Introduction:

Bestway Cement Limited is part of the Bestway Group of the United Kingdom.
Bestway Group was founded by Sir Mohammed Anwar Pervez nearly thirty three
years ago on what could be best described as one mans vision and passion. Since
then it has translated into a unique and successful group of businesses spread
across the globe with the help of committed, professional and hardworking
management and staff, together with loyal customers and suppliers. The Group has
a well diversified portfolio incorporating within its folds cement manufacturing,
global banking, wholesale cash & carry business, a string of retail outlets, real
estate investment, ethnic food and beverage import and distribution and milling of
rice. Recently the group has embarked upon a large power generation project in
Pakistan thus further diversifying its operations and revenue base.
Bestway is U.Ks second largest cash and carry operator in terms of turnover with
group annual turnover in excess of US Dollars 3.6 billion and profits in excess of
US Dollars 135 million; the second largest cement producer in Pakistan and joint
owner of Pakistans third largest bank, United Bank Limited. Its rice milling
facilities are one of the largest of its kind in the country. The group is the largest
overseas Pakistani investor with investments in excess of US Dollars 1 billion and
a global workforce of over 22,000 people spread over four continents.

Vision
To Produce High Quality Cement At The Lowest Cost

Corporate Mission
Our mission is:
Bestway will consistently produce High Quality
Cement.
Bestway will endeavor to be the lowest cost producer.
It is companys aim to achieve 15% of the market
share of North Zone from present 12% by year 2008
and ultimately to 25% in the longer term.
Bestway will continue to provide a high standard of
customer service.
In order to meet future expansion needs, Bestway will
continue its policies of staff training and development,
promoting from within whenever possible.
Bestway appreciates it has responsibility towards the
community within which it operates. It will continue
to set aside 2.5% of the net profit for education and
charitable purposes.

Products:
These are the products manufactured by the Bestway Cement
Ordinary Portland Cement
Sulphate Resistant Cement
Quick Setting Cement
Low Alkali Ordinary Portland Cement
Clinker

TYPES OF RATIOS:
There are 5 main types
1)
2)
3)
4)
5)

Liquidity Ratio
Profitability Ratio
Debt Ratio
Asset Activity Ratio
Market Value Ratio

Liquidity
Ratio

Liquidity Ratio:
It tells the short term paying ability of the firm.

Types of Liquidity Ratio

1) Current Ratio:
Formula = Current assets
Current liabilities
Year 2005: C.A = 1463229017 = .8687
C.L 1684317665

Year 2004: C.A = 906486303 = .9220

C.L 983168136

Interpretation:
Short term paying ability of the firm is not satisfactory at all.
Against 1Rs in 2005 and 2004 company have only .86 and .92 paisa current liabilities.
respectively to pay off its
Short term creditors must think before they decide to make investment in this company

2) Acid Test Ratio:

Formulae = quick assets
Current liabilities
Year 2005: Q.A = 1368255012 = .8123
C.L 1684317665

Year 2004: Q.A = 791253645 = .8047

C.L 983168136

Interpretation:
Quick assets are calculated by deducting prepaid and inventory from current assets.
If we compare the figures of inventory and prepaid with total current assets we see that
contribution of both is not very much high and that is the reason that quick ratio do not differ a
lot from current ratio. However in 2004 (113143807Rs) a lot of inventory is tied up as compared
with 2005 (93439984Rs).

3) Working Capital
Formulae= Current Assets current Liabilities

Year 2005: W.C = C.A C.L

=1463229017 1684317665
= - 221088648

Year 2004: W.C = C.A C.L

=906486303 983168136
= - 76681833

Interpretation:
Negative amount shows that current liabilities are more than current assets.

Debt
Ratio

Debt Ratio:
Basic measure of the creditors claim is represented by debt ratio; it states total liabilities as a percentage
of total assets.

