PROJECT REPORT OF

FINANCIAL REPORTING & ANALYSIS ON

“FAUJI CEMENT COMPANY”

Submitted to:

Mr. Farrukh Naveed

Submitted By:

Hasan Qureshi (29)Jawaad ul Hassan (08)Rahiqa Fatima (21)Humaira Akram (04)

MSc. (Accounting and Finance)

2nd Semester.

Department Of Commerce

FAUJI CEMENT COMPANY

LIMITED

1

Company Introduction

A longtime leader in the cement manufacturing industry, Fauji Cement Company, headquartered in Islamabad, operates a cement plant at Jhang Bahtar, Tehsil Fateh Jang, District Attock in the province of Punjab. The company has a strong and longstanding tradition of service, reliability, and quality that reaches back more than 10 years. Sponsored by Fauji Foundation the Company was incorporated in Rawalpindi in 1992.

The cement plant operating in the Fauji Cement is one of the most efficient and best maintained in the country and has an annual production capacity of 1.165 million tons of cement. The quality portland cement produced at this plant is the best in the Country and is preferred the construction of highways, bridges, commercial and industrial complexes, residential homes, and a myriad of other structures needing speedy strengthening bond, fundamental to Pakistan's economic vitality and quality of life.

Company History

Fauji Cement Company Limited was sponsored by Fauji Foundation and incorporated as a public limited company on 23 November 1992. It obtained the Certificate of Commencement of Business on 22 May 1993. The company has been setup with primary objective of producing and selling Ordinary Portland Cement. For the purpose of selection of sound process technology, state of the art equipment, civil design and project monitoring, Local and Foreign Consultants were engaged.

The company entered into a contract with World renowned cement plant manufacturers M/s F.L. Smith to carry out design , engineering, procurement, manufacturing, delivery, erection, installation, testing and commissioning at site of a new, state of the art, cement plant including all auxiliary and ancillary equipment, complete in all respects for the purpose of manufacturing a minimum of 3,000 tdp clinker and corresponding quantity of Ordinary Portland Cement as per Pakistan/British Standard Specifications. The contract came into force on January, 1, 1994. Physical work on the project started in August 1994. Commissioning activities started in May 1997 generally remained smooth and trouble free, which enabled first batch of clinker production on 26 September 1997 followed by cement production in November 1997. Subsequently in 2005, the Plant Capacity has been raised to 3,700 tons of clinker per day i.e. 3,885 tons of cement per day.

Corporate Profile

Board of Directors

Lt Gen Syed Arif Hasan, HI (M) (Retd) Chairman

Lt Gen Javed Alam Khan, HI (M) (Retd) Chief Executive

2

Mr. Qaiser Javed Director

Mr. Riyaz H. Bokhari, IFU Director

Brig Arif Rasul SI (M) (Retd) Qureshi, Director

Brig Rahat Khan, SI (M) (Retd) Director

Dr. Nadeem Inayat Director

Brig Liaqat Ali (Retd) Director

Brig Munawar Ahmed Rana (Retd) Director

Brig Shabbir Ahmed (Retd) Secretary

Human Resources Committee

Dr. Nadeem Inayat President

Mr. Qaiser Javed Member

Brig Liaqat Ali (Retd) Member

Brig Shabbir Ahmed (Retd)   Secretary

Audit Committee

Mr. Qaiser Javed President

Mr. Riyaz H. Bokhari Member

Brig Rahat Khan (Retd) Member

Dr. Nadeem Inayat Member

Brig Shabbir Ahmed (Retd) Secretary

Technical Committee

Brig Rahat Khan (Retd) President

Brig Arif Rasul Qureshi (Retd) Member

Brig Liaqat Ali (Retd) Member

Mir Khawar Saleem, Director (Project) Secretary

Mission Statement

FCCL while maintaining its leading position in quality of cement and through greater

market outreach will build up and improve its value addition with a view to ensuring

optimum returns to the shareholders.

3

Our Vision

To transform FCCL into a role model cement manufacturing Company fully aware of

generally accepted principles of corporate social responsibilities engaged in nation

building through most efficient utilization of resources and optimally benefiting all

stake holders while enjoying public respect and goodwill.

Our Objective

The company has been set up with the primary objective of producing and selling

ordinary Portland cement. The finest quality of Cement is available for all type of

customers whether for Dams, Canals, industrial structures, highways, commercial or

residential needs using latest state of the art dry process Cement manufacturing

process.

Our Values

Customers: We listen to our customers and improve our product to meet their present

and future needs.

People: Our success depends upon high performing people working together in a safe

and healthy work place where diversity, development and team work are valued and

recognized.

Accountability: We expect superior performance and results. Our leaders set clear

goals and expectations, are supportive and provide and seek frequent feed back.

Citizen Ship: We support the communities where we do business, hold ourselves to

the highest standards of ethical conduct and environment responsibility, and

communicate openly with FCCL people and the public.

Financial Responsibility: We are prudent and effective in the use of the resources

entrusted to us.

Product

4

Ordinary Portland Cement

Clinker 94-95%

Gypsum 5-6%

28 days strength up to 8000 P.S.I

Fineness up to 3100 cm2/gm

Quality Policy EMPHASIS ON 100% CUSTOMER SATISFACTION.

100 % EFFECTIVE UTILIZATION OF PLANT CAPACITIES.

EMPHASIS ON 100% TOP QUALITY HUMAN RESOURCES.

EMPHASIS ON 100% QUALITY CULTURE.

TO

REMAIN A LEADING MANUFACTURER OF PORTL

Income Statement Analysis

Fauji Cement Co LtdSummarized Income Statement

For the Year Ended 30 June, 2003 To 2007 (in 000)2003 2004 2005 2006 2007Rupees Rupees Rupees Rupees Rupees

SALES 2,488,992 3,247,262 3,921,363 5,683,456 4,780,036Less : Sales tax and excise duty 978,254 951,031 1,076,219 1,397,317 1,316,753NET SALES 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283

Less: Cost of salesRaw Material 75,725 115,164 136,819 205,751 235,379

5

Direct Labor 65,299 91,289 87,091 142,070 133,780

Factory OverheadRent Rate & Taxes 882 952 1,378 2,562 2,213Fuel Consumed 472,772 564,591 699,818 843,909 979,044Power Consumed 246,489 310,041 332,383 393,785 431,609Depreciation 245,737 243,056 251,981 261,566 276,244Other F.OH 192,730 238,876 245,183 325,001 355,819Total F.OH 1,158,610 1,357,516 1,530,743 1,826,823 2,044,929Total Manufacturing Cost 1,299,634 1,563,969 1,754,653 2,174,644 2,414,088 Work in Process 37,601 -21,944 16,137 -82,047 -21,550Cost of goods manufactured 1,337,235 1,542,025 1,770,790 2,092,597 2,392,538Finished goods -2,104 13,381 -7,223 2,430 -20,750Cost of Sales 1,335,131 1,555,406 1,763,567 2,095,027 2,371,788

