Fianl Project

2011 Final

Project of Financial Management

FINANCIAL MANAGMENT TOPIC: PROJECT ON Fauji Fertilizer Company & Engro Corporation limited

Submitted To: PROF. MUZAFFAR ASAD

Submitted By:

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Project of Financial Management Syed Nouman Ali

L1F10MCOM0145

Rabia Shahid

L1F10MCOM0124

Asma Arif

L1F10MCOM0123

Section: C

DUE DATE: 13 June, 2011

Contents

Acknowledgement.............................. Acknowledgement........................................................... .......................................................... ..........................................2 .............2 Meaning of ratio analysis:................................................................... analysis:............................................................................. ...................... ............3 3 Types of ratio comparisons.......................................................................................3 Cross-sectional analysis............................................................. analysis......................................................................... ........................ .............4 .4 Time -series analysis.......................................... analysis....................................................................... ............................................. ....................4 ....4 Groups of financial ratios.......................................................... ratios...................................................................................... ................................4 ....4

FAUJI FERTILIZER CORPORATION (FFC).........................................................5 History.......................................................................................................................5 History.......................................................................................................................5 .........................................................................................................5 Awards of FFC ...........................................................................................................5

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Project of Financial Management Mission Statement............................................ Statement......................................................................... ................................................ ............................6 .........6 Corporate Vision........................................................ Vision.......................................................................................... .................................. .............8 ............ .8 RATIO ANALYSIS.................. ANALYSIS............................................... .......................................................... ............................................. ......................9 ......9 BALANCE SHEET............................ SHEET......................................................... .......................................................... ........................................23 ...........23 INCOME STATEMENT........................................................................................25 ENGRO CORPORATION............. CORPORATION.......................................... ......................................................... ............................................26 ................26 ...................................................................................................29 RATIO ANALYSIS ...................................................................................................29 BALANCE SHEET............................ SHEET......................................................... .......................................................... ........................................42 ...........42 INCOME STATEMENT........................................................................................44 INCOME STATEMENT

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Acknowledgement We have the pearl of our eyes to admire blessing of the compassionate and omnipotent because the words are bound, knowledge is limited and time is short to express His dignity. It is one of the infinite blessings of almighty ALLAH that He bestowed us with potential and ability to complete the present training and make a material contribution towards the deep oceans of knowledge. First we avail this opportunity to bow our head before ALLAH almighty in humility who given us the wisdom and perseverance for completing this piece of report. We invoke peace for Holy Prophet Muhammad (S.A.W.) who is forever torch. We feel highly privilege to ascribe the most and ever burning flame of my gratitude and deep scene of devotion to the

Prof. Prof. Muzaffa Muzaffarr Asad

who taught us

with heart and also gave a guideline to this report.

“Financial Management project”

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Financial managers are always concerned with taking important decisions about the businesses of their organization. They have to consider each and every transaction of their business in order to keep track of changes in the equity. They have to present such a picture of their organization as would facilitate investors to invest in the company. Ratio analysis is one of the facilitative tools making the actual state of affairs of the business more comprehensive and explicable for the investors and potential users of the books of a ccounts of the company. Throughout this semester, I am conducting the ratio analysis of Engro And Fauji Fertilizer. both are pronounced companies companies of Pakistan. Pakistan. It is considered considered as the benchmark benchmark in power industry. industry. In this project, we will be focusing on a brief introduction of the company followed by its ratio analysis. In designing this project, the key source of information has been the financial statements of the company. I have put up all my efforts in bringing out the true picture of both companies and making this project a true replica of the actual state of affairs of the company.

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MEANING OF RATIO ANALYSIS: Ratio analysis is the method or process by which the relationship of items or group of items in the financial statement are computed, determined and presented. Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial health and profitability of business enterprises. Ratio analysis can be used both in trend and static analysis. There are several ratios at the disposal of an analyst but their group of ratio he would prefer depends on the purpose and the objective of analysis. While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus on a technique, which is easy to use. It can provide you with a valuable investment analysis tool. cross-sectional ctional analysis. Cross-sectional analysis compares financial This technique is called cross-se

ratios rat ios of sev severa erall com compan panies ies fro from m the sam samee ind indust ustry ry.. Rat Ratio io anal analysi ysiss can pro provid videe val valuabl uablee inform inf ormati ation on abo about ut a com company pany's 's fi financ nancial ial heal health. th. A fin financi ancial al rat ratio io mea measur sures es a com company pany's 's performance in a specific area. For example, you could use a ratio of a company's debt to its equity to measure a company's leverage. By comparing the leverage ratios of two companies, you can determ determine ine which company uses greater debt in the conduct of its business. A compan company y whose leverage ratio is higher than a competitor's has more debt per equity. You can use this information to make a judgment as to which company is a better investment risk.

