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Table of Contents

Executive Summary
i
Introduction
. 1
Trend Analysis 1: Apex Spinning & Knitting Mills Ltd.
1
Comparative Analysis: Apex
Spinning 6
Trend Analysis 2: Anlima Yarn Dyeing Ltd.
8
Comparative Anlysis: Anlima
Yarn 10
Trend Analysis 3: Malek Spinning Mills Ltd.
. 13
Comparative Analysis: Malek
Spinning 16
Trend Analysis 4: Rahim Textiles Mills Ltd.
.. 17
Comparative Analysis: Rahim
Textiles 20
Trend Analysis 5: Square Textiles Ltd.
..23
Horizontal
Analysis
26
Vertical
Analysis
..28
Summary & Conclusion
..30

Executive Summary
Financial ratio is one of the mostly used financial tools to evaluate a
companys financial performance. In this report we have used various
financial ratios to examine strengths and weaknesses of some of the
textile companies in our country. Later in this report horizontal analysis
and vertical analysis have also been incorporated to have a better insight
into financial performance. Industry evaluation has also been done taking
the average of the five companies selected for this report.
Textiles industry is one of the pivotal industries in the context of
Bangladeshs economy. Each year it helps to strengthen the economy
through extensive export operations. So, for the betterment of the
countrys economy it is of utmost importance that companies in that
particular sector maintain a sound financial performance. Otherwise if
those companies cripple it would have an immensely negative impact on
our countrys overall financial health. Keeping these issues in mind we
have tried to shed light on various aspects of financial situation of a
company using various ratio analysis and later horizontal and vertical
analysis.
Our ratio analysis has revealed various aspects of strengths and
weaknesses of various companies. Apex Knitting has shown its strength in
asset utilization but suffered from comparatively higher COGS. Anlima
Yarn suffers a bit with respect to liquidity ratios and has a bit low ROA.
However it managed to yield better ROE through comparatively heavy
debt financing. Malek Spinning had serious problem in cash management
although recovered a bit in 2011 and they show high dependence on
equity financing. Rahim Textiles again suffers a bit from liquidity problem
and shows relatively high dependence on equity financing. Square Textiles
maintains relatively steady level of financial performance. To some extent
it lacks those concerning issues that should alarm the management about
disconcerting inefficiency or mismanagement.

In the last part we tried to provide some recommendations based on our


findings regarding various financial performance issues. Some company
needs to check whether their high expenditure on COGS is justifiable or
not, few needs to consider whether they are over-utilizing their assets or
human resources or not, and few needs to develop a more efficient cash
management strategy. Along with those one or two company may give a
second thought regarding their financing strategy, whether they should
maintaining heavy dependence on equity financing or should try to have
some financial leverage by using a bit more debt financing.
As stated earlier textiles industry remains at the center of the countrys
economy so sound financial analysis is extremely crucial in order to
pinpoint problem areas and rectify them whenever needed. This would
help the industry to grow further in future.

Introduction
A financial ratio is a relative magnitude of two selected numerical values
taken from an enterprise's financial statements. Often used in accounting,
there are many standard ratios used to try to evaluate the overall financial
condition of a corporation or other organization. Financial ratios may be
used by managers within a firm, by current and potential shareholders of
a firm, and by a firm's creditors. Financial analysts use financial ratios to
compare the strengths and weaknesses in various companies. If shares in
a company are traded in a financial market, the market price of the shares
is used in certain financial ratios.
In this report we have focused on four main categories of financial ratios:

Liquidity Ratios

Profitability Ratios

Activity Ratios

Solvency Ratios

The industry we picked is the textile industry. The names of companies


used in the report are:
Apex Spinning Mills Ltd.
Anlima Yarn Dyeing Ltd.
Malek Spinning Mills Ltd.
Rahim Textiles Mills Ltd.
Square Textiles Ltd.
We have used both trend analysis and comparative analysis to evaluate
the financial situation of the above mentioned companies. Below are the
findings of our research.

Trend Analysis: Apex Spinning & Knitting Mills Ltd.


Liquidity Ratios
Current Ratio
1

Current Ratio of Apex Spinning & Knitting Mills Ltd is just over 1 and hasnt
deviated much over the three years. It means that the company holds
sufficient current assets that can be liquidated to meet its current
obligation. The figures also imply that only a small portion of the current
assets have been financed by long term debt and the rest by current
liabilities. Current assets havent piled up in the last years as ratios are
just over 1.
Over the years the ratio hasnt shown much movement and that indicates
that the companys policies pertaining to liquidity have been pretty stable
in last three years.
Acid-test Ratio
Acid-test ratio is similar to current ratio except of the fact that the former
one doesnt consider inventory in the calculation. So it basically considers
the part of current assets that can be almost readily liquidated whenever
needed. As the figures are below 1 the company cant meet all of its
current obligations without relying on inventories.
Over the three years this particular ratio hasnt changed much which
indicates consistency in company policy regarding liquidity management.

Profitability Ratios
Net Profit Margin Ratio
The ratio show is an indicator of companys profitability and efficiency in
expense management as compares net profit with net sales. The ratio
increased a bit in the year 2010 but dipped in 2011. If we look at the
income statement figures then we will see that in 2010 companys net
profit increased a bit even though there was a decrease in sales. However,
in 2011 just the opposite happened; sales increased while net profit
plummeted.
So clearly the company hasnt been equally efficient in managing its
expense throughout the three years. Either there was a problem
associated with COGS or the company may had to bear a bit too much
operating expenses. But to see the whole picture we have to look into the
following ratio. But so far we can state that in the year 2010 company
managed its expenses in a much more efficient manner than in 2011.
Gross profit Margin Ratio

This ratio shows the relationship between gross profit and sales and helps
us pinpoint the problem associated with expense management. However,
gross profit margin ratio shows almost the same trend like that of net
profit margin ratio. So, to pinpoint the problem area we have showed both
operating expenses and COGS as a percentage of sales and it revealed
that COGS/Sales percentage increased a bit in 2011 while operating
expense/sales percentage decreased. But due to large volume involved
with COGS that small increase in the percentage lead lower net profit
margin ratio and gross profit margin ratio.
Now the company needs to check whether they are using superior raw
materials in the production process or just paying higher price for average
quality raw materials. If they are purchasing higher quality raw materials
then they to be more efficient in other areas such as operational expenses
in order to boost their profitability.
Return on Assets
Return on assets refers to companys ability to generate net profit utilizing
its assets. Unlike asset turnover this ratio isnt exceptionally high which
means even though the company was able to generate huge amount of
sales utilizing its assets it also had to bear huge expenses and that had a
big impact on its net profit. As we saw earlier the companys COGS
consumes a substantial portion of its sales and it may have caused the
ROA figure to remain at such level.
However, interestingly unlike asset turnover ratio ROA hasnt increased in
the year 2011 and reduced instead. The main reason is that in that year
even though both sales and assets increased net profit did mainly not due
to relatively high COGS. As we stated earlier the company needs to check
whether they are using raw materials of superior quality or they are just
paying high prices for an average quality raw material.
Return on Common Stock Equity
This ration shows how efficient the company has been in utilizing its
common equity to generate net income. The pattern of this ratio of Apex
Spinning corresponds to that of ROA; increased slightly in 2010 and
dropped in 2011. The figures have been pretty stable over the years. For a
better understanding of the changes underlying in ROA and ROE we need
to conduct DuPont analysis which is presented below.
DuPont Analysis