Gross Profit 175,607 740,825 1,081,577 2,191,112 1,091,495

Less Operating ExpensesGeneral & Admin ExpensesSalary, wages and benefits 15,408 21,817 21,835 35,663 42,439Traveling and entertainment 2,933 2,053 3,320 4,769 3,487Legal and Professional charges 12,117 1,655 3,148 3,490 2,281Other General and Admin Expenses 7,917 14,542 13,991 22,706 23,095Total 38,375 40,067 42,294 66,628 71,302

Selling and Distribution ExpensesSalary, wages and benefits 7,992 12,011 11,085 21,388 20,651Rent Rate & Taxes 1,209 1,144 1,172 1,112 1,353Communication Expenses 1,149 1,850 2,590 2,376 2,871Advertisement and sales Promotion 1,737 2,296 2,101 2,866 2,029Other selling expenses 2,930 3,116 4,386 3,953 13,741Total 15,017 20,417 21,334 31,695 40,645Other Operating Expenses 0 0 40,493 94,127 58,098

Operating Profit(EBIT) 122,215 680,341 977,456 1,998,662 921,450

Add Other incomeInterest on Bank Accounts 6,795 9,517 3,821 34,600 68,079Interest on Long Term Advances 79 119 34 135 135Gain on Disposal of Fixed Assets 1,259 378 4,750 1,301 100Others 394 32,730 2,611 7,288 5,521Total 8,527 42,744 11,216 43,324 73,835

Less Financial chargesFee and charges on Loans 3,347 11,615 10,564 500 500Interest on Long term loans 307,050 57,324 175,784 254,030 200,642Mark up on Short term loans from Associations 0 873 3,185 456 0Interest on short term loans 4,246 0 4,353 1,095 779Others 148,763 134,410 35,748 8,215 5,184Total 463,406 204,222 229,634 264,296 207,105Less Amortization of Differed Cost 191,061 762,152 0 0 0Profit/ Loss Before Taxation -523,725 -243,289 759,038 1,777,690 788,180Less Taxation 7,650 557,439 248,548 573,951 141,857

6

Profit/loss after Taxation -516,075 314,150 510,490 1,203,739 646,323Earning/ (Loss) per share - Basic -1.43 0.85 1.38 3.25 1.74Earning/ (Loss) per share - Diluted -1.27 0.75 1.22 2.87 1.54

Horizontal Analysis

Fauji Cement Co Ltd Income Statement (Horizontal Analysis)

For the Year Ended 30 June, 2003 To 20072003 2004 2005 2006 2007

SALES 100.00% 130.46 157.55 228.34 192.05

Less: Sales tax and excise duty 100.00% 97.22 110.01 142.84 134.60

NET SALES 100.00% 151.99 188.33 283.71 229.24

Less: Cost of salesRaw Material 100.00% 152.08 180.68 271.71 310.83

Direct Labor 100.00% 139.80 133.37 217.57 204.87

Factory OverheadRent Rate & Taxes 100.00% 107.94 156.24 290.48 250.91

Fuel Consumed 100.00% 119.42 148.02 178.50 207.09

Power Consumed 100.00% 125.78 134.85 159.76 175.10

Depreciation 100.00% 98.91 102.54 106.44 112.41

Other F.OH 100.00% 123.94 127.22 168.63 184.62

Total F.OH 100.00% 117.17 132.12 157.67 176.50

Total Manufacturing Cost 100.00% 120.34 135.01 167.33 185.75

Work in Process 100.00% -58.36 42.92 -218.20 -57.31

Cost of goods manufactured 100.00% 115.31 132.42 156.49 178.92

Finished goods 100.00% -635.98 343.30 -115.49 986.22

Cost of Sales 100.00% 116.50 132.09 156.92 177.64

Gross Profit 100.00% 421.87 615.91 1247.74 621.56

Less Operating ExpensesGeneral & Admin ExpensesSalary, wages and benefits 100.00% 141.60 141.71 231.46 275.43

Traveling and entertainment 100.00% 70.00 113.19 162.60 118.89

Legal and Professional charges 100.00% 13.66 25.98 28.80 18.82

Other General and Admin Expenses 100.00% 183.68 176.72 286.80 291.71

Total 100.00% 104.41 110.21 173.62 185.80

Selling and Distribution ExpensesSalary, wages and benefits 100.00% 150.29 138.70 267.62 258.40

Rent Rate & Taxes 100.00% 94.62 96.94 91.98 111.91

Communication Expenses 100.00% 161.01 225.41 206.79 249.87

Advertisement and sales Promotion 100.00% 132.18 120.96 165.00 116.81

Other selling expenses 100.00% 106.35 149.69 134.91 468.98

Total 100.00% 135.96 142.07 211.06 270.66

7

Operating Profit 100.00% 556.68 799.78 1635.37 753.96

Add Other incomeInterest on Bank Accounts 100.00% 140.06 56.23 509.20 1001.90

Interest on Long Term Advances 100.00% 150.63 43.04 170.89 170.89

Gain on Disposal of Fixed Assets 100.00% 30.02 377.28 103.34 7.94

Others 100.00% 8307.11 662.69 1849.75 1401.27

Total 100.00% 501.28 131.54 508.08 865.90

Less Financial chargesFee and charges on Loans 100.00% 347.03 315.63 14.94 14.94

Interest on Long term loans 100.00% 18.67 57.25 82.73 65.35

Interest on short term loans 100.00% 0.00 102.52 25.79 18.35

Others 100.00% 90.35 24.03 5.52 3.48

Total 100.00% 44.07 49.55 57.03 44.69

Less Amortization of Differed Cost 100.00% 398.91 0.00 0.00 0.00

Profit/ Loss Before Taxation 100.00% 46.45 -144.93 -339.43 -150.50

Less Taxation 100.00% 7286.78 3248.99 7502.63 1854.34

Profit/loss after Taxation 100.00% -60.87 -98.92 -233.25 -125.24

8

Vertical Analysis

Fauji Cement Co LtdIncome Statement ( Vertical Analysis)

