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INTRODUCTION TO BUSINESS FINANCE

MUHAMMAD ALI JINNAH UNIVERSITY 1


INTRODUCTION TO BUSINESS FINANCE

TERM REPORT

FINANCIAL ANALYSIS OF TOWELLERS LIMITED

SUBMITTED TO

MR. ASIF SAEED NAJI

SUBMITTED BY

SYED OMER HASAN

SECTION

DATED

JULY, 9th 2009

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INTRODUCTION TO BUSINESS FINANCE

LETTER OF ACKNOWLEDGEMENT

July 9th, 2009

First of all I would like to thanks to AL MIGHTY ALLAH


who give me enough strength to complete this report. This
task was assigned to me by my course instructor MR. ASIF
SAEED NAJI who also helped me out through out this
project.

This report shows the financial position of Towellers


Limited which is prepared as a part of the course
requirement for Introduction to Business Finance. The
material compiled and presented in this report is a result of
exhaustive work.

This report has proved to be a great experience. For this, I


would like to thank our course instructor “Mr. ASIF
NAJI” for providing us with the opportunity, as well as his
guidance in the light of his vast experience.

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INTRODUCTION TO BUSINESS FINANCE

EXECUTIVE SUMMARY

This project is prepared on a Annual Report of “Towellers


Ltd”, which gives us a knowledge of the Finance
terminologies that are used in the financial report. In this
report I worked on the Common size Balance sheet,
common size income statement, Ratio Analysis, Growth
Rates, Time Series Analysis, Cross sectional Analysis. The
primary objective of this report is to identify the financial
functions and analysis of Towellers Ltd. My purpose of
writing this report is a step to learn the different
techniques used in Financial Management.

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TABLE OF CONTENT
1) COMPANY INTRODUCTION
1.1 Vision……………………………………………………….. 5
1.2 Mission……………………………………………………… 6
1.3 Company Information………………….…………………… 7
1.4 Director’s Report…………………………………………… 8
1.5 Company Profile……………………………………………. 9
1.6 Products……………………………………………………...
10

2) INTRODUCTION TO FINANCIAL RATIOS


2.1 Ratios…………………………….………………………….
11

3) RATIO ANALYSIS…………………………………………….
16

4) COMMON SIZE STATEMENT……………………………....


22

5) GROWTH RATE
5.1 Internal Growth Rate 2007………………………………..
24

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5.2 Sustainable Growth Rate 2007…………………………


24

6) PROFORMA STATEMENT ………………………………….


25

7) ANALYSIS
7.1 Table of time series and cross sectional analysis……………. 27
7.2 Time Series Analysis…………………………………………
28
7.3 Cross Sectional Analysis (2007……………………………..
31

8) RECOMMENDATION………………………………………….
33

INTRODUCTION

Towellers was established as a private limited company in the


year 1973, initially having operations limited to manufacturing
terry towels only. The year 1979 brought a new phase in the life
of Towellers. This year the company achieved, not only the top
most position in the country, as a manufacturer of terry towels
and made-ups, but at the same time walked into other fields, i.e.
bed wear, garments (both knitted & woven), home textiles and
several other textile made-ups.

VISION STATEMENT

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“To be a Dynamic, Profitable and Growth Oriented Company.”

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MISSION STATEMENT

To be a foremost company receptive to the needs of our


customers acknowledged for consistently providing fine quality
product and services by understanding the behavior and
preparing fully to meet the challenges of global markets and to
maximize profit by making best efforts in production planning,
quality of products and marketing strategies and so give
consistent financial return to the Shareholders on their
investment.”