DuPont analysis shows ROE as a multiplication of three ratios a) Net profit


margin b) Assets turnover ratio c) Equity multiplier. Judging all these three
ratios we can have a better insight into ROE.
The analysis reveals that equity multiplier has been relatively stable over
the years. Net profit margin among increased slightly among the three
which caused a slight increase of ROE in the year 2010. In 2011 even
though both asset turnover ratio and equity multiplier increased those
were nullified by a decrease in net profit margin ratio which has brought
down ROE figure slightly in that particular year. As we have discussed
earlier simultaneous increase in Asset turnover ratio and decrease in Net
Profit Margin ratio was caused by relatively high COGS in 2011.
ROA can also been shown as a multiplication of Asset Turnover Ratio and
Net Profit Margin. ROA of Apex Spinning has followed a similar pattern of
that of ROE and in this case as well Net Profit Margin was main cause
behind the deviations.
EPS
The higher the ratio the better is for the company as it indicates better
profitability of the entity. EPS has increased slightly in 2010 and again
dipped a bit 2011. The number of common stock outstanding was
constant over the last few years and hence the deviation was caused by
the change in Net Profit of the company.
Dividend Payout Ratio
This ratio expresses the amount of cash dividend paid as a percentage of
net profit. Apex Spinning has consistently paid out a very high percentage
of its net income as dividends. Shareholders of the company should be
mighty pleased with this kind of payout ratio. The drawback is that the
company will be left with very low amount of retained earnings which may
in turn hinder companys ability to reinvest in business or expansion. The
company needs to keep in mind its growth potential and future needs for
investment.
P/E Ratio
Extremely high P/E ratio in 2009 indicates that the company was highly
overvalued in that particular year. Even though EPS was very low in 2009
market price of companys stock was much higher. However, the valuation
came down to normal level in the latter years.

Activity Ratios
4

Receivables Turnover Ratio


The ratio has increased a bit in the year 2011 which means in that year
the company showed better efficiency in collecting its receivables
compared to previous years. The better efficiency may be a result of more
stringent receivables policy or simply more efficiency in collecting its
outstanding receivables.
Inventory Turnover Ratio
This ratio has increased steadily over the years though not by much.
Higher inventory turnover ratio implies efficiency in inventory
management. Because an increase in this ratio can be caused either of
the two events; increase of COGS given inventory remains relatively
constant or decrease of inventory given COGS remains relatively constant.
So in the former case the company has to make sure that its inventory
doesnt much even if there is an increase in production and the latter case
the company has to make sure that it reduces its current level of
inventories while production remains relatively constant. So we can see
from the discussion is either of the cases the company has to show
improved efficiency regarding inventory management.
In case of Apex Spinning both of the events took place. In year 2010 the
company managed to lower down its inventory level while COGS remained
relatively constant and in 2011 even though both COGS and inventory
increased the change in inventory was much less compared to that of
COGS.
Asset Turnover Ratio
Asset turnover ratio indicates a companys efficiency in converting its
assets in sales. Apex Spinning Mills ratio increased substantially in the
year 2011 mainly due to high increase in sales. The ratio is also close to
200% in all the years which is quite exceptional. All these data reflect the
companys superiority in asset management policy and practices.
However, the company needs to be very cautious about the fact that
whether it is over-utilizing its assets or not. If that is the case then its
machineries and equipment may deteriorate a lot faster forcing the
company to invest in those areas much earlier than anticipated.
Cash Conversion Cycle
The ratio is a combination of three ratios DSO, DIH and DPO. It represents
the amount of time needed for a company to have cash back in hand. The
lower the ratio the better it is for the company as it would imply efficiency
in managing payables, receivables and inventories. CCC of Apex Spinning
5

has reduced dramatically over the last three years. Reduced DIH and DSO
and increased DPO was the reason behind. This event definitely indicates
efficiency in those above mentioned areas but at the same time the
company needs to check whether they are missing out any potential
buyers or not whom they could avail with a less stringent credit policy.

Solvency Ratios
Debt to Total Assets Ratio
Like equity multiplier this ratio is also a measure of a companys financial
leverage. Higher ratio indicates more reliance on debt financing and vice
versa.
Times Interest Earned
This ratio shows how easily a company can pay its debt obligations. A
company relying heavily on debt financing should have sufficient income
to pay its creditors. As for Apex Spinning this ratio has increased a bit over
the years. Interestingly both net income before interest and tax and
interest expense followed a downward trend in all those years.
Furthermore, high debt to asset ratio and equity multiplier ratio in 2011
indicate companys more reliance on debt financing in 2011. Yet TIE ratio
kept increasing. So this may indicate firms efficiency in utilizing debt
financing, they have been able pursue debt financing at a comparatively
lower cost.
Equity Multiplier
This ratio shows the companys financing strategy. The higher the ratio
the more is the usage of debt financing applied by the company. The trend
implies that companys reliance on debt financing was a bit lower in 2010
but it rose again in 2011.

Comparative Analysis: Apex Spinning & Knitting Mills


Ltd.
Liquidity Ratios
Current Ratio

Current ratio of Apex Spinning is a bit lower than that of the industry
which implies that the company hardly lets its current assets to pile up
comparing to the industry. Also at the same time it makes sure that it has
enough current assets in hand to liquidate and meet its current
obligations.
Acid-test Ratio
Acid-test ratio of the company is also lower than the industry average
value. So, we can say that unlike the industry the company cant meet its
current obligations without liquidating its inventories.

Profitability Ratios
Net profit margin ratio
Companys net profit margin ratio is considerably lower than that of the
industry average. So clearly the company has to bear comparatively more
expenses compared to other companies in the market. We need to look at
gross profit margin ratio in order to specify which cost component is
causing this event.
Gross profit margin ratio
Companys gross profit margin ratio is lower than the industry average as
well but not as low as net profit margin ratio is. So, we can now state that
COGS is the main reason behind companys comparatively low net profit
margin ratio. Other costs such as administrative and selling overhead also
play a role at it but not as significant as COGS does. Now the company
needs to check out whether they are purchasing superior quality product
or are they just paying high prices for an average quality raw material.

