Financial Statement Analysis of Pakistan Tobacco Company

Acknowledgement

Pakistan Tobacco Company | Final Project 1

Pakistan Tobacco Company

Pakistan Tobacco Company Limited (PTC) is a part of British American Tobacco - the world's most international tobacco group - with brands sold in 180 markets around the world. Pakistan Tobacco's operations in Pakistan began in 1947, making it one of Pakistan's first foreign investments.

The company produces high quality tobacco products to meet the diverse preferences of millions of consumers, and it works in all areas of the business - from seed to smoke. The company provides a number of reputed brands of cigarettes to consumers in Pakistan, including Benson and Hedges, Embassy, Gold Flake, Capstan and Gold Leaf.

Vision

“Like a lighthouse in a dark, stormy sea... Our vision serves as a beacon of light and hope, helping us navigates the waters”

Mission Statement

“Transform PTC to perform responsibly with the speed, flexibility and enterprising spirit of an innovative, consumer focused Company”

Strategic Objectives

“Our strategy reflects our vision of being the champions of Growth, Productivity, Responsibility and a Winning Organisation”

Company’s Brands


“We have always considered ourselves a consumer focused company. We aim to offer a product that excels in all aspects and exceeds the expectations of our

consumers”

Pakistan Tobacco Company invests in trying to understand the consumers’ preferences and ensures that adult smokers make informed choices about different brands available in the market. We have put in particular effort in promoting two of our Global Drive Brands, Dunhill and Pall Mall; and two of our great value for money brands, John Player Gold Leaf and Gold Flake.

Dunhill

Dunhill, a premium global brand, celebrated its centenary in 2007.

2008 was an exceptional year for Dunhill in Pakistan as the brand witnessed exponential growth; fuelled by its re-launch in July. Going forward, Dunhill is poised to strengthen its foothold in the premium segment.

Benson & Hedges

In 1873, Richard Benson & William Hedges started a partnership in London.

Benson & Hedges was launched in Pakistan in March 2003 and has since been able to build strong brand loyalty among its consumers showing excellent year on year growth.

Gold Leaf

The story of John Player Gold Leaf has to start from the story of its founder, John Player. An enterprising businessman, John Player started a small tobacco selling business in 1877 and turned it into a thriving cigarette company, John Player and Sons.

John Player Gold Leaf has become an institution in itself, becoming one of the most recognisable cigarette brands in the country. John Player Gold Leaf has recently been declared the largest Urban Brand in Pakistan, beating out products across the F.M.C.G. spectrum.

Capstan

Capstan has a rich heritage, originating in Britain in the 19th century. The brand was created under the auspices of W.D. & H.O. WILLS at Bristol and London.


Gold Flake

Gold Flake, like many of our brands, also boasts its origins at W.D. & H.O. WILLS where it was a premium brand around the end of the 19th century. Launched in 1982, in 'soft cup' packaging, the brand took off when it was repositioned in the Value For Money (VFM) segment and later a 'hinge lid' variant was introduced in 2000.

Gold Flake has grown tremendously as a brand since 2004, making it the largest volume brand in Pakistan, and the second largest brand in British American Tobacco's Asia Pacific region. The key to Gold Flake’s success has been its novel engagement schemes which have fuelled growth over the years. Through consumer relevant initiatives, Gold Flake has established itself as a fresh and modern offering in the VFM segment and is all set to consolidate its position as the major volume driver for Pakistan Tobacco Company.

Embassy

Embassy, is a leading volume brand in Pakistan, and is most popular in Punjab where it enjoys a leading position. Having built its heritage over a number of years, Embassy thrives on its brand loyalty and locally tailored taste characteristics.

Financial Highlights

Gross Turn Over


Year Gross Turnover2004 25,453 Million Rupees2005 30,615 Million Rupees2006 35,715 Million Rupees2007 40,889 Million Rupees2008 49,054 Million Rupees2009 57,544 Million Rupees

20042005

20062007

20082009

0

10000

20000

30000

40000

50000

60000

Gross Turn over

Years

Mill

ion

Rup

ees

Financial Highlights

Property Plant and Equipment (Fixed Assets)


Years Property Plant and Equipment

2004 3,564 Million Rupees2005 3,798 Million Rupees2006 4,529 Million Rupees2007 5,154 Million Rupees2008 5,600 Million Rupees2009 5,952 Million Rupees

