Industrial & Time Serious Analysis by Zeeshan Tufail

8/9/2019 Industrial & Time Serious Analysis by Zeeshan Tufail

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STATEMENT OF SUBMISSION

I completed their task of Midt erm PROJECT of Financial

Management TASK GIVEN: Ratios Analysis of Financial Statements

at Superior University Lahore; to fulfill the partial requirement of

the Semester of MBA 4t h Semest er.



ACKNOWLEDGEMENT

We bow our head to Almighty Allah, the Omnipotent, the Merciful,

who endeavor our services towards his manuscript. All praises to

Almighty Allah who gave us the courage and patience for completion

of this work. All the respects are for Holy Prophet Muhammad

(Peace Be upon Him) who see moral and spiritual teachings

enlightened our hearts.

We feel how weak and deficit in vocabulary to find suitable wordsthat would fully convey the sense of immense indebtedness and

deep gratitude that we owe to our teacher, Sir Noman Dar for his

endless propitious guidance, illustration advice, keen interest, value

able comments and encouragement throughout the course of

studies and completion of this work.



DYNEA PAKISTAN LIMITED

ANNUAL REPORTS

FOR THE YEAR ENDED

30TH JUNE 2006

30TH JUNE 2007

30TH JUNE 2008



FINANCIAL ANALYSIS

Financial analysis is an aspect of the overall business finance function that involves

examining historical data to gain information about the current and future financial health

of a company. Financial analysis can be applied in a wide variety of situations to give

business managers the information they need to make critical decisions. "The inability to

understand and deal with financial data is a severe handicap in the corporate world," Alan

S. Donnahoe wrote in his book What Every Manager Should Know about Financial Analysis.

"In a very real sense, finance is the language of business. Goals are set and performance is

measured in financial terms. Plants are built, equipment ordered, and new projects

undertaken based on clear investment return criteria. Financial analysis is required in

every such case."

ROLE OF FINANCIAL ANALYSIS WITH THE HELP OF FINANCIAL MANAGEMENT

New business leaders and managers have to develop at least basic skills in financial

management. Expecting others in the organization to manage finances is clearly asking for

trouble. Basic skills in financial management start in the critical areas of cash management

and bookkeeping, which should be done according to certain financial controls to ensure

integrity in the bookkeeping process. New leaders and managers should soon go on to

learn how to generate financial statements (from bookkeeping journals) and financial

analysis of those statements to really understand the financial condition of the business.

Financial analysis shows the "reality" of the situation of a business -- seen as such; financial

management is one of the most important practices in management. This topic will help

you understand basic practices in financial management, and build the basic systems and

practices needed in a healthy business.

Financial analysis can tell you a lot about how your business is doing. Without this analysis,

you may end up staring at a bunch of numbers on budgets, cash flow projections and profit

and loss statements. You should set aside at least a few hours every month to do financial

analysis. Analysis includes cash flow analysis and budget deviation analysis mentioned

above. Analysis also includes balance sheet analysis and income statement analysis. There



are some techniques and tools to help in financial analysis, for example, profit analysis,

break-even analysis and ratios analysis that can substantially help to simplify and

streamline financial analysis. How you carry out the analysis depends on the nature and

needs of you and your business. The following links will help you get a sense for the

"territory" of financial analysis.

ROLE OF FINANCIAL ANALYSIS WITH THE HELP OF CORPORATE FINANCE

Corporatefinance is a broad term that is used to collectively identify the various financial

dealings undertaken by a corporation. Generally, the term also applies to the various

methods, procedures, and configurations of the financial operations employed by a given

company. In most instances, corporations will have a specific financial division that is

charged with the task of managing corporatefinance in all aspects of financial operation.

The primary goal of corporate finance is to maximize corporate value while managing the

firm's financial risks. Although it is in principle different from managerial finance which

studies the financial decisions of all firms, rather than corporations alone, the main

concepts in the study of corporate finance are applicable to the financial problems of all

kinds of firms.

The discipline can be divided into long-term and short-term decisions and techniques.

Capital investment decisions are long-term choices about which projects receive

investment, whether to finance that investment with equity or debt , and when or whether

to pay dividends to shareholders. On the other hand, the short term decisions can be

grouped under the heading "Working capital management ". This subject deals with the

short-term balance of current assets and current liabilities; the focus here is on managing

cash, inventories, and short-term borrowing and lending (such as the terms on credit

extended to customers).

