Table of Contents
Executive Summary ……………………………………………………………………………………………… i Introduction………………………………………………………………………………… ………………………. 1 Trend Analysis 1: Apex Spinning & Knitting Mills td. …………………………………………… 1 !omparative Analysis: Apex Spinning…………………………………………………………………… " Trend Analysis #: Anlima $arn %yeing td. …………………………………………………………… !omparative Anlysis: Anlima $arn………………………………………………………………………… 1' Trend Analysis (: Male) Spinning Mills td. …………………………………………………………. 1( !omparative Analysis: Male) Spinning………………………………………………………………… 1" Trend Analysis *: +a,im Textiles Mills td. ………………………………………………………….. 1!omparative Analysis: +a,im Textiles………………………………………………………………… extile s………………………………………………………………… #' Trend Analysis : S/uare Textiles td. …………………………………………………………………..#( 0oriontal Analysis……………………… Analysis……………………………………… ……………………………… ……………………………… …………………………… ……………… … ………#" 2ertical Analysis……………………… Analysis……………………………………… ……………………………… ……………………………… …………………………… ……………… … …………..# Summary & !onclusion ………………………………………………………………………………………..('
Executive Summary Financi inancial al ratio ratio is one of the mostly mostly used used nanci nancial al tools tools to evalua evaluate te a compan company’s y’s nanc nancial ial perfor performan mance. ce. In this this repor reportt we have have us used ed variou various s nanc nancial ial ratios ratios to exami examine ne streng strengths ths and weakne weaknesse sses s of some some of the textile companies in our country. Later in this report horizontal analysis and vertical analysis have also been incorporated to have a better insight into nancial performance. Industry evaluation has also been done taking the average of the ve companies selected for this report. extiles extiles industry is one of the pivotal industries in the context of !angladesh !angladesh’s ’s economy economy.. "ach year it helps to strength strengthen en the economy economy thr through ough exte extens nsiv ive e expor xportt oper operat atio ions ns.. #o$ #o$ for for the the bett better erme ment nt of the the countr country’s y’s econom economy y it is of utmost utmost import importanc ance e that that compan companies ies in that that particular particular sector maintain maintain a sound nancial performance. performance. %therwise %therwise if those companies cripple it would have an immensely negative impact on our country’s overall nancial health. &eeping these issues in mind we have have trie tried d to sh shed ed light light on vari variou ous s aspe aspect cts s of nan nanci cial al situ situat atio ion n of a compan company y us using ing variou various s ratio ratio analys analysis is and later later horizo horizonta ntall and vertic vertical al analysis. %ur %ur rati ratio o anal analys ysis is has revea eveale led d vari variou ous s aspe aspect cts s of str strengt engths hs and and weaknesses of various companies. 'pex &nitting has shown its strength in asset utilization utilization but su(ered su(ered from comparati comparatively vely higher higher )%*#. )%*#. 'nlima 'nlima +arn +arn su(ers a bit with respect to li,uidity ratios and has a bit low -%'. -%'. owever it managed to yield better -%" through comparatively heavy debt nancing. /alek #pinning had serious problem in cash management although recovered a bit in 0122 and they show high dependence on e,uity nancing. -ahim extiles again su(ers a bit from li,uidity problem and shows relatively high dependence on e,uity nancing. #,uare extiles maintains relatively steady level of nancial performance. o some extent it lacks those concerning issues that should alarm the management about disconcerting ine3ciency or mismanagement. mismanagement.
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In the last part we tried to provide some recommendations based on our ndings regarding various nancial performance issues. #ome company needs to check whether their high expenditure on )%*# is 4ustiable or not$ few needs to consider whether they are over5utilizing their assets or human resources or not$ and few needs to develop a more e3cient cash management strategy. 'long with those one or two company may give a second thought regarding their nancing strategy$ whether they should maintaining heavy dependence on e,uity nancing or should try to have some nancial leverage by using a bit more debt nancing. 's stated earlier textiles industry remains at the center of the country’s economy so sound nancial analysis is extremely crucial in order to pinpoint problem areas and rectify them whenever needed. his would help the industry to grow further in future.
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Introduction ' nancial ratio is a relative magnitude of two selected numerical values taken from an enterprise7s nancial statements. %ften used in accounting$ there are many standard ratios used to try to evaluate the overall nancial condition of a corporation or other organization. Financial ratios may be used by managers within a rm$ by current and potential shareholders of a rm$ and by a rm7s creditors. Financial analysts use nancial ratios to compare the strengths and weaknesses in various companies. If shares in a company are traded in a nancial market$ the market price of the shares is used in certain nancial ratios. In this report we have focused on four main categories of nancial ratios8 •
Li,uidity -atios
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9rotability -atios
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'ctivity -atios
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#olvency -atios
he industry we picked is the textile industry. he names of companies used in the report are8 'pex #pinning /ills Ltd. 'nlima +arn :yeing Ltd. /alek #pinning /ills Ltd. -ahim extiles /ills Ltd. #,uare extiles Ltd. ;e have used both trend analysis and comparative analysis to evaluate the nancial situation of the above mentioned companies. !elow are the ndings of our research.
Trend Analysis: Apex Spinning & Knitting Mills Ltd. Liquidity Ratios Current Ratio
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)urrent -atio of 'pex #pinning < &nitting /ills Ltd is 4ust over 2 and hasn’t deviated much over the three years. It means that the company holds su3cient current assets that can be li,uidated to meet its current obligation. he gures also imply that only a small portion of the current assets have been nanced by long term debt and the rest by current liabilities. )urrent assets haven’t piled up in the last years as ratios are 4ust over 2. %ver the years the ratio hasn’t shown much movement and that indicates that the company’s policies pertaining to li,uidity have been pretty stable in last three years. Acid-test Ratio 'cid5test ratio is similar to current ratio except of the fact that the former one doesn’t consider inventory in the calculation. #o it basically considers the part of current assets that can be almost readily li,uidated whenever needed. 's the gures are below 2 the company can’t meet all of its current obligations without relying on inventories. %ver the three years this particular ratio hasn’t changed much which indicates consistency in company policy regarding li,uidity management.