20042005

20062007

20082009

0

1000

2000

3000

4000

5000

6000

Fixed Assets

Years

Mill

ion

Rup

ees

Earnings per Share and Dividend Yield

Year Earnings Dividend Yield2004 2.60/Share 3.25%


2005 5.17/Share 5.37%2006 7.46/Share 7.64%2007 9.47/Share 6.37%2008 9.91/Share 9.08%2009 11.83/Share 9.10%

0

2

4

6

8

10

12

Earning per Share and Dividend Yield

Earning per ShareDividend Yield

Years

Rs

per

shar

e

Gross Volume

Year Volume Gross Profit Operating Profit After Tax Profit2004 27 Billion 3,483 Million 1,077 Million 665 Million2005 31 Billion 4530 Million 2,081 Million 1,322 Million


2006 35 Billion 5534 Million 2,841 Million 1,905 Million2007 37 Billion 6516 Million 3,720 Million 2,420 Million2008 41 Billion 7277 Million 3,860 Million 2,532 Million2009 41 Billion 8224 Million 4,589 Million 3,022 Million

20042005

20062007

20082009

0

5

10

15

20

25

30

35

40

45

Volume


2004 2005 2006 2007 2008 20090

1000

2000

3000

4000

5000

6000

7000

8000

9000

Profit

Gross ProfitOperating ProfitProfit after Tax

Years

Mill

ion

Rup

ees


Financial Analysis 2004-2005

Balance Sheet (Horizontal Analysis)

ITEMS 2004 2005 Horizontal Analysis

NON CURRENT ASSETS

Property plant and Equipment

3,564,407 4,529,366 4529366 - 3564407÷ 3564407 27.07%

Investment in Subsidiary Company

5,000 5,000 5000 – 5000 ÷ 5000 ---

Long term Loans 16,324 17,782 17782 – 16324 ÷ 16324 8.93%

Long Term Deposits 4,433 11,365 11365 – 4433 ÷ 4433 156.3%

CURRENT ASSETS

Stock in Trade 3,074,052 3,780,931 3780931 – 3074052 ÷ 3074052 22.99%

Stores and Spares 131,464 125,232 125232 – 131464 ÷ 131464 (4.70%)

Trade Debts 12,486 2,894 2894 – 12486 ÷ 12486 (76.82%)

Loans and Advances 32,273 32,676 32676 – 32273 ÷ 32273 1.24%

Short term Payments

36,003 31,987 31987 – 36003 ÷ 36003 (11.15%)

Other Receivables 119,126 104,791 104791 – 119126 ÷ 119126 (12.03%)

Cash and Bank 39,197 57,605 57605 – 39197 ÷ 39197 46.96

Total Current Assets 3,434,601 4,136,116 4136116 – 3434601 ÷ 3434601 20.42%

Total Assets 7,024,765 7,968,453 7968453 – 7024765 ÷ 7024765 13.43%

Balance Sheet



SHARE CAPITAL AND RESERVES

Share Capital 2,554,938 2,554,938 2554938 – 2554938 ÷ 2554938 ---

Revenue Reserves 707,885 1,084,456 1084456 – 707885 ÷ 707885 53.19%

NON CURRENT LIABILITIES

Retirement Benefits --- --- --- ---

Deferred Taxation 624,475 724,673 724673 – 624475 ÷ 624475 16.04%

CURRENT LIABILITIES

Trade and other payables

2,056,298 2,515,824 2515824 – 2056298 ÷ 2056298 22.34%

Accrued Interest 5,041 10,911 10911 – 5041 ÷ 5041 116.44%

Short term running finance

996,579 400,662 400662 – 996579 ÷ 996579 (59.79%)

Income tax liability 79,549 676,969 676969 – 79549 ÷ 79549 75.10%

Total Current Liabilities

3,137,467 3,604,366 3604366 – 3137467 ÷ 3137467 14.88%

Total Liabilities 7,024,765 7,968,453 7968453 – 7024765 ÷ 7024765 13.43%

Profit and Loss Account



Gross turnover 25,452,634 30,615,062 30615062 – 25452634 ÷ 25452634 20.28%

Excise Duties 12,466,912 14,758,558 14758558 – 12446912 ÷ 12446912 18.57%

Sales Tax 3,413,146 4,103,324 4103324 – 3413146 ÷ 3416146 20.20%

Net Sales 9,572,576 11,753,180 11753180 – 9572576 ÷ 9572576 22.77%

Cost of Sales 6,089,955 7,223,576 7223576 – 6089955 ÷ 6089955 18.61%

Gross Profit 3,482,621 4,529,604 4529604 – 3482621 ÷ 3482621 30.06%

Selling and distribution

1,442,356 1,578,656 1578656 – 1442356 ÷ 1442356 9.44%

Administrative Expenses

595,637 573,285 573285 – 595637 ÷ 595637 (3.75%)