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COMPANY INFORMATION

BOARD OF DIRECTORS

CHIEF EXECUTIVE
Mr. S. M. Obaid

DIRECTORS
Mr. S. M. Junaid
Mrs. Surraiya Junaid
Mr. S.M. Obaid
Mr. Tariq Muhammad Khan.
Mr. Shaheer Hussain Siddiqui
Mr. Nasir A. Khan
Mr. Javed Ashfaq
Mr. Mukhtar Ahmed Malik

COMPANY SECRETARY
Mr. Tariq Muhammad Khan

CHIEF FINANCIAL OFFICER


Mr. Muhammad Noman Jalil

BANKERS
Union Bank Limited
Askari Commercial Bank Limited
Hong Kong & Shanghai Bank Corp.
Soneri Bank Limited

AUDITORS
Mushtaq & Company
Chartered Accountants
407-Commerce Centre,
Hasrat Mohani Road, Karachi.
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SHARE REGISTRAR
Noble Computer Services (Pvt.) Limited
Sohni Centre, BS-5 & 6, Block-4, F.B. Area,
Main Karimabad, Karachi
Tel: 6801880, 6801129

AUDIT COMMITTEE
Mr. Mukhtar Ahmed Malik (Chairman)
Mr. Shaheer Hussain Siddiqui (Member)
Mr. Tariq Mohammad Khan (Member)
INTERNAL AUDIT DEPARTMENT
Mr. Syed Adil Tariq Hameed (Incharge)
Mr. Mohammad Farzan Ijtaba (Secretary)
Mr. Farooq Ahmed Siddiqui (Member)
Mr. Sanaullah Khan (Member)

REGISTERED OFFICE
WSA-30 & 31, Block-1,
Federal "B" Area, Karachi-75950
Web Site: www.towellers.com
E-mail: towellers@cyber.net.pk

MILLS
Plots No. 14, 15/1, 15/2, 15/A, 16/2, 17/2,
Sector 12-D, N.K.I.A., Karachi.
Plot No. J-7, J-8, H.I.T.E. Hub, Balouchistan.
Survey No; 248, 249, 11, 264, 265, 292, 293, 301
Deh Hattul Buth Taluka Thana Bola Khan
District Dadu.

DIRECTOR REPORT TO THE MEMBERS


The Directors have the pleasure in submitting their report to the members
alongwith (unaudited) accounts for the 3rd quarter ended March 31, 2007.
OPERATING RESULTS
By the grace of God the company managed to make a profit of Rs. 4,497
million after meeting all operational, administrative, financial and other
expenses even though the:

1 . Cotton Yarn prices in the period went up


drastically.
2. The shipping companies increased their freight rates for this period
by over 20%.
3. The fuel, gas and electricity charges also went up.
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4. The prices of dyes & chemicals increased.

The period under review was a very tough keeping in view the above-
mentioned facts and also keeping in mind that the orders were booked in
June 2005 for the next 12 months and had to be honored at the booked
prices. The textile industry in general also faced tough competition from
other exporting countries like Bangladesh, India and China etc.

The Financial Result of the company are reproduced as under:

(Rupees in thousand)

Sales Net
1,541,141
Cost of goods sold
1,300,173
Gross profit
240,968
Distribution cost
107,605
Administrative cost
84,246
Other operating income 307
Operating profit
49,425
Finance cost
28,436
Other operating expenses 1,049
Profit before taxation
19,939
Taxation
15,442
Profit after Taxation 4,497
Add: un appropriate profit B/F
299,990
Add: Incremental Depriation 1,812
Available for appropriation
306,299
Balance Carried to balance sheet
306,299

FUTURE PLANS:

The management as advised earlier had launched an expansion programme


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to upgrade the quality and to house all its manufacturing facilities under one
roof in order to have better controls and to minimize and cut down on its
overhead in order to achieve a better financial result and higher profits. The
project is nearly in the phase of completion and we hope to be in trial
production in june 2006.

STAFF. & LABOUR RELATIONS:

The management is always seeking a close relationship with the staff


members, whose satisfaction remains a key priority for the company.

On behalf of the board, I would like to thank the workers and staff at all
levels for the hard work put in by them, which enabled the company to
operate efficiently and hope that their efforts will continue during. the coming
years.

STORY OF SUCCESS
With continued successes and expansions, the company entered an entirely
new league in the year 1994 and became a public corporation. Their assets
had exceeded certain limits and it became imperative that they show their
worth to the people.