Protability Ratios Net ro!t Margin Ratio he ratio show is an indicator of company’s protability and e3ciency in expense management as compares net prot with net sales. he ratio increased a bit in the year 0121 but dipped in 0122. If we look at the income statement gures then we will see that in 0121 company’s net prot increased a bit even though there was a decrease in sales. owever$ in 0122 4ust the opposite happened= sales increased while net prot plummeted. #o clearly the company hasn’t been e,ually e3cient in managing its expense throughout the three years. "ither there was a problem associated with )%*# or the company may had to bear a bit too much operating expenses. !ut to see the whole picture we have to look into the following ratio. !ut so far we can state that in the year 0121 company managed its expenses in a much more e3cient manner than in 0122. "ross pro!t Margin Ratio
0
his ratio shows the relationship between gross prot and sales and helps us pinpoint the problem associated with expense management. owever$ gross prot margin ratio shows almost the same trend like that of net prot margin ratio. #o$ to pinpoint the problem area we have showed both operating expenses and )%*# as a percentage of sales and it revealed that )%*#>#ales percentage increased a bit in 0122 while operating expense>sales percentage decreased. !ut due to large volume involved with )%*# that small increase in the percentage lead lower net prot margin ratio and gross prot margin ratio. ?ow the company needs to check whether they are using superior raw materials in the production process or 4ust paying higher price for average ,uality raw materials. If they are purchasing higher ,uality raw materials then they to be more e3cient in other areas such as operational expenses in order to boost their protability. Return on Assets -eturn on assets refers to company’s ability to generate net prot utilizing its assets. @nlike asset turnover this ratio isn’t exceptionally high which means even though the company was able to generate huge amount of sales utilizing its assets it also had to bear huge expenses and that had a big impact on its net prot. 's we saw earlier the company’s )%*# consumes a substantial portion of its sales and it may have caused the -%' gure to remain at such level. owever$ interestingly unlike asset turnover ratio -%' hasn’t increased in the year 0122 and reduced instead. he main reason is that in that year even though both sales and assets increased net prot did mainly not due to relatively high )%*#. 's we stated earlier the company needs to check whether they are using raw materials of superior ,uality or they are 4ust paying high prices for an average ,uality raw material. Return on Co##on Stoc$ %uity his ration shows how e3cient the company has been in utilizing its common e,uity to generate net income. he pattern of this ratio of 'pex #pinning corresponds to that of -%'= increased slightly in 0121 and dropped in 0122. he gures have been pretty stable over the years. For a better understanding of the changes underlying in -%' and -%" we need to conduct :u9ont analysis which is presented below. 'uont Analysis
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:u9ont analysis shows -%" as a multiplication of three ratios aA ?et prot margin bA 'ssets turnover ratio cA ",uity multiplier. Budging all these three ratios we can have a better insight into -%". he analysis reveals that e,uity multiplier has been relatively stable over the years. ?et prot margin among increased slightly among the three which caused a slight increase of -%" in the year 0121. In 0122 even though both asset turnover ratio and e,uity multiplier increased those were nullied by a decrease in net prot margin ratio which has brought down -%" gure slightly in that particular year. 's we have discussed earlier simultaneous increase in 'sset turnover ratio and decrease in ?et 9rot /argin ratio was caused by relatively high )%*# in 0122. -%' can also been shown as a multiplication of 'sset urnover -atio and ?et 9rot /argin. -%' of 'pex #pinning has followed a similar pattern of that of -%" and in this case as well ?et 9rot /argin was main cause behind the deviations. %S he higher the ratio the better is for the company as it indicates better protability of the entity. "9# has increased slightly in 0121 and again dipped a bit 0122. he number of common stock outstanding was constant over the last few years and hence the deviation was caused by the change in ?et 9rot of the company. 'i(idend ayout Ratio his ratio expresses the amount of cash dividend paid as a percentage of net prot. 'pex #pinning has consistently paid out a very high percentage of its net income as dividends. #hareholders of the company should be mighty pleased with this kind of payout ratio. he drawback is that the company will be left with very low amount of retained earnings which may in turn hinder company’s ability to reinvest in business or expansion. he company needs to keep in mind its growth potential and future needs for investment. )% Ratio "xtremely high 9>" ratio in 011C indicates that the company was highly overvalued in that particular year. "ven though "9# was very low in 011C market price of company’s stock was much higher. owever$ the valuation came down to normal level in the latter years.
Activity Ratios D
Recei(a*les Turno(er Ratio he ratio has increased a bit in the year 0122 which means in that year the company showed better e3ciency in collecting its receivables compared to previous years. he better e3ciency may be a result of more stringent receivables policy or simply more e3ciency in collecting its outstanding receivables. In(entory Turno(er Ratio his ratio has increased steadily over the years though not by much. igher inventory turnover ratio implies e3ciency in inventory management. !ecause an increase in this ratio can be caused either of the two events= increase of )%*# given inventory remains relatively constant or decrease of inventory given )%*# remains relatively constant. #o in the former case the company has to make sure that its inventory doesn’t much even if there is an increase in production and the latter case the company has to make sure that it reduces its current level of inventories while production remains relatively constant. #o we can see from the discussion is either of the cases the company has to show improved e3ciency regarding inventory management. In case of 'pex #pinning both of the events took place. In year 0121 the company managed to lower down its inventory level while )%*# remained relatively constant and in 0122 even though both )%*# and inventory increased the change in inventory was much less compared to that of )%*#. Asset Turno(er Ratio 'sset turnover ratio indicates a company’s e3ciency in converting its assets in sales. 'pex #pinning /ills’ ratio increased substantially in the year 0122 mainly due to high increase in sales. he ratio is also close to 011E in all the years which is ,uite exceptional. 'll these data reect the company’s superiority in asset management policy and practices. owever$ the company needs to be very cautious about the fact that whether it is over5utilizing its assets or not. If that is the case then its machineries and e,uipment may deteriorate a lot faster forcing the company to invest in those areas much earlier than anticipated. Cas+ Con(ersion Cycle he ratio is a combination of three ratios :#%$ :I and :9%. It represents the amount of time needed for a company to have cash back in hand. he lower the ratio the better it is for the company as it would imply e3ciency in managing payables$ receivables and inventories. ))) of 'pex #pinning G
has reduced dramatically over the last three years. -educed :I and :#% and increased :9% was the reason behind. his event denitely indicates e3ciency in those above mentioned areas but at the same time the company needs to check whether they are missing out any potential buyers or not whom they could avail with a less stringent credit policy.
Solvency Ratios 'e*t to Total Assets Ratio Like e,uity multiplier this ratio is also a measure of a company’s nancial leverage. igher ratio indicates more reliance on debt nancing and vice versa. Ti#es Interest %arned his ratio shows how easily a company can pay its debt obligations. ' company relying heavily on debt nancing should have su3cient income to pay its creditors. 's for 'pex #pinning this ratio has increased a bit over the years. Interestingly both net income before interest and tax and interest expense followed a downward trend in all those years. Furthermore$ high debt to asset ratio and e,uity multiplier ratio in 0122 indicate company’s more reliance on debt nancing in 0122. +et I" ratio kept increasing. #o this may indicate rm’s e3ciency in utilizing debt nancing$ they have been able pursue debt nancing at a comparatively lower cost. %uity Multiplier his ratio shows the company’s nancing strategy. he higher the ratio the more is the usage of debt nancing applied by the company. he trend implies that company’s reliance on debt nancing was a bit lower in 0121 but it rose again in 0122.