The terms corporate finance and corporate financier are also associated with investment

banking. The typical role of an investment bank is to evaluate the company's financial

needs and raise the appropriate type of capital that best fits those needs.



ROLE OF FINANCIAL ANALYSIS WITH THE HELP OF WORKING CAPITAL

MANAGEMENT

Working capital refers to that part of firms capital which is required for financing short

term or current assets such as cash, marketable securities, debtors, and inventories. In

other words working capital is the amount of funds necessary to cover the cost of operating

the enterprise.

Financial management decisions are divided into the management of assets (investments)

and liabilities (sources of financing), in the long-term and the short-term. It is common

knowledge that a firm's value cannot be maximized in the long run unless it survives the

short run. Firms fail most often because they are unable to meet their working capital

needs; consequently, sound working capital management is a requisite for firm survival.

About 60 percent of a financial manager's time is devoted to working capital management,

and many of the potential employees in finance-related fields will find out that their first

assignment on the job will involve working capital. For these reasons, working capital

policy and management is an essential topic for financial analysis. Working capital refers to

current assets, and net working capital is defined as current assets minus current liabilities.

Working capital policy refers to decisions relating to the level of current assets and the way

they are financed, while working capital management refers to all those decisions and

activities a firm undertakes in order to manage efficiently the elements of current assets.

Working capital, sometimes called gross working capital, simply refers to the firm's total

current assets (the short-term ones), cash, marketable securities, accounts receivable, and

inventory. While long-term financial analysis primarily concerns strategic planning,

working capital management deals with day-to-day operations.



RATIOS ANALYSIS

Liquidity Ratios

1. Current Ratio

FORMULA = current asset s / current liabilities

Name Y ear 2006 Y ear 2007 Y ear 2008

Current Assets 418,961,027 395,702,747 518,597,390

Current Liabilities 282,390,563 240,205,345 307,703,547

Calculation 1.483:1 1.647:1 1.685:1

Int erpretation

This ratio shows the Short Term Liquidity of the company. If the ratio is greater than

unity it is satisfactory, if less than unity it shows that the company face Working Capital Or

Short Term Liquidity Problem. The above result shows that we have current assets

Rs.1.647 and Rs.1.685 to pay Rs.1 liability that is satisfactory condition in 2008 as

compared to year 2007.

2. Quick Ratio

FORMULA = current asset s - inventory

Current liabilities

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

Current Assets Current Liabilities

Year 2006

Year 2007

Year 2008




Current Assets 418,961,027 395,702,747 518,597,390

Current Liabilities 282,390,563 163,818,967 233,112,330

Inventory 147,567,854 163,818,967 233,112,330

Calculation 0.961:1 0.965:1 0.927:1

INTERPRETATION

This ratio reflects the Immediate Liquidity Position of the company. If the percentage of

inventory in current assets is higher than acid-test ratio will be lower. The above result

shows that the acid test ratio in year 2007 & year 2008 are 41% and 44%, therefore in year

2008 the Immediate Liquidity Position is high so it is unsatisfactory while 2007 is

satisfactory.

3. Working Capital Ratio

FORMULA = current asset s - inventory


Current Assets 418,961,027 395,702,74

7

518,597,390

Current Liabilities 282,390,563 240,205,34

5

307,703,547

Calculation 136,570,464 155,497,4 210,893,84

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

Current Assets Current Liabilities Inventory

Year 2006

Year 2007

Year 2008



02 3

INTERPRETATION

This ratio reflects the ability of the company to work. As per the above result shows

that the working capital of 2008 is more favorable for the company as compare to the 2006,

and 2007.

Leverage/Capital Ratios

4. Debt Ratio

FORMULA = Total Debt / Total Asset s


Total Debt 17,011,538 7,163,025 8,219,846

Total Assets 592,369,210 303,685,825 344,587,457

Calculation 0.028 0.023 0.023

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

Current Assets Current Liabilities Calculation

Year 2006

Year 2007

Year 2008



INTERPRETATION

This ratio indicates the Capital Structure of the company. The capital structure of the

Company in the year 2007 was composed of 2% debt and 98% of equity. It remain same

in the year 2008.