AWARDS AND ACHIEVEMENTS

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In appreciation of its contributions towards the development of the country's


exports, the company has the honor of having received Pakistan's most
prestigious and coveted Export Performance Awards and in addition to this
they, for their high quality products, services and performance standards,
received international applause by being presented with the International
Asia Award, the Gold Mercury International Award and the Asian
Productivity Organization's Gold Medal. Besides these, the company has
won numerous awards and recognitions, from various local and international
organizations.

INTERNATIONAL QUALITY STANDARD


The success story of Towellers must be attributed to the unfailing dedication
of its people, professionals in their respective fields, towards their customers
as all standards and guidelines given by them are followed and executed to
the core. To prove this to the world in 1998, the company strived and
successfully managed to obtain the international quality standard of ISO
9002, for their exports.

The company has a very satisfied and devoted customer base of not only
those who have been with the company since its inception, but also those
who have just entered into the industry. For this new generation of textile
buyers, the company has already begun broadening its product base, with
the recent inclusion of a printing mill and a facility to produce quilts and
comforters, with its own garneting unit. In addition to this, the latest
technology in compaction has also been installed in order to give the
products the best possible finish.

The future, as it comes, has a lot more in store for the world, when Towellers
intends to include a spinning facility and much more.

PRODUCTS
Towellers Limited has a wide variety of products. The products are very
distinctly divided between institutional and retail. In the institutional we cater
to the health care, hospital and linen rental. In retail we cater mostly to the
importers and stores.

• TOWELS
• APPAREL
• BLANKETS
• BABY PRODUCTS
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• BED WEAR
• KITCHEN PRODUCTS

INTRODUCTION TO FINANCIAL RATIOS

Financial ratios are useful indicators of a firm’s performance and financial


situation. Most ratios can be calculated from information provided by the
financial statements. Financial ratios can be used to analyze trends (Time
series ratio analysis) and to compare the firm’s financials to those of other
firms (Cross sectional ratio analysis). In some cases, ratio analysis can
predict future bankruptcy.

Financial ratios can be classified according to the


information they provide. The following type of ratios are
frequently used:

SHORT-TERM SOLVENCY RATIOS:

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These ratios measure a firm’s ability to meet its short-term obligations. These
include:

• Current Ratio
• Quick Ratio
• Cash Ratio
• Working Capital

LONG-TERM SOLVENCY RATIOS:


These ratios measure a firm’s ability to meet its long-term obligations. These
include:
• Debt ratio
• Debt to Equity ratio
• Times Interest earned

ASSETS UTILIZATION RATIOS:


These indicate how efficiently management utilizes its Assets in generating
Revenue by relating or comparing Sales to different types of Assets. These
include:

• Account Receivable Turnover


• Average Collection Period
• Inventory Turnover
• Fixed Assets Turnover
• Total Assets Turnover

PROFITABILITY RATIOS:
These measure the overall record of management in producing profit. These
include:

• Gross profit margin


• Operating profit margin
• Net profit margin
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• Return on Assets
• Return on Equities

DIVIDEND POLICY RATIOS:


These provide insight into the dividend policy of the firm and the prospects for
future growth. Following are the commonly used ratios:

• Dividend per share


• Dividend payout ratio
• Retention ratio
• Earning per share

CURRENT RATIOS

The Current Ratio is one of the best known measures of financial strength. It
is figured as shown below:

Current Ratio = Total Current Assets / Total Current Liabilities

The main question this ratio addresses is: "Does your business have enough
current assets to meet the payment schedule of its current debts with a
margin of safety for possible losses in current assets, such as inventory
shrinkage or collectable accounts?" A generally acceptable current ratio is 2
to 1. But whether or not a specific ratio is satisfactory depends on the nature
of the business and the characteristics of its current assets and liabilities.
The minimum acceptable current ratio is obviously 1:1, but that relationship
is usually playing it too close for comfort.