Asset Turnover Ratio


This ratio is considerably higher than the industry average value. So
clearly it indicates that the company is a lot efficient compared to other
players in the market when it comes to the question of utilizing assets to
generate sales. However, the company does need to make sure that they
are not over-utilizing their assets, let it be human resources or
machineries. Underpaid but efficient employees can leave the company
for better opportunity so they shouldnt let that happen. Over-use of
machineries can force them to reinvest in non-current way before the
anticipated period.
ROA
7

Companys return on assets is a bit lower than the industry average value.
To pinpoint the problem we need to look at the DuPont Analysis presented
later.
ROE
Like ROA, companys ROE figure is also lower than the industry average
value. Now lets have a look at the DuPont analysis to figure out the main
reason behind this.
DuPont Analysis
Like we said earlier ROE is a multiplication of Net Profit Margin, Asset
Turnover Ratio and Equity Multiplier. Among the three ratios only Net Profit
Margin is lower than the industry average. So we can state that
companys poor expense management is reason behind lower ROE.
ROA can be described as a multiplication of Asset Turnover Ratio and Net
Profit Margin. Like in the case of ROE here also Net Profit Margin was the
cause behind lower ROA. So again expense management issues have
caused the company to suffer from a lower ROA despite showing lot
efficiency in asset utilization.
EPS
EPS is a bit higher than the industry average even though the companys
net profit margin ratio was poor. This might happen if the company is
heavily reliant debt financing. Solvency ratios will enable us to determine
whether it is the case or not. But at present we can state that higher EPS
enhance companys image among shareholders.
Dividend Payout Ratio
This ratio is considerably higher than the industry average referring to the
fact that the company is paying a lot dividend to its shareholders
compared to other companies in the market. So, this information is likely
to make shareholders happy. But the drawback is that the company will
have lower retained earnings to make new and re-investments.

P-E Ratio
Interestingly companys P-E ratio is ratio is lot lower that the industry
average even though it has comparatively higher EPS and dividend payout
ratio. So, this indicates undervaluation of the company in the market.

Activity Ratios
Receivables Turnover Ratio
Companys receivable turnover ratio is a bit higher than the industry
average which indicates efficiency in collecting receivables.
Inventory Turnover Ratio
Inventory turnover ratio is higher as well and again it implies efficiency in
inventory utilization that contributes into COGS.
Cash Conversion Cycle
CCC is lot lower than the industry average which indicates superior
efficiency in managing accounts receivables, payables and inventories. It
has resulted due to lower DIH, DSO and slightly higher DPO. However, the
company needs to make sure that they arent losing any customers due to
strict receivables collection policy and credit terms.

Solvency Ratios
Debt to Total Assets Ratio
Company uses more debt financing than the average industry and it
explains how the firm managed to yield an above industry average EPS
even though it suffered from lower Net Profit Margin. More reliance on
debt financing gives a firm financial leverage.
TIE Ratio
TIE ratio is slightly less than the industry average. Company needs to be
cautious in this regard as they are more dependent on debt financing.
Equity Multiplier
As the company is more dependent on debt financing quite expectedly its
equity multiplier is a bit higher than the industry average due to
comparatively lower amount of equity.

Trend Analysis: Malek Spinning Mills Ltd


Liquidity Ratios
Current Ratio
9

Current Ratio of Maled Spinning Mills Ltd. is just above 1 and hasnt
deviated much over the three years. Low values for the current or quick
ratios (values less than 1) indicate that a firm may have difficulty meeting
current obligations. Low values, however, do not indicate a critical
problem. If it has good long-term prospects, it may be able to borrow
against those prospects to meet current obligations.
Over the years the ratio hasnt shown much movement and that indicates
that the companys policies pertaining to liquidity have been pretty stable
in last three years.
Acid-test Ratio
Acid-test ratio is similar to current ratio except of the fact that the former
one doesnt consider inventory in the calculation. As the figures are below
1 the company cant meet all of its current obligations without relying on
inventories.
Over the three years this particular ratio hasnt changed much which
indicates consistency in company policy regarding liquidity management.

Profitability Ratios
Net Profit Margin Ratio
The ratio increased a bit in the year 2010 but dipped in 2011. As It is
greater than industry average, it shows the company has been equally
efficient in managing its expense throughout the three years.
Gross profit Margin Ratio
Gross profit margin ratio kept increasing throughout the three years
indicating. It is good for the company in one sense that it is managing is
COGS in an efficient way but at the same time it needs to make sure that
they are purchasing quality raw materials. Otherwise low quality raw
materials may result in low quality finished products which in turn would
negatively affect the sales figures and profitability of the company.
Return on Assets
Malek Spinning Mills asset turnover ratio increased gradually and slightly
over the years. However, there is significant increase in sales. Also, the
ratio is considerably below 100% in all the years which is somewhat low in
comparison with its sales. It seems that the company isnt considering

10

asset turnover with current significance. They are investing for long term
profitability. The increasing rates and profits suggest accordingly so.
Return on Common Stock Equity
The pattern of this ratio of Malek Spinning Mills corresponds to that of
ROA; increased in 2011. For a better understanding of the changes
underlying in ROA and ROE we need to conduct DuPont analysis which is
presented below.
DuPont Analysis
The analysis reveals that equity multiplier has been relatively stable over
the years. Net profit margin among increased slightly among the three
which caused a slight increase of ROE in the year 2010. In 2011 even
though both asset turnover ratio and equity multiplier increased those
were nullified by a decrease in net profit margin ratio which has brought
down ROE figure slightly in that particular year
EPS
The higher the ratio the better is for the company as it indicates better
profitability of the entity. EPS was low in 2009 increased significantly in
2010. The number of common stock outstanding was constant over the
last few years and hence the deviation was caused by the change in Net
Profit of the company.
Dividend Payout Ratio
Malek Spinning Mills has paid out a very high percentage of its net income
as dividends in 2010. Shareholders of the company should be mighty
pleased with this kind of payout ratio. The drawback is that the company
will be left with very low amount of retained earnings which may in turn
hinder companys ability to reinvest in business or expansion. The
company needs to keep in mind its growth potential and future needs for
investment.

Activity Ratios
Receivables Turnover Ratio
The ratio has increased a bit in the year 2011 which means in that year
the company showed better efficiency in collecting its receivables
compared to previous years. The better efficiency may be a result of more

11

stringent receivables policy or simply more efficiency in collecting its


outstanding receivables.