For the Year Ended 30 June, 200…

2003 2004 2005 2006 2007SALES 100.00% 100.00% 100.00% 100.00% 100.00%Less : Sales tax and excise duty 39.30 29.29 27.45 24.59 27.55NET SALES 60.70 70.71 72.55 75.41 72.45Raw Material 3.04 3.55 3.49 3.62 4.92Direct Labor 2.62 2.81 2.22 2.50 2.80

Factory OverheadRent Rate & Taxes 0.04 0.03 0.04 0.05 0.05Fuel Consumed 18.99 17.39 17.85 14.85 20.48Power Consumed 9.90 9.55 8.48 6.93 9.03Depreciation 9.87 7.48 6.43 4.60 5.78Other F.OH 7.74 7.36 6.25 5.72 7.44Total F.OH 46.55 41.80 39.04 32.14 42.78

Cost of Sales 53.64 47.90 44.97 36.86 49.62

Gross Profit 7.06 22.81 27.58 38.55 22.83General & Admin ExpensesSalary, wages and benefits 0.62 0.67 0.56 0.63 0.89Traveling and entertainment 0.12 0.06 0.08 0.08 0.07Legal and Professional charges 0.49 0.05 0.08 0.06 0.05Other General and Admin Expenses

0.32 0.45 0.36 0.40 0.48

Total 1.54 1.23 1.08 1.17 1.49Selling and Distribution ExpensesSalary, wages and benefits 0.32 0.37 0.28 0.38 0.43Rent Rate & Taxes 0.05 0.04 0.03 0.02 0.03Communication Expenses 0.05 0.06 0.07 0.04 0.06Advertisement and sales Promotion

0.07 0.07 0.05 0.05 0.04

Other selling expenses 0.12 0.10 0.11 0.07 0.29Total 0.60 0.63 0.54 0.56 0.85Operating Profit 4.91 20.95 24.93 35.17 19.28Less Financial chargesFee and charges on Loans 0.13 0.36 0.27 0.01 0.01Interest on Long term loans 12.34 1.77 4.48 4.47 4.20Mark up on Short term loans from Associations

0.00 0.03 0.08 0.01 0.00

Interest on short term loans 0.17 0.00 0.11 0.02 0.02Others 5.98 4.14 0.91 0.14 0.11Total 18.62 6.29 5.86 4.65 4.33

9

FAUJI CEMENT COMPANYBALANCE SHEET

FAUJI CEMENT COMPANY LIMITEDBALANCE SHEETAs On 2003 To 2007

2003 2004 2005 2006 2007CURRENT ASSETS: 721,338,365 574,461,034 1,113,721,603 1,579,381,610 1,953,527Cash and Bank Balance 193,992,231 19,708,814 603,109,660 847,590,378 423,133Receivables 60,721,925 73,584,212 8,235,163 2,836,409 858,758Stock in Trade: 47,962,326 61,599,838 55,931,122 145,090,210 183,309Raw Material 10,149,401 15,223,951 18,468,968 28,011,800 23,931Work in process 5,816,672 27,760,995 11,624,101 93,670,852 115,221Finished goods: 31,996,253 18,614,892 2,588,053 23,407,558 44,157NON CURRENT ASSETS: 5,591,918,365 5,335,892,506 5,110,066,731 4,576,776,382 4,447,161Fixed assets 4,581,054,157 4,386,945,532 4,717,315,487 4,563,115,282 4,392,450Long term Deposits, Prepayments and Deferred cost 21,600,000 36,600,000 46,611,000 46,611,000 46,611Long Term Loans and Advances 40,000,000 - 9,000,000 9,000,000 8,100CURRENT LIABILITIES 472,332,789 372,116,351 1,137,589,149 1,207,427,336 1,393,957Current portion of long term loan 137,390,439 86,508,407 552,995,000 550,000,000 550,000Short term loans 15,914,497 308,876,433 236,353,099 375,510Other liabilities 319,027,853 285,607,944 275,717,716 421,074,237 468,447Non Current LIABILITIES 421,593,774 3,599,103,166 2,567,217,891 1,648,292,490 1,223,195Long term loans 4,188,487,125 3,558,839,081 2,522,005,000 1,425,000,000 875,000Provisions for staff 27,450,649 40,264,085 45,212,891 7,911,808 8,277Share Holders Equity 1,624,986,187 1,939,134,023 2,449,624,461 3,282,616,746 3,735,206Paid up capital 1,624,986,187 1,939,134,023 2,449,624,461 3,282,616,746 3,735,206Total Assets 6313256750 5910353540 6223788334 6198107892 6400688Total Liabilities 4688270563 3971219517 3774163873 2915491146 2665482Total Liabilities & Owner's Equity 6313256750 5910353540 6223788334 6198107892 6400688

10

FAUJI CEMENT COMPANY BALANCE SHEET HORIZONTAL ANALYSIS

As On 2003 To 2007

FAUJI CEMENT COMPANY LIMITED Balance Sheet Trend Analysis

  2003 2004 2005 2006 2007CURRENT ASSETS: 100.00% 80.00% 154.00% 219.00% 0.27%Cash and Bank Balance 100.00% 102.00% 310.00% 437.00% 0.22%Receivables 100.00% 121.00% 14.00% 5.00% 1.4%Stock in Trade: 100.00% 128.00% 116.00% 302.00% 0.38%Raw Material 100.00% 150.00% 182.00% 276.00% 0.24%Work in process 100.00% 477.00% 200.00% 1610.00% 2%Finished goods: 100.00% 58.00% 81.00% 73.00% 14%NON CURRENT ASSETS: 100.00% 95.00% 91.00% 82.00% 0.08%Fixed assets 100.00% 95.00% 103.00% 99.60% 0.09%Long Term deposits 100.00% 169.00% 215.80% 215.80% 0.02%Long Term Loans and Advances 100.00% 0.00% 22.50% 22.50% 0.02%CURRENT LIABILITIES 100.00% 78.00% 255.00% 268.00% 0.31%Current portion of long term loan 100.00% 63.00% 402.00% 400.00% 0.40%Short term loans 100.00% 0.00% 1941.00% 148.00% 2.4%Other liabilities 100.00% 89.50% 86.40% 132.00% 0.15%Non Current LIABILITIES 100.00% 85.40% 61.00% 39.00% 0.03%Long term loans 100.00% 85.00% 60.00% 34.00% 0.02%Provisions for staff 100.00% 147.00% 164.70% 28.00% 0.03%Share Holders Equity 100.00% 119.30% 150.74% 202.00% 0.23%Paid up capital 100.00% 119.30% 150.74% 202.00% 0.23%Total Assets 100.00% 93.60% 98.58% 98.17% 0.1013%Total Liabilities 100.00% 84.70% 80.50% 62.00% 0.05%Total Liabilities & Owner's Equity 100.00% 93.60% 98.58% 98.17% 0.1013%

11

Ratio Analysis

Short Term Liquidity/ Short Term Debt Paying

Ability

Short term liquidity ratios measure the short term debt paying ability of a company. If

the entity cannot maintain debt paying ability it will not be able to maintain a long

term debt paying ability nor it will be able to satisfy its stockholders. When analyzing

the short term debt paying ability of the firm, we find a close relationship between the

current assets and the current liabilities. Generally, the current liabilities will be paid

with cash generated from the current assets. The profitability of the firm does not

determine the short term debt paying ability.

