ACKNOWLEDEMENT IN THE NAME OF ALLAH THE PRAISEWORTHY,

THE PASSIONATE WHOSE BLESSINGS MADE IT POSSIBLE TO COMPLETE THIS TASK.

WE ARE VERY MUCH THANKFULL TO THE SECRETARY OF NML WHO HAS PROVIDED US ALL THE INFORMATION REGARDING THE PROJECT.

WE ARE HIGHLY THANKFULL TO OUR RESPECTED MA’AM WHOSE GUIDEANCE AND CONSTANT ENCOURAGEMENT HELPED US TO COMPLTE THIS RESEARCH REPORT.

RATIO ANALYSIS

OFNISHAT MILLS LIMITED (2009-2010)

EXECUTIVE SUMMARY We have tried to completely describe all the elements of the “NISHAT MILLS LIMITED” in this this report.

We have tried to describe the ratio analysis of “NISHAT MILLS LIMITED” in all types of last two years.

PRESENTED BYMUHAMMAD SALMAN

PRESENTED TO MS: AMMARA YASMIN

INTRODUCTION OF “NISHAT MILLS LIMITED”

VISION MISSION

MAIN FOCUS OF PRESENTATION

MAIN FOCUS OF PRESENTATION Liquidity Ratios1. Current Ratio2. Acid test (quick) Ratio3. Cash Ratio Debt Ratios1. Debt-to-Equity2. Debt-to-Total-Assets3. Total Capitalization Coverage Ratios1. Interest Coverage Ratio Activity Ratios1. Receivable turnover Ratio2. Average Collection Period

(Receivable turnover in Days)3. Payable turnover Ratio4. Average Payable Period

(Payable Turnover in Days)

5. Inventory Turnover Ratio6. Average Age of Inventory7. Total Assets turnover

ratio Profitability Ratios1. Gross Profit Margin2. Operating Profit Margin3. Net Profit Margin4. Return On Investment5. Return on Equity Market/Valuation

Ratios1. Earning per share2. Price earning ratio3. Market price per

share/Book value per share

INTRODUCTION FLAGSHIP COMPANY ESTABLISHED IN 1951. MOST MODERN , BIGGEST COMPOSIT UNIT IN

PAKISTAN. PROFESSIONAL AND CLIENT ORIENTED MARKETING

STRATEGIES. ISO-9001 AND IKO-TEX 100 CERTIFIED SA 800 CERTIFICATION IS CURRENTLY IN PROGRESS TOTAL EXPERTS FOR THE COMPANY IN THE YEAR 2000

WERE 9.1 BILLION. DUE TO THE APPLICATION OF MANAGEMENT POLICIES CONSOLIDATION OF OPERATION A STRONG BALANCE SHEET AND EFFECTIVE MARKETING STRATEGY THE TREND IS EXPECTED TO CERTAIN IN THE YEARS OF COME.

THE COMPANY’S PRODUCTION FACILITIES COMPRISES, SPINNING, WEAVING, PROCESSING, STITCHING AND POWER GENERATING.

VISION To transform the Company into a modern and dynamic

yarn, cloth and processed cloth and finished product manufacturing Company that is fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.

  To transform the Company into a modern and dynamic

power generating Company that is fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.

MISSION To provide quality products to

customers and explore new markets to promote/expand sales of the Company through good governance and foster a sound and dynamic team, so as to achieve optimum prices of products of the Company for sustainable and equitable growth and prosperity of the Company.

Nishat Mills LimitedBalance Sheet

ASSETS JUNE 30, 2010 JUNE 30, 2009

NON-CURRENT ASSETSPROPERTY, PLANT AND EQUIPMENTINVESTMENT PROPERTIESLONG TERM INVESTMENTSLONTERM LOANSLONGTERM DEPOSITES AND PAYMENTS

11,841,667 132,550 21,959,543 489,803 16,823

34,449,386

11,199,635 41,049 11,952,949 12,367 11,848

23,217,848CURRENT ASSETSSTORES, SPARE PARTS AND LOOSE TOOLSSTACK IN TRADE (INVENTORIES)TRADE DEBTSLOANS AND ADVANCESSHORT TERM DEPOSITES AND PAYMENTSOTHER RECEIVABLES (A/R)ACCRUDE INTERESTSHORT TERM INVESTMENTSCASH AND BACK BALANCES

