1

FINANCIAL ANALYSIS OF CHERAT CEMENT

COMPANY LIMITED KPK




BY: BIBI SARA
REGESTRATION #
BBA HONS (2009-2013)
TO: MR. SAEED AKBAR

NORTHERN UNIVERSITY NOWSHERA
(Main Campus) Wattar Walai Ziarat, Kaka Sahib Road, Nowshera,
KPK
Ph: 0923-210641-42
2

APPROVAL SHEET
FINANCIAL ANALYSIS OF CHERAT CEMENT COMPANY LIMITED KPK

Supervisor: _________________________________________________
Mr. Saeed Akbar
Lecturer. Deptt of Mgt Sciences
Northern University Nowshera

Member Research Committee: __________________________________
Mr. Abdul Waheed
HOD. Deptt of Management Sciences
Northern University Nowshera

Member Research Committee: _________________________________
Mr. Junaid Iqbal
Lecturer. Deptt of Mgt Sciences
Northern University Nowshera


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CHAPTER # 1
1.0 INTRODUCTION
The progress of any country depends on the industrial development of the country. To
gain a power in the world country needs to be industrially advanced and developed. To get
success, every country needs to be respected for what it produces and contributes to the
world market. Any economic activity which deals with manufacturing of goods by
processing raw material is called industry. It is the form of economic and commercial
activity in a country. An industry helps to contribute to the national income.
Even for the improvement of most modernized production of cement, industrialization is
necessary. Cement industry is indeed a highly important segment of industrial sector that
plays an important role in the socio-economic development of a country. Throughout the
world the top most producers of cement are China, India and USA. As the most populated
state of the world their combined total makes half of the world total. According to
research China constantly has produced more cement than any other country from last 18
years. Approximately 3.3 billion tons of cement is consumed globally of which 1.8 billion
tons is manufactured by china.
Since independence of Pakistan a country production capacity had less than half a million
tons per annum but by now it has exceeded 10 million tons per annum due to
establishment of new manufacturing facilities. Pakistan was net importer of cement but
due to privatization new owner supported by financial help pushed the industry to a point
where a country had reached to an oversupply situation.
Pakistan cement market is divided in to two regions the one is northern region and the
other is southern region. Northern region contain areas of Punjab, KPK, Azad Kashmir
and upper parts of Baluchistan whereas the southern region contains the entire province of
Sindh and lower part of Baluchistan. In fact southern region of a country always produced
surplus cement but now due to new plants opened in northern region has become almost
self-sufficient in supply of cement.
4

Pakistan has one of the highest population growth rate in the world this has prompted a
sizable demand for housing facilities in the country. Urban areas have demanded 0.6
million units per annum and due to greater urbanization demand of cement is predicted to
grow up to 7% per annum. Demand for cement will go high for infrastructure units due to
commencement of work on motor ways, power plants, Islamabad new city, Karachi
package and Ghazi Brotha dam. This will cause demand of cement to grow at high rate.
Recently there were 24 cement manufacturing units in the country but due to closure of
National cement Karachi unit it is reached to 23 units. Out of these 23 units, 20 units
produce ordinary Portland cement, 2 units produce white cement and remaining one unit
produce slag cement.
Cherat cement located in KPK has capacity of 0.72 million per annum. Cherat was the
first cement plant in the private sector. The company is owned by Ghulam Faruque group
who are the owner of Cherat paper sack as well. The main target market of Cherat cement
is upper Punjab and KPK. Recently the company has increased its capacity and has
expended their business. Due to expansion they are in a position to take advantage to
provide cement to northern areas that have high demand for it. Expansion had helped them
to achieve economies of scale. As Afghanistan is in need of reconstruction after
devastation of a long war it will be beneficial for Cherat to export cement to Afghanistan.

Cement industry is indeed a highly important segment of industrial sector that plays an
important role in the socio-economic development of a country. The first name in the field
of cement manufacturing was listed in 1981 in Karachi stock exchange.
The factory is built on Cherat Hills and manufacture high quality grey Portland cement.
The cement is made on the most computerized system. There is upgraded quality control
system and modern production system. CCCL is the largest producer and supplier in
Pakistan. Production capacity of CCCL is 2500tons/day

This research report makes us to know about financial strength of Cherat cement industry
and its performance. Financial statement analysis is a method used by interested parties
such as shareholders, creditors and management to evaluate the conditions and
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performance of the firm. Ratio analysis, trend analysis and common size analysis are used
in this research which is the most common forms of financial analysis. Financial ratio
analysis is an important topic and is covered in all mainstream management sciences
textbooks. It is widely used to summarize the financial health of a company. This research
report will be of great use for investors, creditors as well as the students of, management
sciences and for those who are interested in finance particularly.