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If you feel your business's current ratio is too low, you may be able to raise it
by:
• Paying some debts.
• Increasing your current assets from loans or other borrowings with a
maturity of more than one year.
• Converting non-current assets into current assets.
• Increasing your current assets from new equity contributions.
• Putting profits back into the business.

QUICK RATIOS

The Quick Ratio is sometimes called the "acid-test" ratio and is one of the
best measures of liquidity. It is figured as shown below:

Quick Ratio = Cash + Government Securities + Receivables / Total


Current Liabilities

The Quick Ratio is a much more exacting measure than the Current Ratio.
By excluding inventories, it concentrates on the really liquid assets, with
value that is fairly certain. It helps answer the question: "If all sales revenues
should disappear, could my business meet its current obligations with the
readily convertible `quick' funds on hand?"

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An acid-test of 1:1 is considered satisfactory unless the majority of your


"quick assets" are in accounts receivable, and the pattern of accounts
receivable collection lags behind the schedule for paying current liabilities.

WORKING CAPITAL

Working Capital is more a measure of cash flow than a ratio. The result of
this calculation must be a positive number. It is calculated as shown below:

Working Capital = Total Current Assets - Total Current Liabilities


Bankers look at Net Working Capital over time to determine a company's
ability to weather financial crises. Loans are often tied to minimum working
capital requirements.
A general observation about these three Liquidity Ratios is that the higher
they are the better, especially if you are relying to any significant extent on
creditor money to finance assets.

LEVERAGE RATIO

This Debt/Worth or Leverage Ratio indicates the extent to which the


business is reliant on debt financing (creditor money versus owner's equity):

Debt/Worth Ratio = Total Liabilities / Net Worth

Generally, the higher this ratio, the more risky a creditor will perceive its
exposure in your business, making it correspondingly harder to obtain credit.

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GROSS MARGIN RATIO

This ratio is the percentage of sales dollars left after subtracting the cost of
goods sold from net sales. It measures the percentage of sales dollars
remaining (after obtaining or manufacturing the goods sold) available to pay
the overhead expenses of the company.
Comparison of your business ratios to those of similar businesses will reveal
the relative strengths or weaknesses in your business. The Gross Margin
Ratio is calculated as follows:

Gross Margin Ratio = Gross Profit / Net Sales

NET PROFIT MARGIN RATIO

This ratio is the percentage of sales dollars left after subtracting the Cost of
Goods sold and all expenses, except income taxes. It provides a good
opportunity to compare your company's "return on sales" with the
performance of other companies in your industry. It is calculated before
income tax because tax rates and tax liabilities vary from company to
company for a wide variety of reasons, making comparisons after taxes
much more difficult. The Net Profit Margin Ratio is calculated as follows:

Net Profit Margin Ratio = Net Profit Before Tax / Net Sales

INVENTORY TURNOVER RATIO


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This ratio reveals how well inventory is being managed. It is important


because the more times inventory can be turned in a given operating cycle,
the greater the profit. The Inventory Turnover Ratio is calculated as follows:

Inventory Turnover Ratio = Net Sales / Average Inventory at Cost

ACCOUNTS RECEIVABLE TURNOVER RATIO


This ratio indicates how well accounts receivable are being collected. If
receivables are not collected reasonably in accordance with their terms,
management should rethink its collection policy. If receivables are
excessively slow in being converted to cash, liquidity could be severely
impaired. Getting the Accounts Receivable Turnover Ratio is a two step
process and is is calculated as follows:

Daily Credit Sales = Net Credit Sales Per Year / 365 (Days)
Accounts Receivable Turnover (in days) = Accounts Receivable /
Daily Credit Sales

RETURN ON ASSETS RATIO

This measures how efficiently profits are being generated from the assets
employed in the business when compared with the ratios of firms in a similar
business. A low ratio in comparison with industry averages indicates an
inefficient use of business assets. The Return on Assets Ratio is calculated
as follows:

Return on Assets = Net Profit Before Tax / Total Assets

RETURN ON INVESTMENT (ROI) RATIO

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The ROI is perhaps the most important ratio of all. It is the percentage of
return on funds invested in the business by its owners. In short, this ratio
tells the owner whether or not all the effort put into the business has been
worthwhile. If the ROI is less than the rate of return on an alternative, risk-
free investment such as a bank savings account, the owner may be wiser to
sell the company, put the money in such a savings instrument, and avoid the
daily struggles of small business management. The ROI is calculated as
follows:

Return on Investment = Net Profit before Tax / Net Worth

These Liquidity, Leverage, Profitability, and Management Ratios allow the


business owner to identify trends in a business and to compare its progress
with the performance of others through data published by various sources.
The owner may thus determine the business's relative strengths and
weaknesses.

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SHORT TERM SOLVENCY

Working capital

= CURRENT ASSETS – CURRENT LIABILTIES

= 191,064,572

Current ratio

= CURRENT ASSETS / CURRENT LIABILTIES

1.26

Quick ratio

(CURRENT ASSETS - STOCK – PREPAID)/CURRENT


LIABILITIES

= 0.76

RATIO ANALYSIS (2007)

LONG TERM SOLVENCY RATIO

Debt ratio

= TOTAL LIABILITIES / TOTAL ASSETS

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= 0.64

Debt to equity ratio

= TOTAL DEBT / TOTAL EQUITY

= 0.75

Time Interest Earned

= EARNING BEFORE INTEREST AND TAXES / INTEREST


EXPENSE

= 2.27 TIMES

ASSETS UTILIZATION/ACTIVITY RATIO

Average collection period

= ACCOUNT RECEIVABLE / (NET SALES / 365)

= 58 DAYS

Average payment period

= ACCOUNT PAYABLE / (NET PURCHASES / 365)

= 41 DAYS

Inventory turnover

= COST OF GOOD SOLD / AVERAGE INVENTORY

= 2.82 TIMES

Total Assets turnover

= NET SALES / TOTAL ASSETS

= 1.35 TIMES
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Fixed Assets turnover

= NET SALES / FIXED ASSETS

= 3.69 TIMES

PROFITABLITY RATIO

Operating profit margin

= OPERATING PROFIT / NET SALES

= 0.019

Net profit margin

= NET PROFIT / NET SALES

= 0.003

Book return on assets

= NET PROFIT / TOTAL ASSETS

= 0.004

Return on equity

= NET PROFIT / SHARE HOLDER’S EQUITY

= 0.0025

RATIO ANALYSIS (2008)

SHORT TERM SOLVENCY

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Working capital

= CURRENT ASSETS – CURRENT LIABILTIES

= 136,283,861

Current ratio

= CURRENT ASSETS / CURRENT LIABILTIES

= 1.26

Quick ratio

= (CURRENT ASSETS – STOCK – PREPAID)

= 0.58

LONG TERM SOLVENCY RATIO

Debt ratio

= TOTAL LIABILITIES / TOTAL ASSETS

= 0.75

Debt to equity ratio

= TOTAL DEBT / TOTAL EQUITY

= 2.98

Time Interest Earned

= EARNING BEFORE INTEREST AND TAXES / INTEREST


EXPENSE

= 1.96 TIMES

ASSETS UTILIZATION/ACTIVITY RATIO


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Average collection period

= ACCOUNT RECEIVABLE / (NET SALES / 365)

= 94 DAYS

Average payment period

= ACCOUNT PAYABLE / (NET PURCHASES / 365)