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Project of Financial Management However, you must be careful not to place too much importance on one ratio. You obtain a better indication of the direction in which a company is moving when several ratios are taken as a group.

Types of ratio comparisons There are two major types of ratio comparisons: 

Cross-sectional analysis



Time series analysis

Cross-sectional Cross-sectional analysis Cross-sectional analysis is the comparison of different firm’s financial ratios at the same point in time; comparing the firm’s ratio to those firms in its industry or to industry averages. Frequently, a firm will compare its ratio values to those of its key competitors of group of competitors that firm wishes to evaluate.

Time -series analysis Time Time series series analy analysis sis is applie applied d when when a financ financial ial analys analystt evalua evaluates tes perfor performan mance ce overtim overtime. e. Comparison of current to past performance, using ratio analysis, allows the firm to determine whethe whetherr it is progre progressi ssing ng as planne planned. d. Develo Developin ping g trends trends can be seen seen by using using multi multi year year comparison and knowledge of these trends should assist the firm in planning future operations.

Groups of financial ratios 

Liquidity ratios



Activity ratios



Debt analysis ratios



Profitability ratios

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Project of Financial Management 

Marketability ratio

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FAUJI FERTILI FERTILIZER ZER CORPORAT CORPORATION ION (FFC)

AWARDS OF FFC

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Introduction With a vision to acquire self - sufficiency in fertilizer production in the country, FFC was incorporated in 1978 as a private limited company. This was a joint venture between Fauji Foundation (a leading charitable trust in Pakistan) and Haldor Topsoe A/S of Denmark. The initial share capital of the company was 813.9 Million Rupees. The present share capital of the company stands above Rs. 8.48 Billion. Additionally, FFC has more than Rs. 8.3 Billion as long term investments which include stakes in the subsidiaries FFBL, FFCEL and associate FCCL.

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Project of Financial Management FFC commenced commercial production of urea in 1982 with annual capacity of 570,000 570, 000 metric tons. •

•

•

•

•

Through De-Bottle Necking (DBN) program, the production capacity of the existing plant increased to 695,000 metric tons per year. Production capacity was enhanced by establishing a second plant in 1993 with annual capacity of 635,000 metric tons of urea. FFC participated as a major shareholder in a new DAPS/Urea manufacturing complex with participation of major international/national institutions. The new company Fauji Fertilizer Bin Qasim Limited (formerly FFC-Jordan Fertilizer Company Limited) commenced commercial production with effect from January 01, 2000. The facility is designed with an annual capacity of 551,000 metric tons of urea and 445,500 metric tons of DAP, revamped to 670,000 metric tons of DAP. In the year 2002, FFC acquired ex Pak Saudi Fertilizers Limited (PSFL) Urea Plant situated at Mirpur Mathelo, District Ghotki from National Fertilizer Corporation (NFC) through privatization process of the Government of Pakistan. It has annual production capacity of 574,000 metric tons urea which has been revamped to 718,000 metric tons urea in 2009. This acquisition at Rs. 8,151 million represented the largest industrial sector transactions in Pakistan at that time.

Mission Statement

FFC is committed to play its leading role in industrial and agricultural advancement in Pakistan by

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Project of Financial Management providing quality fertilizers and allied services to its customers and given the passion to excel, take on fresh challenges, set new goals and take initiatives for development of profitable business ventures.

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Corporate Vision FFC's vision for the 21st Century remains focused on harmonizing the Company with fresh challenges and encompasses diversification and embarking on ventures within and beyond the territorial limits of the Country in collaboration with leading business partners.

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Project of Financial Management RATIO ANALYSIS ASSETS ASSE TS TEST T EST RATIO : NO.OF YEARS ASSETS TEST RATIO

2006 0.9668 53

2007 0.1574 12

2008 0.0535 26

2009 0.0216 81

2010 0.0337 36

Quick ratio or acid test ratio

1. ○

This is a ratio between quick current assets and current liabilities (alternatively quick liabilities).