Co#parati(e Analysis: Apex Spinning & Knitting Mills Ltd. Liquidity Ratios Current Ratio
H
)urrent ratio of 'pex #pinning is a bit lower than that of the industry which implies that the company hardly lets its current assets to pile up comparing to the industry. 'lso at the same time it makes sure that it has enough current assets in hand to li,uidate and meet its current obligations. Acid-test Ratio 'cid5test ratio of the company is also lower than the industry average value. #o$ we can say that unlike the industry the company can’t meet its current obligations without li,uidating its inventories.
Protability Ratios Net pro!t #argin ratio )ompany’s net prot margin ratio is considerably lower than that of the industry average. #o clearly the company has to bear comparatively more expenses compared to other companies in the market. ;e need to look at gross prot margin ratio in order to specify which cost component is causing this event. "ross pro!t #argin ratio )ompany’s gross prot margin ratio is lower than the industry average as well but not as low as net prot margin ratio is. #o$ we can now state that )%*# is the main reason behind company’s comparatively low net prot margin ratio. %ther costs such as administrative and selling overhead also play a role at it but not as signicant as )%*# does. ?ow the company needs to check out whether they are purchasing superior ,uality product or are they 4ust paying high prices for an average ,uality raw material.
Asset Turno(er Ratio his ratio is considerably higher than the industry average value. #o clearly it indicates that the company is a lot e3cient compared to other players in the market when it comes to the ,uestion of utilizing assets to generate sales. owever$ the company does need to make sure that they are not over5utilizing their assets$ let it be human resources or machineries. @nderpaid but e3cient employees can leave the company for better opportunity so they shouldn’t let that happen. %ver5use of machineries can force them to reinvest in non5current way before the anticipated period. R,A
)ompany’s return on assets is a bit lower than the industry average value. o pinpoint the problem we need to look at the :u9ont 'nalysis presented later. R,% Like -%'$ company’s -%" gure is also lower than the industry average value. ?ow lets have a look at the :u9ont analysis to gure out the main reason behind this. 'uont Analysis Like we said earlier -%" is a multiplication of ?et 9rot /argin$ 'sset urnover -atio and ",uity /ultiplier. 'mong the three ratios only ?et 9rot /argin is lower than the industry average. #o we can state that company’s poor expense management is reason behind lower -%". -%' can be described as a multiplication of 'sset urnover -atio and ?et 9rot /argin. Like in the case of -%" here also ?et 9rot /argin was the cause behind lower -%'. #o again expense management issues have caused the company to su(er from a lower -%' despite showing lot e3ciency in asset utilization. %S "9# is a bit higher than the industry average even though the company’s net prot margin ratio was poor. his might happen if the company is heavily reliant debt nancing. #olvency ratios will enable us to determine whether it is the case or not. !ut at present we can state that higher "9# enhance company’s image among shareholders. 'i(idend ayout Ratio his ratio is considerably higher than the industry average referring to the fact that the company is paying a lot dividend to its shareholders compared to other companies in the market. #o$ this information is likely to make shareholders happy. !ut the drawback is that the company will have lower retained earnings to make new and re5investments.
-% Ratio Interestingly company’s 95" ratio is ratio is lot lower that the industry average even though it has comparatively higher "9# and dividend payout ratio. #o$ this indicates undervaluation of the company in the market.
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Activity Ratios Recei(a*les Turno(er Ratio )ompany’s receivable turnover ratio is a bit higher than the industry average which indicates e3ciency in collecting receivables. In(entory Turno(er Ratio Inventory turnover ratio is higher as well and again it implies e3ciency in inventory utilization that contributes into )%*#. Cas+ Con(ersion Cycle ))) is lot lower than the industry average which indicates superior e3ciency in managing accounts receivables$ payables and inventories. It has resulted due to lower :I$ :#% and slightly higher :9%. owever$ the company needs to make sure that they aren’t losing any customers due to strict receivables collection policy and credit terms.
Solvency Ratios 'e*t to Total Assets Ratio )ompany uses more debt nancing than the average industry and it explains how the rm managed to yield an above industry average "9# even though it su(ered from lower ?et 9rot /argin. /ore reliance on debt nancing gives a rm nancial leverage. TI% Ratio I" ratio is slightly less than the industry average. )ompany needs to be cautious in this regard as they are more dependent on debt nancing. %uity Multiplier 's the company is more dependent on debt nancing ,uite expectedly its e,uity multiplier is a bit higher than the industry average due to comparatively lower amount of e,uity.
Trend Analysis: Male$ Spinning Mills Ltd Liquidity Ratios Current Ratio C
)urrent -atio of /aled #pinning /ills Ltd. is 4ust above 2 and hasn’t deviated much over the three years. Low values for the current or ,uick ratios Kvalues less than 2A indicate that a rm may have di3culty meeting current obligations. Low values$ however$ do not indicate a critical problem. If it has good long5term prospects$ it may be able to borrow against those prospects to meet current obligations. %ver the years the ratio hasn’t shown much movement and that indicates that the company’s policies pertaining to li,uidity have been pretty stable in last three years. Acid-test Ratio 'cid5test ratio is similar to current ratio except of the fact that the former one doesn’t consider inventory in the calculation. 's the gures are below 2 the company can’t meet all of its current obligations without relying on inventories. %ver the three years this particular ratio hasn’t changed much which indicates consistency in company policy regarding li,uidity management.
Protability Ratios Net ro!t Margin Ratio he ratio increased a bit in the year 0121 but dipped in 0122. 's It is greater than industry average$ it shows the company has been e,ually e3cient in managing its expense throughout the three years. "ross pro!t Margin Ratio *ross prot margin ratio kept increasing throughout the three years indicating. It is good for the company in one sense that it is managing is )%*# in an e3cient way but at the same time it needs to make sure that they are purchasing ,uality raw materials. %therwise low ,uality raw materials may result in low ,uality nished products which in turn would negatively a(ect the sales gures and protability of the company. Return on Assets /alek #pinning /ills’ asset turnover ratio increased gradually and slightly over the years. owever$ there is signicant increase in sales. 'lso$ the ratio is considerably below 211E in all the years which is somewhat low in comparison with its sales. It seems that the company isn’t considering
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asset turnover with current signicance. hey are investing for long term protability. he increasing rates and prots suggest accordingly so. Return on Co##on Stoc$ %uity he pattern of this ratio of /alek #pinning /ills corresponds to that of -%'= increased in 0122. For a better understanding of the changes underlying in -%' and -%" we need to conduct :u9ont analysis which is presented below. 'uont Analysis he analysis reveals that e,uity multiplier has been relatively stable over the years. ?et prot margin among increased slightly among the three which caused a slight increase of -%" in the year 0121. In 0122 even though both asset turnover ratio and e,uity multiplier increased those were nullied by a decrease in net prot margin ratio which has brought down -%" gure slightly in that particular year %S he higher the ratio the better is for the company as it indicates better protability of the entity. "9# was low in 011C increased signicantly in 0121. he number of common stock outstanding was constant over the last few years and hence the deviation was caused by the change in ?et 9rot of the company. 'i(idend ayout Ratio /alek #pinning /ills has paid out a very high percentage of its net income as dividends in 0121. #hareholders of the company should be mighty pleased with this kind of payout ratio. he drawback is that the company will be left with very low amount of retained earnings which may in turn hinder company’s ability to reinvest in business or expansion. he company needs to keep in mind its growth potential and future needs for investment.