TOTAL ASSETS

688,8326,060,4412,041,256 504,046 31,912 724,407 16,906 1,554,543 110,585

11,732,928

46,182,314

561,2514,092,5121,300,366 462,025 29,880 323,000

- 1,414,310 111,494

8,294,838

31,512,686

Nishat Mills LimitedBalance Sheet

EQUITY & LIABILITIES JUNE 30, 2010

JUNE 30, 2009

SHARE CAPITAL AND RESERVESAUTHORISED SHARE CAPITAL

ISSUED, SUBSCRIBED AND PAID UP SHARE CAPITALRESERVES

TOTAL EQUITY

11,000,000

3,515,99927,860,314

31,376,313

11,000,000

2,424,82716,905,940

19,330,767

NON-CURRENT LIABILITIESLONG TERM DEBTSDEFERRED TEX

2,980,6941,256,892

4,237,586

2,334,411245,243

2,579,654

CURRENT LIABILITIESTRADE AND OTHER PAYABLES (A/P)ACCRUDE MARKEUPSHORT TERM BORROWINGSCURRENT PORTION OF LONG TERM FINANCINGPROVISION OF TAXATION

TOTAL LIABILITIESTOTAL EQUITY AND LIABILITIES

2,139,321232,247

6,649,4471,128,632418,7678

10,568,415

14,806,00146,182,31

4

1,309,958202,777

7,342,600433,313313,917

9,062,265

12,181,91931,512,6

86

Nishat Mills LimitedIncome statement

Particulars JUNE 30, 2010

JUNE 30, 2009

SALESCOST OF GOODS SOLDGROSS PROFIT

DISTRIBUTION COSTADMINISTRATIVE EXPENSESOTHER OPERATING EXPENSES

OTHER OPRATING INCOME

PROFIT FROM OPERATIONSFINANCE COST

PROFIT BEFORE TAXATIONPROVISION FOR TAXATION

PROFIT AFTER TAXATIONEARING PER SHARE- BASIC AND DILUTED

31,535,647(25,555,462)

5,980,185(1,714,598)(545,166)(289,080)

(2,548,844)

3,431,341

981,650

4,412,991(1,126,922)

3,286,069(370,608)

2,915,46110.50

23,870,379(19,518,838)

4,351,541(1,315,630)(435,012)(191,608)

(1,942,250)

2,409,291

599,006

4,412,991(1,446,796)

1,561,501(293,500)

1,268,0016.23

Liquidity Ratios

Liquidity ratios are used to measure a firm ability to meet short term obligations.

They compare short term obligations with short term (or current) resources available to meet these obligations.

From these ratios, much insight can be obtained into the present cash solvency of the firm.

 

L1)Current Ratio: Shows a firm’s ability to cover its current liabilities with its current assets

Current RatioCurrent Assets

Current LiabilitiesNISHAT MILLS LIMITED

PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Current Assets 11,732,928 8,294,838Current Liabilities 10,568,415 12,181,919

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

11,732,928

10,568,415

1.11: 1

8,294,838

12,181,919

.86:1

COMPARISON

L2) Acid-Test Ratio: Shows a firm’s ability to meet current liabilities with its most liquid assets

Acid-Test (Quick)Current Assets - InvCurrent Liabilities

Nishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Current Assets 11,732,928 8,294,838Current Liabilities 10,568,415 12,181,919Inventory 6,060,441 4,092,512

COMPARISON JUNE 30, 2010 RS. JUNE 30, 2009 RS.

11,732,928 -6,060,441

10,568,415

.53:1

8,294,838-4,092,512

12,181,919

.43:1

L3) Cash Ratio: Shows a firm’s ability to meet current liabilities with its cash. Cash Ratio

CashCurrent Liabilities

Nishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Cash 110,585 111,494Current Liabilities 10,568,415 12,181,919

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

110,585

10,568,415

.010:1

111,494

12,181,919

.011:1

COMPARISON

Summary of the Liquidity Ratio Comparisons

Strong current ratio and weak acid-test ratio indicates a potential problem in the inventories account.