○

It is cal calcul culate ated d by div dividi iding ng qui quick ck cur curren rentt ass assets ets by cur curren rentt li liabi abilit lities ies (qu (quick ick cur curren rentt liabilities)

○

Quick ratio = quick assets where

○

Current liabilities/(quick liabilities)

○

Conventionally a quick ratio of 1:1 is considered satisfactory.

Director Finance

Current Ratio: NO OF YEARS

2006

2007

2008

2009

2010

Chief Fiancal Manager Company Cost Manager Officer & Secretary Planning Supply Human Chain

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Project of Financial Management CURRENT R RA ATIO

0.893 458

0.942 059

0.821 195

0.835 498

0.836 99

2. Cu Curr rren entt rat ratio io ○

It is calculated by dividing current assets by current liabilities.

○

Current ratio = current assets

○

Current liabilities

○

Conventionally a current ratio of 2:1 is considered satisfactory

Cash to Current Curr ent Assets: NO.OF YEARS CASH TO CURRENTASSETS

2006 2007 2008 2009 0.0097 0.0077 0.0141 0.0087 75 62 04 29

2010 0.0195 24

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3. Cu Curr rren entt as asse sets ts ○

Include – 

Inventories of raw material, finished goods,



Stores and spares,



Sundry debtors/receivables,



Short term loans deposits and advances,



Cash in hand and bank,



Prepaid expenses,



Incomes receivables and



Marketable investments and short term securities.

Cash Cas h to Curre Cu rrent nt Liab L iabil ilit ities ies : NO.OF YEARS CASH TO CURRENT LIABILITIES

2006

2007

2008

2009

2010

0.008 715

0.007 312

0.011 582

0.007 293

0.016 341

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Project of Financial Management 4. Cu Curr rren entt li liab abil ilit itie iess ○

Include – 

Sundry creditors/bills payable,



Outstanding expenses,



Unclaimed dividend,



Advances received,



Incomes received in advance,



Provision for taxation,



Proposed dividend,



Installments of loans payable within 12 months,



Bank overdraft and cash credit

A/ R R TURN OVERRATIO: OVERRATIO : NO.OF YEARS A/R TURN OVERRATIO

2006 31.15 252

2007 16.50 352

2008 61.68 787

2009 140.7 752

2010 125.3 628

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5. Deb Debtor torss turn turnove overr rati ratio o ○

This ratio is a test of the liquidity of the debtors of a firm. It shows the relationship between credit sales and debtors.

○

Debtors turnover ratio =

○

Credit sales average debtors and bills receivables

Debt Deb t to Equity: Equi ty: NO.OF YEARS DEBT TO EQUITY

2006 1.120 572

2007 1.297 024

2008 1.598 161

2009 1.946 818

2010 1.787 553

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Project of Financial Management 6. De Debt bt eq equi uity ty ra rati tio o ○

This ratio indicates the relative proportion of debt and equity in financing the assets of the firm. It is calculated by dividing long-term debt by shareholder’s funds.

○

Debt equity ratio = long-term debts where

○

Shareholders’ funds

○

Generally, financial institutions favor a ratio of 2:1.

○

However this standard should be applied having regarded to size and type and nature of business and the degree of risk involved.

L T D TO T O CAPITALI CAPI TALIZATI ZATION ON: NO.OF YEARS L T D TO CAPITALIZATION

2006 0.216 952

2007 0.283 413

2008 0.388 653

2009 0.367 907

2010 0.312 916

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7. Deb Debtt to tota totall capit capital al rati ratio o ○

In this ratio the outside liabilities are related to the total capitalization of the firm. It indicates what proportion of the permanent capital of the firm is in the form of long-term debt.

○

Debt to total capital ratio = long- term debt

○

Shareholder’s funds + long- term debt

○

Conventionally a ratio of 2/3 is considered satisfactory.

Interest Ratio: NO.OF YEARS INTERST RATIO

2006 14.93 57

2007 12.22 182

2008 12.92 613

2009 14.81 794

2010 16.00 804

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Project of Financial Management 8. In Inter terest est cov covera erage ge rat ratio io ○

This ratio measures the debt servicing capacity of a firm in so far as the fixed interest on long-term loan is concerned. It shows how many times the interest charges are covered by edit out of which they will be paid.