Activity Ratios Recei(a*les Turno(er Ratio he ratio has increased a bit in the year 0122 which means in that year the company showed better e3ciency in collecting its receivables compared to previous years. he better e3ciency may be a result of more
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stringent receivables policy or simply more e3ciency in collecting its outstanding receivables.
In(entory Turno(er Ratio his ratio has increased steadily over the years though not by much. igher inventory turnover ratio implies e3ciency in inventory management. In case of /alek #pinning /ills remained almost steady over last three years. Asset Turno(er Ratio /alek #pinning’s asset turnover ratio increased gradually and slightly over the years. owever$ there is signicant increase in sales. 'lso$ the ratio is slightly below industry average in all the years which is somewhat low in comparison with its sales. It seems that the company isn’t considering asset turnover with current signicance. hey are investing for long term protability. Cas+ Con(ersion Cycle ))) of /alek #pinning /ills Ltd. has increased over the last three years. his event denitely indicates e3ciency in those above mentioned areas but at the same time the company needs to check whether they are missing out any potential buyers or not whom they could avail with a less stringent credit policy.
Solvency Ratios 'e*t to Total Assets Ratio Like e,uity multiplier this ratio is also a measure of a company’s nancial leverage. igher ratio indicates more reliance on debt nancing and vice versa. Ti#es Interest %arned 's for /alek #pinning /ills Ltd. this ratio has increased a bit over the years. Interestingly both net income before interest and tax and interest expense followed a downward trend in all those years. #o this may indicate rm’s e3ciency in utilizing debt nancing$ they have been able pursue debt nancing at a comparatively lower cost. %uity Multiplier
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his ratio shows the company’s nancing strategy. he higher the ratio the more is the usage of debt nancing applied by the company. he trend implies that company’s reliance on debt nancing was a bit higher in 0121 but dipped in 0122.
Co#parati(e Analysis: Male$ Spinning Mills Ltd. Liquidity Ratios Current Ratio )urrent ratio of /alek #pinning /ills Ltd. is a bit lower than that of the industry which implies that the company hardly lets its current assets to pile up comparing to the industry. 'lso at the same time it makes sure that it has enough current assets in hand to li,uidate and meet its current obligations. Acid-test Ratio 'cid5test ratio of the company is also lower than the industry average value. #o$ we can say that unlike the industry the company can’t meet its current obligations without li,uidating its inventories.
Protability Ratios Net pro!t #argin ratio )ompany’s net prot margin ratio is considerably lower than that of the industry average. #o clearly the company has to bear comparatively more expenses compared to other companies in the market. ;e need to look at gross prot margin ratio in order to specify which cost component is causing this event. "ross pro!t #argin ratio )ompany’s gross prot margin ratio is higher than the industry average.'t present it seems like they have been able to purchase raw materials at a bit lower cost than other competitors without compromising much in the 26
,uality as the ratio isn’t considerably higher than the industry average. !ut still the company needs to keep an eye open for any deterioration in the ,uality of raw materials purchased. %therwise it will a(ect sales and prot gures. Asset Turno(er Ratio his ratio is considerably lower than the industry average value. #o clearly it indicates that the company is not e3cient compared to other players in the market when it comes to the ,uestion of utilizing assets to generate sales. R,A )ompany’s return on assets is a bit lower than the industry average value. o pinpoint the problem we need to look at the :u9ont 'nalysis presented later. R,% Like -%'$ company’s -%" gure is also lower than the industry average value. ?ow lets have a look at the :u9ont analysis to gure out the main reason behind this. 'uont Analysis -%' can be described as a multiplication of 'sset urnover -atio and ?et 9rot /argin. Like in the case of -%" here also ?et 9rot /argin was the cause behind lower -%'. #o again expense management issues have caused the company to su(er from a lower -%' despite showing lot e3ciency in asset utilization. %S "9# is higher than the industry average even though the company’s net prot margin ratio was poor. his might happen if the company is heavily reliant debt nancing. #olvency ratios will enable us to determine whether it is the case or not. !ut at present we can state that higher "9# enhance company’s image among shareholders. 'i(idend ayout Ratio his ratio is considerably higher than the industry average referring to the fact that the company is paying a lot dividend to its shareholders compared to other companies in the market. #o$ this information is likely to make shareholders happy. !ut the drawback is that the company will have lower retained earnings to make new and re5investments. 2D
-% Ratio Interestingly company’s 95" ratio is ratio is lot lower that the industry average even though it has comparatively higher "9# and dividend payout ratio. #o$ this indicates undervaluation of the company in the market.
Activity Ratios Recei(a*les Turno(er Ratio )ompany’s receivable turnover ratio is a bit higher than the industry average which indicates e3ciency in collecting receivables. In(entory Turno(er Ratio Inventory turnover ratio is higher as well and again it implies e3ciency in inventory utilization that contributes into )%*#.
Cas+ Con(ersion Cycle ))) is lot lower than the industry average which indicates superior e3ciency in managing accounts receivables$ payables and inventories. It has resulted due to lower :I$ :#% and slightly higher :9%. owever$ the company needs to make sure that they aren’t losing any customers due to strict receivables collection policy and credit terms.
Solvency Ratios 'e*t to Total Assets Ratio )ompany uses more debt nancing than the average industry and it explains how the rm managed to yield an above industry average "9# even though it su(ered from lower ?et 9rot /argin. /ore reliance on debt nancing gives a rm nancial leverage. TI% Ratio I" ratio is slightly less than the industry average. )ompany needs to be cautious in this regard as they are more dependent on debt nancing. %uity Multiplier
2G
's the company is more dependent on debt nancing ,uite expectedly its e,uity multiplier is a bit higher than the industry average due to comparatively lower amount of e,uity
Trend Analysis: Ra+i# Textiles Ltd. Liquidity Ratios Current Ratio )urrent -atio of -ahim extiles Ltd. is 4ust below 2 and hasn’t deviated much over the three years. Low values for the current or ,uick ratios Kvalues less than 2A indicate that a rm may have di3culty meeting current obligations. Low values$ however$ do not indicate a critical problem. If it has good long5term prospects$ it may be able to borrow against those prospects to meet current obligations. %ver the years the ratio hasn’t shown much movement and that indicates that the company’s policies pertaining to li,uidity have been pretty stable in last three years.
