,000708,731,000

= 0.20

For 2006

= 204,584,000

967,960,000

= 0.21

For 2007

= 325,375,000

1,188,458,000

= 0.27

For 2008

= 460,668,000

1,746,655,000

= 0.26

For 2009

= 323,844,000

91

1,911,776,000

= 0.17

X3 = Earning Before Interest And Taxes

Total AssetsFor 2005

= 57,021,000708,731,000

= 0.080

For 2006

= 133,393,000

967,960,000

= 0.14

For 2007

= 213,285,000

1,188,458,000

= 0.18

For 2008

= 285,691,000

1,746,655,000

= 0.16

For 2009

= 308,677,000

1,911,776,000

= 0.16

X4 = Market Value Of Equity

Book Value Of Total AssetFor 2005

92

= 5,313,125,000563,510,000

= 9.4

For 2006

= 4,718,055,000

806,269,000

= 5.85

For 2007

= 8,841,040,000

998,590,000

= 8.85

For 2008

= 20,058,291,000

1,505,730,000

= 13.32

For 2009

= 28,844,154,000

1,601,953,000

= 18.0

X5 = Net SalesTotal Assets

For 2005

= 1,533,879,000708,731,000

= 2.16

For 2006

93

= 1,847,700,000

967,960,000

= 1.91

For 2007

= 2,391,058,000

1,188,458,000

= 2.01

For 2008

= 3,061,746,000

1,746,655,000

= 1.75

For 2009

= 3,758,706,000

1,911,776,000

= 1.97

Z-Score = 0.012X1 + 0.014X2 + 0.033X3 + 0.066X4 + 0.010X5

For 2005

Z-Score = 0.012(0.057) + 0.014(0.20) 0.033(0.080) + 0.066(9.4) + 0.010(2.16)

= 0.000684 + 0.0028+ 0.00264 + 0.6204 + 0.0216 = 0.65

For 2006

Z-Score = 0.012(0.083) + 0.014(0.21) + 0.033(0.14) + 0.066(5.85) + 0.010(1.91) = 0.000996 + 0.00294 + 0.00462 + 0.3861 + 0.0191

= 0.41

94

For 2007

Z-Score = 0.012(0.053) + 0.014(0.27) + 0.033(0.18) + 0.066(8.85)+ 0.010(2.01)

= 0.000636 + 0.00378 + 0.00594 + 0.5841 + 0.0201 = 0.61

For 2008

Z-Score = 0.012(0.041) + 0.014(0.26) + 0.033(0.16) + 0.066(13.32) + 0.010(1.75)

= 0.000492 + 0.00364 + 0.00528 + 0.87912 + 0.0175 = 0.91

For 2009

Z-Score = 0.012(0.074) + 0.014(0.17) + 0.033(0.16) + 0.066(18.0) + 0.010(1.97)

= 0.000888 + 0.00238 + 0.00528 + 1.188+ 0.0197 = 1.22

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Conclusion.

We may conclude that the National foods is the top ten gainer of Pakistan,

during these five years although firm sales have increased but there is increase

in expenses at a faster rate as compare to net sales. Due to this reason there is a

decline in the profit.

During these five years especially in 2009 company’s total assets have increased

but liabilities also increased at a faster rate and owner’s equity decreased.

The firm’s efficiency is going worse from 2005 to 2009 which is not a favorable

sign for the company

The firm’s liquidity position is better than the previous year which is a favorable

sign for the company.

The overall profitability of the firm is decreasing from 2005 to 2009 which is

not a good sign for the company.

The firm’s long term debt paying ability is showing different variations in these

five years. The debt paying ability is high in 2009 which is a favorable sign for

the company.

Due to decrease in net profit the earning per share, book value per share etc. are

going in worse condition which is unfavorable for the company because

investor will not invest in companies in which they earn less.

So, we conclude that the company’s overall financial position is not going well

in 2009 as compared with previous years, so company should try to improve it.

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Suggestions

The company should utilize its assets efficiently.

The company should try to decrease its expense so that the net profit

increases and the profitability of the company improve.

The company should try to maintain its liquidity position in order to

meet its current liabilities.

The company should not only focus on its current liabilities, it should

also try to meet its long term obligations.

The company should also focus on maximizing shareholder’s value to

get more capital.

The company should also try to attract the new investors so that the

capital for the company increases.

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Financial Statement ANalysis of National Foods Limited Pakistan from 2005-2009

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