Day’s Sales in Receivable

The number of day’s sales in receivables relates the amount of the accounts receivable

to the average daily sales on account. It is computed as follows,

Day’s Sales in Acc/ Receivable = Average Gross Receivables / (Net Sales/365) Days

Days Sale in Account Receivable ( Amounts in Rs. “000”)Years 2003 2004 2005 2006 2007Gross Account Receivable 79,492 23,833 25,021 27,042 27,906Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283Days Sale in Account Receivable(Days)

19.21 3.79 3.21 2.30 2.94

19.21

3.79 3.21 2.30 2.94

0.005.00

10.0015.0020.0025.00

20032004200520062007

Years

Series1

12

Interpretation

This ratio gives an indication of the length of time that the receivables have been

outstanding at the end of the year. Shortening the credit terms indicates that there will

be less risk in the collection of future receivables and a lengthening of the credit terms

indicates a greater risk. In the above data we see that in year 2003 the days sales in

account receivable is very high and it was not good for the company but after 2003

there is a great decrease in the days sales in inventory which show the good

performance of the company’s management and it shows a less risk in the collection

of future receivables.

Account Receivable Turnover

This ratio indicates the liquidity of the receivables. It is computed by as follows

Accounts Receivable Turnover = Net Sales / Average Gross Receivable (Times/Year)

Account Receivable Turn Over( Amounts in Rs. “000”)Years 2003 2004 2005 2006 2007Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283Gross Account Receivable 79,492 23,833 25,021 27,042 27,906Account Receivable Turn Over (Times/Year)

19.00 96.35 113.71 158.50 124.11

19.00

96.35113.71

158.50124.11

0.00

50.00

100.00

150.00

200.00

2003 2004 2005 2006 2007

Years

Acc

ou

nt

Rec

eiva

ble

T

urn

Ove

r (T

ime/

Yea

r)

Series1

Interpretation

From the above calculation it is shown that account receivable turnover is increasing

with every year. It shows the liquidity of accounts receivable in terms of time per

year. We see that in 2003 the account receivable turnover is too low and in 2004 there

is a high increase in accounts receivable turnover and we see a gradual increase in the

13

accounts receivable up to year 2006. In 2007 we see a great decline in accounts

receivable turnover.

Days Sales in Inventory

The number of day’s sales in inventory ratio relates the amount of the ending

inventory to the average daily cost of goods sold. It is computed as follows,

Days Sales in Inventory = Ending Inventory / (Cost of Goods Sold/365) (Days)

Days Sales in Inventory ( Amounts in Rs. “000”)Years 2003 2004 2005 2006 2007Ending Inventory 236,602 259,000 353,806 635,978 652,078Cost of Goods Sold 1,335,131 1,555,406 1,763,567 2,095,027 2,371,788Days Sales in Inventory(Days)

64.68 60.78 73.23 110.80 100.35

64.68 60.7873.23

110.80100.35

0.0020.0040.0060.0080.00

100.00120.00

2003 2004 2005 2006 2007

Years

Day

s S

ales

in

In

ven

tory

(D

ays)

Series1

Interpretation

The day’s sales in inventory estimate the number of days that it will take to sell the

current inventory. The lower the number of day’s sales in inventory, the better the

inventory control. From the above data we see that there is a slight decrease in 2004

in day’s sales in inventory and it shows a good trend but after 2004 there is a high

increase in the day’s sales in inventory to year 2006 which shows a weak inventory

control of the management. In 2007 we see a little decrease in number of days in

day’s sales inventory which indicates that management is trying to improve the

inventory control system

14

Inventory Turnover

This ratio indicates the liquidity of the inventory. The formula is as follow,

Inventory Turnover = Cost of Goods Sold / Average Inventory (Times/Year)

Inventory Turnover ( Amounts in Rs. “000”)Years 2003 2004 2005 2006 2007Cost of Goods Sold 1,335,131 1,555,406 1,763,567 2,095,027 2,371,788Ending Inventory 236,602 259,000 353,806 635,978 652,078Inventory Turnover (Times) 5.64 6.01 4.98 3.29 3.64

5.64 6.014.98

3.29 3.64

0.00

2.00

4.00

6.00

8.00

2003 2004 2005 2006 2007

Years

Inve

nto

ry T

urn

ove

r (T

imes

)

Series1

InterpretationAs shown in the table there is an increase in 2004 as compared to the base year. Whereas there is a decline in the inventory turnover in the following two years. On the other hand there is a slight rise in the ratio in last year. It is better for the company to have a high inventory turnover ratio .

Working Capital

The working capital of a business is an indication of the short term solvency of the

business. It is computed as follows

Working Capital = Current Assets – Current Liabilities

Net Working Capital ( Amounts in Rs. “000”)Years 2003 2004 2005 2006 2007Current Assets 721,338 574,461 1,113,721 1,579,382 1,953,527Current Liabilities 472332 372116 1206946 1267199 1442287Net Working Capital

249006 202345 -93225 312183 511240

15

InterpretationIn the first year there is decrease in the working capital. And then in the second year the working capital gone to the negative side. That decline is due to increase in the current liabilities. That in turn affected the short term solvency of the company. But in the coming years the working capital increase to a good extent. That on the other hand increased the solvency of the company. Higher ratio is better for the organization to get the short term loans from financial institutions.