5. Int erest Coverage Ratio

FORMULA = EBIT / Int erest


EBIT 60,195,217 27,118,753 44,780,000

Interest 18,429,195 15,647,972 11,075,034

Calculation 3.266 1.733 4.043

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

Total Debt Total Assets

Year 2006

Year 2007

Year 2008



INTERPRETATION

This ratio reflects the companies ability to cover its interest. As per the above result shows

that the result of 2008 shows that the company is working at its full capacity as compare to

2006 and 2007.

6. Debt equity Ratio

FORMULA = Debt / Equity


Debt 17,011,538 7,163,025 8,219,846

Equity 292,967,109 296,522,800 336,367,611

Calculation 0.05 0.24 0.02

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

EBIT Interest

Year 2006

Year 2007

Year 2008



INTERPRETATION

This ratio reflects the capital structure of the company is how efficient as per the above the

result shows that the debt 5% and 95% equity in 2006 and debt 24% and equity 76% in

2007. In 2008 the debt is 2% and equity is 98%. So 2008 is more favorable for the

company.

Profitability Ratios

7. Gross Profit Ratio

FORMULA = (Gross Profit / Sale) 100


Gross Profit 180,896,845 132,162,723 187,990,553

Sale 1,114,079,977 1,174,891,399 1,261,973,380Calculation 16.273% 11.248% 14.896%

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

Debt Equity

Year 2006

Year 2007

Year 2008



INTERPRETATION

This ratio reflects the gross profit of the company. The above result shows that in year2007 & year 2008 the gross profit is 11.248% and 14.896%.

8. Net Profit Ratio

FORMULA = (Net Profit / Sale) 100


Net Profit 36,524,226 17,710,004 39,844,811

Sale 1,114,079,977 1,174,891,399 1,261,973,380

Calculation 3.278 1.507 3.157

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

Gross Profit Sale

Year 2006

Year 2007

Year 2008



INTERPRETATION

This ratio reflects the profit generating ability of the company. As per the above result

shows 2006 is generating more profit as compare 2007 and2008.

9. Operating Profit Ratio

FORMULA = (Operating Profit / Sale) 100


Operating Profit 85,936,554 45,466,175 87,482,885

Sale 1,114,079,977 1,174,891,399 1,261,973,380

Calculation 7.713% 3.869% 6.932%

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

Net Profit Sale

Year 2006

Year 2007

Year 2008



INTERPRETATION

This ratio shows that in year2007 and 2008 the operating profit ratio is 3.869% and6.932% while increment is 3.063% that is good for the company. The above result shows

that operating profit and net sale both are increased.

10. Return On Asset s

FORMULA = (Net Profit /Asset s)


Net Profit 36,524,226 17,710,004 39,844,811

Assets 592,369,210 303,685,825 344,587,457

Calculation 0.061 Times 0.05 Times 0.11 Times

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

Operating Profit Sale

Year 2006

Year 2007

Year 2008



INTERPRETATION

This ratio indicates the profitability of the assets of the company. The above result showsthat if we invest Rs.1 in the Dynea Pakistan Ltd. Generating profit Rs. 0.05 in year 2007 and

Rs.0.11 in 2008.

11. Re

turn On Equity

FORMULA = (Net Profit /Equity) 100


Net Profit 36,524,226 17,710,004 39,844,811

Equity 292,967,109 296,522,800 336,367,611

Calculation 12.47 5.97 11.85

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

Net Profit Assets

Year 2006

Year 2007

Year 2008



Int erpretation

This ratio reflects the ability of the company to generate profit. As per the above result

shows that if we invest 1 rupee in 2006 and get return on it 12.47 which is more

favorable for the company and also shows that company was working at its full capacity

in 2006.

Mark et/Shareholder Ratio

12. EPS Ratio

FORMULA = (Net Income /No. of Common Share)


Net Profit 36,524,226 17,710,004 39,844,811

Common Shares 592,369,210 303,685,825 344,587,457

Calculation 0.183 0.089 0.199

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

Net Profit Equity

Year 2006

Year 2007

Year 2008



Int erpretation

This ratio reflects earning of the company on its shares. As per the above

result shows that if we invest 1 rupee in 2008 and get profit of 0.199 as

compare to 2006 and 2007.

13. Per Earning Ratio

FORMULA = (Mark et Price Per Share /Earning Per Share)


MP Share 5 5 5

EP Share 1.94 0.94 1.46

Calculation 2.577 5.319 3.424

Int erpretationthis ratio reflects the ability of the company that how much worth of the companys share in the market.