○

Interest coverage ratio = edit

○

Interest

○

A ratio of 6 to 7 times is considered satisfactory. Higher the ratio greater the ability of the firm to pay interest out of its profits. But too high a ratio may imply lesser use of debt and/or very efficient operations

Payable Turnover Ratio: NO.OF YEARS PAYABLE TURN OVER RATIO

2006 1.394 212

2007 1.109 039

2008 0.928 742

2009 0.805 486

2010 0.916 602

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Project of Financial Management 9. Cre Credit ditors ors tur turnov nover er rati ratio o ○

This ratio shows the speed with which payments are made to the suppliers for purchases made from them. It shows the relationship between credit purchases and average creditors.

○

Creditors turnover ratio =

○

Credit purchases average creditors & bills payables

Total Assets Turnover: NO.OF YEARS TOTAL ASSETS TURN OVER

2006 1.090 103

2007 0.972 224

2008 0.958 452

2009 0.938 046

2010 0.394 01

10.Asset turnover ratio ○

Depending on the different concepts con cepts of assets employed, there are

○

Many variants of this ratio. These ratios measure the efficiency of a firm in managing and utilizing its assets.

○

Total asset turnover ratio = sales/cost of goods sold

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Project of Financial Management ○○

Average total assets

○

Fixed asset turnover ratio = sales/cost of goods sold

○

Average fixed assets

○

Capital turnover ratio = sales/cost of goods sold

○

Average capital employed

○

Working capital turnover ratio = sales/cost of goods sold

○

Net working capital

GROSS PROFIT MARGIN MARG IN: NO.OF YEARS GROSS PROFIT MARGIN

2006 0.324 153

2007 0.355 886

2008 0.403 955

2009 0.432 709

2010 0.435 972

11.Gross profit margin ○

This ratio is calculated by dividing gross profit by sales. It is expressed as a percentage.

○

Gross profit is the result of relationship between prices, sales volume and costs.

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Gross profit margin = gross profit x 100 net sales

○

A firm should have a reasonable gross profit margin to ensure coverage of its operating expenses and ensure adequate adequ ate return to the owners of the business i.e. the shareholders.

○

To judge whether the ratio is satisfactory or not, it should be compared with the firm’s past ratios or with the ratio of similar firms in the same industry or with the industry average.

NET PROFIT MARGIN MARG IN: NO.OF YEARS NET PROFIT MARGIN

2006 0.154 792

2007 0.189 277

2008 0.156 151

2009 0.243 98

2010 0.245 772

12.Net profit margin ○

This ratio is calculated by dividing net profit by sales. It is expressed as a percentage.

○

This ratio is indicative of the firm’s ability to leave a margin of reasonable compensation to the owners for providing capital, after meeting the cost of production, operating charges and the cost of borrowed funds.

○

Net profit margin =

○

Net profit after interest and tax x 100

○

Another variant of net profit margin is operating profit margin which is calculated as:

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○

○

Operating profit margin = Net profit before interest and tax x 100 High Hi gher er th thee ra rati tio, o, gr great eater er is th thee ca capa paci city ty of th thee fi firm rm to wi with thst stand and adv adver erse se ec econo onomi micc conditions and vice versa

RETURN RETU RN ON INVES I NVESTMEN TMENT T: NO.OF YEARS RETURN ON INVESTMENT

2006 0.168 739

2007 0.184 019

2008 0.149 663

2009 0.228 865

2010 0.096 836

13.Return on assets ○

This ratio measures the profitability of the total funds of a firm. It measures the relationship between net profits and total assets. The objective is to find out how efficiently the total assets have been used by the management.

○

○

Return on assets = Net profit after taxes plus interest x 100

○

Total assets

○

Total assets exclude fictitious assets. As the total assets at the beginning of the year and end of the year may not be the same, average total assets may be used as the denominator.