Inventory Turnover Ratio


This ratio has increased steadily over the years though not by much.
Higher inventory turnover ratio implies efficiency in inventory
management. In case of Malek Spinning Mills remained almost steady
over last three years.
Asset Turnover Ratio
Malek Spinnings asset turnover ratio increased gradually and slightly over
the years. However, there is significant increase in sales. Also, the ratio is
slightly below industry average in all the years which is somewhat low in
comparison with its sales. It seems that the company isnt considering
asset turnover with current significance. They are investing for long term
profitability.
Cash Conversion Cycle
CCC of Malek Spinning Mills Ltd. has increased over the last three years.
This event definitely indicates efficiency in those above mentioned areas
but at the same time the company needs to check whether they are
missing out any potential buyers or not whom they could avail with a less
stringent credit policy.

Solvency Ratios
Debt to Total Assets Ratio
Like equity multiplier this ratio is also a measure of a companys financial
leverage. Higher ratio indicates more reliance on debt financing and vice
versa.
Times Interest Earned
As for Malek Spinning Mills Ltd. this ratio has increased a bit over the
years. Interestingly both net income before interest and tax and interest
expense followed a downward trend in all those years. So this may
indicate firms efficiency in utilizing debt financing, they have been able
pursue debt financing at a comparatively lower cost.
Equity Multiplier

12

This ratio shows the companys financing strategy. The higher the ratio
the more is the usage of debt financing applied by the company. The trend
implies that companys reliance on debt financing was a bit higher in 2010
but dipped in 2011.

Comparative Analysis: Malek Spinning Mills Ltd.


Liquidity Ratios
Current Ratio
Current ratio of Malek Spinning Mills Ltd. is a bit lower than that of the
industry which implies that the company hardly lets its current assets to
pile up comparing to the industry. Also at the same time it makes sure
that it has enough current assets in hand to liquidate and meet its current
obligations.
Acid-test Ratio
Acid-test ratio of the company is also lower than the industry average
value. So, we can say that unlike the industry the company cant meet its
current obligations without liquidating its inventories.

Profitability Ratios
Net profit margin ratio
Companys net profit margin ratio is considerably lower than that of the
industry average. So clearly the company has to bear comparatively more
expenses compared to other companies in the market. We need to look at
gross profit margin ratio in order to specify which cost component is
causing this event.
Gross profit margin ratio
Companys gross profit margin ratio is higher than the industry average.At
present it seems like they have been able to purchase raw materials at a
bit lower cost than other competitors without compromising much in the
13

quality as the ratio isnt considerably higher than the industry average.
But still the company needs to keep an eye open for any deterioration in
the quality of raw materials purchased. Otherwise it will affect sales and
profit figures.
Asset Turnover Ratio
This ratio is considerably lower than the industry average value. So clearly
it indicates that the company is not efficient compared to other players in
the market when it comes to the question of utilizing assets to generate
sales.
ROA
Companys return on assets is a bit lower than the industry average value.
To pinpoint the problem we need to look at the DuPont Analysis presented
later.
ROE
Like ROA, companys ROE figure is also lower than the industry average
value. Now lets have a look at the DuPont analysis to figure out the main
reason behind this.
DuPont Analysis
ROA can be described as a multiplication of Asset Turnover Ratio and Net
Profit Margin. Like in the case of ROE here also Net Profit Margin was the
cause behind lower ROA. So again expense management issues have
caused the company to suffer from a lower ROA despite showing lot
efficiency in asset utilization.
EPS
EPS is higher than the industry average even though the companys net
profit margin ratio was poor. This might happen if the company is heavily
reliant debt financing. Solvency ratios will enable us to determine whether
it is the case or not. But at present we can state that higher EPS enhance
companys image among shareholders.
Dividend Payout Ratio
This ratio is considerably higher than the industry average referring to the
fact that the company is paying a lot dividend to its shareholders
compared to other companies in the market. So, this information is likely
to make shareholders happy. But the drawback is that the company will
have lower retained earnings to make new and re-investments.
14

P-E Ratio
Interestingly companys P-E ratio is ratio is lot lower that the industry
average even though it has comparatively higher EPS and dividend payout
ratio. So, this indicates undervaluation of the company in the market.

Activity Ratios
Receivables Turnover Ratio
Companys receivable turnover ratio is a bit higher than the industry
average which indicates efficiency in collecting receivables.
Inventory Turnover Ratio
Inventory turnover ratio is higher as well and again it implies efficiency in
inventory utilization that contributes into COGS.

Cash Conversion Cycle


CCC is lot lower than the industry average which indicates superior
efficiency in managing accounts receivables, payables and inventories. It
has resulted due to lower DIH, DSO and slightly higher DPO. However, the
company needs to make sure that they arent losing any customers due to
strict receivables collection policy and credit terms.

Solvency Ratios
Debt to Total Assets Ratio
Company uses more debt financing than the average industry and it
explains how the firm managed to yield an above industry average EPS
even though it suffered from lower Net Profit Margin. More reliance on
debt financing gives a firm financial leverage.
TIE Ratio
TIE ratio is slightly less than the industry average. Company needs to be
cautious in this regard as they are more dependent on debt financing.
Equity Multiplier

15

As the company is more dependent on debt financing quite expectedly its


equity multiplier is a bit higher than the industry average due to
comparatively lower amount of equity

Trend Analysis: Rahim Textiles Ltd.


Liquidity Ratios
Current Ratio
Current Ratio of Rahim Textiles Ltd. is just below 1 and hasnt deviated
much over the three years. Low values for the current or quick ratios
(values less than 1) indicate that a firm may have difficulty meeting
current obligations. Low values, however, do not indicate a critical
problem. If it has good long-term prospects, it may be able to borrow
against those prospects to meet current obligations.
Over the years the ratio hasnt shown much movement and that indicates
that the companys policies pertaining to liquidity have been pretty stable
in last three years.

Acid-test Ratio
Acid-test ratio is similar to current ratio except of the fact that the former
one doesnt consider inventory in the calculation. As the figures are below
1 the company cant meet all of its current obligations without relying on
inventories.
Over the three years this particular ratio hasnt changed much which
indicates consistency in company policy regarding liquidity management.

