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Table of Contents

Internal Variance Analysis of Fauji fertilizer ....................................................................................................1 Internal Variance Analysis of Fatima fertilizer .................................................................................................4 External Variance Analysis for 2010.................................................................................................................7 External Varience Analysis for 2009.................................................................................................................8 Working Capital.................................................................................................................................................9 Current Ratio....................................................................................................................................................10 Quick Ratio (Acid Test Ratio) .........................................................................................................................11 Cash Ratio........................................................................................................................................................12 Gross Profit Margin .........................................................................................................................................13 Operating Profit Margin (return on sales)........................................................................................................14 Net profit margin (net return on sale) ..............................................................................................................15 Return on Total Assets.....................................................................................................................................16 Return on Stockholders Equity.......................................................................................................................17 Debt to Assets Ratio.........................................................................................................................................18 Debt to Equity Ratio ........................................................................................................................................19 Long term Debt to Equity ratio........................................................................................................................20 Times interest earned (coverage ratio).............................................................................................................21 Days of Inventory ............................................................................................................................................22 Inventory turnover ...........................................................................................................................................23 Average collection period ................................................................................................................................24 Conclusion .......................................................................................................................................................25

Variance Analysis Fauji Fertilizer Company Balance Sheet for the year ended December 31, 2010

Benchmark Year 2010


EQUITY AND LIABILITIES EQUITY Share capital Capital reserves Revenue reserves NON CURRENT LIABILITIES Long term borrowings Deferred taxation CURRENT LIABILITIES Trade and other payables Interest and mark up accrued Short term borrowings Current portion of long term borrowings Taxation 9,614,026 137,968 5,640,420 1,759,405 3,426,264 20,578,083 43,060,856 8,002,897 147,329 6,088,348 1,799,405 1,816,595 17,854,574 38,551,582 1,611,129 (9,361) (447,928) (40,000) 1,609,669 2,723,509 4,509,274 3,819,405 3,215,821 7,035,226 4,578,809 3,035,757 7,614,566 (759,404) 180,064 (579,340) 6,785,271 160,000 8,502,276 15,447,547 6,785,271 160,000 6,137,171 13,082,442 0 0 2,365,105 2,365,105 2010 2009 Variance

(Rupees 000)
Variance %

27.817 15.311

(19.883) 5.599 (8.235)

16.758 (6.785) (7.941) (2.273) 46.980 13.235 10.472

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Variance Analysis Fauji Fertilizer Company Balance Sheet for the year ended December 31, 2010

Benchmark Year 2010


ASSETS NON CURRENT ASSETS Property, plant and equipment Goodwill Long term investments Long term loans and advances Long term deposits and prepayments 15,933,588 1,569,234 7,870,027 455,328 9,037 25,837,214 13,993,518 1,569,234 7,727,528 337,541 6,305 23,634,126 1,940,070 0 142,499 117,787 2,732 2,203,088 2010 2009 Variance

(Rupees 000)
Variance %

12.176 1.811 25.869 30.231 8.527

CURRENT ASSETS Stores, spares and loose tools Stock in trade Trade debts Loans and advances Deposits and prepayments Other receivables Short term investments Cash and bank balances 2,440,201 211,720 357,956 336,269 50,188 617,664 12,020,581 1,189,063 17,223,642 43,060,856 2,996,633 144,087 256,886 130,219 37,653 734,062 6,768,568 3,849,348 14,917,456 38,551,582 (556,432) 67,633 101,070 206,050 12,535 (116,398) 5,252,013 (2,660,285) 2,306,186 4,509,274 (22.803) 31.945 28.235 61.275 24.976 (18.845) 43.692 (223.730) 13.390 10.472

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Variance Analysis Fauji Fertilizer Company Income Statement for the year ended December 31, 2010

Benchmark Year 2010


2010 2009 36,163,174 20,515,044 15,648,130 3,174,505 12,473,625 944,947 1,272,448 10,256,230 2,800,987 13,057,217 4,234,111 8,823,106 13 Variance 8,711,185 4,795,362 3,915,823 769,968 3,145,855 141,794 103,552 2,900,509 352,123 3,252,632 1,046,889 2,205,743 3.25