As per the above result shows that the market worth of company share in 2007 was 5.319 which is

more favorable for the company as compare to 2006 and 2008.

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

Net Profit Common Shares

Year 2006

Year 2007

Year 2008



Activity/Operating Ratios

14. Account Receivable Turnover

FORMULA = (Net Credit Sale/Avg. Account Receivable)


Net Credit Sale 1,114,079,977 1,174,891,399 1,261,973,380

Avg.Account Receivable 19,683,288 8,626,949 53,469,215 Calculation 56.60 136.18 23.60

Int erpretation

This ratio reflects the company how quickly they collect its receivable. As per the above the

result shows that the company has the minimum duration to collect its receivable in 2008

which is more favorable than remaining years.

0

1

2

3

4

5

6

MP Share EP Share

Year 2006

Year 2007

Year 2008



15. Avg. Collection Period

FORMULA = (No. of days in a Y ear /Account Receivable TurnOver )


No.of Days in a Year 365 365 365

AccountReceivableTurnOver 56.60 136.18 23.60


Int erpretation

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

Net Credit Sale Avg.Account

Receivable

Year 2006

Year 2007

Year 2008

0

50

100

150

200

250

300

350

400

No.of Days in a

Year

AccountReceivable

TurnOver

Year 2006

Year 2007

Year 2008



This ratio reflects how quickly the company is collecting its receivable according to the

above result shows that in 2007 company has minimum duration for collecting its

receivable which shows the management ability.

16. Account Payable Turnover

FORMULA = (Net Credit Purchase/Avg. Account Payable)


Net Credit Purchase 763,214,633 856,156,694 953,876,338

Avg.Account Payable 75,751,429 71,994,948 132,744,359

Calculation 10.075 11.89 7.185

Int erpretation

This ratio shows the goodwill of the company. According to the above result in 2008 its

payable duration is minimum as compare 2006 and 2007.

17. Avg. payment Period

FORMULA = (No. of Days in a Y ear/Account Payable TurnOver)



AccountRavableTurnOver 10.075 11.89 7.185

Calculation 36.228 30.698 50.800

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

Net Credit PurchaseAvg.Account Rayable

Year 2006

Year 2007

Year 2008



Int erpretation

The above ratio shows the strength of the company. If company pays its debt in minimum

time than the company is working good above result shows that in 2007 its debt paying

capacity is minimum as compare to 2006 and 2008.

18. Inventory TurnOver

FORMULA = (CGS/Avg. Inventory)


CGS 933,183,132 1,174,891,399 765,596,765

Avg. Inventory 147,567,864 163,818,967 233,112,330

Calculation 6.323 7.172 3.284

0

50

100

150

200

250

300

350

400

No.of Days in a

Year

AccountRavable

TurnOver

Year 2006

Year 2007

Year 2008



Int erpretation

This ratio shows that the if we 1 rupee in 2008 and get return of 3.284 as compare to 2006

and 2007 which shows that in 2008 company was getting maximum return on its

inventory.

19. Avg. age Of Inventory

FORMULA = (No. of Days in a Y ear/Inventory turn Over)



Inventory TurnOver 6.323 7.172 3.284

Calculation 57.72 50.89 111.14

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

CGS Avg. Inventory

Year 2006

Year 2007

Year 2008



Inventory

This above ratio shows the average age of inventory of the company as the above result

shows that in 2007 average age of inventory of the company is 50.89 that is most favorable

as compare to other years.

20. Operating Cycle

FORMULA = (Avg. Collection Period + Avg. Age of Inventory)


ACP 7.21 2.68 15.46

Avg. Age of Inventory 57.2 50.89 111.14

Calculation 64.93 53.57 126.6

0

50

100

150

200

250

300

350

400

No.of Days in a

Year

Inventory TurnOver

Year 2006

Year 2007

Year 2008



Int erpretation

This ratio shows that the working condition of the company as above result shows in 2007

the operating cycle of the company is 53.57 which is good as compare to other years.