Acid-test Ratio 'cid5test ratio is similar to current ratio except of the fact that the former one doesn’t consider inventory in the calculation. 's the gures are below 2 the company can’t meet all of its current obligations without relying on inventories. %ver the three years this particular ratio hasn’t changed much which indicates consistency in company policy regarding li,uidity management.
Protability Ratios Net ro!t Margin Ratio he ratio increased a bit in the year 011C but dipped in 0121. 's It is lower than industry average$ it shows the company hasn’t been e,ually e3cient in managing its expense throughout the three years. "ither there was a problem associated with )%*# or the company may had to bear a
2H
bit too much operating expenses. !ut to see the whole picture we have to look into the following ratio. "ross pro!t Margin Ratio *ross prot margin ratio kept increasing throughout the three years indicating. It is good for the company in one sense that it is managing is )%*# in an e3cient way but at the same time it needs to make sure that they are purchasing ,uality raw materials. %therwise low ,uality raw materials may result in low ,uality nished products which in turn would negatively a(ect the sales gures and protability of the company. Return on Assets -ahim extiles’ asset turnover ratio increased gradually and slightly over the years. owever$ there is signicant increase in sales. 'lso$ the ratio is considerably below 211E in all the years which is somewhat low in comparison with its sales. It seems that the company isn’t considering asset turnover with current signicance. hey are investing for long term protability. he increasing rates and prots suggest accordingly so. Return on Co##on Stoc$ %uity he pattern of this ratio of -ahim extiles corresponds to that of -%'= increased in 0122. For a better understanding of the changes underlying in -%' and -%" we need to conduct :u9ont analysis which is presented below. 'uont Analysis he analysis reveals that e,uity multiplier has been relatively stable over the years. ?et prot margin among increased slightly among the three which caused a slight increase of -%" in the year 0121. In 0122 even though both asset turnover ratio and e,uity multiplier increased those were nullied by a decrease in net prot margin ratio which has brought down -%" gure slightly in that particular year %S he higher the ratio the better is for the company as it indicates better protability of the entity. "9# was high in 011Cdropped signicantly in 0121. he number of common stock outstanding was constant over the last few years and hence the deviation was caused by the change in ?et 9rot of the company. 'i(idend ayout Ratio
2
-ahim extiles has paid out a very high percentage of its net income as dividends in 0121. #hareholders of the company should be mighty pleased with this kind of payout ratio. he drawback is that the company will be left with very low amount of retained earnings which may in turn hinder company’s ability to reinvest in business or expansion. he company needs to keep in mind its growth potential and future needs for investment.
Activity Ratios Recei(a*les Turno(er Ratio he ratio has increased a bit in the year 0122 which means in that year the company showed better e3ciency in collecting its receivables compared to previous years. he better e3ciency may be a result of more stringent receivables policy or simply more e3ciency in collecting its outstanding receivables. In(entory Turno(er Ratio his ratio has increased steadily over the years though not by much. igher inventory turnover ratio implies e3ciency in inventory management. In case of -ahim extilesit remained almost steady over last three years. Asset Turno(er Ratio -ahim extiles’ asset turnover ratio increased gradually and slightly over the years. owever$ there is signicant increase in sales. 'lso$ the ratio is slightly below industry average in all the years which is somewhat low in comparison with its sales. It seems that the company isn’t considering asset turnover with current signicance. hey are investing for long term protability. Cas+ Con(ersion Cycle ))) of -ahim extiles Ltd. has increased over the last three years. his event denitely indicates e3ciency in those above mentioned areas but at the same time the company needs to check whether they are missing out any potential buyers or not whom they could avail with a less stringent credit policy.
Solvency Ratios 'e*t to Total Assets Ratio 2J
Like e,uity multiplier this ratio is also a measure of a company’s nancial leverage. igher ratio indicates more reliance on debt nancing and vice versa. Ti#es Interest %arned 's for -ahim extiles Ltd. this ratio has increased a bit over the years. Interestingly both net income before interest and tax and interest expense followed a downward trend in all those years. #o this may indicate rm’s e3ciency in utilizing debt nancing$ they have been able pursue debt nancing at a comparatively lower cost. %uity Multiplier his ratio shows the company’s nancing strategy. he higher the ratio the more is the usage of debt nancing applied by the company. he trend implies that company’s reliance on debt nancing was a bit higher in 0121 but dipped in 0122.
Co#parati(e Analysis: Ra+i# Textiles Ltd. Liquidity Ratios Current Ratio )urrent ratio of -ahim extiles Ltd. is a bit lower than that of the industry which implies that the company hardly lets its current assets to pile up comparing to the industry. 'lso at the same time it makes sure that it has enough current assets in hand to li,uidate and meet its current obligations. Acid-test Ratio 'cid5test ratio of the company is also lower than the industry average value. #o$ we can say that unlike the industry the company can’t meet its current obligations without li,uidating its inventories.
Protability Ratios Net pro!t #argin ratio
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)ompany’s net prot margin ratio is considerably lower than that of the industry average. #o clearly the company has to bear comparatively more expenses compared to other companies in the market. ;e need to look at gross prot margin ratio in order to specify which cost component is causing this event. "ross pro!t #argin ratio )ompany’s gross prot margin ratio is higher than the industry average.'t present it seems like they have been able to purchase raw materials at a bit lower cost than other competitors without compromising much in the ,uality as the ratio isn’t considerably higher than the industry average. !ut still the company needs to keep an eye open for any deterioration in the ,uality of raw materials purchased. %therwise it will a(ect sales and prot gures. Asset Turno(er Ratio his ratio is considerably lower than the industry average value. #o clearly it indicates that the company is not e3cient compared to other players in the market when it comes to the ,uestion of utilizing assets to generate sales. R,A )ompany’s return on assets is a bit lower than the industry average value. o pinpoint the problem we need to look at the :u9ont 'nalysis presented later. R,% Like -%'$ company’s -%" gure is also lower than the industry average value. ?ow lets have a look at the :u9ont analysis to gure out the main reason behind this. 'uont Analysis -%' can be described as a multiplication of 'sset urnover -atio and ?et 9rot /argin. Like in the case of -%" here also ?et 9rot /argin was the cause behind lower -%'. #o again expense management issues have caused the company to su(er from a lower -%' despite showing lot e3ciency in asset utilization. %S "9# is higher than the industry average even though the company’s net prot margin ratio was poor. his might happen if the company is heavily reliant debt nancing. #olvency ratios will enable us to determine whether 01
it is the case or not. !ut at present we can state that higher "9# enhance company’s image among shareholders. 'i(idend ayout Ratio his ratio is considerably higher than the industry average referring to the fact that the company is paying a lot dividend to its shareholders compared to other companies in the market. #o$ this information is likely to make shareholders happy. !ut the drawback is that the company will have lower retained earnings to make new and re5investments. -% Ratio Interestingly company’s 95" ratio is ratio is lot lower that the industry average even though it has comparatively higher "9# and dividend payout ratio. #o$ this indicates undervaluation of the company in the market.