(Rupees 000)
Variance %

Sales Cost of sales GROSS PROFIT Distribution cost Finance cost Other expenses Other income NET PROFIT BEFORE TAXATION Provision for taxation NET PROFIT AFTER TAXATION
Earnings per share basic and diluted (Rs)

44,874,359 25,310,406 19,563,953 3,944,473 15,619,480 1,086,741 1,376,000 13,156,739 3,153,110 16,309,849 5,281,000 11,028,849
16.25

19.412 18.946 20.015 19.520 20.141 13.048 7.526 22.046 11.167 19.943 19.824 20.000 20.000

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Variance Analysis Fatima Fertilizer Company Balance Sheet for the year ended December 31, 2010
Benchmark Year 2010
EQUITY AND LIABILITIES SHARE CAPITAL AND RESERVES Authorized 2,100,000,000 (2009: 2,100,000,000) ordinary shares of Rs 10 each 400,000,000 (2009: 400,000,000) preference shares of Rs 10 each Issued, subscribed and paid up 2,000,000,000 (2009: 1,800,000,000) ordinary shares of Rs 10 each 400,000,000 (2009: Nil) preference shares of Rs 10 each Share premium Accumulated loss 2,010 2009

(Rupees 000)
Variance Variance

21,000,000 4,000,000

21,000,000 4,000,000

20,000,000 4,000,000 790,000 (531,220) 24,258,780

18,000,000 (257,212) 17,742,788

2,000,000 4,000,000 790,000 (274,008) 6,515,992

10.000 100.000 100.000 51.581 26.860

NON CURRENT LIABILITIES Advance against preference shares Long term finance Dividend payable on preference shares Employee retirement benefits 37,446,530 603,672 73,796 38,123,998 3,898,250 30,846,063 54,493 34,798,806 (3,898,250) 6,600,467 603,672 19,303 3,325,192 17.626 100.000 26.157 8.722

CURRENT LIABILITIES Current portion of long term finance Short term finance secured Trade and other payables Accrued finance cost Provision for taxation 316,208 3,704,173 2,989,396 64,483 7,074,260 402,796 1,662,141 2,596,001 4,660,938 (402,796) 316,208 2,042,032 393,395 64,483 2,413,322 100.000 55.128 13.160 100.000 34.114

CONTINGENCIES & COMMITMENTS 69,457,038 57,202,532 12,254,506 17.643

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Variance Analysis Fatima Fertilizer Company Balance Sheet for the year ended December 31, 2010
Benchmark Year 2010
ASSETS NON CURRENT ASSETS Property, plant and equipment Capital work in progress Deferred tax asset Long term loans and deposits 2010 2009 Variance

(Rupees 000)
% Variance

875,984 64,258,204 21,914 16,330 65,172,432

684,940 54,292,989 8,150 54,986,079

191,044 9,965,215 21,914 8,180 10,186,353

21.809 15.508 100.000 50.092 15.630

CURRENT ASSETS Stores and spares Stock in trade Trade debts Loans, advances, deposits, prepayments and other receivables Cash and bank balances

2,269,080 535,825 256,548 939,864 283,289 4,284,606 69,457,038

1,142,798 849,238 224,417 2,216,453 57,202,532

1,126,282 535,825 256,548 90,626 58,872 2,068,153 12,254,506

49.636 100.000 100.000 9.642 20.782 48.269 17.643

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Variance Analysis Fatima Fertilizer Company Profit and Loss Account for the year ended December 31, 2010
Benchmark Year 2010
2010 2009 (96,205) (7,494) 6,578 (97,121) (97,121) (0.08) (0.08) Variance (17,661) (1,456) (4,832) (23,949) (42,569) (66,518) 0.01

(Rupees 000)
% Variance 15.510 16.268 (276.747) 19.781 100.000 40.649 (14.286)

Administrative expenses Finance cost Other income Loss before taxation Taxation Loss for the year Loss per share basic (rupees) diluted (rupees)