Current Ratio

The current ratio determines short term debt paying ability and is computed as follows

Current Ratio = Current Assets / Current Liabilities

Current Ratio ( Amounts in Rs. “000”)Years 2003 2004 2005 2006 2007Current Assets 721,338 574,461 1,113,721 1,579,382 1,953,527Current Liabilities 472332 372116 1206946 1267199 1442287Current Ratio in Times 1.53 1.54 0.92 1.25 1.35

249006202345

312183

511240

-200000

-100000

0

100000

200000

300000

400000

500000

600000

2003 2004 2005 2006 2007

Years

Series1

Net

W

or

kin

g

Cap

ita

l (i

n

Rs)

1.53 1.54

0.92

1.25 1.35

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2003 2004 2005 2006 2007

Years

Series1

16

Cu

rren

t R

ati

o in

T

imes

InterpretationIn the above table the ratio is increasing in the first years that mean the company has more funds to pay its current liabilities. But in the coming year there is a decrease in the ratio. That affects the company’s debt paying ability. In the last two years the ratio increased due to increase in the current assets. So that is the positive sign for the company. It increases the short term, liquidity of the company and it attracts the short term loan providers on the cost of profitability.

Acid Test Ratio / Quick Ratio

The acid test ratio relates the most liquid assets to current liabilities. Inventory is

removed from current assets when computing the acid test ratio. Reason for removing

inventory is that inventory may be slow moving or possibly obsolete and parts of the

inventory may have been pledged to specific creditors.

Acid Test Ratio / Quick Ratio = (Current Assets – Inventory) / Current Liabilities

Acid Test Ratio ( Amounts in Rs. “000”)Years 2003 2004 2005 2006 2007Current Assets 721,338 574,461 1,113,721 1,579,382 1,953,527Inventory 236,602 259,000 353,806 635,978 652,078Current Liabilities 472332 372116 1206946 1267199 1442287Acid Test Ratio 1.03 0.85 0.63 0.74 0.90

InterpretationIn the above table we can see that there is a decreasing trend in the ratio. This ratio is taken on the basis of quick assets (cash or cash equivalents). The main reason of the decline is the increase in the current liabilities. The other reason is increase in the inventory that decreases the required ratio.

1.03

0.85

0.630.74

0.90

0.00

0.20

0.40

0.60

0.80

1.00

1.20

2003 2004 2005 2006 2007

Years

Aci

d

Test

R

ati

o

(Tim

es)

Series1

17

Cash Ratio

The best indicator for the company’s short term liquidity may be the cash ratio. It is

computed as follows,

Cash Ratio = (Cash & Cash Equivalent + Marketable Securities) / Current Liabilities

Cash Ratio ( Amounts in Rs. “000”)Years 2003 2004 2005 2006 2007Cash & Cash Equivalent & Marketable Securities

193992 197088 603110 847590 423133

Current Liabilities 472332 372116 1206946 1267199 1442287Cash Ratio 0.41 0.53 0.50 0.67 0.29

0.41

0.53 0.50

0.67

0.29

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

2003 2004 2005 2006 2007

Years

Cas

h R

atio

( T

imes

)

Series1

Interpretation

A high cash ratio indicates that the firm is not using its cash to its best advantage. A

cash ratio that is too low could indicate an immediate problem with paying bills.

18

Long Term Liquidity / Long Term Debt Paying Ability

Debt Ratio

The debt ratio indicates the firm’s long term debt paying ability. It is computed as follows

Debt Ratio = Total Liabilities/Total Assets

The debt ratio indicates the percentage of assets financed by creditors, and it helps to determine how well creditors are protected in case of insolvency. If creditors are not well protected, the company is not in a position to issues additional long term debt. From the prospective of long term debt paying ability, the lower the ratio, the better the company’s position.

Debt Ratio (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Total Liabilities 4,688,270 3,971,219 3,774,164 2,915,491 2,665,482Total Assets 6313256 5910353 6223788 6198107 6400688Debt Ratio 74.26% 67.19% 60.64% 47.04% 41.64%

74.26%67.19%

60.64%

47.04%41.64%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

2003 2004 2005 2006 2007

Years

De

bt

Ra

tio

(%

ag

e)

Series1

Interpretation

This table shows the current and past debt paying ratio of the company. The ratio in 2003 was 74.26% which was very high but after that till 2007 it is decreasing continuously and in 2007 it is 41.64% this decreasing trend shows the company is in better position as compare to 2003.Major reason of that decreasing trend is liabilities were decreasing year to year and liabilities decreasing due to increasing in the owner’s equity.

19

Debt/Equity Ratio

It determines the entity’s long term debt paying ability. This computation compares the total debt with total share holder’s equity. This ratio also helps to determine how well creditors are protected in case of insolvency. From the prospective of long term debt paying ability, the lower the ratio, the better the company’s position.It is computed as follows:

Debt/Equity Ratio =Total Liabilities/Shareholder’s Equity

Debt Equity Ratio (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Total Liabilities 4,688,270 3,971,219 3,774,164 2,915,491 2,665,482Shareholder's Equity 1,624,986 1,939,134 2,449,624 3,282,616 3,735,206Debt - Equty Ratio 288.51% 204.79% 154.07% 88.82% 71.36%

288.51%

204.79%

154.07%

88.82%71.36%

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

350.00%

2003 2004 2005 2006 2007

Years

De

bt

/ Eq

uit

y R

ati

o (

%a

ge

)

Series1

InterpretationThis table shows the current and past debt/Equity ratio of the company. The ratio in 2003 was 288.51% which was very high but after that till 2007 it is decreasing continuously and in 2007 it is 71.36% this decreasing trend shows that company is in better position as compare to 2003.Major reason of that decreasing trend is liabilities were decreasing year to year and liabilities are decreasing due to increasing in the owner’s equity.

20

Debt to Tangible Net worth Ratio

The Debt to Tangible Net worth Ratio determines the entity’s long term debt paying ability. This ratio also helps to determine how well creditors are protected in case of insolvency. From the prospective of long term debt paying ability, the lower the ratio, the better the company’s position. The Debt to tangible net worth ratio is a more conservative ratio than either the Debt Ratio or the Debt/Equity Ratio. It eliminates Intangible assets, such as good will, trade marks, patents and copy right because they do not provide resources to pay creditors a very conservative position. It is computed as follows:

Debt To Tangible Net worth (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Total Liabilities 4,688,270 3,971,219 3,774,164 2,915,491 2,665,482Shareholder's Equity 1,624,986 1,939,134 2,449,624 3,282,616 3,735,206Intangible Assets 0 0 0 0 0Debt To Tangible Net worth 288.51% 204.79% 154.07% 88.82% 71.36%

Debt to Tangible Net worth Ratio = Total Liabilities/Shareholder’s Equity – Intangible Assets

288.51%

204.79%

154.07%

88.82% 71.36%

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

350.00%

2003 2004 2005 2006 2007

Years

Deb

t T

o T

ang

ible

Net

wo

rth

(

%ag

e)

Series1

InterpretationThis table shows the current and past Debt to Tangible Net worth of the company. The ratio in 2003 was 288.51% which was very high but after that till 2007 it is decreasing continuously and in 2007 it is 71.36% this decreasing trend shows that company is in better position as compare to 2003.Major reason of that decreasing trend is liabilities were decreasing year to year and liabilities are decreasing due to increasing in the owner’s equity.