= 44 DAYS

Inventory turnover

= COST OF GOOD SOLD / AVERAGE INVENTORY

= 1.98 TIMES

Total Assets turnover

= NET SALES / TOTAL ASSETS

= 0.65 TIMES

Fixed Assets turnover

= NET SALES / FIXED ASSETS

= 1.61 TIMES

PROFITABLITY RATIO

Operating profit margin

= OPERATING PROFIT / NET SALES

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= 0.018

Net profit margin

= NET PROFIT / NET SALES

= 0.0021

Book return on assets

= NET PROFIT / TOTAL ASSETS

= 0.0014

Return on equity

= NET PROFIT / SHARE HOLDER’S EQUITY

= 0.54%

TIME SERIES AND CROSS SECTIONAL


ANALYSIS

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RATIOS 2007 2008 INDUSTRY


191,064,5136,283,8
WORKING CAPITAL 72 61 152,640,686

CURRENT RATIO 1.26 1.26 0.97

QUICK RATIO 0.76 0.58 0.46

DEBT RATIO 0.64 0.75 0.71

DEBT TO EQUITY RATIO 0.75 2.98 3.89

TIME INTEREST EARNED 2.27 1.96 3 TIMES

AVERAGE COLLECTION PERIOD 58 94 40.51

AVERAGE PAYMENT PERIOD 41 44 40.5

INVENTORY TURNOVER 2.82 1.98 4.67

TOTAL ASSETS TURNOVER 1.35 0.65 0.94

FIXED ASSETS TURNOVER 3.69 1.61 2.35

OPERATING PROFIT MARGIN 1.90% 1.80% 2.50%

NET PROFIT MARGIN 0.30% 0.21% 1.20%

BOOK RETURN ON ASSETS 0.40% 0.14% 0.2239%

RETURN ON EQUITIES 0.24% 0.54% 0.56%

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TOWELLERS LIMITED

CROSS SECTIONAL ANALYSIS (2008)

WORKING CAPITAL

It is commonly used to measure a firm’s overall liquidity

Towellers has 136,283,861 which is lesser than the industry Average 152,640,686,
firm is in worse condition “

CURRENT RATIO

It measures the firm’s ability to meet its short term obligations.

Towellers limited have 1.26 current rations in 2008 which is higher than the
industry Average 0.97 that’s why it’s in better condition.

QUICK RATIO

It provides the better measure of overall liquidity only when firm inventory
cant easily converted into cash.

Towellers Ltd has 0.58 quick ratio in 2008 which is greater than the industry
Average 0.46 that’s why it’s in better condition

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INVENTORY TURNOVER

“It reflects the speed with which firms moves its inventory from raw material
& with finished goods till sale to customer. Higher the values of this ratio
preferred because it indicates the quicker turnover of inventory.”

Towellers Ltd has 1.98 Inventory turnovers in 2008 which is less than the
industry Average 4.67 that’s why it’s worse in condition.

AVERAGE COLLECTION PERIOD

It is useful in evaluating credit and condition polices. The average amount of


time needed to collect account receivables.

Towellers Ltd has 94 days in 2008 shows the account receivable collected as
earlier than the industry Average 40.51 days that’s why firm is worse in
condition.

FIXED ASSETS TURNOVER

It measures the efficiency with which firm has been using its fixed earning
assets to generate sale.

Towellers has Fixed Assets Turnover of 1.61 times in 2008 which is less than
the industry average 2.35 times, in 2008 firm Fixed Assets Turnover reflects
the lower efficiency of fixed assets utilization because firm has newer assets
which have higher book value or older assets than industry fixed assets
turnover of firm can be misleading newer assets have lower turn over than
older assets have lower book value

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TOTAL ASSETS TURNOVER

It indicates the efficiency of the firm uses all its assets which generate sales.
Higher the Total Assets Turnover the more efficiency its assets have been
used.

Towellers has Total Assets Turnover of 0.65 times in 2008 which is lesser
than the industry average 0.94, firm is Worse in condition .This firm
measure is because of the lesser interest to management and its indicates
the firm operating have been financially inefficient

DEBT RATIO

It measures the proportion of total assets financed by the firm creditor .The
higher the debt ratio the greater the amount of other people is to generate
profits.

Towellers has Debt Ratio financed 0.75 in 2008 of its assets with debt. Firm
debt is higher than the Industry Debt Ratio 0.71

DEBT EQUITY

It indicates the relationship between the long term funds provided by the
creditor and by the firm owners.