(113,866) (8,950) 1,746 (121,070) (42,569) (163,639) (0.08) (0.07)

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

EXTERNAL VARIANCE ANALYSIS OF FAUJI FERTILIZER VS FATIMA FERTILIZER FOR THE YEAR ENDED DECEMBER 31, 2010

BALANCE SHEET EQUITY AND LIABILITIES EQUITY Issued, subscribed and paid up share capital NON CURRENT LIABILITIES Long term borrowings CURRENT LIABILITIES Trade and other payables Interest and mark up accrued Short term borrowings Current portion of long term borrowings Taxation ASSETS NON CURRENT ASSETS Property, plant and equipment Long term Loans, Deposits and Prepayments CURRENT ASSETS Stores, spares and loose tools Stock in trade Trade debts Loans, advances, deposits, prepayments and other receivables Cash and bank balances PROFIT AND LOSS ACCOUNT Finance cost Other expenses Other income NET PROFIT BEFORE TAXATION Provision for taxation NET PROFIT AFTER TAXATION

Benchmark FFC

FATIMA

(Rupees in '000) Variance % Variance

6,785,271

20,000,000

(13,214,729)

(194.76)

3,819,405

37,446,530

(33,627,125)

(880.43)

9,614,026 137,968 5,640,420 1,759,405 3,426,264

3,704,173 2,989,396 316,208 64,483

5,909,853 (2,851,428) 5,324,212 1,759,405 3,361,781

61.47 (2,066.73) 94.39 100.00 98.12

15,933,588 464,365

875,984 16,330

15,057,604 448,035

94.50 96.48

2,440,201 211,720 357,956 1,004,121 1,189,063

2,269,080 535,825 256,548 939,864 283,289

171,121 (324,105) 101,408 64,257 905,774

7.01 (153.08) 28.33 6.40 76.18

1,086,741 1,376,000 3,153,110 16,309,849 5,281,000 11,028,849

(8,950) (113,866) 1,746 (121,070) (42,569) (163,639)

1,095,691 1,489,866 3,151,364 16,430,919 5,323,569 11,192,488

100.82 108.28 99.94 101.00 100.81 101.00

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

EXTERNAL VARIANCE ANALYSIS OF FAUJI FERTILIZER VS FATIMA FERTILIZER FOR THE YEAR ENDED DECEMBER 31, 2009

BALANCE SHEET EQUITY AND LIABILITIES EQUITY Issued, subscribed and paid up share capital NON CURRENT LIABILITIES Long term borrowings CURRENT LIABILITIES Trade and other payables Interest and mark up accrued Short term borrowings Current portion of long term borrowings Taxation ASSETS NON CURRENT ASSETS Property, plant and equipment Long term Loans, Deposits and Prepayments CURRENT ASSETS Stores, spares and loose tools Stock in trade Trade debts Loans, advances, deposits, prepayments and other receivables Cash and bank balances PROFIT AND LOSS ACCOUNT Finance cost Other expenses Other income NET PROFIT BEFORE TAXATION Provision for taxation NET PROFIT AFTER TAXATION

Benchmark FFC

FATIMA

(Rupees in '000) Variance % Variance

6,785,271

21,000,000

(14,214,729)

(209.49)

4,578,809

30,846,063

(26,267,254)

(573.67)

8,002,897 147,329 6,088,348 1,799,405 1,816,595

1,662,141 2,596,001 402,796 -

6,340,756 (2,448,672) 6,088,348 1,396,609 1,816,595

79.23 (1,662.04) 100.00 77.62 100.00

13,993,518 343,846

684,940 8,150

13,308,578 335,696

95.11 97.63

2,996,633 144,087 256,886 901,934 3,849,348

1,142,798 849,238 224,417

1,853,835 144,087 256,886 52,696 3,624,931

61.86 100.00 100.00 5.84 94.17

944,947 1,272,448 2,800,987 13,057,217 4,234,111 8,823,106

(7,494) (96,205) 6,578 (97,121) (97,121)