1.1 PURPOSE OF THE STUDY
The main purpose of this research study will be examining financial position, analyzing
profitability, analyzing market strength and drawing conclusion about overall performane
of CCCL over a period of 2007-2011. The main objectives will be:
1. To examine the financial position of Cherat Cement Company Limited.
2. To analyze the profatibility of Cherat Cement Company Limited.
3. To analyze the market strength of Cherat Cemnet Company Limited.
4. To draw conclusions about the overall performance of the company from 2007-
2011.
5.
1.2 SIGNIFICANCE OF THE STUDY
This research is important for investors and management as well. It is an anlayst
microscope and let them to get a better view of financial health of a company.
The relationship between the two items of fiancial data express in the form of ratio and
then interpreted with the view to evaluating the financial and performance of the firm
,from the basis of the financial ratio analysis.
Ratio anaylsis is the fact that allow the company to compare its performance with that of
other companies in the same industry .it gives the potential investors a quick snap shot of
the financial condition of a business .
6

Ratios analysis are important both internally and externally. On internal basis we do
planning and evaluate management through financial ratio analysis and externally we
become able to make policies, monitor performance, take investment decisions and
manage credit grantings etc.


















7

CHAPTER # 2
2.0 LITERATURE REVIEW
Doron Nissim,Stephen H.Penman(2003) made research on Financial Statement Analysis
of leverage and how it informs about protability and Price-to-Book Ratios. This research
present financial statement analysis that distinguishes leverage arises in nancing
activities from leverage that arises in operations. This study yields two leveraging
equations, one for borrowing to nance operations and one for borrowing in the course of
operations. This research concludes that balance sheet line items for operating liabilities
are priced differently than those dealing with nancing liabilities.
Doron Nissim, Stephen H.Penman (2001) do research on ratio analysis and equity
valuation. The researcher research that standard portability analysis is integrated and
unlimited and is complemented with an analysis of growth and analysis of operating
activities is well-known from the analysis of nancing activities. This study present a
matter of pro forma analysis of the future, with forecasted ratios viewed as building blocks
of forecasts of payoffs. The analysis of current nancial statements is seen as a matter of
identifying current ratios as predictors of the future ratios that determine equity payoffs.
Jane A. Ou and Stephen H. Penman(1989) have did research on ratio analysis and equity
the researcher did work on financial statement analysis that combines a huge position of
financial statement things into one summary calculate which indicates the way of one-
year-ahead earnings changes. Positions are taken in stock on the basis of this calculation
during the period of 1973-1983 which engage canceling long and short location with zero
net investment. The two-year investment-period return to the long and short location in
the order of 12.5%.and after adjustment for size effects the return is about 7.0% and these
returns cant be explained by nominated firm risk characteristics.
E. Eldon Eversull and Beverly L. Rotan (1997) have done research on Analysis of
Financial Statements Local Farm Supply, Marketing Cooperatives. In this report they
examined the balance sheet and income statement of a local firm supply and marketing
cooperatives, they compared 1995 and 1994 and trend above the past 10 years. The facts
in this research stand for four cooperatives size and types .general size of income
8

statement and balance sheet evaluate dissimilar cooperative size and type. For this
comparison balance sheet and income statement items and ratios are used.

Mary Fischer, Teresa P. Gordon, Janet Greenlee, & Elizabeth K. Keating (2003) did
research on An Analysis of the Financial Statements of U.S private colleges and
universities. This study analyzed the private organizations that provide permanent
contribution in higher education of US. They wanted to find out that whether the
discretions provided to them by auditing and accounting standards were advantageous to
them or not .As these standards provide an operating way to them. They found that about
60% of the institutions report an operating measure but difference lies in their inclusion
and exclusion of items.

Mabwe kumbirai and Robert Webb (2010) did research on a Financial Ratio Analysis of
commercial bank performance in South Africa. They investigate the performance of
south Africas commercial banking sector from the period 2005-2009.financial ratio are
used to measure the profitability, liquidity and credit quality performance of five large
south Africa based on commercial banks. Their study is based on generally bank
performance increased considerably in the first two years of the analysis. A significant
change in the trend is notice at the onset of the global financing crisis in 2007, getting its
peak period from 2008-2009.

Chunhui (Maggie).Grace OFarrell Kwok-Kee Wei and Lee.J.Yee (2007) did research on
ratio analysis comparability between Chinese and Japanese firm. The main purpose of
their search was Firms in different countries operate in different business environments
and prepare financial statements. Benchmarks for assessing financial ratio of a firm in
different countries are likely to be different .during conducting the financial ratio analysis
each country having its unique cultural, business, and financial have to be taken into
financial data. The methodology of their search is to study and compares ten main
financial ratios of 75 Chinese firms with financial ratio of 75 matched samples Japanese
firms to determine if the common benchmark of each of the financial ratio can be applied
9

in both countries .their findings during the search shows an important difference in
liquidity, solvency and activity ratio between firms from these two countries.