Other Operating Income

14,590 8,100 8100 – 14590 ÷ 14590 (44.48%)

Other Operating Expense

381,914 304,462 304462 – 381914 ÷ 381914 (20.27%)

Operating Profit 1,077,304 2,081,301 2081301 – 1077304 ÷ 1077304 93.19%

Finance Income --- 26,317 --- 100

Finance Cost 21,265 25,554 25554 – 21265 ÷ 21265 20.16%

Profit Before Tax

1,056,039 2,082,064 2082064 – 1056039 ÷ 1056039 97.15%

Income Tax Expense

390,812 760,145 760145 – 390812 ÷ 390812 94.50%

Profit of the Year

665,227 1,321,919 1321919 – 665227 ÷ 665227 98.77%

Financial Analysis 2004–2005

Balance Sheet (Vertical Analysis)Pakistan Tobacco Company | Final Project 12

ITEMS 2004 2005 Vertical Analysis

NON CURRENT ASSETS


3,564,407 4,529,366 4529366 ÷ 7968453 56.84%


5,000 5,000 5000 ÷ 7968453 0.006%

Long term Loans 16,324 17,782 17782 ÷ 7968453 0.22%

Long Term Deposits 4,433 11,365 11365 ÷ 7968453 0.14%

CURRENT ASSETS

Stock in Trade 3,074,052 3,780,931 3780931 ÷ 7968453 47.57%

Stores and Spares 131,464 125,232 125232 ÷ 7968453 1.57%

Trade Debts 12,486 2,894 2894 ÷ 7968453 0.03%

Loans and Advances 32,273 32,676 32676 ÷ 7968453 0.41%

Short term Payments

36,003 31,987 31987 ÷ 7968453 0.40%

Other Receivables 119,126 104,791 104791 ÷ 7968453 1.31%

Cash and Bank 39,197 57,605 57605 ÷ 7968453 0.72%

Total Current Assets 3,434,601 4,136,116 4136116 ÷ 7968453 51.90%

Total Assets 7,024,765 7,968,453 7968453 ÷ 7968453 100%

Balance Sheet




Share Capital 2,554,938 2,554,938 2554938 ÷ 7968453 32.06%

Revenue Reserves 707,885 1,084,456 1084456 ÷ 7968453 13.62%



Deferred Taxation 624,475 724,673 724673 ÷ 7968453 9.09%

CURRENT LIABILITIES


2,056,298 2,515,824 2515824 ÷ 7968453 31.57%

Accrued Interest 5,041 10,911 10911 ÷ 7968453 0.13%


996,579 400,662 400662 ÷ 7968453 5.03%

Income tax liability 79,549 676,969 676969 ÷ 7968453 8.49%

Total Current Liabilities

3,137,467 3,604,366 3604366 ÷ 7968453 45.26%

Total Liabilities 7,024,765 7,968,453 7968453 ÷ 7968453 100%




Gross turnover 25,452,634 30,615,062 30615062 ÷ 11753180 260.48%

Excise Duties 12,466,912 14,758,558 14758558 ÷ 11753180 125.57%

Sales Tax 3,413,146 4,103,324 4103324 ÷ 11753180 34.91%

Net Sales 9,572,576 11,753,180 11753180 ÷ 11753180 100%

Cost of Sales 6,089,955 7,223,576 7223576 ÷ 11753180 61.46%

Gross Profit 3,482,621 4,529,604 4529604 ÷ 11753180 62.70%


1,442,356 1,578,656 1578656 ÷ 11753180 13.43%


595,637 573,285 573285 ÷ 11753180 4.8%


14,590 8,100 8100 ÷ 11753180 0.06%


381,914 304,462 304462 ÷ 11753180 2.59%

Operating Profit 1,077,304 2,081,301 2081301 ÷ 11753180 17.70%

Finance Income --- 26,317 --- 0.22%

Finance Cost 21,265 25,554 25554 ÷ 11753180 0.21%

Profit Before Tax

1,056,039 2,082,064 2082064 ÷ 11753180 17.71%

Income Tax Expense

390,812 760,145 760145 ÷ 11753180 6.46%

Profit of the Year

665,227 1,321,919 1321919 ÷ 11753180 11.24%


Balance Sheet



Vertical Analysis

NON CURRENT ASSETSProperty plant and Equipment

4,529,366

4,529,366 19.25 51.86


5,000 5,000 --- 0.006

Long term Loans 17,782 18,660 4.94 0.21

Long Term Deposits and Payments