Activity Ratios Recei(a*les Turno(er Ratio )ompany’s receivable turnover ratio is a bit higher than the industry average which indicates e3ciency in collecting receivables. In(entory Turno(er Ratio Inventory turnover ratio is higher as well and again it implies e3ciency in inventory utilization that contributes into )%*#. Cas+ Con(ersion Cycle ))) is lot lower than the industry average which indicates superior e3ciency in managing accounts receivables$ payables and inventories. It has resulted due to lower :I$ :#% and slightly higher :9%. owever$ the company needs to make sure that they aren’t losing any customers due to strict receivables collection policy and credit terms.
Solvency Ratios 'e*t to Total Assets Ratio )ompany uses more debt nancing than the average industry and it explains how the rm managed to yield an above industry average "9# even though it su(ered from lower ?et 9rot /argin. /ore reliance on debt nancing gives a rm nancial leverage. 02
TI% Ratio I" ratio is slightly less than the industry average. )ompany needs to be cautious in this regard as they are more dependent on debt nancing. %uity Multiplier 's the company is more dependent on debt nancing ,uite expectedly its e,uity multiplier is a bit higher than the industry average due to comparatively lower amount of e,uity.
Trend Analysis: Suare Textiles Ltd. Liquidity Ratios Current Ratio #,uare extiles Ltd has a current ratio slightly over 2 and has minor deviation over the three years Kmaintaining centrality around 2.DA. It implies that to meet its current re,uirement$ the company holds su3cient current assets that can be li,uidated. he gures also imply that a small segment of the current assets have been nanced by long term debt and the rest by current liabilities. )urrent assets haven’t piled up in the last years as ratios are 4ust over 2. %ver the years the ratio hasn’t shown considerable movement indicating the company’s policies pertaining to li,uidity being stable in last three years. Acid-test Ratio 's the gures show$ they are scattered near around 2$ the company is capable of meeting most of its current obligations. It doesn’t have to rely exceedingly on inventories. he ratio has changed slightly over the 0121 < 0122. his indicates few changes in company policy regarding li,uidity management over that period.
Protability Ratios Net ro!t Margin Ratio he ratio increased greatly in 0121 but dipped slightly in 0122. If we look at the income statement gures then we will see that company’s net prot increased accordingly with its sales over 0121 < 0122. 00
Increasing gures with big volumes in consecutive years indicate that the company has been greatly e3cient in managing its expense. he operating expense was maintained in accordance with )%*#. %nly a slight dip in 0122 would indicate that the company ran a bit more e3ciently in 0121 than 0122. !ut this doesn’t change the fact that company’s production and management are procient in comparison to market.
"ross pro!t Margin Ratio *ross prot margin ratio kept increasing throughout the three years indicating. It is good for the company in one sense that it is managing is )%*# in an e3cient way but at the same time it needs to make sure that they are purchasing ,uality raw materials. %therwise law ,uality raw materials may result in law ,uality nished products which in turn would negatively a(ect the sales gures and protability of the company. Asset Turno(er Ratio #,uare extiles’ asset turnover ratio increased gradually and slightly over the years. owever$ there is signicant increase in sales. 'lso$ the ratio is considerably below 211E in all the years which is somewhat low in comparison with its sales. It seems that the company isn’t considering asset turnover with current signicance. hey are investing for long term protability. he increasing rates and prots suggest accordingly so. Return on Assets -eturn on assets refers to company’s ability to generate net prot utilizing its assets. he signicantly increasing gures over the years indicate that company is well capable of doing so. hough a company’s )%*# consume a substantial portion of its sales$ in this case it couldn’t a(ect -%' as the gures were increasing in considerable amount. he -%' decreased slightly in 0122 though. his may indicate that in that year even though both sales and assets increased net prot did not mainly due to relatively high )%*#. owever$ the consistent rates suggest successful maintenance of the company’s raw material management according to cash < )%*#. Return on Co##on Stoc$ %uity he pattern of this ratio of 'pex #pinning corresponds to that of -%'= increased signicantly in 0121 and dropped minuscule in 0122. he gures have been pretty stable over the years. his shows the company has been e3cient in utilizing its common e,uity to generate net income. 'uont Analysis
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he e,uity multiplier of #,uare extiles Ltd. has been relatively stable over the years. ?et prot margin increased slightly among the three which caused a signicant increase of -%' in the year 0121. In 0122 even though both asset turnover ratio and e,uity multiplier increased the -%' gure slightly decreased in that particular year. his may be due to decreased asset allocation> inventory allocation for other purposes. %S "9# has increased vastly in 0121 and then dipped a bit 0122. owever$ regardless of increase$ the gures are considerably low$ indicating average protability on the rise towards betterment. he number of common stock outstanding decreased signicantly over the last few years and hence the deviation was caused by the change in ?et 9rot of the company.
'i(idend ayout Ratio %ver the three years$ the :ividend payout ratio of #,uare extiles Ltd. has decreased signicantly. his indicates that the company has high amount of retained earnings < plans on reinvestment. owever$ the decreasing trend may displease potential shareholders$ as they invest into those reinvestments without any signicant return. o maintain consistent input of shareholders$ the company should increase this payout ratio past business expansion. his will ensure market growth and future investment possibilities. )% Ratio 'ccording to the tremendously high 9>" ratio in 011C$ the company was highly overvalued in that particular year. hough "9# was very low in 011C market price of company’s stock was much higher. he evaluation descended to typical in the years following.
Activity Ratios Recei(a*les Turno(er Ratio he ratio has increased se,uentially in minuscule gures. his means that the company improved its performance in collecting receivables over the years. his increased e3ciency supposedly is a plausible result of consistent stringent receivables policy or simply more e3ciency in collecting its outstanding receivables. In(entory Turno(er Ratio his ratio has decreased moderately from 011C to 0121$ then rose slightly in the following year. he ratio is considerably low. his indicates consistent ine3ciency in inventory management. 0D
In case of #,uare extiles Ltd.$ over the years the inventory and )%*# didn’t have any collaborated platform for e3cient inventory management. ?either the )%*# did increase nor the inventory remained relatively constant$ or vice versa. 'nd the inconsistency of the gures over the years shows that the company policy on inventory management wasn’t successfully operational. owever$ increased gures in 0122 may indicate induced e3ciency measures. Cas+ Con(ersion Cycle ))) of #,uare extiles has reduced increased signicantly in 0121$ then decreased vastly in 0122. In 0121$ :I and :#% increased and :9% decreased$ resulting into increase in ))). In the following year$ the scenario was opposite. his indicates the company being more e3cient in managing payables$ receivables < inventories in 0122 than 0121.