Enekwe Chinedu Innocent, Okwo Ifeoma Mary and Monday Matthew (2013) have did
search on financial ratio analysis of profitability in Nigerian Pharmaceutical Industry.
The main purpose of their search is to examine the relationship between the financial ratio
analysis and profitability of the Nigerian pharmaceutical over the last past eleven years
from the period 2001-2011. These financial ratio analyses have immense potentials to help
organizations in improving their revenue generation ability as well as minimization of
costs. The researcher used five variables for the analysis that are Inventory turnover ratio,
debtors turnover ratio and creditors velocity, total assets turnover ratio and gross profit
margin. Dependent variables are represented by gross profit margin while independent
variables are inventory turnover, debtors turnover, and creditors velocity and total assets
turnover. The secondary data were obtained from the financial statements of the selected
pharmaceutical companies selected statements the data have been analyzed using
Descriptive research method and multiple regressions to find out the relationship between
the variables. So the result shows that there is negative relationship between all
independent variables with profitability in the Nigerian pharmaceutical industries. The
results further suggested that only 17.8% of the independent variables are determinant
factors of profitability in the enterprises sampled while 82.2% of the major factors are
determine from other factors outside the independent variables.

Florenz C. Tugas (2012) did research on Comparative Analysis of the Financial Ratio of
listed firms belonging to the Education Subsector in the Philippines. The main aim
behind this research is to analyze the financial condition of the three firms for the period
of (2009-2011) using liquidity ratios, activity ratio, leverage ratios, profitability ratios, and
market value ratios. For the liquidity ratios were used: current ratio; quick ratio; acid test
ratio; cash flow liquidity ratio; average collection period; and days payable outstanding.
For activity, the following ratios were used: accounts receivable turnover; accounts
payable turnover; fixed assets turnover; and total assets turnover. For leverage, the
following debt ratio; debt to equity ratio; and times interest earned. For profitability, the
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following ratios were used: operating profit margin; net profit margin; return on total
assets; return on equity; and basic earning power ratio. For market value, the following
ratios were used: price-earnings ratio; market-book ratio; and dividend yield.
Ratios were used: debt ratio; debt to equity ratio; and times interest earned. For
profitability, the following ratios were used: operating profit margin; net profit margin;
return on total assets; return on equity; and basic earning power ratio. For market value,
the following ratios were used: price-earnings ratio; market-book ratio; and dividend
yield. . Necessary information derived from these financial statements were summarized
and used to compute the financial ratios for the three-year period. To provide a basis for
analysis, for each financial ratio, the firm adjudged as the best one (using rule of thumb
and ratio trends) was given three points, the next one, two points, and the last one, one
point. The total points for each ratio category were then computed
to arrive at an overall basis for analysis. Results showed that in terms of liquidity, FEU
ranked first, followed by Malayan, then CEU; in terms of activity, FEU ranked first,
followed by CEU, then Malayan; in terms of leverage, Malayan ranked first, followed by
CEU, then FEU; in terms of profitability, FEU ranked first, followed by Malayan, then
CEU; and in terms of market value, CEU and FEU tied for first and then Malayan
followed. Overall, FEU (44 points) ranked first, followed by Malayan (40 points), then
CEU (36 points).

Jane Frecknall-Hughes, Mike Simpson# and Jo Pad more (2007) have done research on
Inherent limitations in using financial ratio analysis to assess small and medium
sized company performance in their research they critically evaluates the limitation of
using financial ratios to judge the performance of large and medium size
enterprise(SMSE) .the main objective of their research is to notify the small business
research community of the shortcomings of the such an approach to measuring the
performance of (SMSE).Their findings shows that Return on Capital Employed (ROCE)
was found to be a particularly poor indicator of performance in SMEs and may be defined
in many different ways giving rise to widely differing values of ROCE. In addition, the
value of ROCE is open to some manipulation by management and analysts.

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CHAPTER # 3
3.0 RESEARCH METHODOLOGY
3.1 RESEARCH TYPE
Research are made of different reasons.the different procedure are used by researcher for
achievement of their research.some of the procedure are field work,applied research,action
research and bookish research .this research is applied research on CCCL.Therefore the
type of this research is applied research.

3.2 VARIABLES
Variables used in this research are profitability.leverage and liquidity.
3.3 DATA COLLECTION
The balance sheet and income statement of CCCL from 2007 to 2011 will be used for
analysis. For this purpose, annual reports of CCCL will be taken from the official website
of CCCL.
3.4 TOOLS FOR DATA ANALYSIS
In order to assess the performance of Cherat Cement Company, ratio analysis would be
used first. In ratio analysis, profitability ratios, liquidity ratios, asset activity ratios, debt
ratios and market strength ratios will be calculated to assess the profitability, liquidity,
assets utilization efficiency, leverage position and market strength of the company.
Secondly, trend analysis will be used to see the trend in all the entries of balance sheet and
income statement over five years. Then lastly, common-size analysis will be used to check
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the weight of each and every entry of balance sheet out of total assets and in income
statements, out of total sales.
Microsoft Excel will be used for calculation purpose.

