11,365 8,424 (25.88) 0.10

CURRENT ASSETS

Stock in Trade 3,780,931

3,690,893 0.26 43.40

Stores and Spares 125,232 140,008 11.80 1.60

Trade Debts 2,894 2,406 (16.86) 0.03

Loans and Advances 32,676 12,205 (62.65) 0.14

Short term Payments 31,987 72,235 125.83 0.83

Other Receivables 104,791 92,360 (11.86) 1.06

Cash and Bank Balances 57,605 62,883 9.16 0.72

Total Current Assets 4,136,116

4,172,950 0.89 47.78

Total Assets 7,968,453

8,734,400 9.61 100

Balance Sheet


Vertical Analysis



Share Capital 2,554,938

2,554,938 --- 29.25

Revenue Reserves 1,084,456

1,584,249 46.08 18.14



Deferred Taxation 724,673 845,004 16.60 9.67

CURRENT LIABILITIES


2,515,824

2,212,241 (12.07) 25.23

Accrued Interest 10,911 11,115 1.87 0.13


400,662 1,293,114 222.75 14.81

Income tax liability 676,969 233,712 (65.48) 2.68

Total Current liability 3,604,366

3,750,209 4.05 42.94

Total Liabilities 7,024,765

8,734,400 9.61 100



Vertical Analysis


Gross turnover 30,615,062 35,715,451 16.66 ---

Excise Duties 14,758,558 16,991,172 15.13 ---

Sales Tax 4,103,324 4,833,285 17.79 ---

Net Sales 11,753,180 13,890,994 18.19 100

Cost of Sales 7,223,576 8,357,747 15.70 60.16

Gross Profit 4,529,604 5,533,520 22.16 39.84


1,578,656 1,816,198 15.05 13.07


573,285 644,981 12.75 4.64


8,100 20,686 155.38 0.15


304,462 251,932 (17.25) 1.81

Operating Profit 2,081,301 2,841,095 36.51 20.45

Finance Income 26,317 47,402 80.12 0.34

Finance Cost 25,554 27,824 8.88 0.20

Profit Before Tax 2,082,064 2,860,673 37.40 20.59

Income Tax Expense

760,145 955,685 25.72 6.88

Profit of the Year 1,321,919 1,904,988 44.11 13.74


Balance Sheet



Vertical Analysis

NON CURRENT ASSETS


4,529,366 5,154,326

13.80 52.45


5,000 5,000 --- 0.05

Long term Loans 18,660 12,513 (32.94) 0.13


8,424 13,025 54.62 0.13

CURRENT ASSETS

Stock in Trade 3,690,893 3,998,181

5.47 40.69


Trade Debts 2,406 2,386 (0.83) 0.02

Loans and Advances 12,205 38,580 216.10 0.39

Short term Payments 72,235 64,887 (10.17) 0.66

Other Receivables 92,360 229,891 148.91 2.34

Cash and Bank Balances

62,883 166,666 165.04 1.70

Total Current Assets 4,172,950 4,641,368

11.23 47.23

Total Assets 8,734,400 9,826,232

12.50 100

Balance Sheet


Vertical Analysis



Share Capital 2,554,938 2,554,938 --- 26.00

Revenue Reserves 1,584,249 1,149,742 (27.43) 11.70


Retirement Benefits --- 1,149,742 100 4.98

Deferred Taxation 845,004 809,109 (4.25) 8.23

CURRENT LIABILITIES


2,212,241 3,548,237 60.39 36.11

Accrued Interest 11,115 8,401 (24.42) 0.09


1,293,114 1,038,550 (19.69) 10.57

Income tax liability 233,712 227,752 (2.55) 2.32

Total Current liabilities

3,750,209 4,822,940 28.60 49.08

Total Liabilities 8,734,400 9,826,232 12.50 100



Vertical Analysis


Gross turnover 35,715,451 40,889,275 14.49 --

Excise Duties 16,991,172 19,311,946 13.66 --

Sales Tax 4,833,285 5,534,452 14.51 --

Net Sales 13,890,994 16,042,877 15.49 100

Cost of Sales 8,357,747 9,527,306 14.00 59.39

Gross Profit 5,533,520 6,515,571 17.75 40.61


1,816,198 1,795,793 (1.12) 11.19