952,441 1,368,653 2,794,409 13,154,338 4,234,111 8,920,227

100.79 107.56 99.77 100.74 100.00 101.10

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Working Capital
A measure of both a company's efficiency and its short-term financial health. It is also known as net working capital", or the "working capital ratio. The working capital ratio is calculated as Working Capital = Current Assets Current Libalities Current Ratio Fauji Fertilizer Fatima Fertilizer
Working Capital for Fauji Fertilizer
-2,700,000 -2,800,000 -2,900,000 -3,000,000 -3,100,000 -3,200,000 -3,300,000 -3,400,000 2010 2009

2010 (3,354,441) (2,789,654)

2009 (2,937,118) (2,444,485)


Working Capital for Fatima Fertilizer
-2,200,000 -2,300,000 -2,400,000 -2,500,000 -2,600,000 -2,700,000 -2,800,000 -2,900,000 2010 2009

Working Capital for 2010


0 -500,000 -1,000,000 -1,500,000 -2,000,000 -2,500,000 -3,000,000 -3,500,000 -4,000,000 Fauji Fertilizer Fatima Fertilizer 0 -500,000 -1,000,000 -1,500,000 -2,000,000 -2,500,000 -3,000,000 -3,500,000

Working Capital for 2009

Fauji Fertilizer Fatima Fertilizer

Analysis Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets (cash, accounts receivable and inventory). If a company's current assets do not exceed its current liabilities, then it may run into trouble paying back creditors in the short term. The worst-case scenario is bankruptcy. Working capitals for both companies i.e. Fauji and Fatima Fertilizer have declining working capital ratio and it is increased in 2010 than previous year 2009. Both Firms has been facing problems in paying the dues.
Financial Analysis Fauji fertilizer vs Fatima fertilizer

Page 9

Current Ratio
This ration indicates that for every one rupee of current assets there should be one rupee of current liability. A low current ratio indicates tied up assets not being put into use so therefore lack of liquidity. Current Ratio = Current Assets Current Liabiltites 2010 0.84 0.61 2009 0.83 0.48

Current Ratio Fauji Fertilizer Fatima Fertilizer

Current Ratio Fauji Fertillizer


0.838 0.837 0.837 0.836 0.836 0.835 0.835 2010 2009 2010 2009 0.700 0.600 0.500 0.400 0.300 0.200 0.100 0.000

Current Ratio Fatima Fertilizer

2010 2009

2010

2009

Current Ratio for 2010


1 0.8 0.6 0.4 0.2 0 Fauji Fertilizer Fatima Fertilizer Fauji Fertilizer
Fatima Fertilizer

Current Ratio for 2009


1 0.8 0.6 0.4 0.2 0 Fauji Fertilizer Fatima Fertilizer Fauji Fertilizer Fatima Fertilizer

Analysis The Current ratio is the measure of general liquidity in the firm. For both companies i.e. Fauji Fertilizer and Fatima Fertilizer, The current ratio of 2010 is slightly higher than that of 2009 which means that in 2010 the company will be much more in good position to pay the debt in the next coming year. In above comparative graph, you can easily judge that Fauji Fertilizer is in better position than Fatima Fertilizer.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Quick Ratio (Acid Test Ratio)


This is the measurement of Liquidity in Business. This is also most commonly used test of Liquidity. Qucik Ratio = Current assets - Inventory Current Liabilities Quick Ratio Fauji Fertilizer Fatima Fertilizer 2010 0.82 0.52 2009 0.82 0.47

Quick Ratio for Fauji Fertilizer


0.68 0.67 0.66 0.65 0.64 0.63 0.62 0.61 2010 2009 0.25 0.20 2010 2009 0.15 0.10 0.05 0.00

Quick Ratio for Fatima Fertilizer

2010 2009

2010

2009

Quick Ratio for 2010


0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Fauji Fertilizer Fatima Fertilizer 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