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CHAPTER # 4
4.0 FINANCIAL STATEMENT ANALYSIS:
4.1 RATIO ANALYSIS:
Ratio analysis is an expression of a mathematical relationship between one to another.
This analysis discloses such conditions which cannot be noted by analyzing individual
components of the ratio.
A) LIQUIDITY RATIOS:
CURRENT RATIO:
Current Ratio = Current assets / current liabilities

YEARS: 2007 2008 2009 2010 2011
Q.R: 1.55 1.01 1.26 0.77 0.95
The current assets are also called liquid assets or working capital. Organizations maintain
working capital to finance their current liabilities. So in current ratio, we assess the
liquidity position of the company. The current ratio of CCCL does not seem to be good
enough. As we can see that in 2007, it is 1.55 and we can say that the current assets of
CCCL are sufficient to pay its current liabilities. Since it has no issue of liquidity in 2007
but in the succeeding years, the ratio is decreasing especially in 2010 and 2011, the ratio is
0.77 and 0.95 respectively. Hence CCCL cannot pay its current liabilities through its
current assets. So it has prominent liquidity issues in the years 2008, 2009, 2010 and 2011.
14





QUICK RATIO:
Quick ratio= current assets Inventory
Current Liabilities
YEARS: 2007 2008 2009 2010 2011
Q.R: 0.64 0.09 0.07 0.03 0.04
Quick ratio tells us about the more accurate liquidity because it subtracts the inventory
from current assets. As we saw that the current ratio of CCCL was not satisfactory so it is
obvious that quick ratio will also be discouraging. So we can see that quick ratio is less
than 1 throughout the period and even it is close to zero in succeeding years after 2007.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2007 2008 2009 2010 2011
current ratio
current ratio
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Which means that after subtracting the inventory from its current assets, CCCL is not able
to finance its current liabilities and hence faces a big problem of liquidity in the period?


B) LEVERAGE RATIO:
DEBT-TO-TOTAL ASSETS RATIO:
Debt-to-Total assets ratio = Total debt/total assets
YEARS: 2007 2008 2009 2010 2011
D.T.A.R 0.96 0.75 0.817 0.602 0.708
This ratio tells us about how much debt financing is there in total assets of the firm. By
calculating the debt ratio of CCCL, it can be seen that it has a huge debt financing in its
total assets especially in 2007. This much high debt ratio is not a good sign for the
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2007 2008 2009 2010 2011
Quick ratio
Quick ratio
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company because it can lead the company to bankruptcy. So it should try to minimize debt
financing as much as possible.





DEBT TO EQUITY RATIO:
Debt to equity ratio: total debt/total shareholders equity.
YEARS: 2007 2008 2009 2010 2011
D.T.E.R: 0.57 1.03 1.09 1.16 1.30
The ratio has decreased due to increase in debt and decrease in equity .it shows that most
of the CCCL financing provided by debt not by shareholders.
0
0.2
0.4
0.6
0.8
1
1.2
2007 2008 2009 2010 2011
Debt to total assets ratio
Debt to total assets ratio
17





TIMES INTEREST EARNED RATIO:
TIME INTEREST EARNED: EBIT / total interest charged
YEARS: 2007 2008 2009 2010 2011
T.I.E.R: 10.57 101.33 22.15 22.03 134.26
It is used to asses a company ability to service the interest on its debt with operating
income from the current period. In this ratio we have to specify how much EBIT
Company has so to pay down the interest.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2007 2008 2009 2010 2011
Debt to equity ratio
Debt to equity ratio
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C) PROFITABILITY RATIO:
GROSS PROFIT MARGIN
Gross profit margin= Sales CGS / Sales
YEARS: 2007 2008 2009 2010 2011
GPM: 10.9% 4.62% 14.68% 2.57% 13.35%
There is decreased in gross profit margin in 2008 and 2010 due to increase in cost of goods
sold which is unfavorable .however in 2009 and 2011 it is favorable.
0
20
40
60
80
100
120
2007 2008 2009 2010 2011
Time interest earned ratio
Time interest earned ratio
19


OPERATING EXPENSES:
Operating Expenses = EBIT / Sales * 100

YEARS 2007 2008 2009 2010 2011
OE 2.19 2.101 2.503 4.63 6.749

0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
2007 2008 2009 2010 2011
Gross profit margin
Gross profit margin
0
1
2
3
4
5
6
7
8
2007 2008 2009 2010 2011
Operating Eepenses
Operating Eepenses
20


NET PROFIT MARGIN:
Net Profit Margin= Net profit/ Sales * 100
YEARS: 2007 2008 2009 2010 2011
NPM: 4.92% 1.06% 5.25% 7.83% 0.2 5%
Net profit margin increase in 2009 and 2010 which shows favorable condition. However
in 2008 and 2011 it is decrease.