Profitability Ratios
Net Profit Margin Ratio
The ratio increased a bit in the year 2009 but dipped in 2010. As It is
lower than industry average, it shows the company hasnt been equally
efficient in managing its expense throughout the three years. Either there
was a problem associated with COGS or the company may had to bear a

16

bit too much operating expenses. But to see the whole picture we have to
look into the following ratio.
Gross profit Margin Ratio
Gross profit margin ratio kept increasing throughout the three years
indicating. It is good for the company in one sense that it is managing is
COGS in an efficient way but at the same time it needs to make sure that
they are purchasing quality raw materials. Otherwise low quality raw
materials may result in low quality finished products which in turn would
negatively affect the sales figures and profitability of the company.
Return on Assets
Rahim Textiles asset turnover ratio increased gradually and slightly over
the years. However, there is significant increase in sales. Also, the ratio is
considerably below 100% in all the years which is somewhat low in
comparison with its sales. It seems that the company isnt considering
asset turnover with current significance. They are investing for long term
profitability. The increasing rates and profits suggest accordingly so.
Return on Common Stock Equity
The pattern of this ratio of Rahim Textiles corresponds to that of ROA;
increased in 2011. For a better understanding of the changes underlying
in ROA and ROE we need to conduct DuPont analysis which is presented
below.
DuPont Analysis
The analysis reveals that equity multiplier has been relatively stable over
the years. Net profit margin among increased slightly among the three
which caused a slight increase of ROE in the year 2010. In 2011 even
though both asset turnover ratio and equity multiplier increased those
were nullified by a decrease in net profit margin ratio which has brought
down ROE figure slightly in that particular year
EPS
The higher the ratio the better is for the company as it indicates better
profitability of the entity. EPS was high in 2009dropped significantly in
2010. The number of common stock outstanding was constant over the
last few years and hence the deviation was caused by the change in Net
Profit of the company.
Dividend Payout Ratio

17

Rahim Textiles has paid out a very high percentage of its net income as
dividends in 2010. Shareholders of the company should be mighty pleased
with this kind of payout ratio. The drawback is that the company will be
left with very low amount of retained earnings which may in turn hinder
companys ability to reinvest in business or expansion. The company
needs to keep in mind its growth potential and future needs for
investment.

Activity Ratios
Receivables Turnover Ratio
The ratio has increased a bit in the year 2011 which means in that year
the company showed better efficiency in collecting its receivables
compared to previous years. The better efficiency may be a result of more
stringent receivables policy or simply more efficiency in collecting its
outstanding receivables.
Inventory Turnover Ratio
This ratio has increased steadily over the years though not by much.
Higher inventory turnover ratio implies efficiency in inventory
management. In case of Rahim Textilesit remained almost steady over last
three years.
Asset Turnover Ratio
Rahim Textiles asset turnover ratio increased gradually and slightly over
the years. However, there is significant increase in sales. Also, the ratio is
slightly below industry average in all the years which is somewhat low in
comparison with its sales. It seems that the company isnt considering
asset turnover with current significance. They are investing for long term
profitability.
Cash Conversion Cycle
CCC of Rahim Textiles Ltd. has increased over the last three years. This
event definitely indicates efficiency in those above mentioned areas but at
the same time the company needs to check whether they are missing out
any potential buyers or not whom they could avail with a less stringent
credit policy.

Solvency Ratios
Debt to Total Assets Ratio
18

Like equity multiplier this ratio is also a measure of a companys financial


leverage. Higher ratio indicates more reliance on debt financing and vice
versa.
Times Interest Earned
As for Rahim Textiles Ltd. this ratio has increased a bit over the years.
Interestingly both net income before interest and tax and interest expense
followed a downward trend in all those years. So this may indicate firms
efficiency in utilizing debt financing, they have been able pursue debt
financing at a comparatively lower cost.
Equity Multiplier
This ratio shows the companys financing strategy. The higher the ratio
the more is the usage of debt financing applied by the company. The trend
implies that companys reliance on debt financing was a bit higher in 2010
but dipped in 2011.

Comparative Analysis: Rahim Textiles Ltd.


Liquidity Ratios
Current Ratio
Current ratio of Rahim Textiles Ltd. is a bit lower than that of the industry
which implies that the company hardly lets its current assets to pile up
comparing to the industry. Also at the same time it makes sure that it has
enough current assets in hand to liquidate and meet its current
obligations.
Acid-test Ratio
Acid-test ratio of the company is also lower than the industry average
value. So, we can say that unlike the industry the company cant meet its
current obligations without liquidating its inventories.

Profitability Ratios
Net profit margin ratio

19

Companys net profit margin ratio is considerably lower than that of the
industry average. So clearly the company has to bear comparatively more
expenses compared to other companies in the market. We need to look at
gross profit margin ratio in order to specify which cost component is
causing this event.
Gross profit margin ratio
Companys gross profit margin ratio is higher than the industry average.At
present it seems like they have been able to purchase raw materials at a
bit lower cost than other competitors without compromising much in the
quality as the ratio isnt considerably higher than the industry average.
But still the company needs to keep an eye open for any deterioration in
the quality of raw materials purchased. Otherwise it will affect sales and
profit figures.
Asset Turnover Ratio
This ratio is considerably lower than the industry average value. So clearly
it indicates that the company is not efficient compared to other players in
the market when it comes to the question of utilizing assets to generate
sales.
ROA
Companys return on assets is a bit lower than the industry average value.
To pinpoint the problem we need to look at the DuPont Analysis presented
later.
ROE
Like ROA, companys ROE figure is also lower than the industry average
value. Now lets have a look at the DuPont analysis to figure out the main
reason behind this.
DuPont Analysis
ROA can be described as a multiplication of Asset Turnover Ratio and Net
Profit Margin. Like in the case of ROE here also Net Profit Margin was the
cause behind lower ROA. So again expense management issues have
caused the company to suffer from a lower ROA despite showing lot
efficiency in asset utilization.
EPS
EPS is higher than the industry average even though the companys net
profit margin ratio was poor. This might happen if the company is heavily
reliant debt financing. Solvency ratios will enable us to determine whether
20

it is the case or not. But at present we can state that higher EPS enhance
companys image among shareholders.
Dividend Payout Ratio
This ratio is considerably higher than the industry average referring to the
fact that the company is paying a lot dividend to its shareholders
compared to other companies in the market. So, this information is likely
to make shareholders happy. But the drawback is that the company will
have lower retained earnings to make new and re-investments.
P-E Ratio
Interestingly companys P-E ratio is ratio is lot lower that the industry
average even though it has comparatively higher EPS and dividend payout
ratio. So, this indicates undervaluation of the company in the market.