Solvency Ratios 'e*t to Total Assets Ratio Like e,uity multiplier this ratio is also a measure of a company’s nancial leverage. It rose slightly in 0121 and dipped in 0122 indicating consistency in nancial strategy. Ti#es Interest %arned In case of #,uare extiles Ltd.$ the ratio rose greatly in 0121 and decreased signicantly in 0122. !oth net income before interest and tax and interest expense followed an upward trend in all those years. Furthermore$ high debt to asset ratio and e,uity multiplier ratio in 0121 indicate company’s more reliance on debt nancing in 0121. )onse,uently I" ratio kept increasing. !ut it fall in 0122. his indicates rm’s higher e3ciency in utilizing debt nancing in 0121 than 0122. hey have been able pursue debt nancing at a comparatively lower cost. %uity Multiplier his ratio shows the company’s nancing strategy. he higher the ratio the more is the usage of debt nancing applied by the company. he trend implies that company’s reliance on debt nancing was a bit higher in 0121 but it lessened again in 0122.
Co#parati(e Analysis: Suare Textiles Ltd. 0G
Liquidity Ratios Current Ratio #,uare extiles have a current ratio that is slightly lower than the industry average indicating to the fact that the company hasn’t allowed its current assets to pile up a lot. Acid-test Ratio 'cid5test ratio is also lower than the industry average. #o these two ratios imply the company’s e3ciency in current asset management. 't the same time the company managed to maintain an average acid5test ratio that is more than 2$ so they do not need to rely upon their inventories to meet their current obligation.
Protability Ratios Net ro!t Margin Ratio ?et prot margin ratio is higher than the industry average and that is a sign of e3cient management of company expenses. It’s also not likely the company is over5using its assets or workforce as there is no big gap between the industry average and the company average. #o most likely the company can reap the whole benet of an increased net prot margin with worrying about the drawbacks. "ross pro!t Margin Ratio *ross prot margin ratio is also higher than the industry average and most likely this has a signicant role to play behind increased net prot margin. 't present it seems like they have been able to purchase raw materials at a bit lower cost than other competitors without compromising much in the ,uality as the ratio isn’t considerably higher than the industry average. !ut still the company needs to keep an eye open for any deterioration in the ,uality of raw materials purchased. %therwise it will a(ect sales and prot gures. Asset Turno(er Ratio 'sset turnover ratio is also higher than the industry indicating to the fact that the company has been able to generate more sales per tk worth of asset. #o this shows better utilization of company’s assets. hey 4ust need to make sure that they are not over5using machineries otherwise they may have to make unplanned investment due to early deterioration. Return on Assets -eturn on assets of #,uare extiles is slightly higher than the industry average and this again means more e3ciency and better utilization of
0H
company’s assets. In :u9ont analysis we will have a closer look at the reasons behind this slightly above average -%'. Return on Co##on Stoc$ %uity -%" also shows a better than industry average gure. owever$ gure here is a bit better than the -%' and increased used of debt nancing can be reason for that. Let’s have a look at :u9ont analysis for further investigation. 'uont Analysis 'll three components of the analysis8 ?et 9rot /argin$ 'ssets urnover -atio and ",uity /ultiplier are better than the industry average. igher e,uity multiplier could be reason for better -%" compared to -%'. #o clearly the company is utilizing and managing its assets well. 's far as -%' is concerned we need to look at two components8 ?et 9rot /argin -atio and 'ssets urnover -atio. !oth of them are higher than the industry average value. his again points at more e3ciency policies and practices. %S "9# is slightly higher than the industry average and it was expected as the company experienced better than average protability and also relies a bit more on debt nancing. Increased "9# should enhance company image. 'i(idend ayout Ratio :ividend payout ratio is also higher than the industry average. #o$ #,uare extiles have been paying its shareholders comparatively more dividends than the industry. It’s certainly is a good news for the shareholders and may have a role to play in the market price of company share. )% Ratio #urprisingly 95" ratio is way below than the industry average even it has higher than average "9# and dividend payout ratio. #o$ all these information refers to the fact that shares of #,uare extiles are a lot undervalued. If the market works in a somewhat e3cient manner than its share price is likely to go up in near future.
Activity Ratios Recei(a*les Turno(er Ratio @nlike protability ratios receivables turnover ratio doesn’t reect company’s e3ciency. It’s slightly lower than the industry average. owever$ it shouldn’t be an issue for the company if a less stringent collection and credit policy allow them to retain and attract customers. 0
In(entory Turno(er Ratio Inventory turnover ratio is again slightly lower than the industry average. !ut the di(erence isn’t large enough to sound an alarm. Cas+ Con(ersion Cycle ))) is also slightly higher than the industry average. ere is an interesting event going on. )ompany’s :#% is a bit higher than the industry average$ however much of that impact has been nullied due to a higher than industry average :9%. #o the rm is late in receiving money from its customers but at the same they paying their suppliers a lot later. #o$ basically they aren’t doing a bad 4ob in managing their cash conversion cycle.
Solvency Ratios 'e*t to Total Assets Ratio 's the rm relies a bit more on debt nancing its debt to total assets ratio is a bit higher than the industry average. his should give the company a tax shield and nancial leverage. Ti#es Interest %arned his ratio is important in the company’s aspect as they are a bit more reliant on debt nancing. hey are doing a good 4ob here as the ratio is higher than the average. #o most likely they are earning enough income to pay for their interest expenses. %uity Multiplier Like debt to total assets ratio e,uity multiplier is also a bit higher than the industry average due to more use of debt nancing.
Analysis on oriontal State#ents ;e have considered 011C as the base year in all the calculation and analysis so that we can observe year to year growth of di(erent sectors of the companies and industry.
Income Statement Apex Spinning & Knitting Mills Ltd. "ven though both sales and gross prot decreased in the year 0121 net income in that year was more than that of the previous year. he only reason that we observe from the horizontal statement is that the company managed to pay a lot less income tax in the year 0121 which enabled them to maintain a better net income gure.