RETURN ON EQUITY:
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
2007 2008 2009 2010 2011
Net profit margin
Net profit margin
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Return on equity: Net profit/ shareholders equity
YEARS: 2007 2008 2009 2010 2011
ROE: 11.36 -2.57 11.61 -13.18 2.41
IT measures a firm's efficiency at generating profits from every unit of shareholders'
equity. It shows how well a company uses its resources to generate earnings growth. The
ROE is useful for comparing the profitability of a company to that of other firms in the
same industry. So there is increased in ratio of return on equity in 2009 which shows that
increased in net income as well as sales. However the value is decreased in 2008, 2010
and 2011.


RETURN ON ASSETS: Return on Assets= Net profit/ total assets
YEARS: 2007 2008 2009 2010 2011
R.O.A: 6.91 -1.43 5.63 6.20 1.08
-15
-10
-5
0
5
10
15
2007 2008 2009 2010 2011
Return on equity
Return on equity
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This is an indicator that reflects how profitable a company is relative to its total assets.
ROA gives an idea as to how efficient management is at using its assets to generate
earnings. This is calculated by dividing a company's annual earnings by its total assets.
The higher the ROA, the better, because the company earns more money on less
investment. So there is increased in ratio in 2009 and 2010 that shows that the CCCL will
manage its resources efficiently and effectively, however in 2008 and 2011 it is decreased.



D) ACTIVITY RATIO:
TOTAL ASSETS TURNOVER
Total assets turnover: Sales/Total assets
YEARS: 2007 2008 2009 2010 2011
TATO: 0.98 0.89 0.96 0.71 0.79
-2
-1
0
1
2
3
4
5
6
7
8
2007 2008 2009 2010 2011
Return on assets
Return on assets
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The ratio decreased because of decreased in sales in relation to assets this shows that the
company is not efficient in using its assets to generate sales.


FIXED ASSETS TURNOVER
Fixed assets turnover= Sales/ Fixed assets
YEARS: 2007 2008 2009 2010 2011
F.A.T 1.56 1.53 1.34 0.95 0.06
The ratio is continuously decreasing from 2007-2011 it shows that fixed assets are
increasing while sales are decreasing. The decrease in ratio is either due to increase in
fixed assets or due to decrease in sales which is not favorable condition for CCCL.
0
0.2
0.4
0.6
0.8
1
1.2
2007 2008 2009 2010 2011
Total assets turn-over
Total assets turn-over
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INVENTORY TURNOVER
Inventory turnover= sales / Inventory of finished goods
YEARS: 2007 2008 2009 2010 2011
ITO: 29.40 18.70 16.28 17.24 11.23
A ratio showing how many times a company's inventory is sold and replaced over a
period. This ratio is decreased due to increase in inventory which has higher the cost of
goods sold there is slightly decreased in value which shows that the CCCL is not effective
towards the liquidity.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2007 2008 2009 2010 2011
Fixed assets turnover
Fixed assets turnover
25





E.MARKET VALUE RATIO:
EARNING PER SHARE:
Earning per share = Net profit / Number of Share
YEARS: 2007 2008 2009 2010 2011
EPS: 1.78 -0.75 2.51 -3.38 0.12
The earnings per share is increased in 2009 because the income is increased .This
increased in earning per share and also increased the return on common equity ,however
in 2008 ,2010,2011 there is decreased in earning per share which positively affect the
trust of the investors towards the CCCL.
0
5
10
15
20
25
30
35
2007 2008 2009 2010 2011
Inventory turnover
Inventory turnover
26









TREND ANALYSIS

Trend analysis indicates in which direction a company is headed. Trend percentages are
computed by taking a base year and assigning its figures as a value of 100. Figures
Generated in subsequent years are expressed as percentages of base-year numbers.
Trend percentages show horizontally the degree of increase or decrease, but they do not
Indicate the reason for the changes. They do serve to indicate unfavorable developments
-4
-3
-2
-1
0
1
2
3
2007 2008 2009 2010 2011
Earning per share
Earning per share
27

That will require further investigation and analysis. A significant change may have been
caused by a change in the application of an accounting principle.