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RETURN RETU RN ON O N EQUITY EQ UITY : YEARS RETURN ON EQUITY

2006

2007

2008

2009

2010

0.357 823

0.422 697

0.388 482

0.067 442

0.713 955

14.Return on shareholders shareholders’’ equity ○

This ratio measures the relationship of profits to owner’s funds. Shareholders fall into two groups i.e. Preference shareholders and equity shareholders. So the variants of return on shareholders’ equity are

○

○

Return on total shareholder’s equity = Net profits after taxes x 100

○

Total shareholders’ equity

○

Total shareholder’s equity includes preference share capital plus equity share capital plus rese re serv rves es an and d su surp rplu luss le less ss ac accu cumu mula late ted d lo loss sses es and fi fict ctit itio ious us as asse sets ts.. To hav havee a fa fair ir

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Project of Financial Management representation of the total shareholders’ funds, average total shareholders’ funds may be used as the denominator

BALANCE SHEET

2006

2007

2008

2009

2010

960795 7 156923 4 640938 2

103904 90 156923 4 632512 9

1273081 3

1399351 8

1593358 8

1569234

1569234

1569234

7744779

7727528

7870072 7

76647

142782

163102

337541

455328

2474

2144

1524

6305

9037

45000

0

0

0

ASSETS NON-CURRENT ASSETS Property, plant and equipment Good will Long term Investment Long term loans and advantages Long term deposit and prepayments other assets

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Project of Financial Management 177106 94

184297 79

2220945 2

2363412 6

9666791 4

220205 3

240798 8

3034268

2996633

2440201

952905

642836

258094

144087

211720

961427

172260 2

495929

256886

357956

95245

83917

136944

130219

336269

25488

33665

107369

37653

50188

154276 3 302766 4 135000 0

1233479

734062

617664

3511563

6768568

1202058 1

cash and bank balances

145139 0 245285 0 162322 9

931865

3849348

1189063

Total Current Assets

976458 7

108114 35

9709511

1491745 6

1722364 2

CURRENT ASSETS

Store spare losses tools Stock in trade Trade debts Loan and advantages deposit and prepayments other receivable short term investment

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Project of Financial Management Total Assets

274752 81

292412 14

3191896 3

3855158 2

1138915 56

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Project of Financial EQUITY AND Management LIABILITIES Issued, subscribed and paid up share

493474 2

493474 2

4934742

6785271

6785271

160000

160000

160000

160000

160000

786180 1

763530 3

7190471

6137171

8502276

129565 43

127300 45

122852 13

1308244 2

1544754 7

119375 0 239600 0

267125 0 236352 6

537821 4 243189 5

4578809

3819405

3035757

3215821

capital

Capital Reserves Revenue Reserves

Total Equity NON-CURRENT LIABILITIES

Long term borrowing deferred liabilities

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INCOME STATEMENT

2006

Sales Cost of Goods Sold

Gross Profit

29950873 20242194 9708679

2007

2842900 5 1831152 5 1011748 0

2008

2009

30592806

36163174

18234692

20515044

12358114

15648130

2010

4487435 9 2531040 6 1956395 3

Distribution Cost

2746782

2418793

2668571

3174505

3944473

Other Operating Expenses

735331

845327

895647

1272448

1376000

3482113

3264120

3564218

4446953

5320473

6226566

6853360

8793896

11201177

1424348 0

1259819

1658000

194558

2800987

3153110

Other Operating Income

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Profit From Operations

7486385

8511360

8988454

14002164

1739659 0

501241

696407

695371

944947

1086741

6985144

7814953

8293083

13057217

1630984 9

Provision For Taxation

2349000

2434000

3516000

4234111

5281000

Profit After Taxation

4636144

5380953

4777083

8823106

1102884 9

Finance Cost

Profit Before Taxation

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Project of Financial Management ENGRO CORPORATION

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Project of Financial Management AWARD

INTRODUCTION Engro is one of Pakistan’s most progressive, growth oriented organizations, yet we never forget where we came from. Our history is a part of who we are today. Our diverse d iverse range of companies represents our rich legacy of innovation and growth. Engro Corporation Limited is one of Pakistan’s largest conglomerates with businesses ranging from fertilizers to power generation. In the interest of better managing and overseeing businesses of subsidiaries and affiliates that are currently part of Engro’s capital investments, Engro Chemical Pakistan Limited converted into a holding company structure. As part of this process, two major changes occurred with effect from January 1, 2010; Engro Chemical was renamed as Engro Corporation Limited and it demerged and transferred its fertilizer business into a separate wholly owned subsidiary, Engro Fertilizers Limited. Currently Engro Corporation’s portfolio consists of seven businesses which include chemical fertilizers, PVC resin, a bulk liquid chemical terminal, industrial automation, foods, power generation and commodity trade.