21. Asset s Turnover

FORMULA = (Sale/Total Asset s)


Total Assets 592,369,210 543,891,170 652,291,004

Sale 1,114,079,977 1,174,891,399 1,261,973,380


0

20

40

60

80

100

120

ACP Avg. Age of

Inventory

Year 2006

Year 2007

Year 2008





Total assets Turnover (times) 1.88 2.16 2.28 2.106

Account Payable Turnover 10.075 11.89 7.185 9.716

Average Payment Period 36.228 30.698 50.800 39.242

Average Age of Inventory 57.72 50.89 111.14 73.25

Operating Cycle 64.93 53.57 126.6 81.7

Debt Ratio 0.028 % 0.023 % 0.023 % 0.024

Interest Coverage Ratio 3.266 1.733 4.043 3.014

Debt equity Ratio 0.05 0.24 0.02 0.103

Gross profit Margin 16.273% 11.248% 14.896% 14.139

ROA 0.61 0.05 0.11 0.256

ROE 12.47 5.97 11.85 10.096

EPS 0.183 0.089 0.199 0.157

PE Ratio 2.577 5.319 3.424 3.773

TIME SERIES ANALYSIS

Current Ratio Analysis

The average of 2008 is more then as compare to 2007 and 2006. So the ratio of 2008 is

favorable.

Quick Ratio Analysis

The quick ratio of 2008 is more then as compare to 2007 and 2006. So the ratio of 2008 is

favorable.

Inventory Turnover Ratio

The Inventory Turnover ratio of 2007 is more then as compare to 2006 and 2008. So the

ratio of 2007 is favorable.



Average Collection Period

The Average Collection Period of 2007 is less then as compare to 2006 and 2008. So the

average collection period of 2007 is favorable and 2008 is unfavorable for average

collection period.

Total Asset s Turnover (times)

The total assets turnover (times) of 2008 is more then as compare to 2006 and 2007. So

the total assets turnover (times) of 2008 is favorable

Debt Ratio

The debt ratioof 2006 is less then as compare to 2007 and 2008. So the debt ratio of 2006

is favorable and 2007-8 is unfavorable for debt ratio.

Int erest Coverage Ratio

The Interest Coverage Ratio of 2008 is more then as compare to 2006 and 2007. So the

Interest coverage Ratio of 2008 is favorable.

Gross profit Margin

The Gross profit Margin of 2006 is more then as compare to 2007 and 2008. So the gross

profit margin of 2006 is favorable and 2007 is unfavorable for debt ratio.

Net Profit Margin

The Net Profit Margin of 2006 is more then as compare to 2007 and 2008. So the net profit

margin of 2006 is favorable and 2007 is unfavorable for debt ratio.

ROA

The ROA of 2007 is more then as compare to 2006 and 2008. So the ROA of 2007 is

favorable and 2006 is unfavorable for debt ratio.



ROE

The ROE of 2006 is more then as compare to 2007 and 2008. So the ROE of 2006 is

favorable and 2007 is unfavorable for debt ratio.

Mark et/Book Ratio

The Market/Book Ratio of 2005 is more then as compare to 2006 and 2004. So the

Market/Book Ratio of 2005 is favorable and 2006 is unfavorable for debt ratio.

Working Capital Ratio

The working Capital of Year 2008 is more than as compare to 2006 & 2007.So the 2008 is

favorable & 2006 is unfavorable.

Debt Equity Ratio

The debt equity ratio of year 2008 is less as compared to 2007 & 2006. So 2008 is favorable

& 2007 is unfavorable for company.

Earnings Per Share

EPS of 2008 is more than other years which shows company is growing as compared to

previous years. So 2008 is more favorable while 2007 is less favorable.

Per Earning Ratio

The PE ratio of 2007 is more favorable for co. as compared to 2006 & 2008. In 2007 co.

showing more profit, in 2006 co. indicate less profit due to recession & other factors.

Receivable Turn Over

Receivable turn Over of 2008 is less than as compared to 2006 as well 2007, which meansin 2008 co. showing better condition with respect to last three years. So this year is more

satisfactory.

Account Payable Turn Over

Account payableturn Over of 2008 is less as compared to 2006 & 2007.Which means that

co. is trying to maintain its goodwill.



Avg. Payment Period

Avg. Payment period of 2007 is less as compared to 2006 & 2008. Main reason for

decrease the avg. Payment period of 2008 is recession & inflation.

Avg. age of Inventory

Avg. age of inventory of 2007 is more favorable as compared to 2006 & 2008. In this year

the co. activities were its peak. The reason for increase avg. age of inventory of 2008 was

recession, inflation as well as political conditions in Pakistan.

Operating cycle

Operating cycle of 2007 is more favorable as compared to 2006 & 2008.

Documents

Industrial & Time Serious Analysis by Zeeshan Tufail