TREND ANALYSIS OF BALANCE SHEET
2007 2008 2009 2010 2011

A.Non-Current Assets (A1+A3+A5+A6+A7) 100 114.7966 134.8146 106.4074 100.8243

1.Capital work in progress 100 0 0
1.43901
3 655.2914
2.Operating fixed assets at cost 100 110.8719 98.0526 128.374 101.7338
3.Operating fixed assets after D.A.D 100 114.7975 88.63043 153.5018 95.93687
4.Depreciation for the year 100 74.72357 110.8617 111.8402 119.3228

5.Intangible assets 100 0 0
340.357
1 105.7663
6.Long term investments 100 0 0
106.961
5 130.1915
7.Other non-current assets 100 0 0
137.781
9 265.908
B.Current Assets (B1+B2+B3+B4+B5) 100 139.1988 72.21843 92.2625 138.5703
1.Cash & bank balance 100 86.82673 92.61396 88.40482 131.7528
2.Inventories 100 176.9073 135.229 71.70157 187.8133
3.Trade Debt 100 0 0 0 0

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4.Short term investments 100 21.90541 0.147159 74.5098 0
5.Other current assets 100 222.4214 67.5547 98.25649 128.8952
C.Current Liabilities (C1+C2) 100 214.565 58.09043 151.4864 110.9409
1.Short term Secured loans 100 218.7325 100.828 166.1008 114.2546
2.Other current liabilities 100 212.2464 33.58588 126.3321 103.4399
D.Non-Current Liabilities (D1+D2+D3+D4+D5) 100 86.97143 369.0176 70.43861 124.7308

1.Long term secured loans 100 0 0
89.7839
1 125.0352
2.Long term unsecured loans 100 0 0 0 0
3.Debentures/TFCs 100 0 0 0 0
4.Employees benefit obligations 100 0 0 0 0
5.Other non-current liabilities 100 801.0526 83.20946 3.991321 101.2107
E.Shareholders Equity (E1+E2+E3) 100 96.49082 105.1109 99.0108 103.8201
1.Issued, Subscribed & Paid up capital 100 100 100 100 100
i).Ordinary Shares 100 100 100 100 100
ii).Preference shares 100 0 0 0 0
2 Reserves 100 93.87207 109.1739 98.2905 106.6502
i).Capital Reserve 100 0 0 0 0 0
ii).Revenue Reserve 100 O 0 98.2905 106.6502 0
3.Surplus on revaluation of fixed assets 100 0 0 0 0 0

TREND ANALYSIS OF INCOME
STATEMENT 2007 2008 2009 2010 2011
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1.Sales 100 11.25334 1176.855 75.95359 122.3371
i).Local sales (Net) 100 104.0475 109.6989 61.32944 135.8449
ii).Export Sales (Net) 100 140.1967 137.0074 104.2821 106.9485
2.Cost of sales 100 120.53 105.2688 86.73963 108.7937
i).Cost of material 100 0 0 96.07394 112.9917
other input cost 100 0 11.21023 757.9792 107.8945
3.Gross Profit 100 47.50678 377.2027 13.17657 635.6673
4.General, administrative and other expenses 100 101.3322 177.1601 78.91208 1002.408
i).Selling & distribution expenses 100 0 0 135.7224 96.95304
ii).Administrative and other expenses 100 101.3322 122.517 53.57445 103.9557

5.Salaries, wages and employee benefits 100 0 0
103.383
7 328.1108
6.Financial expenses 100 108.0033 140.1846 140.7146 178.0228

of which: (i) Interest expenses 100 0 0
140.714
6 178.0228
7.Net profit before tax 100 22.87118 454.7648 115.7492 18.55964
8.Tax expense (current year) 100 19.56705 111.845 151.2231 173.0994
9.Total amount of dividend 100 0 0 0 0
10.Total value of bonus shares issued 100 0 0 0 0
11.Cash flows from operations 100 0 0 56.54878 122.4556
G.Miscellaneous 100 0 0 0 0
1.Total capital employed (E+D) 100 94.93338 144.6666 88.0868 110.2132

30

2.Total fixed liabilities (D1+D3) 100 0 0
89.7839
1 125.0352
3.Retention in business (F7-F8-F9) 100 96.35407 335.2981 134.5257 3.406941
4.Contractual Liabilities (G2+C1) 100 218.7325 262.6887 119.0767 119.2632

MNMN
Non-current assets shows downward trend in 2008, 2010 and 2011 however it slightly
shows upward trend in 2009 which shows increase in non-current assets.
Current-assets shows decrease in 2009 and 2010 however it slightly increase in 2011 but it
shows upward trend in 2008 as compared to other years.
Current liabilities are greater in 2008 the value lowered down in 2009 and 2010 however
in 2011 it shows slightly increase. Current assets increase due to increase in short term
investments, inventories and other current assets.
Non-current liabilities shows upward trend in 2009. It is on its minimum point in 2008
however in 2010 and 2011 it decreases as compared to 2009. Increase in non-current
liabilities is due increase in long-term loan and vice versa.
Shareholders equity shows upward trend in 2010 and 2011 it is minimum in 2009 which
shows greater contribution of shareholders.
Sales of CCL are at zero in 2008 however in 2009 there appears greater increase in 2009.
In 2010 the sales decreases as compared to 2009 but in 2011 sales shows slight increase as
compared to that of 2010.
Cost of sales is greater 2008 however it is on its minimum point 2010. In 2009 and 2011 it
is greater as compared to 2010 while lower as compared to 2008. Increase in cost of sales
is due to increase in cost of material.
Gross profit increases in 2009, it decreases in 2008 and 2010 however it is on its peak
point in 2011. The increase in gross profit is due to decrease in cost of goods sold or we
can say general and administrative expenses. It is on its peak in 2011 but in 2008, 2009
and 2011 the value is lower as compared to 2011. The increase is due to in selling and
administrative expenses.
31