Activity Ratios
Receivables Turnover Ratio
Companys receivable turnover ratio is a bit higher than the industry
average which indicates efficiency in collecting receivables.
Inventory Turnover Ratio
Inventory turnover ratio is higher as well and again it implies efficiency in
inventory utilization that contributes into COGS.
Cash Conversion Cycle
CCC is lot lower than the industry average which indicates superior
efficiency in managing accounts receivables, payables and inventories. It
has resulted due to lower DIH, DSO and slightly higher DPO. However, the
company needs to make sure that they arent losing any customers due to
strict receivables collection policy and credit terms.

Solvency Ratios
Debt to Total Assets Ratio
Company uses more debt financing than the average industry and it
explains how the firm managed to yield an above industry average EPS
even though it suffered from lower Net Profit Margin. More reliance on
debt financing gives a firm financial leverage.
21

TIE Ratio
TIE ratio is slightly less than the industry average. Company needs to be
cautious in this regard as they are more dependent on debt financing.
Equity Multiplier
As the company is more dependent on debt financing quite expectedly its
equity multiplier is a bit higher than the industry average due to
comparatively lower amount of equity.

Trend Analysis: Square Textiles Ltd.


Liquidity Ratios
Current Ratio
Square Textiles Ltd has a current ratio slightly over 1 and has minor
deviation over the three years (maintaining centrality around 1.47). It
implies that to meet its current requirement, the company holds sufficient
current assets that can be liquidated. The figures also imply that a small
segment of the current assets have been financed by long term debt and
the rest by current liabilities. Current assets havent piled up in the last
years as ratios are just over 1.
Over the years the ratio hasnt shown considerable movement indicating
the companys policies pertaining to liquidity being stable in last three
years.
Acid-test Ratio
As the figures show, they are scattered near around 1, the company is
capable of meeting most of its current obligations. It doesnt have to rely
exceedingly on inventories.
The ratio has changed slightly over the 2010 & 2011. This indicates few
changes in company policy regarding liquidity management over that
period.

Profitability Ratios
Net Profit Margin Ratio
The ratio increased greatly in 2010 but dipped slightly in 2011. If we look
at the income statement figures then we will see that companys net profit
increased accordingly with its sales over 2010 & 2011.
22

Increasing figures with big volumes in consecutive years indicate that the
company has been greatly efficient in managing its expense. The
operating expense was maintained in accordance with COGS. Only a slight
dip in 2011 would indicate that the company ran a bit more efficiently in
2010 than 2011. But this doesnt change the fact that companys
production and management are proficient in comparison to market.

Gross profit Margin Ratio


Gross profit margin ratio kept increasing throughout the three years
indicating. It is good for the company in one sense that it is managing is
COGS in an efficient way but at the same time it needs to make sure that
they are purchasing quality raw materials. Otherwise law quality raw
materials may result in law quality finished products which in turn would
negatively affect the sales figures and profitability of the company.
Asset Turnover Ratio
Square Textiles asset turnover ratio increased gradually and slightly over
the years. However, there is significant increase in sales. Also, the ratio is
considerably below 100% in all the years which is somewhat low in
comparison with its sales. It seems that the company isnt considering
asset turnover with current significance. They are investing for long term
profitability. The increasing rates and profits suggest accordingly so.
Return on Assets
Return on assets refers to companys ability to generate net profit utilizing
its assets. The significantly increasing figures over the years indicate that
company is well capable of doing so. Though a companys COGS consume
a substantial portion of its sales, in this case it couldnt affect ROA as the
figures were increasing in considerable amount.
The ROA decreased slightly in 2011 though. This may indicate that in that
year even though both sales and assets increased net profit did not
mainly due to relatively high COGS. However, the consistent rates suggest
successful maintenance of the companys raw material management
according to cash & COGS.
Return on Common Stock Equity
The pattern of this ratio of Apex Spinning corresponds to that of ROA;
increased significantly in 2010 and dropped minuscule in 2011. The
figures have been pretty stable over the years. This shows the company
has been efficient in utilizing its common equity to generate net income.
DuPont Analysis

23

The equity multiplier of Square Textiles Ltd. has been relatively stable over
the years. Net profit margin increased slightly among the three which
caused a significant increase of ROA in the year 2010. In 2011 even
though both asset turnover ratio and equity multiplier increased the ROA
figure slightly decreased in that particular year. This may be due to
decreased asset allocation/ inventory allocation for other purposes.
EPS
EPS has increased vastly in 2010 and then dipped a bit 2011. However,
regardless of increase, the figures are considerably low, indicating
average profitability on the rise towards betterment. The number of
common stock outstanding decreased significantly over the last few years
and hence the deviation was caused by the change in Net Profit of the
company.

Dividend Payout Ratio


Over the three years, the Dividend payout ratio of Square Textiles Ltd. has
decreased significantly. This indicates that the company has high amount
of retained earnings & plans on reinvestment. However, the decreasing
trend may displease potential shareholders, as they invest into those
reinvestments without any significant return. To maintain consistent input
of shareholders, the company should increase this payout ratio past
business expansion. This will ensure market growth and future investment
possibilities.
P/E Ratio
According to the tremendously high P/E ratio in 2009, the company was
highly overvalued in that particular year. Though EPS was very low in
2009 market price of companys stock was much higher. The evaluation
descended to typical in the years following.

Activity Ratios
Receivables Turnover Ratio
The ratio has increased sequentially in minuscule figures. This means that
the company improved its performance in collecting receivables over the
years. This increased efficiency supposedly is a plausible result of
consistent stringent receivables policy or simply more efficiency in
collecting its outstanding receivables.
Inventory Turnover Ratio
This ratio has decreased moderately from 2009 to 2010, then rose slightly
in the following year. The ratio is considerably low. This indicates
consistent inefficiency in inventory management.
24

In case of Square Textiles Ltd., over the years the inventory and COGS
didnt have any collaborated platform for efficient inventory management.
Neither the COGS did increase nor the inventory remained relatively
constant, or vice versa. And the inconsistency of the figures over the
years shows that the company policy on inventory management wasnt
successfully operational. However, increased figures in 2011 may indicate
induced efficiency measures.
Cash Conversion Cycle
CCC of Square Textiles has reduced increased significantly in 2010, then
decreased vastly in 2011. In 2010, DIH and DSO increased and DPO
decreased, resulting into increase in CCC. In the following year, the
scenario was opposite. This indicates the company being more efficient in
managing payables, receivables & inventories in 2011 than 2010.