Types of debt Ratios:

1) Debt to Total Asset Ratio:
To what extent assets are being financed by the debtors

Formulae = Total debts * 100

Total assets
Year 2005: T.D * 100 = 5427435145 * 100 = 60%
T. A
9024017436
Year 2004: T.D * 100 = 3129132779 * 100 = 52%
T. A
5988352813

Interpretation:
In 2005 and 2006 company is highly geared.
In 2005 debts are increased.
Company used 60% financing from creditors to make assets means against 1 asset the 60%
debts used in 2005 but in 2004 this percentage is low i.e.52%.

2) Debt to Equity Ratio:

To what extent assets are being financed by the equity (capital contribution)

Formulae = Total debt * 100

Total shareholders equity
Year 2005: T.D * 100 = 5427435145 * 100 = 150 %
T.S.E
3596582291

= 1 : 1.5

Year 2004: T.D * 100 = 3129132779 * 100 = 109 %

T.S.E
2859220034

= 1 : 1.09

Interpretation:
This ratio represent a comparison between debt and equity and tell that in 2005 and 2004 debt
financing is more as compared to equity contribution so the company is highly geared company.
Therefore creditors have no cushion n safety if company decided to wind up the business.

Profitability
Ratio

Profitability Ratio:
Types of profitability ratios:
1) Gross Profit Margin
How much gross profit is earned by the company from sale of 1 $

Formulae = Gross profit * 100

Sales
Year 2005: G.P * 100 = 1548949995 * 100 = 43.807 %
Sales
3535841713

Year 2004: G.P * 100 = 1070457414 * 100= 40 %

Sales
2665965550

Interpretation:
Cost of goods sold in 2004 is very high as compared to 2005.
In 2004 against each 1Rs of sale Company have earned .4 paisa of gross profit this shows that
C.G.S is .6 paisa against 1Rs of sales which is very high.
Similarly in 2005 against each 1Rs of sales company have earned .43 paisa of gross profit this
shows that C.G.S is .57 paisa against 1Rs of sales which is also very high.
Decrease in C.G.S in 2005 shows that cost control is improved as compared in 2004.
According to the ratio of both years company has not control over its cost.

2) Net Profit Margin

How much net profit a company makes from sale of 1 $

Formulae = Net profit * 100

Sales
Year 2005: N.P * 100 = 930831812 * 100 = 26 %
Sales
3535841713
Year 2004: N.P * 100 = 678575296 * 100 = 25 %
Sales
2665965550

Interpretation:
In 2005 sales have increased due to which net profit generated by the firm against 1Rs has
increased to .26 paisa than in 2004 i.e. .25 paisa.
Increase in sale in 2005 might be because that the company have increased its quality, reduce
its cost which was not the case in 2004.
In 2005 N.P increased because operating expenses of company in this year decrease.

3) Return on Assets:
How efficiently assets are utilized and how much operating income is generated by an asset of 1 $

Formulae = operating income * 100

Total assets
Year 2005: O.I * 100 = 1431009348 * 100 = 15.8%
T.A
9024017436
Year 2004: O.I * 100 = 994184053 * 100 = 16 %
T.A
5988352813

Interpretation:
Due to increase in salaries and wages in 2005 operating income has decreased to 15 % as
compared to operating income in 2004 i.e. 16 %
Against 1Rs in 2004 and 2005 company have earned operating income of .15 and .16 paisa
respectively.

4) Return on Equity:
For one dollar capital contribution by the owner how much return does he gets

Formulae = net income * 100

Total share holders equity
Year 2005: N.I * 100 = 930831812 * 100 = 25.8 %
T.S.E
3596582291
Year 2004: N.I * 100 = 678575296 * 100 = 23.7 %
T.S.E
2859220034

Interpretation:
Ratio shows that shareholders have got profit of .25 paisa and .23 paisa against 1Rs share.
Shows that company is moving a step toward betterment and trying to reduce operating cost
and cost of sales which has resulted in increase in gross profit and operating income in 2005 due
to which net profit of share holders has increased.