Quick Ration for 2009

Fauji Fertilizer Fatima Fertilizer

Fauji Fertilizer Fatima Fertilizer Fauji Fertilizer Fatima Fertilizer

Analysis Quick Ratio is an indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better the position of the company. In above calculation you can observe that Quick Ratio of Fauji Fertilizer is same 0.82 but for Fatima Fertilizer, it is increased from 0.47 to 0.52 which is shows good sign or improvement and shows ability to meet its short-term obligations with most its liquid assets.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Cash Ratio
This ratio indicates serve Liquidity problems with Inventory and Receivables. Cash Ratio = Cash Equivelent + Marketable Security Current Liability Cash Ratio Fauji Fertilizer Fatima Fertilizer 2010 0.64 0.17 2009 0.60 0.23

Cash Ratio for Fauji Fertilizer


0.65 0.64 0.63 0.62 0.61 0.6 0.59 0.58 0.57 2010 2009 0.25 0.20 2010 2009 0.15 0.10 0.05 0.00

Cash Ratio for Fatima Fertilizer

2010 2009

2010

2009

Cash Ratio for 2010


0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 Fauji Fertilizer Fatima Fertilizer 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

Cash Ratio for 2009

Fauji Fertilizer Fatima Fertilizer

Fauji Fertilizer Fatima Fertilizer Fauji Fertilizer Fatima Fertilizer

Analysis The ratio of a company's total cash and cash equivalents to its current liabilities. The cash ratio is most commonly used as a measure of company liquidity. It can therefore determine if, and how quickly, the company can repay its short-term debt. A strong cash ratio is useful to creditors when deciding how much debt, if any, they would be willing to extend to the asking party. Cash Ratio for Fauji Fertilizer is slightly increased from 2009 and for Fatima Fertilizer is decreased from 0.23 to 0.17. Fauji Fertilizer is more stable as you can see from above graphs and values.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Gross Profit Margin


This ratio shows the percentage of revenues available to cover operating expenses and yield a profit. Higher is better and the trend should be upward. Gross profit margin = Sales Cost of goods sold Sale Gross Profit Margin Fauji Fertilizer Fatima Fertilizer 2010 0.43 Not Possible 2009 0.43 Not Possible

Gross profit margin for Fauji Fertilizer


0.5 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2010 2009 2010 2009

Analysis This shows the percentage of available revenues according with respect to its sales. Gross Profit Margin for Fauji fertilizer is same for year 2010 and 2009 i.e. 0.43. If Fauji fertilizer wants to increase its profit margin then it should decrease the value of cost of goods sold, or increase the value of Sales. This Shows that company's profitability is low and cost of goods sold is very high. Gross Profit Margin for Fatima Fertilizer is not possible due to the fact that values of sales and Cost of goods sold is not given in Financial Statement.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Operating Profit Margin (return on sales)


Shows the profitability of current operations without regard to interest charges and income taxes. Higher is better and the trend should be upward. Operating profit margin = Sales Operating expenses Sale Operating Profit Margin Fauji Fertilizer Fatima Fertilizer 2010 0.36 Not Possible or Operating Income Sale 2009 0.36 Not Possible

Operating Profit Margin for Fauji Fertilizer


0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2010 2009 2010 2009

Analysis This ratio shows the profitability without including any types of charges or any type of expense. It is the ration between Operating Income and Sales. For Fauji fertilizer the value of Operating Profit Margin is very low i.e. 0.36 and it is constant between two years for 2010 and 2009. If Fauji fertilizer wants to increase Return on Sale then it should increase its Operating Income by having less Operating Expense. Return on Sale for Fauji fertilizer is very low. Operating Profit Margin for Fatima Fertilizer is not possible due to the fact that values of sales and Cost of goods sold is not given in Financial Statement.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Net profit margin (net return on sale)


Show the after-tax profits per dollar of sales. Higher is better and the trend should be upward. Net profit margin = Profit after taxes Sale Net profit margin Fauji Fertilizer Fatima Fertilizer 2010 0.25 Not Possible 2009 0.24 Not Possible