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Project of Financial Management Besides providing the long term vision for the company and overseeing performance of the subsidiaries and affiliates, Engro Corporation Limited is also responsible for allocation of capital, management of talent, leadership dev elopment, HR guiding policies, leadership role in public relations and CSR activities, control structures, legal and IT support. From its inception as Esso Pakistan Fertilizer Limited in 1965 to Engro Corporation Limited in 2010, Engro has come a long way and will continue working towards its vision of becoming a premier Pakistani company with a global reach.

CULTURE Engro is about the people who are a part of us. Our culture is dynamic and energetic, with emphasis on our core values and loyalty of our employees. Our work environment promotes leadership, integrity, teamwork, diversity and excellence. The tone for our corporate culture c ulture and the importance of employees was set after the Company was bought out by employees in 1991. As the Company grows, we are determined to keep our culture open and transparent, and inclusive for all our employees.

DIFFRENCE BUSINESS Our diversified businesses represent our immense growth potential to generate opportunities for creating and sustaining value for our stakeholders. Engro Fertilizers Limited Engro Foods Limited Engro Polymer & Chemicals Limited

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Project of Financial Management Engro Powered Limited Engro EXIMP Private Limited Engro Vopak Terminal Limited

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RATIO ANALYSIS

CURREN CUR RENT T RATIO RA TIO : NO.OF YEARS CURRENT RATIO

2006 7.468 622

2007 0.920 06

2008 2.007 253

2009 0.732 66

2010 0.073 614

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Project of Financial Management 15.Current ratio ○

It is calculated by dividing current assets by current liabilities.

○

Current ratio = current assets where

○

Current liabilities

○

Conventionally a current ratio of 2:1 is considered satisfactory

ASSETS ASSE TS TEST T EST RATIO : NO.OF YEARS ASSETSTEST RATIO

2006 0.168 678

16.Quick ratio or acid test ratio

2007 0.049 917

2008 0.332 092

2009 0.106 089

2010 0.002 094

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This is a ratio between quick current assets and current liabilities (alternatively quick liabilities).

○

It is cal calcul culate ated d by div dividi iding ng qui quick ck cur curren rentt ass assets ets by cur curren rentt li liabi abilit lities ies (qu (quick ick cur curren rentt liabilities)

○

Quick ratio = quick assets where

○

Current liabilities/(quick liabilities)

○

Conventionally a quick ratio of 1:1 is considered satisfactory.

CASH CAS H TO T O C.A C .A: NO.OF YEARS CASH TO C.A

2006 0.022 585

2007 0.054 254

17.Current assets ○

Include – 

Inventories of raw material, finished goods,



Stores and spares,

2008 0.157 705

2009 0.136 68

2010 0.018 203

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Sundry debtors/receivables,



Short term loans deposits and advances,



Cash in hand and bank,



Prepaid expenses,



Incomes receivables and



Marketable investments and short term securities.

CASH CAS H TO T O C.L C .L: NO.OF YEARS CASH TO C.L

2006 0.168 678

18.Current liabilities ○

Include – 

Sundry creditors/bills payable,



Outstanding expenses,



Unclaimed dividend,

2007 0.049 917

2008 0.316 555

2009 0.100 14

2010 0.001 34

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Advances received,



Incomes received in advance,



Provision for taxation,



Proposed dividend,



Installments of loans payable within 12 months,



Bank overdraft and cash credit

Debt to equity NO.OF YEARS Debt to equity

2006 1.967 592

2007 1.305 924

2008 1.715 199

2009 4.034 711

2010 3.802 106

19.Debt equity ratio ○

This ratio indicates the relative proportion of debt and equity in financing the assets of the firm. It is calculated by dividing long-term debt by shareholder’s funds.

○

Debt equity ratio = long-term debts where

○

Shareholders’ funds

○

Generally, financial institutions favor a ratio of 2:1.

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However this standard should be applied having regarded to size and type and nature of business and the degree of risk involved.