Financial expense increases from 2009 to 2011.financial expense consist of interest
expense as well as general expenses therefore financial expenses increase due to increase
in interest expenses.
Net profit before tax is greater in 2009, 2010 however it decrease in 2008 and 2011 due to
increase in other expenses without tax. The tax expense is lower in 2008 however it
increases from 2009 ton 2011. Cash flow from operation due to at zero in 2008, 2009
however it increases from 2010 to 2011.
32


33

A.Non-Current Assets (A1+A3+A5+A6+A7) 62.17793 71.37815 96.2282 102.3939 103.2379
1.Capital work in progress 0 0 28.95445 0.416658 2.730325
2.Operating fixed assets at cost 129.3816 143.4478 140.6543 180.5635 183.6942
3.Operating fixed assets after D.A.D 62.17742 71.37815 63.26277 97.10946 93.16377
4.Depreciation for the year 6.693393 5.001542 5.544795 6.201307 7.399574
5.Intangible assets 0 0 0.166414 0.566403 0.599063
6.Long term investments 0 0 3.230843 3.455755 4.499099
7.Other non-current assets 0 0 0.613724 0.845599 2.248516
B.Current Assets (B1+B2+B3+B4+B5) 37.82207 52.64786 38.02145 35.07952 48.60979
1.Cash & bank balance 2.135962 1.854586 1.717605 1.518445 2.000593
2.Inventories 3.319456 5.872359 7.941132 5.693913 10.69392
3.Trade Debt 0.060509 0 0 0 0
4.Short term investments 13.43278 2.942505 0.00433 0.003226 0
5.Other current assets 18.87336 41.97841 28.35839 27.86394 35.91527
C.Current Liabilities (C1+C2) 24.31851 52.17901 30.31101 45.91702 50.94078
1.Short term Secured loans 8.693365 19.01521 19.17265 31.84591 36.38542
2.Other current liabilities 15.62514 33.1638 11.13835 14.07131 14.55536
D.Non-Current Liabilities (D1+D2+D3+D4+D5) 12.38202 10.76882 39.73883 27.99147 34.91399
1.Long term secured loans 0 0 30.77816 27.63382 34.55201
2.Long term unsecured loans 0 0 0 0 0
3.Debentures/TFCs 0 0 0 0 0
4.Employees benefit obligations 0 0 0 0 0
5.Other non-current liabilities 1.344333 10.76882 8.960675 0.357649 0.361979
E.Shareholders Equity (E1+E2+E3) 63.29948 61.07818 64.19981 63.56471 65.99297
1.Issued, Subscribed & Paid up capital 27.05084 27.05084 27.05084 27.05083 27.05083
i).Ordinary Shares 27.05084 27.05084 27.05084 27.05083 27.05083
ii).Preference shares 0 0 0 0 0
2 Reserves 36.24863 34.02734 37.14897 36.51388 38.94214
i).Capital Reserve 0 0 0 0 0
ii).Revenue Reserve 0 0 37.14897 36.51388 38.94214
3.Surplus on revaluation of fixed assets 0 0 0 0 0
Total assets 100 100 100 100 100
1.Sales 100 100 100 100 100
i).Local sales (Net) 76.52516 707.5457 65.95288 53.25428 59.13435
ii).Export Sales (Net) 23.47484 292.4551 34.04712 97.42949 40.86565
2.Cost of sales 89.04935 953.7718 85.31417 97.42949 86.64353
i).Cost of material 0 0 85.31417 17.18829 15.87527
other input cost 0 844.1056 8.040598 80.24119 70.76825
3.Gross Profit 10.95065 46.22896 14.8172 2.570514 13.35647
4.General, administrative and other expenses 4.962593 44.68633 6.726943 6.988966 57.26635
i).Selling & distribution expenses 0 0 2.074853 3.707578 2.938283
ii).Administrative and other expenses 4.962593 44.68633 4.65209 3.281388 2.788354
5.Salaries, wages and employee benefits 0 0 3.099416 4.218747 11.31477
6.Financial expenses 2.190078 21.01916 3.796287 4.638566 6.749962
of which: (i) Interest expenses 0 0 2.503761 4.638566 6.749962
7.Net profit before tax 7.162732 14.55748 5.625356 8.572744 1.300563
8.Tax expense (current year) 2.236877 3.889431 0.369641 0.735952 1.041327
9.Total amount of dividend 2.771413 0 0 0 0
10.Total value of bonus shares issued 0 0 0 0 0
11.Cash flows from operations 0 0 6.779117 5.047172 5.052063
G.Miscellaneous
1.Total capital employed (E+D) 77.53729 654.1063 80.40699 93.25161 84.01014
2.Total fixed liabilities (D1+D3) 0 0 23.81 28.14554 28.76629
3.Retention in business (F7-F8-F9) 2.154442 18.44691 23.81 9.308696 0.259236
4.Contractual Liabilities (G2+C1) 8.906536 173.1174 38.64197 60.58117 59.05899