Net Profit Magin for Fauji Fertilizer


0.252 0.25 0.248 0.246 0.244 0.242 0.24 0.238 0.236 0.234 2010 2009 2010 2009

Analysis This ratio shows the profit margin including charges and expense. It is the ration between Profit after Taxes and Sales. For Fauji fertilizer the value of Operating Profit Margin is very low i.e. 0.25 but it is increase a very little from 0.24 (Year 2009) to 0.25 (Year 2010). If Fauji fertilizer wants to increase Net Return on Sale then it should decrease its Operating Expense. Net Return on Sale for Fauji fertilizer is very low but having positive value is the sign that company is making profits through operations. Net Profit Margin for Fatima Fertilizer is not possible due to the fact that values of sales and Cost of goods sold is not given in Financial Statement.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Return on Total Assets


A measure of the return on total investment in the Enterprise. Interest is added to after-tax profits to form the numerator since total assets are financed by creditors as well as by stockholder. Higher is better and the trend should be upward. Return on total assets = Profit after taxes + Interest Total assets Return on Total Assets Fauji Fertilizer Fatima Fertilizer 2010 0.26 (0.002) 2009 0.23 (0.002)

ROTA for Fauji Fertilizer 0.27 0.26 0.25 0.24 0.23 0.22 0.21 2010 2009 2010 2009
0 -0.0005 -0.001 -0.0015 -0.002 -0.0025

ROTA for Fatima Fertilizer


2010 2009

2010 2009

ROTA for 2010


0.3 0.25 0.2 0.15 0.1 0.05 0 -0.05 Fauji Fertilizer Fatima Fertilizer Fauji Fertilizer Fatima Fertilizer 0.25 0.2 0.15 0.1 0.05 0 -0.05 Fauji Fertilizer

ROTA for 2009

Fauji Fertilizer Fatima Fertilizer Fatima Fertilizer

Analysis Return on assets is a measure of how effectively the firm's assets are being used to generate profits. By having positive value means that company's assets are greater than its profit. For Fauji fertilizer the value of Return on Total Assets increased from 0.23 (Year 2009) to 0.26 (Year 2010). It shows a little improvement but higher value is better for company and trend should be upward. For Fatima fertilizer Negative ratio shows that company is in loss. Company has to pay interest cost from its assets.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Return on Stockholders Equity


Shows the return stockholders are earning on their investment in the enterprise. A return in 12-15% range is average and the trend should be upward. Return on stockholders equity = Profit after taxes____ Total stockholder equity 2010 0.71 (0.01) 2009 0.67 (0.01)

Return on Stockholders Equity Fauji Fertilizer Fatima Fertilizer

ROE for Fauji Fertilizer


0.72 0.71 0.7 0.69 0.68 0.67 0.66 0.65 2010 2009 0 -0.002 2010 2009 -0.004 -0.006 -0.008 -0.01 -0.012

ROE for Fatima Fertilizer


2010 2009

2010 2009

ROE for 2010


0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 -0.1 Fauji Fertilizer

ROE for 2009


0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 -0.1 Fauji Fertilizer

Fauji Fertilizer Fatima Fertilizer Fatima Fertilizer

Fauji Fertilizer Fatima Fertilizer Fatima Fertilizer

Analysis Return on equity is the bottom line measure for the shareholders, measuring the profits earned for each dollar invested in the firm's stock. Fauji fertilizer by having positive Return on Equity (ROE) shows that stockholders are getting profit from company, although it is very minimal but trend is going upward from 0.67 (Year 2009) to 0.71 (Year 2010). Fauji fertilizer must increase its net profit margin to have better ROE and to gain investor trust. Fatima fertilizer is in very bad situation, having negative ratio shows that company is in loss. Company has to pay interest cost from its assets.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Debt to Assets Ratio


Measure the extent to which borrowed funds have been used to finance the firms operation. Low fractions or ratios are better a higher fraction indicates overuse of debt and greater risk of bankruptcy. Debt to Assest Ratio = ___Total debt___ Total assets Debt to Assets Ratio Fauji Fertilizer Fatima Fertilizer 2010 0.64 0.65 2009 0.66 0.69