644,981 736,147 14.13 4.59


20,686 71,756 246.88 0.45


251,932 335,763 33.28 2.09


Finance Income 47,402 30,878 (34.86) 0.19

Finance Cost 27,824 25,928 (6.81) 0.16


Income Tax Expense

955,685 1,304,367 36.49 8.13



Balance Sheet



Vertical Analysis

NON CURRENT ASSETS


5,154,326 5,599,758 8.64 53.87


5,000 5,000 --- 0.05

Long term Loans 12,513 9,244 (26.12) 0.09


13,025 41,172 216.10 0.40

CURRENT ASSETS

Stock in Trade 3,998,181 4,059,063 1.52 39.05


Trade Debts 2,386 2,666 11.74 0.03





166,666 69,172 (58.50) 0.67

Total Current Assets 4,641,368 4,739,867 2.12 45.60

Total Assets 9,826,232 10,395,041

5.79 100

Balance Sheet


Vertical Analysis



Share Capital 2,554,938 2,554,938 --- 24.58



Retirement Benefits 1,149,742 739,133 51.00 7.11

Deferred Taxation 809,109 836,939 3.44 8.05

CURRENT LIABILITIES


3,548,237 4,324,704 21.88 41.60



1,038,550 572,397 (44.88) 5.51

Income tax liability 227,752 303,183 33.12 2.92

Total Current Liability 4,822,940 5,210,638 8.04 50.13

Total Liabilities 9,826,232 10,395,041 5.79 100



Vertical Analysis


Gross turnover 40,889,275 49,053,928 19.97 --

Excise Duties 19,311,946 23,351,734 20.92 --

Sales Tax 5,534,452 6,829,699 23.40 --

Net Sales 16,042,877 18,872,495 17.64 100

Cost of Sales 9,527,306 11,595,736 21.71 61.44

Gross Profit 6,515,571 7,276,759 11.68 38.56


1,795,793 1,933,364 7.66 10.24


736,147 928,358 26.11 4.92


71,756 60,551 (15.62) 0.32


335,763 615,458 83.30 3.26


Finance Income 30,878 59,600 93.02 0.32

Finance Cost 25,928 26,013 0.33 0.14


Income Tax Expense

1,304,367 1,361,422 4.37 7.21



Balance Sheet



Vertical Analysis

NON CURRENT ASSETS


5,599,758 5,952,108 6.29 48.68


5,000 5,000 0.04

Long term Loans 9,244 7,310 (20.92) 0.06


41,172 19,915 (51.63) 0.16

CURRENT ASSETS

Stock in Trade 4,059,063 5,765,367 42.04 47.15


Trade Debts 2,666 1,684 (36.83) 0.01

Loans and Advances 65,917 48,598 (26.27) 0.40

Short term Payments 105,728 72,483 (31.44) 0.59

Other Receivables 246,675 88,147 (64.27) 0.72

Cash and Bank Balances 69,172 47,874 (30.79) 0.39


Total Assets 10,395,041 12,226,861

17.62 100

Balance Sheet


Vertical Analysis



Share Capital 2,554,938 2,554,938 --- 20.90

Revenue Reserves 1,053,393 1,705,296 61.89 13.95


Retirement Benefits

739,133 --- (100) 0.00

Deferred Taxation 836,939 1,109,847 32.61 9.08

CURRENT LIABILITIES


4,324,704 5,037,469 16.48 41.20



572,397 1,300,837 127.26 10.64

Income tax liability

303,183 490,815 61.89 4.01

Total Current Liability

5,210,638 6,856,780 31.59 56.08

Total Liability 10,395,041

12,226,861 17.62 100



Vertical Analysis


Gross turnover 49,053,928 57,544,309 17.31 --

Excise Duties 23,351,734 27,654,345 18.43 --

Sales Tax 6,829,699 8,223,439 20.41 --

Net Sales 18,872,495 21,666,525 14.80 100

Cost of Sales 11,595,736 13,442,066 15.92 62.04

Gross Profit 7,276,759 8,224,459 13.02 37.96


1,933,364 2,246,014 16.17 10.37


928,358 1,100,814 18.58 5.08


60,551 226,499 274.06 1.05


615,458 514,665 (16.38) 2.38


Finance Income 59,600 102,826 72.53 0.47