34

Common size analysis tells us how much percentage every item in balance sheet is of
total assets and in income statement we take every element as percentage of sales.
In our common size balance sheet non-current assets increase from previous period and
most definitely this increase occur due to increase in operating fixed assets at cost,
operating fixes assets after DAD depreciation for the year and other long term investment.
While our current assets increase in 2008 and 2011.It decrease in 2007, 2009 and in
2010 .The decrease had occurred due to decrease in cash and bank balance short term
investment and other current assets.
On the equity and liabilities sections we see that our current liabilities increases due to
increase in short term loans and other current liabilities.
Non-current liabilities had increases due to increase in long term loans and other non-
current liabilities.
Common size income statement shows increases trend in shareholder equity.
In common size income statement gross profit increases in 2008, 2011 and the decrease
in 2007, 2009 and 2010.
Net profit before tax is on peak in 2008 but in 2010 there is a very small. However in
2009 and 2011 it decreases. The decrease is due to increase in net expenses.
The tax expenses decrease from 2009 to 2011 it increases in 2009 which effect net
profit.




CHAPTER 5
35

CONCLUSIONS AND RECOMMENDATIONS
CONCLUSION:
Liquidity: It is very important for any company to have optimal level of current assets so
that it can finance its current liabilities with its current assets. If it does not have enough
current assets, the company may suffer from liquidity problem.
As we can see from the calculations of current ratio and quick ratio, Cherat Cement
Company is suffering from severe liquidity problems. If it does not control the problem, it
may suffer financially as it would not be able to finance its current liabilities.
Profitability: In order to stay in the market and perform safely and with growth, a
company must maintain a sound profitability position. But in the case of CCCL, the gross
profit margin ratio of the company is quite low in the years 2008 and 2010 which is
alarming for the company. Similarly, the net profit margin of CCCL is pretty low in the
years 2008 and 2011 which is again critical situation and if not controlled the problem
permanently, it may result in reduced share price and low growth of the company. Return
on assets of CCCL shows increase in 2009 and 2010 which shows efficiency of a
company but in 2008 and 2011 in decreases unfavorably thus showing fluctuation in this
ratio. In case of return on equity there decrease in 2009 which shows increase in net profit
but the value decreases in 2008, 2009 and 2011. ROE is useful to show how well a
company uses its resources to earning.
Leverage ratio measure the degree of protection of suppliers of long-term funds. In case of
CCCL the debt to total assets ratio shows a huge debt financing in its total assets
especially in 2007 which is an alarming level of debt financing for the company but if we
look at the times interest earned ration, the company can easily pay its interest expense
through its operating profit. But still CCCL management should consider this thing
because it can create problem in the future. Debt to equity ratio is increased from 2007 to
2011 which means that CCCL has increased debt financing and reduced equity financing
over the period.
36

In case of activity ratio, the company is not bad but the efficiency in asset utilization is
decreasing since 2008 and onwards. It should try to regain its efficiency in asset utilization
in order to be successful.
RECOMMENDATION:
1. Working capital management area is quite critical for a company and if not handled
with care, could lead to severe issues. So CCCL should strictly consider its liquidity
problems and hence, should try to increase its level of current assets which could at least
finance current liabilities.
2. There are prominent fluctuations in profitability ratios which is not good for the market
reputation of a company. So CCCL should try to bring consistency to its profitability.
3. In case of leverage ratios, we saw that the company has heavily relied on debt financing
rather than equity financing through the sample period which can be very harmful for the
company in several ways. Heavy debt financing can lead to bankruptcy costs. It is not
welcomed by the shareholders also because increased debt financing diluted their
earnings. So it is recommended that the CCCL should reduce debt financing and increase
reliance on equity financing.
4. In case of activity ratios, CCCL was really good in utilizing its assets but it could not
maintain its performance and the ratios dropped quickly from 2007 to 2011. So it is
recommended that it should try to regain the efficiency of asset utilization and consistency
in activity ratios.
5. Regarding the market strength, CCCL in not been impressive over the sample period.
The Earning per Share ratio is quite low and even negative in 2008 and 2010. It is strongly
recommended that the management should work on their weaknesses, as discussed earlier,
so that the Earnings Per Share ratio could be increased and ultimately the confidence of
investors can be build.

37

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