Note that this industry has a relatively high level of inventories.

Debt RatiosBalance Sheet Ratios

Financial Leverage Ratios

Shows the extent to which the firm is financed by debt.

D1) Debt-to-Equity : It is the relationship between borrower’s fund (Debt) and Owner’s Capital (Equity).

PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Total Debts 13,549,109 11,936,676Stock Holder's Equity 31,376,313 19,330,767

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

13,549,109

31,376,313

.43:1

11,936,676

19,330,767

.61:1

COMPARISON

Debt-to-EquityTotal Debt

Shareholders’ Equity

Nish at MILLS LIMITED

D2) Debt-to-Total-Assets: Shows the percentage of the firm’s assets that are supported by debt financing

Debt-to-Total-AssetsTotal Debt

Total AssetsNishat mills limited

PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Total Debts 13,549,109 11,936,676Stock Holder's Equity 46,182,314 31,512,686

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

13,549,109

46,182,314

.29:1

11,936,676

31,512,686

.37:1

COMPARISON

D3) Long term Debt to Total Capitalization: Shows the relative proportion of long-term debt to the long-term financing of the firm.

Total CapitalizationLong Term Debt

Total CapitalizationNishat mills limited

PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Long Term Debts 2,980,694 2,334,411Stock Holder's Equity 31,376,313 19,330,767

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

2,980,694

31,376,313

.086:1

2,334,411

19,330,767

.107:1

COMPARISON

Coverage RatiosIncome Statement Ratios

Coverage Ratios

Ratios that relates the financial charges

(interest) of a firm to its ability to service or cover

them.

C1) Interest Coverage Ratios: It Indicates a firm’s ability to cover interest charges. It is also called times interest earned. Interest Coverage

EBITInterest Charges

Nishat mills limited

PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. EBIT 4,061,736 2,938,466Interest Expense 1,308,396 1,446,796

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

4,061,736

1,308,396

3.10 :1

2,938,466

1,446,796

2.03:1

COMPARISON

Activity Ratios Ratios that measure how effectively

the firm is using its assets are called Activity Ratios.

Activity ratios, also known as Efficiency or Turnover Ratio, measure how effectively the firm is using its assets.

A1)Receivable Turnover: Indicates quality of receivables and how successful the firm is in its collections.

Receivable TurnoverAnnual Net Sales

ReceivablesNishat mills limited

PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Sales 32,554,012 23,870,379Accounts Receivables 2,041,256 1,300,366

COMPARISON JUNE 30, 2010 RS. JUNE 30, 2009 RS.

32,554,012

2,041,256

15.94 times

23,870,379

1,300,366

18.35 times

A2)Average Collection Period: Average number of days that receivables are outstanding

Average Collection Period

Days in the YearReceivable Turnover

orReceivables * Days in the year

Annual Credit salesNishat mills limited

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

365

15.94

22.58 days

365

18.35

19.16 days

A3)Payable Turnover :Indicates the promptness of payment to suppliers by the firm.

Payable Turnover (PT)Annual Credit Purchases

Accounts Payable

Nishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Purchases 7,405,307 5,517,538Accounts Payable 2,139,321 1,309,958

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

7,405,307

2,139,321

3.46 times

5,517,538

1,309,958

4.21 times

COMPARISON

A3)Average Payment Period :Average number of days that payables are outstanding.

PT in DaysDays in the YearPayable Turnover

OrAccounts payable * Days in the year

Annual Credit PurchasesNishat mills limited

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

365

3.46

105.49 days

365

4.12

88.59 days

A4)Inventory Turnover:The rate at which a company’s Inventory is turned over is called Inventory turnover ratio.

Inventory TurnoverCost of Goods Sold

Avg. InventoryNishat mills limited

PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Cost of Goods Sold 25,555,462 19,518,838Inventory 6,060,441 4,092,512

COMPARISON JUNE 30, 2010 RS. JUNE 30, 2009 RS.

25,555,462

6,060,441

4.12 times

19,518,838

4,092,512

4.762 times

A5)Average Age of Inventory :Average number of days that inventories are converted into CGS.