Finance Cost 26,013 43,802 68.39 0.20


Income Tax Expense

1,361,422 1,626,083 19.44 7.51




Balance Sheet


Vertical Analysis

NON CURRENT ASSETS


5,952,108 5,680,296 (4.5) 39.58


5,000 5000 --- 0.03

Long term Loans 7,310 4170 (42.9) 0.02


19,915 29,721 49.2 0.20

CURRENT ASSETS

Stock in Trade 5,765,367 7,255,007 25.83 50.55


Trade Debts 1,684 1,554 (7.71) 0.01





47,874 56,910 18.87 0.39


Total Assets 12,226,861 14,349,473 17.72 100

Balance Sheet

ITEMS 2009 2010 Horizontal Vertical


Analysis AnalysisSHARE CAPITAL AND RESERVES

Share Capital 2,554,938 2,554,938 --- 17.80



Retirement Benefits

--- --- --- ---

Deferred Taxation

1,109,847 1,113,833 0.35 7.76

CURRENT LIABILITIES


5,037,469 5,815,867 15.45 40.53



1,300,837 2,561,362 96.90 17.84

Income tax liability

490,815 199,409 (59.37) 0.13

Total Current Liability

6,856,780 8,630,286 25.86 60.14

Total Liability 12,226,861 14,349,473 17.36 100



Vertical Analysis


Gross turnover 57,544,309 44,458,074 (22.74) 283.24

Excise Duties 27,654,345 22,347,073 (19.9) 142.37

Sales Tax 8,223,439 6,414,894 (21.99) 40.86

Net Sales 21,666,525 15,696,107 (27.25) 100

Cost of Sales 13,442,066 10,789,048 (19.73) 68.73

Gross Profit 8,224,459 4,907,059 (40.33) 31.26


2,246,014 2,007,158 (10.63) 12.78


1,100,814 943,256 (14.31) 6.00


226,499 158,253 (30.13) 1.00


514,665 24,193 (95.29) 0.15

Operating Profit 4,589,465 1,822,585 (60.28) 11.61

Finance Income 102,826 34,669 (66.28) 0.22

Finance Cost 43,802 101,415 131.5 0.64

Profit Before Tax 4,648,489 1,755,839 (62.22) 11.18

Income Tax Expense

1,626,083 614,218 (62.22) 3.91

Profit of the Year 3,022,406 1,141,621 (62.22) 7.2

Ratio Analysis 2005-2010


Liquidity Ratios

1. Current Ratio

Years Current Assets Current Liabilities Current Ratio

2004 3,434,601 3,137,467 1.094

2005 4,136,116 3,604,366 1.147

2006 4,172,950 3,750,209 1.112

2007 4,641,368 4,822,940 0.962

2008 4,739,867 5,210,638 0.909

2009 6,242,528 6,856,780 0.910

2010 7,893,825 8,630,286 0.914

2. Quick Ratio

Years Quick Assets Current Liabilities Quick Ratio

2004 3,60,549 3,137,467 0.1149

2005 3,55,185 3,604,366 0.098

2006 3,82,097 3,750,209 0.101

2007 6,43,187 4,822,940 0.133

2008 6,80,804 5,210,638 0.130

2009 4,77,161 6,856,780 0.069

2010 6,38,818 8,630,286 0.074

Liquidity Ratios

3. Inventory Turnover

Years Cost of Sales Average Inventory Inventory Turnover


2004 6,089,955 3,069,090 1.98

2005 7,223,576 3,427,491 2.10

2006 8,357,474 3,785,892 2.20

2007 9,527,306 3,894,517 2.44

2008 11,595,736 4,028,622 2.87

2009 13,442,066 4,972,215 2.70

2010 10,789,048 6,510,187 1.67

4. Average Account Receivables Turnover

Years Credit Sales Average A/R A/R Turnover

2004 9,572,576 1,05,266 90.93

2005 11,753,180 1,11,958 104.97

2006 13,890,994 98,575 140.91

2007 16,042,877 1,61,125 99.56

2008 18,872,495 2,38,282 117.15

2009 21,666,525 1,67,411 129.41

2010 15,696,107 1,06,521 147.34

Profitability Ratios

1. Assets Turnover

Years Sales Average Total Assets Assets Turnover


2004 9,572,576 6,641,792 1.45

