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D.G. KHAN CEMENT COMPANY LIMITED

Superior University
MODULE:
Financial Management
INDIVIDUAL ASSIGNMENT:
Ratio Analysis of Listed Company
(D.G. Khan Cement Company Limited)
COURSE INSTRUCTOR:
Mr. Salman Maqsood
SUBMITTED BY:
11321
PROGRAM:
M.com 2-A

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D.G. KHAN CEMENT COMPANY LIMITED

Mission
To provide quality products to customers and explore new
markets to promote/expand sales of the Company through
good governance and promote 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.

Vision
To transform the Company into a modern and dynamic
cement manufacturing company with qualified professionals
and fully equipped to play a meaningful role on sustainable
basis in the economy of Pakistan.

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D.G. KHAN CEMENT COMPANY LIMITED

2009 RATIO ANALYSIS

(Rupees in thousands)
Liquidity Ratio:
Current Ratio:
= Total Current Assets / Total Current Liabilities
= 13287592 / 15834799
= 0.839
Comment: The higher the current ratio the more liquid the firm is considered to be.
Quick (acid-test) Ratio:
= Total Current Assets - Inventories / Total Current Liabilities
= 13287592 - 899836 / 15834799
= 0.782
Comment: Quick ratio shows the overall liquidity of firms only when firms
inventory is not easily converted into cash. However 1.0 or greater is recommended.

Activity Ratio:
Inventory Turnover Ratio:
= Cost of Goods Sold / Inventory
= 12358479 / 899836
= 13.73
Comment: It shows the period inventory would be sold. However 13.73 means 13
times a year inventory would be sold.
Average Collection Period:
= 365 / Accounts receivable turnover
= 365 / 35.09
= 10.40 days
Comment: It means that 1 batch in 10 days are sold.

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D.G. KHAN CEMENT COMPANY LIMITED

Account Receivable Turnover Ratio:

= Credit Sales / Accounts receivable
= 18038209 / 513966
= 35.09
Total Assets Turnover Ratio:
= Net sales / Total assets
= 18038209 / 42723041
= 0.422
Comment: It shows how much sales are made through assets. Generally the higher
the firms assets turnover indicates the more efficiently its assets have been sold.

Debt Ratio:
Debt Ratio:
= Total liabilities / Total Assets
= 218045991 / 42723041
= 0.510
= 51.03 %
Comment: It shows the proportions of total assets financed by the firms creditors.
The higher this ratio the greater the amount of other peoples money being used to
generate profit. i.e. 51.03 % is invested by others.
Times Interest Earned Ratio:
= EBIT / Interest
= 3383258 / 2606358
= 1.298
Comment: It shows the ability of firm to fulfills its interest obligations.

Profitability Ratio:
Gross Profit Margin Ratio:
= Gross Profit / Net Sales
1

Total liabilities = current liabilities + noncurrent liabilities

= 15834799 +5969800
= 21804599

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D.G. KHAN CEMENT COMPANY LIMITED

= 5679730 / 18038209
= 0.314
= 31.48 %
Comment: It shows the percent of each sales rupee remaining after the firm has paid
for its goods. The higher the gross profit margin, the better it is.

Operating Profit Margin Ratio:

= EBIT / Net Sales
= 3383258 / 18038209
= 0.187
= 18.75 %
Comment: The higher the operating profit margin is preferable.
Net Profit Margin Ratio:
= Earnings available to common stock holders / Net Sales
= 525581 / 18038209
= 0.029
= 2.913 %
Comment: The higher the net profit margin, the better it is.
Return on Assets (ROA) Ratio:
= Earnings available to common stock holders / Total Assets
= 525581 / 42723041
= 0.012
= 1.230 %
Comment: The higher the net ROA, the better it is. Because it shows that how much
return has been earned on efficient utilization of assets.
Return on Equity (ROE) Ratio:
= Earnings available to common stock holders / Total Equity
= 525581 / 209184422
= 0.025
= 2.512 %
Comment: The higher the net ROE, the better it is. Because it shows that how much
return has been earned on common stock holders investment.

Market Ratio:
2

Total Equity = Issued capital + Reserves + Accumulated profit

= 3042494 + 17401220 + 474728
= 20918442.