PT in DaysDays in the Year

Inventory TurnoverOr

Avg Inventory * Days in the yearCGS

Nishat mills limited

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

365

4.126

85 days

365

4.769

75 days

A6)Total Assets Turnover Ratio: Indicates the overall effectiveness of the firm in utilizing its assets to generate sales. Total Asset Turnover

Net SalesTotal Assets

Nishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Sales 31,535,647 23,870,379Total Assets 46,182,314 31,512,686

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

31,535,647

46,182,314

.68

23,870,379

31,512,686

.75

COMPARISON

Profitability Ratios

Ratios that relate profits to sales and investment are called profitability ratios.OrProfitability ratios measures that how much profit the firm generates.

Income Statement/Balance Sheet Ratios

Profitability Ratios

P1)Gross Profit Margin: It shows the relationship between Gross profit and sales.

Gross Profit MarginGross Profit Net Sales

Nishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Gross Profit 5,980,185 4,351,541Net Sales 31,535,647 23,870,379

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

5,980,185

31,535,647

18.96%

4,351,541

23,870,379

18.22%

COMPARISON

P2)Operating Profit Margin: Indicates the firm’s profitability after taking account of all expenses except interest and taxes.Operating Profit Margin

EBITNet Sales

Nishat mills limited

PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Operating Profit 4,412,991 3,008,297Net Sales 31,535,647 23,870,379

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

4,412,991

31,535,647

13.99%

3,008,297

23,870,379

12.60%

COMPARISON

P3)Net Profit Margin: Indicates the firm’s profitability after taking into account all expenses and interest and taxes. Net Profit Margin

Net Profit after TaxesNet Sales

Nishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Net Profit 2,915,461 1,268,001Net Sales 31,535,647 23,870,379

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

2,915,461

31,535,647

9.24%

1,268,001

23,870,379

5.31%

COMPARISON

P4)Return on Investment: Indicates the profitability on the assets of the firm (after all expenses and taxes).

Return on InvestmentNet Profit after Taxes

Total AssetsNishat mills limited

PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Net Profit After tax 2,915,461 1,268,001Total Assets 46,182,314 31,512,686

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

2,915,461

46,182,314

6.39%

1,268,001

31,512,686

4.023%

COMPARISON

P5)Return on Equity: Indicates the profitability to the shareholders of the firm (after all expenses and taxes).Return on Equity

Net Profit after TaxesShareholders’ EquityNishat mills limited

PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Net Profit after Tax 2,915,461 1,268,001S.H.E 31,376,313 19,330,767

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

2,915,461

31,376,313

9.29%

1,268,001

19,330,767

6.55%

COMPARISON

Valuation/Marketability Ratios

The ratios which shows the risk and potential earning of a business investment.

These ratios are not calculated from the financial reports only, since they may involve market data such as share prices.

It is also known as a Valuation Ratios or Shareholders ratios.

M1) Earning per share:It shows that how much net profit investors are earning on each share.

Earning per shareNet Profit after Taxes

Total number of sharesNishat mills limited

PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Net Profit After tax 2,915,461 1,268,001Total No. of Shares 351,599,848 242,482,654

COMPARISON JUNE 30, 2010 RS. JUNE 30, 2009 RS.

2,915,461

351,599,848

.oo8

1,268,001

242,482,654

.005

M2) Price earning ratio: How much investors are willing to pay for $1 of earnings.Price earning ratio

Market price per shareEarning per share

Nishat mills limitedPARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Market Price 57.47 30.5Earning / Share 10.50 6.23

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

57.47

10.50

5.47

30.5

6.23

4.89

COMPARISON

M3) Market to Book Ratio: It shows the relationship between the market price per share and book value per share. M/B

Market price per shareBook value per shareNishat mills limited

JUNE 30, 2010 RS. JUNE 30, 2009 RS.

57.47

10.50

5.47

PARTICULARS JUNE 30, 2010 RS. JUNE 30, 2009 RS. Mkt. /share 57.47Book Value/ Share 10.50 6.23

COMPARISON

Ratios2010 2009

Current ratio 1.11 0.86 Gearing ratio 25.53 34.34

Gross profit % 18.96 18.23 Net profit % (before tax)

10.42 06.54

Earnings per share 10.50 06.23 Proposed dividend % 25.00 20.00

CONCLUSION

QUESTION ANSWER SESSION