Solvency Ratios
Debt to Total Assets Ratio
Like equity multiplier this ratio is also a measure of a companys financial
leverage. It rose slightly in 2010 and dipped in 2011 indicating
consistency in financial strategy.
Times Interest Earned
In case of Square Textiles Ltd., the ratio rose greatly in 2010 and
decreased significantly in 2011. Both net income before interest and tax
and interest expense followed an upward trend in all those years.
Furthermore, high debt to asset ratio and equity multiplier ratio in 2010
indicate companys more reliance on debt financing in 2010.
Consequently TIE ratio kept increasing. But it fall in 2011. This indicates
firms higher efficiency in utilizing debt financing in 2010 than 2011. They
have been able pursue debt financing at a comparatively lower cost.
Equity Multiplier
This ratio shows the companys financing strategy. The higher the ratio
the more is the usage of debt financing applied by the company. The trend
implies that companys reliance on debt financing was a bit higher in 2010
but it lessened again in 2011.

Comparative Analysis: Square Textiles Ltd.


25

Liquidity Ratios
Current Ratio
Square Textiles have a current ratio that is slightly lower than the industry
average indicating to the fact that the company hasnt allowed its current
assets to pile up a lot.
Acid-test Ratio
Acid-test ratio is also lower than the industry average. So these two ratios
imply the companys efficiency in current asset management. At the same
time the company managed to maintain an average acid-test ratio that is
more than 1, so they do not need to rely upon their inventories to meet
their current obligation.

Profitability Ratios
Net Profit Margin Ratio
Net profit margin ratio is higher than the industry average and that is a
sign of efficient management of company expenses. Its also not likely the
company is over-using its assets or workforce as there is no big gap
between the industry average and the company average. So most likely
the company can reap the whole benefit of an increased net profit margin
with worrying about the drawbacks.
Gross profit Margin Ratio
Gross profit margin ratio is also higher than the industry average and
most likely this has a significant role to play behind increased net profit
margin. At present it seems like they have been able to purchase raw
materials at a bit lower cost than other competitors without compromising
much in the quality as the ratio isnt considerably higher than the industry
average. But still the company needs to keep an eye open for any
deterioration in the quality of raw materials purchased. Otherwise it will
affect sales and profit figures.
Asset Turnover Ratio
Asset turnover ratio is also higher than the industry indicating to the fact
that the company has been able to generate more sales per tk worth of
asset. So this shows better utilization of companys assets. They just need
to make sure that they are not over-using machineries otherwise they may
have to make unplanned investment due to early deterioration.
Return on Assets
Return on assets of Square Textiles is slightly higher than the industry
average and this again means more efficiency and better utilization of

26

companys assets. In DuPont analysis we will have a closer look at the


reasons behind this slightly above average ROA.
Return on Common Stock Equity
ROE also shows a better than industry average figure. However, figure
here is a bit better than the ROA and increased used of debt financing can
be reason for that. Lets have a look at DuPont analysis for further
investigation.
DuPont Analysis
All three components of the analysis: Net Profit Margin, Assets Turnover
Ratio and Equity Multiplier are better than the industry average. Higher
equity multiplier could be reason for better ROE compared to ROA. So
clearly the company is utilizing and managing its assets well.
As far as ROA is concerned we need to look at two components: Net Profit
Margin Ratio and Assets Turnover Ratio. Both of them are higher than the
industry average value. This again points at more efficiency policies and
practices.
EPS
EPS is slightly higher than the industry average and it was expected as
the company experienced better than average profitability and also relies
a bit more on debt financing. Increased EPS should enhance company
image.
Dividend Payout Ratio
Dividend payout ratio is also higher than the industry average. So, Square
Textiles have been paying its shareholders comparatively more dividends
than the industry. Its certainly is a good news for the shareholders and
may have a role to play in the market price of company share.
P/E Ratio
Surprisingly P-E ratio is way below than the industry average even it has
higher than average EPS and dividend payout ratio. So, all these
information refers to the fact that shares of Square Textiles are a lot
undervalued. If the market works in a somewhat efficient manner than its
share price is likely to go up in near future.

Activity Ratios
Receivables Turnover Ratio
Unlike profitability ratios receivables turnover ratio doesnt reflect
companys efficiency. Its slightly lower than the industry average.
However, it shouldnt be an issue for the company if a less stringent
collection and credit policy allow them to retain and attract customers.
27

Inventory Turnover Ratio


Inventory turnover ratio is again slightly lower than the industry average.
But the difference isnt large enough to sound an alarm.
Cash Conversion Cycle
CCC is also slightly higher than the industry average. Here is an
interesting event going on. Companys DSO is a bit higher than the
industry average, however much of that impact has been nullified due to a
higher than industry average DPO. So the firm is late in receiving money
from its customers but at the same they paying their suppliers a lot later.
So, basically they arent doing a bad job in managing their cash
conversion cycle.

Solvency Ratios
Debt to Total Assets Ratio
As the firm relies a bit more on debt financing its debt to total assets ratio
is a bit higher than the industry average. This should give the company a
tax shield and financial leverage.
Times Interest Earned
This ratio is important in the companys aspect as they are a bit more
reliant on debt financing. They are doing a good job here as the ratio is
higher than the average. So most likely they are earning enough income
to pay for their interest expenses.
Equity Multiplier
Like debt to total assets ratio equity multiplier is also a bit higher than the
industry average due to more use of debt financing.

Analysis on Horizontal Statements


We have considered 2009 as the base year in all the calculation and
analysis so that we can observe year to year growth of different sectors of
the companies and industry.

Income Statement
Apex Spinning & Knitting Mills Ltd.
Even though both sales and gross profit decreased in the year 2010 net
income in that year was more than that of the previous year. The only
reason that we observe from the horizontal statement is that the company
managed to pay a lot less income tax in the year 2010 which enabled
them to maintain a better net income figure.
28

Figures in 2011 are equally interesting, the company managed to yield


35% more revenue but most of it was wiped out due to higher COGS
resulting in only 7% increase in gross profit. Even that 7% was nullified
due to a higher administrative & selling overhead. The company still
managed to yield a better net income before tax figure compared to 2009
as they managed to curb their interest expenses and this resulted in a net
income figure that is higher than 2009 but slightly lower than 2010.
Anlima Yarn Dyeing Ltd.
Figures are exceptionally for the company in the year 2010 and 2011
compared to the figures of 2009. The company managed a better
performance in almost every department. They even managed to have
lower interest expense in 2011 compared to 2009. The main reason might
be in the interest expense, even though the managed double the profit
figures their interest expense wasnt much in 2010 and in 2011 it in fact
went down. So might have resulted in healthy net income figures in 2010
and in 2011.
Malek Spinning Mills Ltd.
Malek Spinning suffered a lot in 2010 as all the sales and profitability
figures are lower than 2009. Things could have been a bit worse if they
hadnt managed substantial increase in other income segment. In 2011
even though they managed to yield higher sales the effect was wiped out
due to high COGS and administrative and selling expenses. So the
company definitely needs to focus on their expense management issues.
Rahim Textiles Mills Ltd.
The company suffered a lot due to high interest expense in 2010. Even
after managing better sales figures they had to accept 81% decrease in
net income in 2010 owing to high interest expense and administrative
expense. In 2011 the net income figure was a bit better though it was due
to higher sales and a lot higher other income figures. They still had to pay
a lot interest expense compared to that of 2009.
Square Textiles Ltd.
The company doubled their net income figure in 2010 mainly due to
higher sales figure, much higher gross profit and lower interest expense.
So clearly they did a much better job in 2010. Things were pretty much
same in 2011, better sales figures, higher gross margin eventually
resulting in higher net income compared to 2009.
Textile Industry
Industry as a whole managed to yield better net income in both 2010 and
2011 compared to 2009. Higher sales, higher gross profit, comparatively
managed interest expense and lower tax expense were the reasons
behind the increase in net income for the year 2010 and 2011.