L.T.D.TO L.T. D.TO CAPITAL CA PITALIZAT IZATION ION : NO.OF YEARS L.T.D.TO CAPITALIZATION

2006 0.631 344

2007 0.186 259

2008 0.588 519

2009 0.764 511

2010 0.061 648

20.Debt to total capital ratio ○

In this ratio the outside liabilities are related to the total capitalization of the firm. It indicates what proportion of the permanent capital of the firm is in the form of long-term debt.

○

Debt to total capital ratio = long- term debt

○

Shareholder’s funds + long- term debt

○

Conventionally a ratio of 2/3 is considered satisfactory.

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INTRES INT REST T RATIO RAT IO: NO.OF YEARS INTREST RATIO

2006 10.50 102

2007 8.916 505

2008 4.449 141

2009 3.521 58

2010 10.49 967

21.Interest coverage ratio ○

This ratio measures the debt servicing capacity of a firm in so far as the fixed interest on long-term loan is concerned. It shows how many times the interest charges are covered by edit out of which they will be paid.

○

Interest coverage ratio = edit

○

Interest

○

A ratio of 6 to 7 times is considered satisfactory. Higher the ratio greater the ability of the firm to pay interest out of its profits. But too high a ratio may imply lesser use of debt and/or very efficient operations

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PAYABLE PAYAB LE TURN TUR N OVER RATIO R ATIO : NO.OF YEARS PAYABLE TURN OVER RATIO

2006 0.701 125

2007 0.845 131

2008 0.474 11

2009 0.309 47

2010 0.181 204

22.Creditors turnover ratio ○

This ratio shows the speed with which payments are made to the suppliers for purchases made from them. It shows the relationship between credit purchases and average creditors.

○

Creditors turnover ratio =

○

Credit purchases average creditors & bills payables

2011 Final


ASSETS ASSE TS TURNOV T URNOVER ER : NO.OF YEARS ASSETS TURNOVER

2006 0.612 249

2007 0.607 58

2008 0.407 895

2009 0.321 969

2010 0.262 487

23.Asset turnover ratio ○

Depending on the different concepts con cepts of assets employed, there are

○

Many variants of this ratio. These ratios measure the efficiency of a firm in managing and utilizing its assets.

○

Total asset turnover ratio = sales/cost of goods sold

○

Average total assets

○

Fixed asset turnover ratio = sales/cost of goods sold

○

Average fixed assets

○

Capital turnover ratio = sales/cost of goods sold

○

Average capital employed

○

Working capital turnover ratio = sales/cost of goods sold

○

Net working capital

2011 Final


GROSS GRO SS PROFIT PRO FIT : NO.OF YEARS GROSS PROFIT

2006 0.240 727

2007 0.212 241

2008 0.265 751

2009 0.229 731

2010 0.453 421

24.Gross profit margin ○

This ratio is calculated by dividing gross profit by sales. It is expressed as a percentage.

○

Gross profit is the result of relationship between prices, sales volume and costs.

○

Gross profit margin = gross profit x 100 net sales

○

A firm should have a reasonable gross profit margin to ensure coverage of its operating expenses and ensure adequate adequ ate return to the owners of the business i.e. the shareholders.

○

To judge whether the ratio is satisfactory or not, it should be compared with the firm’s past ratios or with the ratio of similar firms in the same industry or with the industry average.

2011 Final

Project of Financial Management NET NE T PROF PR OFIT IT : NO.OF YEARS NET PROFIT

2006 0.144 717

2007 0.136 072

2008 0.181 858

2009 0.068 682

2010 0.344 249

25.Net profit margin ○

This ratio is calculated by dividing net profit by sales. It is expressed as a percentage.

○

This ratio is indicative of the firm’s ability to leave a margin of reasonable compensation to the owners for providing capital, after meeting the cost of production, operating charges and the cost of borrowed funds.

○

Net profit margin =

○

Net profit after interest and tax x 100

○

Another variant of net profit margin is operating profit margin which is calculated as:

○

Operating profit margin =

○

○

Net profit before interest and tax x 100 High Hi gher er th thee ra rati tio, o, gr great eater er is th thee ca capa paci city ty of th thee fi firm rm to wi with thst stand and adv adver erse se ec econo onomi micc conditions and vice versa

2011 Final

Project of Financial Management RETURN RETU RN ON INVES I NVESTMEN TMENT T: NO.OF YEARS RETURN ON INVESTMENT

2006 0.088 603

2007 0.082 675

2008 0.074 179

2009 0.022 114

2010 0.090 361

26.Return on assets ○

This ratio measures the profitability of the total funds of a firm. It measures the relationship between net profits and total assets. The objective is to find out how efficiently the total assets have been used by the management.