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D.G. KHAN CEMENT COMPANY LIMITED

P/E Ratio:
= Market price per share of common stock / Earnings per share (EPS)
= 29.65 3 / 1.63
= 18.190
Comment: The higher the P/E ratio the greater the investor confidence i.e. 18.190
Figure indicates that investors are paying 18.190 for each 1.00 rupee of earnings.
M/B Ratio:
= Market price per share of common stock / Book Value per share of common stock
= 29.65 / 10
= 2.965
B/V
= Common stock equity / no of shares
= 3042494 / 304249.4
= 10
Comment: Investors are currently paying 2.965 for each 1.00 rupee of B/V

Market price Rs.29.65 on 30th June 2009 extracted from (http://pakinvestorsguide.com/index.php?topic=90.330)

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D.G. KHAN CEMENT COMPANY LIMITED

2010 RATIO ANALYSIS

(Rupees in thousands)
Liquidity Ratio:
Current Ratio:
= Total Current Assets / Total Current Liabilities
= 16417492 / 13786189
= 1.190
Comment: The higher the current ratio the more liquid the firm is considered to be.
Quick (acid-test) Ratio:
= Total Current Assets - Inventories / Total Current Liabilities
= 16417492 - 1036876 / 13786189
= 1.115
Comment: Quick ratio shows the overall liquidity of firms only when firms
inventory is not easily converted in to cash. However 1.0 or greater is recommended.

Activity Ratio:
Inventory Turnover Ratio:
= Cost of Goods Sold / Inventory
= 13569994 / 1036876
= 13.08
Comment: It shows the period inventory would be sold. However 13.08 means 13
times a year inventory would be sold.
Average Collection Period:
= 365 / Accounts receivable turnover
= 365 / 53.546
= 6.816 days
Comment: It means that 1 batch in 6 days are sold.

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D.G. KHAN CEMENT COMPANY LIMITED

Account Receivable Turnover Ratio:

= Credit Sales / Accounts receivable
= 16275354 / 303949
= 53.546
Total Assets Turnover Ratio:
= Net sales / Total assets
= 16275354 / 47046043
= 0.345
Comment: It shows how much sales are made through assets. Generally the higher
the firms assets turnover indicates the more efficiently its assets have been sold.

Debt Ratio:
Debt Ratio:
= Total liabilities / Total Assets
= 205268234 / 47046043
= 0.436
= 43.63 %
Comment: It shows the proportions of total assets financed by the firms creditors.
The higher this ratio the greater the amount of other peoples money being used to
generate profit. I.e. 43.63 % is invested by others.
Times Interest Earned Ratio:
= EBIT / Interest
= 2261163 / 1902760
= 1.188
Comment: It shows the ability of firm to fulfills its interest obligations.

Profitability Ratio:
4

Total liabilities = current liabilities + noncurrent liabilities

= 13786189 + 6740634
= 20526823

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D.G. KHAN CEMENT COMPANY LIMITED

Gross Profit Margin Ratio:

= Gross Profit / Net Sales
= 2705360 / 16275354
= 0.166
= 16.62 %
Comment: It shows the percent of each sales rupee remaining after the firm has paid
for its goods. The higher the gross profit margin, the better it is.
Operating Profit Margin Ratio:
= EBIT / Net Sales
= 2261163 / 16275354
= 0.1389
= 13.89 %
Comment: The higher the operating profit margin is preferable.
Net Profit Margin Ratio:
= Earnings available to common stock holders / Net Sales
= 233022 / 16275354
= 0.0143
= 1.431 %
Comment: The higher the net profit margin, the better it is.
Return on Assets (ROA) Ratio:
= Earnings available to common stock holders / Total Assets
= 233022 / 47046043
= 0.0049
= 0.495 %
Comment: The higher the net ROA, the better it is. Because it shows that how much
return has been earned on efficient utilization of assets.
Return on Equity (ROE) Ratio:
= Earnings available to common stock holders / Total Equity
= 233022 / 265192205
= 0.008
= 0.878 %
5

Total Equity = Issued capital + Reserves + Accumulated profit

= 3650993 + 22160477 + 707750
= 26519220

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D.G. KHAN CEMENT COMPANY LIMITED

Comment: The higher the net ROE, the better it is. Because it shows that how much
return has been earned on common stock holders investment.