29

Balance Sheet
Apex Spinning & Knitting Mills Ltd.
Companys total current assets decreased in 2010 even though cash and
other receivables rose sharply. Cash figure was a lot high 2011 as well so
it indicates the company isnt utilizing its cash properly and missing out on
short term investment opportunities. Quite surprisingly the company
significantly reduced it long term obligations over the years. However it
still had more debt in 2011 due to heavy influence on current liabilities.
Even though this would give the company a bit of leverage we must admit
that Its quite a risky strategy the company has taken.
Anlima Yarn Dyeing Ltd.
Accounts receivables of the company rose sharply in 2010 and in 2011
which may be a result of huge credit sales compared to 2009. Still it
shows lack of efficiency in managing receivables. This company has also
reduced its dependence on long term debt and increased its dependence
on short term debt obligations over the three years. Equity has been kept
at a steady level.
Malek Spinning Mills Ltd.
The company shows some serious inefficiency in cash management as its
cash figures rose extremely high in 2010. It has been brought down a lot
in 2011 still it was much higher compared to 2009. Furthermore the
company changed its financing policy twice in the last three years. In
2010 it showed heavy reliance on equity financing and almost halved its
debt obligations. Just the opposite happened in 2011, reduced equity
considerably and doubled the debt financing compared to that of 2009.
They have dramatically changed their policies and practices from 2010 to
2011.
Rahim Textiles Mills Ltd.
This company also shows a bit cash management issues as cash figure
just shot up in 2011. They are certainly missing out some short term
investment opportunities. Other than that the rest of figures have been
kept quite steady over the past three years.

Square Textiles Ltd.


Again cash management is a problem in 2011. Increased dependence on
debt financing more compared to equity financing. Both current and long
term debt financing have been relied upon.

30

Textile Industry
Industry as a whole cash management seems to be a problem that needs
addressing. More reliance on equity financing has been observed in 2010
and quite the opposite has been seen in 2011. Accounts payable has been
exploited a bit in 2011 among the alternatives of current liabilities. Other
figures have been relatively stable.

Analysis on Vertical Statements


Income Statement
Apex Spinning & Knitting Mills Ltd.
COGS percentage is highest and as a result gross profit percentage is
lowest among all the firms. So the company needs to check whether they
are getting superior quality raw materials or not and if they are
purchasing superior quality raw materials then how much value its adding
to the company.
Except of Anlima Yarn administrative and selling overhead is a bit higher
for the company.They need to check whether they are overstaffed or not.
Also need to see for redundant machineries if any.
Anlima Yarn Dyeing Ltd.
COGS and gross profit percentage is pretty similar to the rest of the
companies if not a bit higher. However they suffer from high
administrative and selling costs which affected its profitability.
Malek Spinning Mills Ltd.
COGS and gross profit percentage are pretty much similar to the rest of
the companies, however in 2011 the company suffers from much reduced
gross profit margin due to high COGS.
Selling and administrative expenses have been kept in check compared to
its competitors.
Rahim Textiles Mills Ltd.
Gross profit percentage, administrative and selling overhead percentage is
pretty much similar to the other companies in the industry. However, the
company suffers from lower net profit percentage due comparatively
higher interest expense.
Square Textiles Ltd.

31

The company managed to yield better gross profit percentage and net
profit percentage in 2010 and in 2011 mainly due to lower COGS and
slightly lower administrative costs. If the company can deliver quality
products retaining and attracting customers then reduced COGS shouldnt
be a concerning issue.

Balance Sheet
Apex Spinning & Knitting Mills Ltd.
Lower percentage of cash cancelled out the effect of higher percentage of
accounts receivables resulting in current assets level that is pretty much
similar to industry average except of 2010.
The company has been comparatively more reliant debt financing and less
reliant on equity financing compared to other companies.
Anlima Yarn Dyeing Ltd.
The company holds substantially high percentage of fixed assets which is
lot higher than other companies. Current asset portion is comparatively
lower.
They have been interested in debt financing compared to equity financing.
Malek Spinning Mills Ltd.
Asset segregation is similar to other firms or to the industry average.
However the company showed exceptionally high reliance on equity
financing in 2010. That tendency was curbed a bit in 2011 still it was
much higher than what other companies follow.
Rahim Textiles Mills Ltd.
Current asset portion is lot smaller and fixed assets comprise most of its
assets value. The company is much reliant on debt financing and a lot less
on equity financing.
Square Textiles Ltd.
Figures of Square Textiles dont deviate much from the industry average.
Both current assets and fixed assets somewhat corresponds to that of
industry average. Financing strategy also somewhat aligns with the
industry policy on average except in 2010 when the company showed a
bit more reliance on debt financing.

32

Conclusion
We have reached the end of the report. Based on our findings we can
afford to make few recommendations regarding the financial performance
of the companies.

Apex Spinning should be have a look at its COGS and try to improve
its gross profit margin ratio.
Anlima Yarn should address its liquidity issues and focus on better
utilization of its assets.
Malek Spinning should develop better cash management strategy
and can afford to use more debt financing.
Rahim Textiles can also afford to have more debt financing and
should look out for ways to curb its expenses to boost net profit
margin ratio.
Square Textiles should maintain most of its ongoing policies and no
need to take any radical steps as at present they are going pretty
smoothly.

33

References
Annual Report 2010 11 & 2011 12: Apex Spinning & Knitting Mills Ltd.
Annual Report 2009 10 & 2010 11: Square Textiles Ltd.
Annual Report 2009 10 & 2010 11: Anlima Yarn Dyeing Ltd
Annual Report 2009 10 & 2010 11: Rahim Textiles Ltd.
Annual Report 2009 10 & 2010 11: Malek Spinning Ltd.