Asset Activity
Ratio

Asset Activity Ratio:

How efficiently current assets are utilized by the company

Types of asset activity ratio:

1) Account Receivable Turnover Rate:
How many times business has received the outstanding amount from its customers

Formulae = net sales (credit sales)

Account receivable
Year 2005: net sales (credit sales) = 3535841713 = 74.139 times
Account receivable
47691775

Year 2004: net sales (credit sales) = 2665965550 = 64.04 times

Account receivable
41630455

Interpretation:
In 2005 company has recovered its amount from creditors at a faster rate then in 2004.
Reason might be that the company might have adopted tight credit policy due which bad debts
have decreased.
Increase in account receivable in 2005 might be because of the fact that sales have increased.

2) Account receivable turnover rate in days:

Formulae

= 365
Account receivable turn over rate

Year 2005: 365

=
Account receivable turn over rate

365
74.139

= 5 day

Year 2004: 365

=
Account receivable turn over rate

365
64.04

= 6 days

Interpretation:
Company on average takes 5 days to recover its amount from the creditors in 2005 and in 2004
it used to take 6 days to recover its amount
Company might have adopted tight credit policy (e.g. 2/15 2/8) due to which no of days have
gone down in 2005 which is a good sign for the company.

3) Inventory turnover rate:

Number of times inventory is turned into cash

Formulae = cost of goods sold

Total inventory
Year 2005: cost of goods sold = 1986891718 = 21.26 times
Total inventory
93439984

Year 2004: cost of goods sold = 1595508136 = 14.1 times

Total inventory
113143807

Interpretation:
In 2005 due to increase in sales no of times of inventory transformation into cash have
increased.
In 2005 company have transformed its inventory into cash 21.26 times and in 2004 it has
transformed its inventory into cash 14.1 times.

4) Inventory turnover rate in days:

Formulae

= 365
Inventory turn over rate

Year 2005: 365

Inventory turn over rate

365
21.26

= 17 days

Year 2004: 365

Inventory turn over rate

365
14.1

= 26 days

Interpretation:
Company on average takes 17 days to complete one cycle of transforming inventory into cash in
2005 and in 2004 it used to take 26 days.
Reduction in days in 2005 shows that in 2005 company is utilizing its assets efficiently then it
was in 2004 may be because of increase in demand due to which sales have increased.

Market value
Ratio

Value Ratio:
1) Price earning ratio:
This ratio tells investors that against 1 share how much earning they have got.

Formulae = current stock price

Earning per share
Year 2005: current stock price = 18 = 4.1
Earning per share 4.37
Year 2004: current stock price = 17 = 5.3
Earning per share 3.19

Interpretation:
The investors expectation and current market condition is shown by this ratio.

2) Dividend yield
How much a company pays out in dividends each year relative to its share price.

Formulae = Annual Dividend * 100

Current stock price
Year 2005: Annual Dividend = 193469555 = 10748308.61
Current stock price
18
Year 2004: Annual Dividend = 145102166 = 8535421.5
Current stock price
17

Interpretation:
How much cash flow you are getting for each Rs invested in equity position is shown by this
ratio.

Advantages of Ratio Analysis:

Ratio analysis is an important and age-old technique of financial analysis. The
following are some of the advantages of the ratio analysis:

1. Simplifies financial statements:

It simplifies the comprehension of financial statements. Ratios tell the whole
story of changes in the financial condition of the business.

2. Facilitates inter-firm comparison:

It provides data for inter-firm comparison. Ratios highlight the factors associated
with successful and unsuccessful firm. They also reveal strong firms and weak
firms, over-valued and under-valued firms.

3. Helps in planning:
It helps in planning and forecasting. Ratios can assist management, in its basic
function of forecasting.Planning, coordination, control and communications.

4. Helps in investment decisions:

It helps in investment decision in the case of investors and lending decisions in
the case of bankers.

Final Report
Fundamental of Financial Accounting
Submitted to:
Maam Ammara Mujtabah
Submitted by:
Haroon Ahmadi
Ch. Osama
Usman liaquat
Ch. Muqasir
Ali Rauf