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History & Introduction

From the humble beginnings of Posts & Telegraph Department in 1947 and establishment of Pakistan Telephone & Telegraph Department in 1962, PTCL has been a major player in telecommunication in Pakistan. In 1996, Pakistan Telecommunication (Reorganization) Ordinance formed the basis for PTCL monopoly over basic telephony in the country. PTCL launched its mobile and data services subsidiaries in 2001 by the name of Ufones and Paknet respectively. In the middle of 2005 Government of Pakistan had decided to sell at least 26 percent of this company to some private agency.

Ratio analysis

is a useful way of gaining a "snapshot" picture of a company.

These ratios can be analyzed to identify the company's strengths and weaknesses and useful insights can be gained through the process. Financial ratios are generally grouped together by their purpose. Although there are many of these classifications with some of the key users for the different types of ratios:

Liquidi ty (Short-term creditors) Deb t (Potential lenders or bondholders) Activi ty (Top management of the

company) Profitabi lity (Both existing and potential investors in the company's common stock)

Current Ratio
The current ratio is another test of a company's financial strength. It calculates how many PKR in assets are likely to be converted to cash within one year in order to pay debts that come due during the same year. Current Ratio = Current Assets Current Liabilities

54220241 ----------------- = 1.50 36086322

42611233 ----------------- = 1.73 24569795 2009: 1.50 also shows that firms liquidity position is relatively weak.


2008: The ratio of 1.73 shows that the firm is not in a better position to meet its short term debt.

Day sale out Standing (DSO)

Day sale outstanding is used to appraise accounts receivable. So, DSO represents an average length of time that a firm must wait after making a sale before receiving cash, which is average collection period. DSO= Receivables Average sales per days

286234 2 ----------------- = 18days Analysis 2008: It shows that company

380568 9 ------------------- = 13days

receivables are converting more

quickly in cash as compared to 2007.

2009: In 2009 receivables with respect to sales are converting more quickly.

Fixed Asset turnover

Fixed Asset turnover ratio measures how effectively the firm uses its plant and equipment in production. Net Fixed Asset turnover Sales =

Net Fixed Asset

59239001 ----------------- = 0.762 77730763 Analysis: 2008: In this year PTCL used their assets effectively and gain more sales than industry average.

200 9

61085610 ----------------- = 0.96 63437437

200 8

2009: PTCL is not using their fixed assets effectively and could have better sales by using assets effectively and efficiently.

Total Asset turnover Ratio (TATO)

Where asset turnover tells an investor the total sales for each $1 of assets, return on assets, or ROA for short, tells an investor how much profit a company generated for each $1 in assets. TATO = Sales Total assets


59239001 ----------------- = 0.38 154048029

200 9

61085610 ----------------- = 0.77 140103688 were actively participating in business.

200 8

2008: It shows that its total assets

2009: Currently company is facing worst conditions of assets turnover many of its assets are not participating and should be disposed of immediately. Or this might be due to companys current high receivable.

Total Debts to total assets

Creditors prefer low debt ratios because the lower the ratio, the greater the cushion against creditors losses in the event of Liquidation. Stockholders, on the other hand, may want more leverage because it magnifies expected earnings. Total Debts to total assets = Total assets Total debts


54658520 ----------------- = 35% 154048079

200 9

42215314 ----------------- = 30% 140103688 2009: Due to less concentration on fulfilling their debts company is now going above the industry average and finding it hard to pay debts in future.

200 8

2008: Company is dealing well with its debts and should continue to improve their policies about debts.

Time Interest earned ratio (TIE)

A measure of the firms ability to meet annual interest payments TIE= EBIT Interest charges

4267172 ----------------- = 4.6 Times 908524

3957539 ----------------- = 4.66 Times 847972


2008: It Represents Company is not in a condition to pay its interest costs and can result in some legal action like bankruptcy.

2009: Low ratio shows that the company will face difficulty and when it attempts to borrow an additional fund.

Profit Margin on sales

PTCL posted a net profit of Rs 15.64 billion (EPS Rs 3.07) in FY07 against last year's figure of Rs 20.78 billion. The declining trend in profitability continued during the financial year ended June 30, 2007 due to structural adjustments brought about in the telecom sector by competition Profit margin on sales= NI Sal es

9151185 ----------------- = 15.4% 59239001 Analysis: 2008: Due to recession, there was hyper decrease in debt equity ratio

200 8 (2824890)
----------------- = (4.6%) 61085610

2009: After suffering recession company is recovering and lowering its costs and started getting normal profits.