Towellers has debt equity ratio of 2.98% or times as large as stockholders


equity .Firm with large amount of fixed assets cash flows or both have high
debt equity ratio . 3.89

OPERATING PROFIT

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It measures the percentage of each sales remain after all cost & expenses
other than the interest & taxes are deducted.
Towellers have 1.80% which shows the company is in Loss position. Industry
operating Profit is 2.5%.

NET PROFIT

It measures the percentage of each sales remaining after all cost and
expenses including interest and taxes have been deducted .The higher the
firms net profit the firm is better in condition.

Towellers have 0.21% net profit in 2008 means company isn’t earning profit
on sale. That’s why firm is in loss.

RETURN ON ASSETS

It measure the overall effectiveness of management is generating profits and


its available assets.

Towellers has .14% Return on Assets in 2008 which has generated lower
Return on Assets than industry Return on Assets is 0.2239%

RETURN ON EQUITY

It measures the return earned on the owners or both preferred and common
stockholders investment in the firm .generally the higher this return the
better off are the owner

Towellers have Return on Equity 0.54% in 2008 which is generating lower


Return on Assets than industry Return on Assets is 0.56.”

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TOWELLERS LIMITED

TIME SERIES ANALYSIS (2008)

WORKING CAPITAL

In 2008 working capital were 136,283,861 thousand which shows the


company still not maintains its liquidity position than 2004.

CURRENT RATIO

In 2007 current ratio was 1.26 which is equal to 2006 current ratio. Here this
ratio tells assets remains same.
In 2008 current ratio is again 1.26.

QUICK RATIO

In 2008 company paid current liability through current assets which was 0.58

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INVENTORY TURNOVER

In 2007 graph of this inventory goes down by 2.82 times


In 2008 graph of Inventory goes down more by 1.98.

AVERAGE COLLECTION PERIOD

In 2007 company again has account receivable collection in 58 days.


In 2008 the collection period is much greater than 2005 which is in 94 days.

FIXED ASSETS TURNOVER

In 2007 this fixed assets turnover is same by 3.69 times


In 2008 fixed assets turnover goes down by 1.61.Effecieny of fixed assets
utilization and level of efficiency is not achieved.

TOTAL ASSETS TURNOVER

In 2007 Total assets turnover is same by 1.35 times


In 2008 Total assets turnover goes down by 0.65 efficiency of Total assets
utilization and level of efficiency is not achieved. This firm measure is
because of the lesser interest to management and its indicates the firm
operating have been financially inefficient

DEBT RATIO

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In 2007company Debt Ratio is same by .64


In 2008 company has .76 debts which are higher than 2006 and 2007.

DEBT EQUITY RATIO

In 2007 Debt Equity Ratio was .75 which is same as 2006.


In 2008 Debt Equity Ratio is 2.98 times as large as stockholders equity .Firm
with large amount of fixed assets cash flows or both have high debt equity
ratio.

OPERATING PROFIT

In 2007 operating profit is 1.9% which is same.


In 2008 Towellers has 1.80% which shows the company is Loss position.

NET PROFIT

In 2007 Net loss is 0.30 which shows the company is still in loss
In 2008 Towellers has 0.21 net loss Means Company isn’t earning on sale.
That’s why firm get in loss

MUHAMMAD ALI JINNAH UNIVERSITY 35


INTRODUCTION TO BUSINESS FINANCE

RECOMMENDATIONS
A company should grow at its par by using all of its factors at full but this
company are lacking in it. This company is not only using it’s equity but also
the assets are misused. A company can prove its worth by improving
through the following factor:

• Buying factors of production at low cost or reducing its cost by


removing its unnecessary cost.

• Applying techniques that can apply all the resources at its par.

• Try to pay off the debts and collect its debt so that company can have
more of the resources in use and reducing the cost on interest.

• Paying of the loan taken from the bank.

• Collecting the accounts receivable and get more money involved in


the business.

MUHAMMAD ALI JINNAH UNIVERSITY 36

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