0J
Figures in 0122 are e,ually interesting$ the company managed to yield 6GE more revenue but most of it was wiped out due to higher )%*# resulting in only E increase in gross prot. "ven that E was nullied due to a higher administrative < selling overhead. he company still managed to yield a better net income before tax gure compared to 011C as they managed to curb their interest expenses and this resulted in a net income gure that is higher than 011C but slightly lower than 0121. Anli#a /arn 'yeing Ltd. Figures are exceptionally for the company in the year 0121 and 0122 compared to the gures of 011C. he company managed a better performance in almost every department. hey even managed to have lower interest expense in 0122 compared to 011C. he main reason might be in the interest expense$ even though the managed double the prot gures their interest expense wasn’t much in 0121 and in 0122 it in fact went down. #o might have resulted in healthy net income gures in 0121 and in 0122. Male$ Spinning Mills Ltd. /alek #pinning su(ered a lot in 0121 as all the sales and protability gures are lower than 011C. hings could have been a bit worse if they hadn’t managed substantial increase in other income segment. In 0122 even though they managed to yield higher sales the e(ect was wiped out due to high )%*# and administrative and selling expenses. #o the company denitely needs to focus on their expense management issues. Ra+i# Textiles Mills Ltd. he company su(ered a lot due to high interest expense in 0121. "ven after managing better sales gures they had to accept J2E decrease in net income in 0121 owing to high interest expense and administrative expense. In 0122 the net income gure was a bit better though it was due to higher sales and a lot higher other income gures. hey still had to pay a lot interest expense compared to that of 011C. Suare Textiles Ltd. he company doubled their net income gure in 0121 mainly due to higher sales gure$ much higher gross prot and lower interest expense. #o clearly they did a much better 4ob in 0121. hings were pretty much same in 0122$ better sales gures$ higher gross margin eventually resulting in higher net income compared to 011C. Textile Industry Industry as a whole managed to yield better net income in both 0121 and 0122 compared to 011C. igher sales$ higher gross prot$ comparatively managed interest expense and lower tax expense were the reasons behind the increase in net income for the year 0121 and 0122.
0C
Balance Seet Apex Spinning & Knitting Mills Ltd. )ompany’s total current assets decreased in 0121 even though cash and other receivables rose sharply. )ash gure was a lot high 0122 as well so it indicates the company isn’t utilizing its cash properly and missing out on short term investment opportunities. uite surprisingly the company signicantly reduced it long term obligations over the years. owever it still had more debt in 0122 due to heavy inuence on current liabilities. "ven though this would give the company a bit of leverage we must admit that It’s ,uite a risky strategy the company has taken. Anli#a /arn 'yeing Ltd. 'ccounts receivables of the company rose sharply in 0121 and in 0122 which may be a result of huge credit sales compared to 011C. #till it shows lack of e3ciency in managing receivables. his company has also reduced its dependence on long term debt and increased its dependence on short term debt obligations over the three years. ",uity has been kept at a steady level. Male$ Spinning Mills Ltd. he company shows some serious ine3ciency in cash management as its cash gures rose extremely high in 0121. It has been brought down a lot in 0122 still it was much higher compared to 011C. Furthermore the company changed its nancing policy twice in the last three years. In 0121 it showed heavy reliance on e,uity nancing and almost halved its debt obligations. Bust the opposite happened in 0122$ reduced e,uity considerably and doubled the debt nancing compared to that of 011C. hey have dramatically changed their policies and practices from 0121 to 0122. Ra+i# Textiles Mills Ltd. his company also shows a bit cash management issues as cash gure 4ust shot up in 0122. hey are certainly missing out some short term investment opportunities. %ther than that the rest of gures have been kept ,uite steady over the past three years.
Suare Textiles Ltd. 'gain cash management is a problem in 0122. Increased dependence on debt nancing more compared to e,uity nancing. !oth current and long term debt nancing have been relied upon.
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Textile Industry Industry as a whole cash management seems to be a problem that needs addressing. /ore reliance on e,uity nancing has been observed in 0121 and ,uite the opposite has been seen in 0122. 'ccounts payable has been exploited a bit in 0122 among the alternatives of current liabilities. %ther gures have been relatively stable.
Analysis on 0ertical State#ents Income Statement Apex Spinning & Knitting Mills Ltd. )%*# percentage is highest and as a result gross prot percentage is lowest among all the rms. #o the company needs to check whether they are getting superior ,uality raw materials or not and if they are purchasing superior ,uality raw materials then how much value it’s adding to the company. "xcept of 'nlima +arn administrative and selling overhead is a bit higher for the company.hey need to check whether they are oversta(ed or not. 'lso need to see for redundant machineries if any. Anli#a /arn 'yeing Ltd. )%*# and gross prot percentage is pretty similar to the rest of the companies if not a bit higher. owever they su(er from high administrative and selling costs which a(ected its protability. Male$ Spinning Mills Ltd. )%*# and gross prot percentage are pretty much similar to the rest of the companies$ however in 0122 the company su(ers from much reduced gross prot margin due to high )%*#. #elling and administrative expenses have been kept in check compared to its competitors. Ra+i# Textiles Mills Ltd. *ross prot percentage$ administrative and selling overhead percentage is pretty much similar to the other companies in the industry. owever$ the company su(ers from lower net prot percentage due comparatively higher interest expense. Suare Textiles Ltd.
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he company managed to yield better gross prot percentage and net prot percentage in 0121 and in 0122 mainly due to lower )%*# and slightly lower administrative costs. If the company can deliver ,uality products retaining and attracting customers then reduced )%*# shouldn’t be a concerning issue.
Balance Seet Apex Spinning & Knitting Mills Ltd. Lower percentage of cash cancelled out the e(ect of higher percentage of accounts receivables resulting in current assets level that is pretty much similar to industry average except of 0121. he company has been comparatively more reliant debt nancing and less reliant on e,uity nancing compared to other companies. Anli#a /arn 'yeing Ltd. he company holds substantially high percentage of xed assets which is lot higher than other companies. )urrent asset portion is comparatively lower. hey have been interested in debt nancing compared to e,uity nancing. Male$ Spinning Mills Ltd. 'sset segregation is similar to other rms or to the industry average. owever the company showed exceptionally high reliance on e,uity nancing in 0121. hat tendency was curbed a bit in 0122 still it was much higher than what other companies follow. Ra+i# Textiles Mills Ltd. )urrent asset portion is lot smaller and xed assets comprise most of its assets value. he company is much reliant on debt nancing and a lot less on e,uity nancing. Suare Textiles Ltd. Figures of #,uare extiles don’t deviate much from the industry average. !oth current assets and xed assets somewhat corresponds to that of industry average. Financing strategy also somewhat aligns with the industry policy on average except in 0121 when the company showed a bit more reliance on debt nancing.
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Conclusion ;e have reached the end of the report. !ased on our ndings we can a(ord to make few recommendations regarding the nancial performance of the companies. •
•
•
•
•
'pex #pinning should be have a look at its )%*# and try to improve its gross prot margin ratio. 'nlima +arn should address its li,uidity issues and focus on better utilization of its assets. /alek #pinning should develop better cash management strategy and can a(ord to use more debt nancing. -ahim extiles can also a(ord to have more debt nancing and should look out for ways to curb its expenses to boost net prot margin ratio. #,uare extiles should maintain most of its ongoing policies and no need to take any radical steps as at present they are going pretty smoothly.
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