Debt to Assets ratio for Fauji Fertilizer


0.665 0.66 0.655 0.65 0.645 0.64 0.635 0.63 2010 2009 0.7 0.69 0.68 0.67 0.66 0.65 0.64 0.63

Debt to Assets ratio for Fatima Fertilizer

2010 2009

2010 2009

2010

2009

Debt to Assets ratio for 2010


0.652 0.65 0.648 0.646 0.644 0.642 0.64 0.638 0.636 0.634 Fauji Fertilizer Fatima Fertilizer 0.7 0.69 0.68 Fauji Fertilizer Fatima Fertilizer 0.67 0.66 0.65 0.64

Debt to Assets ratio for 2009

Fauji Fertilizer Fatima Fertilizer Fauji Fertilizer Fatima Fertilizer

Analysis Financial leverage ratios provide an indication of the long-term solvency of the firm. It also measures the extent to which the firm is using long term debt. Both Fauji and Fatima fertilizer have near to same values. Fauji fertilizer have 0.64 for the year 2010 and 0.66 for the year 2009, whereas Fatima fertilizer have 0.65 and 0.69 for the year 2010 and 2009 respectively. This shows that company can incur more debt if it wants. But both companies are near to breaking point which is alarming situation.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Debt to Equity Ratio


Should usually be less than 1.0 High ratios (especially above 1.0) signal excessive debt, lower creditworthiness, and weaker balance sheet strength. Debt to equity Ratio = ______Total debt_________ Total stockholders equity Debt to Equity Ratio Fauji Fertilizer Fatima Fertilizer 2010 1.79 1.86 2009 1.95 2.22

Debt to Equity ratio for Fauji Fertilizer


2 1.95 1.9 1.85 1.8 1.75 1.7 2010 2009 2010 2009 2.3 2.2 2.1 2 1.9 1.8 1.7 1.6

Debt to Equity for Fatima Fertilizer

2010 2009

2010

2009

Debto Equity ratio for 2010


1.88 1.86 1.84 1.82 1.8 1.78 1.76 1.74 Fauji Fertilizer Fatima Fertilizer 2.3 2.2 2.1 Fauji Fertilizer Fatima Fertilizer 2 1.9 1.8

Debt to Equity ratio for 2009

Fauji Fertilizer Fatima Fertilizer Fauji Fertilizer Fatima Fertilizer

Analysis Debt ratio should be less than 1.0, but for Fauji fertilizer having high values 1.79 and 1.95 for the year 2010 and 2009 respectively is the signal of excessive debt. Although it is decreased a little but still it is alarming situation. Same is the case for Fatima fertilizer, its Debt to Equity ratio decreased from 2.22 to 1.86 which is still very high value.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Long term Debt to Equity ratio


Shows the balance between debt and equity in the firms long term capital structure. A low ratio indicates greater capacity to borrow additional funds if needed. Long term debt to equity ratio = _____Long-term debt______ Total stockholders equity Long term debt to equity ratio Fauji Fertilizer Fatima Fertilizer 2010 0.25 1.54 2009 0.35 1.74

Debt to Equity ratio for Fauji Fertilizer


0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2010 2009 1.8 1.75 1.7 1.65 1.6 1.55 1.5 1.45 1.4

Debt to Equity for Fatima Fertilizer

2010 2009

2010 2009

2010

2009

Debt to Equity ratio for 2010


2 1.5 1 0.5 0 Fauji Fertilizer Fatima Fertilizer Fauji Fertilizer Fatima Fertilizer 2 1.5 1 0.5 0

Debit to Equity ratio for 2009

Fauji Fertilizer Fatima Fertilizer Fauji Fertilizer Fatima Fertilizer

Analysis Long term Debt ratio indicates a capacity to borrow additional fund by having low value of Debt to Equity ratio. This is ideal situation for Fauji fertilizer because 0.25 and 0.35 for the year 2010 and 2009 respectively. Fauji fertilizer is also in better condition than Fatima fertilizer because value of Debt to Equity ratio is still very low as compared to Fatima fertilizer.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Times interest earned (coverage ratio)