2005 11,753,180 7,496,609 1.56

2006 13,890,994 8,351,426 1.66

2007 16,042,877 9,280,316 1.78

2008 18,872,495 10,110,636 1.86

2009 21,666,525 11,310,951 1.91

2010 15,696,107 12,964,936 1.21

2. Profit Margin

Years Sales Cost of Goods Sold Profit Margin

2004 9,572,576 6,089,955 36.38 %

2005 11,753,180 7,223,576 38.53 %

2006 13,890,994 8,357,474 39.83 %

2007 16,042,877 9,527,306 40.61 %

2008 18,872,495 11,595,736 38.55 %

2009 21,666,525 13,442,066 37.95 %

2010 15,696,107 10,789,048 31.27%


3. Return on Assets

Years Net Income Average Total Assets Return on Assets


2004 665,227 6,641,792 0.10

2005 1,321,919 7,496,609 0.17

2006 1,904,988 8,351,426 0.22

2007 2,420,207 9,280,316 0.26

2008 2,532,295 10,110,636 0.25

2009 3,022,406 11,310,951 0.27

2010 1,141,621 12,964,936 0.80

4. Return on Common Stockholder’s Equity

Years Net Income Average Stock Holders’ Equity

Return on Stock holders’ Equity

2004 665,227 3,262,823 0.20

2005 1,321,919 3,451,118 0.38

2006 1,904,988 3,889,300 0.48

2007 2,420,207 4,081,022 0.59

2008 2,532,295 3,656,505 0.69

2009 3,022,406 3,934,282 0.76

2010 1,141,621 4,065,563 0.28


5. Earnings per Share


Years Net Income Average Shares Outstanding

Earnings per Share

2004 665,227 2,55,494 2.60

2005 1,321,919 2,55,494 5.17

2006 1,904,988 2,55,494 7.46

2007 2,420,207 2,55494 9.47

2008 2,532,295 2,55,494 9.91

2009 3,022,406 2,55,494 11.83

2010 1,141,621 2,55,494 4.47

6. Payout Ratios

Years Dividends per Share

Earnings per Share Payout Ratio

2004 1.61 2.60 0.61

2005 3.69 5.17 0.71

2006 5.48 7.46 0.73

2007 7.88 9.47 0.83

2008 11.62 9.91 1.17

2009 9.53 11.83 0.80

2010 5.99 4.47 1.34


7. Price Earnings Ratio


Years Market Price of Share

Earnings per Share Price Earnings Ratio

2004 2.60

2005 5.17

2006 7.46

2007 9.47

2008 9.91

2009 11.83

2010 4.47

Solvency Ratios

1. Debt to Assets Ratio

Years Total Debts Total Assets Debt to Assets Ratio


2004 1,896,686 7,024,765 0.27

2005 2,916,486 7,968,453 0.33

2006 3,505,382 8,734,400 0.40

2007 4,586,767 9,826,232 0.46

2008 4,897,101 10,395,041 0.47

2009 6,338,306 12,226,861 0.51

2010 8,377,229 13,613,012 0.61

2. Times Interest Earned

Years Operating Income Interest Expense Times Interest Earned

2004 1,056,039 390,812 2.70

2005 2,082,064 760,145 2.73

2006 2,860,673 955,685 2.99

2007 3,724,574 1,304,367 2.85

2008 3,893,717 1,361,422 2.86

2009 4,648,489 1,626,083 2.85

2010 1,755,839 614,218 2.85

Interpretation of Analysis

Liquidity Ratios


The analysis of Pakistan Tobacco Company’s financial statement shows that it has a high tendency to pay its debts and to convert assets into liquid form within short intervals of time.

The current ratio of PTC remained between 0.90 – 1.14 in the last six years and it shows its ability to pay short term liabilities.

Current Ratio= Current AssetsCurrent Liabilities

The quick ratio of PTC ranged between 0.069– 0.133 from 2005 to 2010. It shows the company’s ability to convert its current assets into liquid form (cash form) in order to meet current liabilities.

