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Financial Management

Assignment on Ratio Analysis Maple Leaf Cement Factory Limited

Muhammad Mukarram M.Com II (Night) National University of Modern Languages

PROFITABILITY RATIOS

GROSS PROFIT RATIO Gross Profit Ratio = Gross Profit Ratio = Gross Profit Ratio = NET PROFIT TO SALES Net Profit Ratio = Net Profit Ratio = Net Profit Ratio = RETURN ON EQUITY Return on Equity = Return on Equity = Return on Equity = Net Income X 100 Shareholders equity 3.224.695 X 100 6,770,913 47.63 % Gross Profit 100 Sales X

6,045,035 X 100 17,357,376 34.83 %

Net Profit X 100 Sales 3,224,695 X 100 17,357,376

18.58 %

RETURN ON CAPITAL EMPLOYED Return on Capital Employed = Return on Capital Employed = Return on Capital Employed = Shareholders Equity Total Assets Current Liabilities 6,770,913 (32,373,090 8,568,551) 28.44 %

Profitability Ratios overall depicted cyclic trend of cement where recession had started from 2008 due to reduction in prices on account of commencement of capacity expansion program of major cement players. Recession peaked in year 2010 and midyear 2011 where prices further declined resulting in overall downfall of all profitability ratios. However, at the end of year 2011 prices started improving due to increase in demand and resulted in better sale price and margin which made all the profitability ratios positive in year 2012. In year 2013, cement sector has shown robust growth due to increase in demand and resulted in better margin than ever and this has contributed in historically better profitability ratios.

LIQUIDITY RATIOS
CURRENT RATIO Current Ratio = Current Assets Current Liabilities 6,682,906 8,568,551 0.78

Current Ratio =

Current Ratio = QUICK / ACID TEST RATIO Quick Ratio =

Current Assets Spare parts & Tools Stock in Trade Current Liabilities 6,682,906 3,751,386 938,899 8,568,551 0.23

Quick Ratio =

Quick Ratio =

CASH TO CURRENT LIABILITIES Cash to Current Liabilities Ratio = Cash to Current Liabilities Ratio = Cash to Current Liabilities Ratio = Cash & Bank Balance Current Liabilities 523,540 8,568,551 0.06

Liquidity Ratios: As prices increased, liquidity position of the Company improved and resulted in better cash flows. Therefore, ratios started improving from year 2011 and ended in much better condition in 2013 as compared to year 2009.

TURNOVER RATIOS
INVENTORY TURNOVER RATIO Inventury Turnover Ratio = Inventury Turnover Ratio = Inventury Turnover Ratio = Cost of Sales Avg. Inventory 11,312,341 (938,899 + 903,395) / 2 12.28

NO. OF DAYS IN INVENTORY No. of Days in Inventory = No. of Days in Inventory = No. of Days in Inventory = DEBTOR TURNOVER RATIO Debtor Turnover Ratio = Debtor Turnover Ratio = Debtor Turnover Ratio = Net Credit Sales Avg. trade Debts 17,357,376 (757,944 + 575931)/2 26.03 365 Inventory Turnover Ratio 365 12.28 29.72

NO. OF DAYS IN RECEIVABLES No. of Days in Receivables = 365 Debtor Turnover Ratio

No. of Days in Receivables = No. of Days in Receivables =

365 26.03 14.02

TOTAL ASSET TURNOVER RATIO Total Asset Turnover Ratio = Total Asset Turnover Ratio = Total Asset Turnover Ratio = Net Sales Total Assets 17,357,376 32,373,090 0.54

FIXED ASSET TURNOVER RATIO Fixed Asset Turnover Ratio = Fixed Asset Turnover Ratio = Fixed Asset Turnover Ratio = Net Sales Fixed Assets 17,357,376 25,690,184 0.68

CREDITOR TURNOVER RATIO Creditor Turnover Ratio = Creditor Turnover Ratio = Creditor Turnover Ratio = Net Credit Purchases Avg. trade Creditors (Creditors + bills payable) 11,312,341 (430097+673544+463599+1235302)/2 8.07

NO. OF DAYS IN CREDITORS No. of Days in Creditors = No. of Days in Creditors = 365 Creditors Turnover Ratio 365 8.07

No. of Days in Creditors = OPERATING CYCLE Operating Cycle = Operating Cycle = Operating Cycle =

45.23

No. of Days in (Inventory + Receivables Creditors) No. of Days in (29.72 + 14.02 45.23) -1.47

Activity / Turnover Ratios improved due to increased revenues on account of increase in sale prices. Operating cycle improved progressively mainly due to better liquidity on account of increased revenue and margins.

INVESTMENT / MARKET RATIOS


EARNING PER SHARE (EPS) Earning Per Share = Earning Per Share = Earning Per Share = PRICE EARNING RATIO Price Earning Ratio = Price Earning Ratio = Price Earning Ratio = Market Value Per Share Earning Per Share 21.93 6.11 3.59 Net Profit After Taxation No. of Issued Shares 3,224,695 527,734 6.11

Investment / Market Ratios: Due to lowest margin in year 2008, earning per share was adverse and this trend was continued till year 2010. After recovery of sale prices in 2011, Investment / Market ratios started improving and resulted in highest earnings per share in year 2013.

CAPITAL STRUCTURE RATIOS


DEBT TO EQUITY RATIO

Debt to Equity Ratio = Debt to Equity Ratio = Debt to Equity Ratio =

Total liabilities Shareholders Equity 32,373,090 6,770,913 4.78

Capital Structure Ratios: Due to unfavorable market conditions in year 2008 financial leverage ratio had started to rise and continued till midyear 2011. After that recovery started due to better margin and resulted in improved ratios in year 2012 and year 2013.