Market Ratio:
P/E Ratio:
= Market price per share of common stock / Earnings per share (EPS)
= 23.466 / 0.72
= 14.392
Comment: The higher the P/E ratio the greater the investor confidence i.e. 14.392
Figure indicates that investors are paying 14.392 for each 1.00 rupee of earnings.
M/B Ratio:
= Market price per share of common stock / Book Value per share of common stock
= 23.46 / 10
= 2.346
B/V
= Common stock equity / no of shares
= 3650993 / 365099.3
= 10
Comment: Investors are currently paying 2.346 for each 1.00 rupee of B/V

Market price 23.46 ^ .5 at 6:29 pm on 20.07.11

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D.G. KHAN CEMENT COMPANY LIMITED

Summary of D.G. Khan Cement Company Limited Ratios

Time Series Analysis

Ratios
Current Ratio
Quick (acid-test) Ratio
Inventory Turnover Ratio
Average Collection Period
Total Assets Turnover Ratio
Debt Ratio
Times Interest Earned Ratio
Gross Profit Margin Ratio
Operating Profit Margin Ratio
Net Profit Margin Ratio
Return on Assets (ROA) Ratio
Return on Equity (ROE) Ratio
P/E Ratio
M/B Ratio
EPS

Actual
2009

Actual
2010

Comments

0.839
0.782
13.73
10.40 days
0.422
0.510 = 51.03 %
1.298
0.314 = 31.48 %
0.187 = 18.75 %
0.029 = 29.13 %
0.012 = 1.230 %
0.025 = 25.12 %
18.190
2.965
0.72

1.190
1.115
13.08
6.816 days
0.345
0.436 = 43.63 %
1.188
0.166 = 16.62 %
0.1389 = 13.89 %
0.143 = 1.431 %
0.0049 = 0.495 %
0.008 = 0.878 %
14.392
2.346
1.63

Good
Good
Need improvement
Good
Need improvement
Good
Good
Need improvement
Need improvement
Need improvement
Need improvement
Need improvement
Need improvement
Need improvement
Good

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D.G. KHAN CEMENT COMPANY LIMITED

Summarizing all Ratios

Liquidity Ratio:
D.G. Khan Cement Company Limiteds current ratio shows favorable condition as compared to 2009. D.G.
Khan Cement Company Limiteds quick ratio shows that firms inventories are easily converted into cash.
The overall liquidity of the firm seems to be good.

Activity Ratio:
D.G. Khan Cement Company Limited seems that they are not able to manage their inventory better in 2010
than 2009. The average collection period seems to be good as compared to 2009 as the firm is paying their
accounts receivable/ bills on time means 4 days earlier than 2009. D.G. Khan Cement Company Limiteds
total assets turnover reflects that utilization of total assets is done efficiently than 2009.

Debt Ratio:
D.G. Khan Cement Company Limiteds increase in debt ratio could be cause of alarm, the firms ability to
meet interest and fixed payment obligations improved from 2009 to 2010

Profitability Ratio:
D.G. Khan Cement Company Limiteds gross profit is not good in 2010 than 2009. Higher levels of
operating and interest expenses in 2010 than 2009 appears to have net profit margin decreased and is
unfavorable. The Firms return on assets and return on common equity behaved not much good as compared
to 2009 and needs improvement. Low 2010 level of return on common equity suggests that firm is not
performing well. Whereas earning per share seems to be behaved well over the period 2009-2010.

Market Ratio:
The P/E ratio shows that firms risk has declined. As it measures the amount investors are willing to pay for
each rupee of a firms earning. The higher the P/E ratio the greater the investors are confident.
The M/B ratio has decreased over the period 2009-2010. This means that investors are pessimistic about the
firms future performance.
The P/E and M/B ratios reflect the firms increased profitability over the 2009-2010 period: Investors
expect to earn high future returns as compensation for the firms above average risk.

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D.G. KHAN CEMENT COMPANY LIMITED

Review
Over all we can say that the firm has recently undergone as expansion in assets by seeing its liquidity ratio.
D.G. Khan Cement Company Limiteds sales, profits and other performance factors seem to need
improvement with the increase in the size of the operations. In addition, the market response to these
activities appears to have been positive. In short it needs improvement in Profitability area. Whereas
Liquidity, Market and debt ratios has behave good.

Suggestions
D.G. Khan Cement Company Limiteds Liquidity ratios have behaved well but inventory turnover seems to
need improvement as compared to 2009. Means the firm needs to manage their inventory properly.
Whereas average collection period as compared to 2009 is better as it shows that firm has paid their
creditors earlier. Total assets turnover shows that sales of assets have done properly as compared to 2009
and needs improvement. Debt ratios show that firm is able to pay their debt obligations more efficiently
than 2009. Profitability ratios show that firm is not earning good profit as compared to 2009, so they need
to low down their cost and expenses to increase their profit. ROA shows that it needs improvement as
compared to 2009 by efficient utilization of assets. Sane like in ROE it needs improvement. Market ratios
are quite good as compared to 2009.