Quick Ratio=Current Assets−InventoryCurrent Liabilities

On yearly basis from the year 2005 – 2010, we observed that the number of times the total inventory or stock of the company was sold on the average of 2.25 times/year. It shows the sales of the company are on a very large scale and also gives rise to the company opportunity to generate huge profits in the long run.

Inventory Turnover= Cost of SalesAverage Inventory

Average Account Receivables Turnover shows that how many times a company is able to recover the amount of credit sales to people. PTC has shown a high Accounts Receivables turnover rate which shows its high liquidity transformation rate.

Accounts Recieveables Turnover= Credi t SalesAverage Accounts Recieveables


Pakistan Tobacco Companies Profitability ratios clearly reflect it’s great ability to generate huge profits and of generating dividends for its shareholders.


Average Assets turnover of the company ranges between 1.21 - 1.91 times per year. It shows the generation of huge sales from the worth of assets of the company and in the case of Pakistan Tobacco Company, it shows the firm's efficiency at using its assets in generating sales or revenue - the higher the number the better.

Assets Turnover= Net SalesAverageTotal Assets

The profit margin of PTC lies between 31.27% - 40.61% in previous six years. It measures the percentage of each dollars of sales that results in net income. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors.

Profit Margin= Net SalesCost of Goods Sold

The return on assets of PTC ranges among 0.80 to 0.27 according to preceding six years record. An overall measure of profitability is return on assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. This number tells you what the company can do with what it has, i.e. how many rupees of earnings they derive from each rupee of assets they control.

Assets Turnover= Net IncomeAverageTotal Assets

Return on common stockholder’s equity of PTC varies between 0.28 – 0.76 between the years 2005 to 2006. Another widely used profitability ratio is return on common stockholder’s equity. It measures profitability from common stockholder’s point of view. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. Averaging ROE over the past 5-10 years can give you a better idea of the historical growth.

Returnon comon stock holders Equity= Net IncomeAverage Stock Holders Equity

Earnings per share are a measure of net income earned on each share of common stock. PTC’s earning per share of last six years lies among 4.47 - 11.83. The EPS formula does not include preferred dividends for categories outside of continued operations and net income. Earnings per share serve as an indicator of a company's profitability.


http://en.wikipedia.org/wiki/Dividends

Earnings per Share= Net IncomeAverage sharesOutstanding

Payout ratio of this company ranges from 0.8 - 1.34. It measures the percentage of earnings distributed in the form of cash dividends. The amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio to determine what companies are doing with their earnings. Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividend.

Payout Ratio= Dividend per ShareEarnings per Share

Price earnings ratio is an oft-quoted measure of the ratio of the market price of each share of common stock to the earnings per share. It is also called its "P/E", or simply "multiple". The P/E ratio is a vital ratio for investors. Basically, it gives us an indication of the confidence that investors have in the future prosperity of the business. A P/E ratio of 1 shows very little confidence in that business whereas a P/E ratio of 20 expresses a great deal of optimism about the future of a business. It is the valuation ratio of a company's current share price compared to its per-share earnings.

Price Earning Ratio= Market Price of ShareEarnings per Share

SOLVENCY RATIOS

Solvency ratios measure the ability of a company to survive over a long period of time. It provides a measurement of how likely a company will be to continue meeting its debt obligations. Different countries use different methodologies to calculate the solvency ratio, and have different requirements.

Debt to total assets ratio measures the percentage of total assets that creditors provide. A metric used to measure a company's financial risk by determining how


much of the company's assets have been financed by debt. If the ratio is less than one, most of the company's assets are financed through equity. If the ratio is greater than one, most of the company's assets are financed through debt. Calculated by adding short-term and long-term debt and then dividing by the company's total assets.

Debt ¿ Asset Ratio= Total DebtsTotal Assets

The average value of Times interest earned of PTC is approximately 2.8 for previous six years. IT PROVIDES COMPANY’S ABILITY TO MEET interest payments as they come due. Times interest earned (TIE) or interest coverage ratio is a measure of a company's ability to honour its debt payments. The times interest earned lets the creditor understand whether or not a company has sufficient income to cover its interest payments requirements. It is calculated by taking a company's earnings before interest and taxes (EBIT) and dividing it by the total interest payable on bonds and other contractual debt.

¿ Interest Earned=Operating IncomeInterst Expenses


Financial Statement Analysis of Pakistan Tobacco Company

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