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RATIO ANALYSIS

OF
GUL AHMED TeXTILES MILLS

Presented by:Rohit Agarwal

Karachi BASHIR H. ALIMOHAMMED October 01, 2000 Chairman & Chief Executive Gul Ahmed Textile Mills Limited Balance Sheet As At June 30, 2000
Note

Share capital Authorized, capital


50,000,000 ordinary Shares of Rs. 10/- each Issued subscribe and paid up Capital Reserved Inappropriate profit Proposed bonus share

June o0,2000 Rs.000s

Sep. 30,1999 Rs.000s

500,000 383,325 1841721 5371 38332 2268749 2036250 68273

500,000 340733 1805053 4463 42592 2192841 1386906 110713

Non-current liabilities Long term loans Deferred liabilities

Current Liabilities Short term bank borrowings Current maturity of long term loans Trade and other payable Provision for taxation

4375827 73993 943201 39000 5432021

4541962 99798 684018 60000 5385778

TOTAL

9805293

9076238

Note

June 30,2000 Rs.000s

Sep. 30,1999 Rs.000s

Property, plant and equipment Operating assets Capital work-in-progress 3486380 542129 4028509 58450 3009318 460301 3469619 58450

Long Term Investment

Long term loans and advances Long term deposits Current assets Stores, spares and loose tools Stock-in-trade Trade debts Loans and advances Deposits and prepayments Other receivables Short term investment Cash and bank balance

7021 3560

8365 3560

338375 2408648 1925491 166061 18935 183200 551497 115546 5707753 9805293

356553 2043870 2058428 258548 2478 170555 546785 99027 5536244 9076238

TOTAL

PROFIT AND LOSS ACCOUNT For the period from October 01, 2004 to June 30, 2005

Note

For nine month ended June 30,2000 Rs.000s 5876261 4912888 963373

For the year ended sep. 30,1999 Rs.000s 6665898 5621084 1044814

Sales Cost of goods sold Gross profit Operating Express Administration Distribution cost Operating profit

350789 253435 604224 359149 6719 365868

411309 270558 681867 362947 11454 374401 109594 13240 900 123734 250667 47917 202750

Other operating income

Finance cost Workers profit participation fund Workers welfare fun

236912 6448 600 243960 121908 46000 75908

Profit for the period/year before taxation Provision after taxation Profit after taxation

Earning per share (Rs.)

1.98

5.29

Ratio Analysis of the Company Financially ratios can for convenience be divided into four basic groups or categories: liquid ratios, activity ratios, debt ratios, and profitability ratios. Liquidity, activity, and debt ratios primarily measure risk, profitability ratios measure return.
Liquidity Ratios The liquidity of a business firm is measured by its ability to satisfy its short term obligations as they come due. Liquidity refers to the solvency of the firms over all financial position the case with which it can pay its bills.

Net working Capital Networking capital though not actually a ratio is commonly used to measure a firms over all liquidity. It is calculated as follows.
Net working capital = current assets current liability Net working capital = ,168,786,199 277,652,492 = 58,866,377
The figure is quite useful for internal control. A time series comparison of the firms net working capital is often helpful in evaluating its operations.

Current Ratio: The current ratio is one of the most commonly cited financial ratios, measures of the firms ability to meet its short-term obligations. It is calculated as follows. For the year in 1999 Current ratio = current assets / current liabilities =101,242,705 / 157,063,847 = 0.6446 2000 Current ratios = 168,786,119 / 227,652,492 = 0.7414

Quick Ratio (Acid Test) A measure of liquidity calculated by dividing the firms current assets minus inventory by current liabilities. The quick ratio of the company is calculated as follows.
1999 Quick Ratio = =

= .5219

2000
Quick Ratios =

=0.4805 Inventory Turnover Commonly measures the activity, or liquidity of a firms inventory. It is calculated as 1999 Inventory turnover =

=
= =27.82 times 2000 = =9.49 times

Fixed Asset Turnover The fixed asset turnover measures the efficiency, with which the firm has been using its fixed, or earning, assets to generate sales. It is calculated by dividing the firms sales by its net fixed assets: Fixed asset turnover = sales / net fixed assets 1999 =612,068,314 / 293,395,271 =2.09 times 2000 =662,165,987/288,368,555 =2.29times This means that the company turns over its net fixed asset 2.09 times in a year 1999 and in 2000 the net fixed asset turnover is 2.29 times which shows that the higher fixed asset turnover are preferred, since they reflect greater efficiency of fixed asset utilization. This difference may be for operating efficiencies.

Total Asset Turnover It indicates the efficiency with which the firm uses all its assets to generate sales. Generally the higher a firms total assets turnover, the more efficiently its assets have been used. The total asset turnover is calculated as follow for the year. Total Asset Turnover = Sales / Total Assets 1999 =612,068,314/398,161,034 =1.54 times 2000 =662,165,987/457,589,874 =1.45times This is acceptable because of nominal change in the companys therefore turn its assets over 1.45 times a year.

Debt Ratio The debt ratio measures the proportion of total assets financed by the firms creditors. Debit ratio can be measured as follow. Debt ratio = total liabilities / total assets 1999 =388,797,910/396,161,034 =0.89 or 98% 2000 =433,525,717/457,589,874 =0.95 or 95% This indicates the firm this year has financed 95% of its assets with debts. The higher this ratio, the more financial leverage the firms have.

Debt Equity Ratio The debt equity ratio indicates the relationship between the longterm funds provided by creditors and those provided by the firms owners. Debt equity ratio = long term debts / stock holders equity 1999 = 54,932,816/7,363,124 =7.46 2000 =44,086,926/24,064,157 =1.83 Time Interest Earned Ratio The time interest earned ratio measures the ability to make contractual interest payments. The higher the value of this ratio, the better able the firm is fulfills its interest obligations. Time interest = earning before interest and taxes / interest 1999 =50,687,436/45,555,696 =1.113 2000 =65,980,665/48,395,941 =1.36

Analyzing Profitability A firms profitability can be assessed relative to sales, assets, and equity or share value. Gross Profit Margin The gross profit margin measures the percentage of each sales rupee remaining after the firm has paid for its goods. The higher the gross profit margin the better and the lower the relative cost of merchandising sold and vice versa. G. P Margin = G.P / Sale 1999 = 76,037,251/612,068,314 =0.124 or 12% 2000 = 98,458,586/662,165,987 =0.149 or 15% The CGS has decreased due to more efficient production process, less wastage of material.

Net Profit Margin It measures the percentage of each sales rupee remaining after all expenses, including taxes, have deducted. Net profit margin = net profit after taxes / sales 1999 =5,189,659/612,068,314 =0.85% 2000 =16,701,033/662,165,987 =2.5% Returns on a Total Assets It measures the overall effectiveness of management in generating profits with its available assets, also called return on investment. Return on total assets. = net profit after tax / total assets =5,189,689/396,161,034 =1.3% =16,701,033/457,589,874 =3.6%

Return on Equity It measure the return earned on the owners investment in the firm Return on equity = net profit after tax / stockholders equity 1999 =5,189,659/7,363,124 =70.5% 2000 = 16,701,033 / 24,064,157 =69.4% Earning Per Share ESP = earning available for common stock holders / total number of shares 1999 = 5, 189, 659, /6,000,000 = 0.89 2000 = 16,701,033/6,000,000 = 2.8

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