Measure the ability to pay annual interest charges. Lenders usually insist on minimum ratio of 2.0, but ratios above 3.0 signal better creditworthiness. Times interest earned ratio = Operatjng income Interest Expense Times interest earned ratio Fauji Fertilizer Fatima Fertilizer 2010 118.22 (0.04) 2009 88.63 (0.03)

Coverage ratio for Fauji Fertilizer


140 120 100 80 60 40 20 0 2010 2009 0 -0.01 2010 2009 -0.02 -0.03 -0.04 -0.05

Coverage ratio for Fatima Fertilizer


2010 2009

2010 2009

Coverage ratio for 2010


140 120 100 80 60 40 20 0 -20 Fauji Fertilizer 100 80 60 Fauji Fertilizer Fatima Fertilizer Fatima Fertilizer 40 20 0 -20

Coverage ratio for 2009

Fauji Fertilizer Fatima Fertilizer Fauji Fertilizer Fatima Fertilizer

Analysis The times interest earned ratio indicates how well the firm's earnings can cover the interest payments on its debt. This ratio also is known as the interest coverage. By having lower values it shows that company has very low capability to pay interest charges. Fauji fertilizer is in stable condition as compared to Fatima fertilizer, because it have much higher value of Times interest earned ration, whereas Fatima does not have any capability to pay interest charges by having negative value.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Days of Inventory
Measures inventory management efficiency. Fewer days of inventory are usually better. Days of inventory = ______Inventory_______ Cost of goods sold / 365 Days of Inventory Fauji Fertilizer Fatima Fertilizer 2010 3.05 Not Possible 2009 2.56 Not Possible

Days of Inventory for Fauji Fertilizer


3.1 3 2.9 2.8 2.7 2.6 2.5 2.4 2.3 2010 2009 2010 2009

Analysis The inventory turnover often is reported as the inventory period, which is the number of days worth of inventory on hand, calculated by dividing the inventory by the average daily cost of goods sold. Days of inventory for Fauji fertilizer is 3.05 for the year 2010 and 2.56 for the year 2009. Fauji fertilizer is in better condition because fewer days of inventory are usually better. Days of Inventory for Fatima Fertilizer is not possible due to the fact that values of sales and Cost of goods sold is not given in Financial Statement.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Inventory turnover
Measures the number of inventory turns per year. Higher is better. Inventory turnover = Cost of goods sold Inventory Inventory Turnover Fauji Fertilizer Fatima Fertilizer 2010 119.56 Not Possible 2009 142.38 Not Possible

Inventory turn-over for Fauji Fertilizer


145 140 135 130 125 120 115 110 105 2010 2009 2010 2009

Analysis Inventory turnover ratio is the cost of goods sold in a time period divided by the average inventory level during that period. Fauji fertilizer have very high Inventory turnover ratio i.e. 119.56 for year 2010 and 142.38 for the year 2009. Inventory turnover for Fatima Fertilizer is not possible due to the fact that values of sales and Cost of goods sold is not given in Financial Statement.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Average collection period


Indicates the average length of time the firm must wait after making a sale of receive cash payment. A short collection time is better. Average collection period = Acount recevieable Total Sales / 365 Average collection period Fauji Fertilizer Fatima Fertilizer 2010 5.02 Not Possible 2009 7.41 Not Possible

Average Collection Period for Fauji Fertilizer


8 7 6 5 4 3 2 1 0 2010 2009 2010 2009

Analysis The receivables turnover often is reported in terms of the number of days that sales remain in accounts receivable before they are collected. This number is known as the collection period. It is the accounts receivable balance divided by the average daily sales. Fauji fertilizer is in very good situation having short collection period for 5 days for the year 2010 and around 7 days for the year 2009. This Shows that company has not to wait too long time to receive cash payment after making sale. Average collection period for Fatima Fertilizer is not possible due to the fact that values of sales and Cost of goods sold is not given in Financial Statement.

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer

Conclusion

Financial Analysis

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Fauji fertilizer vs Fatima fertilizer