21

Times interest earned ratio

The times interest earned ratio indicates a firm’s long term debt paying ability from the income statement view. if the times interest earned is adequate, little danger exists that the firm will not be able to meet its obligations. If the firm has good coverage of the interest obligation, it should also be able to refinance the principle when it comes due.A relatively high stable coverage of interest over the year indicates the good record. A low fluctuation coverage from years to years indicates a poor record.It is computed as follows:

Times interest earned ratio = EBIT/Interest

Interest Earned Ratio (Amounts in Rs. “000”)2003 2004 2005 2006 2007

EBIT 122,215 680,341 977,456 1,998,662 921,450Interest Earned 6,874 9,636 3,855 34,735 68,214Interest Earned Ratio (Times)

18 71 254 58 14

1871

254

5814

0

100

200

300

2003 2004 2005 2006 2007

Years

Inte

rset

Ear

ned

Rat

io

(Tim

es)

Series1

InterpretationThe above table indicates the Time interest earned ratio which shows the firm will able to meet his obligation or not in 2003 interest earned was 18 times of operating profit but in 2004 it was 71 times and it increase further to 254 times in 2005 at that time company was strong in meeting its obligation but after 2005 it was decreased to 58 times in 2006 and 14 times in 2007 this shows company losing its position to meet the obligation.

Fixed Charge Coverage Ratio

The Fixed charge coverage ratio indicates a firm’s long term debt paying ability from the income statement view. The fixed charge ratio indicates a firms ability to cover fixed charges.It is computed as follows:

Fixed Charge Coverage Ratio = EBIT + Lease payment/Interest + Lease payment + (Principle + preferred dividend) * 1/(1-T)

22

Analysis of Profitability

Profitability is the ability of the firm to generate earnings. Profits are important to stockholders as derive revenue in the form of dividend and also important to creditors because profits are one source of funds for debt coverage.

Net Profit Margin

Net Profit Margin= Net Income before Minority shares of Earnings /Net Sale

Net Profit Margin (Amounts in Rs. “000”)

2003 2004 2005 2006 2007Net Income -516,075 314,150 510,490 1,203,739 646,323Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283Net Profit Margin (%age)

-34.16% 13.68% 17.94% 28.08% 18.66%

InterpretationThis ratio gives a measure of net income dollars generated by each dollar of sales. While it is desirable for this ratio to be high, competitive forces within an industry, economic conditions, use of debt financing, and operating characteristics such as high fixed cost will cause the net profit margin to vary between and within industries.

Total Asset Turnover

Total Assets Turnover= Net Sales/Average Total Assets

Total Assets Turnover (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283Total Assets 6,313,256 5,910,353 6,223,788 6,198,107 6,400,688Total Assets Turnover (Times)

0.24 0.39 0.46 0.69 0.54

-34.16%

13.68%17.94%28.08%

18.66%

-40.00%

-20.00%

0.00%

20.00%

40.00%

2003

2004 2005 2006 2007

Years

Net

P

rofi

t Mar

gin

(%

ag

e)

Series1

23

0.24

0.390.46

0.69

0.54

0.00

0.20

0.40

0.60

0.80

2003 2004 2005 2006 2007

Years

To

tal

Ass

ets

Tu

rno

ver

(Tim

es)

Series1

InterpretationIt measures the activity of the assets and the ability of the firm to generate sales through the use of assets. The ratio is increasing and we can conclude that the cement company is efficiently using its assets to generate more sales and more profits.

Return on Assets

Return on Assets= Net Income before Minority Share of Earning /Average Total Assets

Return on Assets (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Net Income -516,075 314,150 510,490 1,203,739 646,323Total Assets 6,313,256 5,910,353 6,223,788 6,198,107 6,400,688Return on Assets (%age) -8.17% 5.32% 8.20% 19.42% 10.10%

InterpretationIt measures the firm’s ability to utilize its assets to create profits by comparing profitsWith the assets which generate the profits. In the base year the ratio is negative that is the bad sign for the company. But later wards it is increasing till the third year and it slope downwards in the last year. The reason behind that increase is the effective use

of assets. The cement company is utilizing its assets in a better way to get more earnings.

-8.17%

5.32% 8.20%

19.42%

10.10%

-10.00%

0.00%

10.00%

20.00%

30.00%

20032004200520062007

Years

Series1

24

Re

turn

o

n

As

se

ts

Operating Income Margin

Operating Income Margin=Operating Income/Net Sales

Operating Income Margin (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Operating Income EBIT 122,215 680,341 977,456 1,998,662 921,450Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283Operating Income Margin 8.09% 29.63% 34.36% 46.63% 26.61%

8.09%

29.63%34.36%

46.63%

26.61%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

2003 2004 2005 2006 2007

Years

Op

erat

ing

In

com

e M

arg

in

Series1

InterpretationIt include only operating income in the numerator. After checking table we can say that there is an increasing trend in operating profit margin the coming three years. But it declined in the last year due to increase in the cost of sales. Management must focus on the cost to control in order earn more profits.

Operating Assets Turnover

Operating Assets Turnover=Net Sales/Average Operating Assets

Operating Assets Turnover (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283Operating Assets 4,581,056 4,386,946 4,553,932 4,423,040 4,259,642Operating Asets Turnover (Times)

0.33 0.52 0.62 0.97 0.81

0.330.52

0.62

0.970.81

0.000.200.400.600.801.001.20

2003 2004 2005 2006 2007

Years

Op

erat

ing

Ass

ets

Tu

rno

ver(

Tim

es)

Series1

25

InterpretationThis ratio measures the ability of operating assets to generate sales dollars. In the table there is increasing trend in the ratio that can be identified that the company is using its assets in the best way it can utilize them. The best use of assets is giving the higher return on them.

Return on Operating Assets

Return on Operating Assets=Operating Income/Average Operating Assets

Return on Operating Assets (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Net Income -516,075 314,150 510,490 1,203,739 646,323Operating Assets 4,581,056 4,386,946 4,553,932 4,423,040 4,259,642Return on Operating Assets -11.27% 7.16% 11.21% 27.22% 15.17%

-11.27%

7.16%11.21%

27.22%

15.17%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

2003 2004 2005 2006 2007

Years

Ret

urn

on

Op

erat

ing

A

sset

s

Series1

InterpretationThe above table is showing that in the base year the operating assets are not utilizing to the best they can be. That’s why the ratio is negative in the base year. On the other the ratio is rising up there main reason behind that increase is the operating assets are utilizing in the best way. So it is important for the company should use its assets in the best manner it can.