Basic Earning Power (BEP)

This ratio determines the raw earning power of the firms assets before the taxes and leverage. BEP= EBIT Total Assets


426717 2 ----------------- = 2%

200 9

395753 9 --------------- = 2.8% 2009: Company is on a decline trend of BEP and their management is not taking steps to solve the problems as compared to the industry.

200 8

2008: Due to the stock crisis many companies BEP decreased rapidly. PTCL also suffered the decrease in BEP but still getting higher than industry.

Return on Assets
It represents how much the income after taxation and depreciation is backed by total assets. This also shows that company is using above average debts and companys BEP is low. Return on Assets= Total Assets NI

9151185 ----------------- = 5.9% 154048079 Analysis: 2008: This low results shows that the companys low basic earning power and high interest cost resulting from its above average use of debt, both of which cause its net income to be relative low.

(2824890) ----------------- = (2.01%) 140103688

2009: In this year company have paid their some remaining debts and resulting in improved return than previous year.

Return on Equity (ROE)

ROE measures how well stock holder get return on their invested money. ROE= NI Common Equity

9151185 ----------------- = 9.2% 99389559

(2824890) ----------------- = (28.8%) 97888374

Analysis: 2008: Company faced worst effects of recession due to high debts and high finance costs. This resulted in decrease in investments. 2009: After the worst recession period company is gradually stabilizing itself in the stock market and getting the interest of the factors.

Price/Earnings (P/E)
This ratio shows the dollar amount investor pay for 1dollar of current earnings. P/E= per share Earning per share Price

10 -------1.79 = 5.58 Times

10 -------Times (5.53) = (1.80)

Analysis: 2008: The stock exchange crisis did not left the big giants of the industry and PTCL is one of them. 2009: This shows that the company is growing well and again getting the confidence of investors.

Price/cash flow
It measures how many times cash inflow or outflow per share. Price/cash flow= Price per share Cash flow per share

10 -------4.302 = 2.32 Times

10 ------ = (5.55) Times (1.80)

Analysis: 2008: In this year the companys cash flows were in negative and they were not satisfying their investors.

2009: PTCL revised its policy about shareholders and cash flows per share and got good response from investors and regained their position.

Market/Book value
It measures how many times the price of share is increased over its book value
Market/book (M/B) = Market price per share

Book Value per share

17.24 ----------Times 19.488 Analysis: 2008: It shows that investors are willing to pay more than its book value than industry average and it is due past records. = 0.884

38.64 -------- = 2.01 Times 19.193

2009: Company did not respond well to its investors and as a result now investors are paying them high but not as much as they can.

Overall Analysis

Summarizing the above financial analysis will lead us to some facts that Ptcl is not in a better position in terms of liquidity and might face some problems in meeting its short-term debt. However EPS of 1.79 shows that company is in better position relative to previous year and gaining the confidence of investor back. Above analysis indicates that company is now going above the industry average and finding it hard to pay debts in future as their debtasset ratio is 35% in year 2009 which was 30% in previous year.

In 2005, the company gets maximum profit while later on till 2009 there is decrease in the value of profit as compared to 2005. The reason behind this is the uncertainty in the process of privatization scenario, increase in the operating cost, decrease in inappropriate profit, increase in payables, increase in capital work in progress, less new investment and loans etc

We humbly thank Allah Almighty, the Merciful and the Beneficent, who gave us health, thoughts and co-operative people to enable us to achieve this goal."

When we started writing, we stop for a while and think what to write? How to write? We have no words to express our feelings. But we have to write to offer our humblebees sense to ALL MIGHTY ALLAH The most beneficial, gracious and merciful who enable us to perceive higher ideas of life and helped us throughout our life especially in making this plan and all blessing to His favorite PROPHET MUHAMMAD (PBUH) who is the greatest personality of this universe. After God we owe our heartiest gratitude to our parents and our family whose prayers encouraged us to complete our task. We are also extremely thankful to our teacher Madam Sonia Shams for her sympathetic treatment, reward less help, precious suggestions, constant encouragement, personal interest and kind guideline that enabled us to make this plan. At the end we shall like to thank all our class fellows who always helped us in our studies when we needed