○

○

Return on assets = Net profit after taxes plus interest x 100

○

Total assets

○

Total assets exclude fictitious assets. As the total assets at the beginning of the year and end of the year may not be the same, average total assets may be used as the denominator.

RETURN RETU RN ON O N EQUITY EQ UITY :

2011 Final

Project of Financial Management NO.OF YEARS RETURN ON EQUITY

2006

2007

2008

2009

2010

0.262 938

0.190 641

0.201 411

0.111 335

0.433 922

27.Return on shareholders shareholders’’ equity ○

This ratio measures the relationship of profits to owner’s funds. Shareholders fall into two groups i.e. Preference shareholders and equity shareholders. So the variants of return on shareholders’ equity are

○

○

Return on total shareholder’s equity = Net profits after taxes x 100

○

Total shareholders’ equity

○

Total shareholder’s equity includes preference share capital plus equity share capital plus rese re serv rves es an and d su surp rplu luss le less ss ac accu cumu mula late ted d lo loss sses es and fi fict ctit itio ious us as asse sets ts.. To hav havee a fa fair ir representation of the total shareholders’ funds, average total shareholders’ funds may be used as the denominator

○

2011 Final

Project of Financial Management BALANCE SHEET

2011 Final

Project of Financial Management 2006

2007

2008

2009

2010

6557603

138116 83

335529 12

695175 12

98617815

18062

133867

122858

122704

122609

3657596

776448 2

110918 57

129886 57

26136701

0

0

136071

2787

5890

63109

49421

218820

328907

1623514

1029637 0

217594 53

451225 18

829605 67

126506529

688568

740873

800091

961117

1015791

269015 3 140888 5

468089 6

422607

467405

261508

251442 5

2413452

0

93213

87278

78728

ASSETS

NON-CURRENT ASSETS Property, plant and equipment Intangible Asset Long term investment Deferred employee compensation expenses Long term loans and advances

CURRENT ASSETS

Stores and spares Stock in trade Trade debts Deferred employee

923448 623349 0

2011 Final


2011 Final

Project of Financial Management EQUITY AND LIABILITIES Issued, subscribed and paid up share capital

2000000

3000000

2128161

2979426

3277369

1068369

3963977

7152722

1055061

1055006 1

Hedging reserve

0

1037386

127307

288258

74813

General reserve

4429240

4429240

4429240

4429240

4429240

2190148

4116622

6911124

9250972

8722156

0

0

305052

609719

890917

9687757

1654722 5

21053606

18612676

2794455 6

15422520

1800000

27756714

58565354

0

0

918050

612842

521482

1127139

1948980

1319432

988169

997196

0

0

73319

211785

315678

41165

38560

44265

47581

1550

share premium

unapporiated profit Employee share compensation

Total Equity NON-CURRENT LIABILITIES Borrowing Derivate financial instrument Deferred liabilities Employee housing subsidy Retirement and others benefits

97425453

2011 Final


INCOME STATEMENT

2011 Final

Project of Financial Management 2006

2007

2008

2331719 8 1712063 5

2009

2010

30171520

35223860

23240176

19252630

Sales

17601738

23183222

Cost of Goods Sold

13364529

18262793

4237209

4920429

6196563

6931344

15971230

1481730

1641724

1657815

1945176

2425210

0

0

0

0

388652

287176

339430

579556

424110

38773

1768906

1981154

2237371

2369286

2852635

2468303

2939275

3959192

4562058

13118595

1338854

1831260

2754330

88467

433947

3807157

4770535

6713522

4650525

13552542

362551

535023

1508948

1320579

1290759

3444606

4235512

5204574

3329946

12261783

897330

1080929

964144

1257696

136016

Gross Profit

Distribution Cost Administrative Expenses Other Operating Expenses

Other Operating Income

Profit From Operations

Finance Cost

Profit Before Taxation

Provision For Taxation

2011 Final


1

www. engro.com

2 www.fauji fertilizer.com 3 fauji fertilizer site:wikipedia.org 4 engro site:wikipedia.org

Fianl Project

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