Sales to Fixed Assets

It is computed as follows

Sales to Fixed Assets = net sales / Average Total Fixed AssetsThis ratio measure the firms ability to make productive use of its property, plant and equipment by generating sales in Rupees..When the fixed assets are low the ratio is substantially higher.

Sales to Fixed Assets (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283Total Fixed Assets 4,581,056 4,386,946 4,553,932 4,423,040 4,259,642Sales to Fixed Assets (Times) 0.33 0.52 0.62 0.97 0.81

26

0.330.52

0.62

0.970.81

0.000.200.400.600.801.001.20

2003 2004 2005 2006 2007

Years

Sal

es t

o F

ixed

Ass

ets

(Tim

es)

Series1

InterpretationThis ratio shows the firms ability of productivity against the fixed assets and this table indicates that the sales to fixed assets which was 0.33 times in 2003 and 0.52 in 2004, 0.62 in 2005, 0.97 in 2006 and 0.81 in 2007 these figures shows that firms productivity against fixed assets increasing year to year but in 2007 it was decreasing due to the decrease in the firms Net sales and this analysis also shows that increase in sales have kept pace with net fixed asset increase

Return on investment (ROI )

The return on investment measure the income earned on the invested capital. These types of measures are widely used to evaluate the enterprise performance. Since return on investment is a type of return on capital, this ratio measures the ability of the firm to reward those who provide long term funds and to attract providers of future funds. Compute the

Return on investment = net income + (interest) (1- Tax Rate)/Avg. (Long Term Debt+ Equity)

It measures the earning on investment and indicates how well the firm utilizes its assets base.

Return on Investment (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Net Income -516,075 314,150 510,490 1,203,739 646,323Interest 463,406 204,222 229,634 264,296 207,105Tax 185,362 81,689 91,854 105,718 82,842Long Term Debts & Equity 5,840,924 5,538,237 5,016,842 4,930,908 4,958,401Return on Investment -4.08% 7.88% 12.92% 27.63% 15.54%

27

-4.08%

7.88%12.92%

27.63%

15.54%

-10.00%

0.00%

10.00%

20.00%

30.00%

2003 2004 2005 2006 2007

Years

Ret

urn

on

In

vest

men

t

Series1

InterpretationIn the above the Return on investment in 2003 is -4.08% but in 2004 to 2006 there is an increasing trend but after that in 2007 it again decreases to 15.54% from 27.63%. The reason behind this that company’s long term debt decreases over five years. Also net income from 2003 to 2006.

Return on Total Equity

This ratio measure the return to both common and preferred shareholders. It is computed as

Return on Total Equity =Net income – Redeemable preferred stock Dividend /

Avg. Total Equity

Return on Total Equity (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Net Income -516,075 314,150 510,490 1,203,739 646,323Redeemable P/Stock Dividend 0 0 0 0 0Total Equity 1,624,986 1,939,134 2,449,624 3,282,616 3,735,206Return on Total Equity -31.76% 16.20% 20.84% 36.67% 17.30%

-31.76%

16.20%20.84%

36.67%

17.30%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

2003 2004 2005 2006 2007

Years

Ret

urn

on

To

tal

Eq

uit

y

Series1

InterpretationIn the above the Return on Total equity in 2003 is -31.76% but in 2004 to 2006 there is an increasing trend but after that in 2007 it again decreases to 17.30% from 36.67%. the reason behind this that company’s long term debt decreases over five years. Also there is an increasing trend in Total equity in five years. Net income also increases from 2003-06.

Return on common Equity 28

This ratio measures the return to common shareholder, the residual owner. Compute the return on common equity as follows

Return on common Equity = Net income –Preferred stock Dividend / Avg. common equity

Return on Common Equity (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Net Income -516,075 314,150 510,490 1,203,739 646,323P/Stock Dividend 0 0 0 0 8361Common Equity 3707430 3707430 3707430 3707430 3707430Return on Common Equity -13.92% 8.47% 13.77% 32.47% 17.21%

-13.92%

8.47%13.77%

32.47%

17.21%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

2003 2004 2005 2006 2007

Years

Ret

urn

on

Co

mm

on

E

qu

ity

Series1

InterpretationIn the above the Return on Common equity in 2003 is -13.92% but in 2004 to 2006 there is an increasing trend but after that in 2007 it again decreases to 17.21% from 32.47%. the reason behind this that company’s long term debt decreases over five years. Also there is an increasing trend in Total equity in five years. Net income also increases from 2003-06.

Gross profit Margin

Gross profit equals the difference between net sales revenue and the cost of goods sold.

Gross profit Margin = Gross profit / Net sales

Gross profit margin analysis helps a number of users. Manager’s budget gross profit levels into their predictions of profitability. Gross profit margin is also use in cost control. Gross profit margin can also be used to estimate inventory involved in insured loses.

Gross Profit Margin (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Gross Profit 175,607 740,825 1,081,577 2,191,112 1,091,495Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283Gross Profit Margin 11.62% 32.26% 38.01% 51.12% 31.52%

Interpretation

29

In this table the gross profit margin has inclined substantially over the 1st four years from 2003 to 2006 after that in 2007 the Gross profit Margin decreased by 31.52%.The increase in Gross profit margin is due to increase in Net sales and Gross profit.The increase in Gross profit is also due to

The cost of buying inventory has decreased in 1st four years but increased in last year (2007).

Selling price has inclined.

Analysis for Investor

Degree of Financial Leverage

Degree of financial leverage is the multiplication factor by which the net income changes as compare to the change in EBIT.Degree of Financial Leverage=%age change in Net income/%age change in EBITThe degree of financial leverage represents a particular base level of income. If earning before interest increases the financial leverage will be favorable if earning before interest decreases the financial leverage will be un favorable.

Degree of Financial Leverage (Amounts in Rs. “000”)Years 2003 2004 2005 2006 2007%age Change in Net Income -367.12 39.12 62.5 135.8 -46.23%age Change in EBIT -61.5 456.67 43.67 104.5 -53.9Degree of Financial Leverage 5.97 0.09 1.43 1.30 0.86

5.97

0.091.43 1.30 0.86

0.00

2.00

4.00

6.00

8.00

2003 2004 2005 2006 2007

Years

Deg

ree

of

Fin

anci

al

Lev

erag

e

Series1

InterpretationIn the above table we have seen that in 1st year the degree of financial leverage is 5.97 but in 2004 id decreases to 0.09 there is a very huge gap after that it increases in 2005 to 1.43 and again there is a slight decrease by 0.13 in 2006 and in last year it again decreases to 0.86. In 2004 EBIT is increases it means financial leverage is favorable as compare to 2003 where EBIT is very less and financial leverage is unfavorable then in last three years again financial leverage is favorable.

Earning per Common Share

30

The amount of income earned on a share of common stock during an accounting period is called earning per common share. Earning per Common Share involves net income p/s dividends declared accumulated and the weighted average number of share outstanding.

Earning per Common Share=net income-preferred dividend/Weighted average number of common shares outstanding

Earning Per Common Share (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Net Income -516,075 314,150 510,490 1,203,739 646,323Preferred Dividend 0 0 0 0 8361Weighted Avg. No. of Common Share O/S 370743 370743 370743 370743 370743Earning Per Common Share -PKR 1.39 PKR 0.85 PKR 1.38 PKR 3.25 PKR 1.72

-PKR 1.39

PKR 0.85PKR 1.38

PKR 3.25

PKR 1.72

-PKR 2.00

-PKR 1.00

PKR 0.00

PKR 1.00

PKR 2.00

PKR 3.00

PKR 4.00

2003 2004 2005 2006 2007

Years

Earn

ing

Per C

om

mo

n

Sh

are

Series1

InterpretationIn the above in 2003 the earning per common share is negative and this is due to loss on sales. The earning per share is rising in the coming three years. That attracts the investors who want the profit maximization. There is decrease in the EPS in the last year as compared to the subsequent years.

Price/Earning Ratio Price per Earning Ratio expresses the relationship between the market price of a share of common stock and that stock’s current earning per share.

Price per earning ratio = Market price per common share /Diluted earning per share

Where diluted earning per share is basic earning per share if company only presents basic earning per share.

Percentage of earnings Retained Percentage of earnings retained = Net income –All dividends / Net income

It is better for trend analysis if non recurring items are remove.

Dividend payout Ratio The dividend payout ratio measures the portion of current earnings per common share being paid out in dividends.

31

Dividend payout = Dividend per common share / Diluted earnings per shareDividend yieldThe dividend yield indicates the relationship between the dividends per common share and the market price per common share.Dividend yield = Dividend per common share / market price per common share

Book Value per Share

It indicates the amount of shareholder’s equity that relates to each share of outstanding common stock.

Book value per share= Total shareholder’s equity-preferred stock equity/Number of common share outstandingBook value is of limited use to the investment analyst since it is based on Historical cost. When market value is below book value, investors view the company as lacking potential. A market value above book value indicates that investors view the company as having enough potential to be worth more than the un recovered cost.

Book Value Per Share (Amounts in Rs. “000”)2003 2004 2005 2006 2007

Total Shareholder's Equity 1,624,986 1,939,134 2,449,624 3,282,616 3,735,206Preferred Stock Equity 486,992 486,992 486,992 486,992 486,992No. of Common Stock O/S 370743 370743 370743 370743 370743Book Value Per Share 3.07 3.92 5.29 7.54 8.76

3.073.92

5.29

7.548.76

0.00

2.00

4.00

6.00

8.00

10.00

2003 2004 2005 2006 2007

Years

Bo

ok

Val

ur

Per

Sh

are

Series1

InterpretationThe book value per share is increasing in the coming years. The reason of that rise is that the total common shareholder’s equity is increasing in the coming years. That is very good for the investors to earn more on their investments. The owners of the cement company are increasing as compared to the base year.

Multivariate Model

This model uses five financial ratios weighted in order to maximize the predictive power of model. The model produces an overall discriminate score called a Z-Score.

32

Z= 0.012 X1+0.014X2+0.033X3+0.006X4+0.010X5

X1 = Working Capital/Total AssetsThis computation is a measure of the net liquid assets of the firm relative to the total capitalization.

X1

2003 2004 2005 2006 2007Working capital 249006 202345 -93225 312183 511240Total Assets 6,313,256 5,910,353 6,223,788 6,198,107 6,400,688X1 0.04 0.03 -0.01 0.05 0.08

X2 = Retained earnings/total assetsThis variable measures cumulative profitability over time.

X2

2003 2004 2005 2006 2007Retain earning 0 0 0 0 0Total Assets 6,313,256 5,910,353 6,223,788 6,198,107 6,400,688X2 0 0 0 0 0

X3= Earning Before Interest & Taxes/Total AssetsThis variable measure the productivity of the firm’s assets abstracting any tax or leverage factors.

X3

2003 2004 2005 2006 2007

Operating Profit(EBIT) 122,215 680,341 977,456 1,998,662 921,450

Total Assets 6,313,256 5,910,353 6,223,788 6,198,107 6,400,688

X3 0.02 0.12 0.16 0.32 0.14

X4= Market Value of Equity/Book Value of Total DebtThis variable measures how much the firms assets can decline in value before the liabilities exceeds the assets and the firm becomes insolvent.

X4

2003 2004 2005 2006 2007Market value of equity Book value of Total Debts 4,688,270 3,971,219 3,774,164 2,915,491 2,665,482

X5= Sales/Total AssetsThis variable measure the sales generating ability of the firm’s assets.

X5

33

0.0035

0.00810.0096

0.0182

0.0111

0.0000

0.0050

0.0100

0.0150

0.0200

2003 2004 2005 2006 2007

Years

Z-s

core

Series1

CONCLUSIONS AND RECOMMENDATIONS

From the above information we conclude that cement sector in one of the prosperous sector in the Pakistan’s economy. The potential investors should take their chances investing in the cement sector through stock exchanges. The Fauji cement country has proved itself as one of the leading cement factories of the country. The trade mark of Fauji Foundation gives a sign of credibility in the minds of the investors.

Since Pakistan is a developing country and for expanding infrastructure and developmental projects, the need of the cement is very obvious. Fauji cement has been providing 63% of the cement in the country as well as exporting to countries like Afghanistan and Bangladesh.

It is strongly recommended that Fauji Cement should expand its business and should establish the strategies of going global.

2003 2004 2005 2006 2007Sales 1510738 2296231 2845144 4286139 3463283Total Assets 6,313,256 5,910,353 6,223,788 6,198,107 6,400,688X5 0.24 0.39 0.46 0.69 0.54

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