Ratio Analysis by Zeeshan Tufail

8/14/2019 Ratio Analysis by Zeeshan Tufail

1/18

1 Mid Term Project of Fin

FINANC

MID

Program MB

Submitted To: Si

Submitted By: Z

ancial Management | Sir

IAL MANAGEME

TERM PROJECT

FINANCIAL RATIOS

- Professional (Sec-) 2nd Seme

r. Tariq Saleem

eshan Tufail

T

ter


2/18

2 Mid Term Project of Financial Management | Sir

Statement of Submission

I completed their task ofMidterm PROJECT of Financial Management

TASK GIVEN: Ratios of Financial Management at Superior University

Lahore; to fulfill the partial requirement of the Semester ofMBA 2nd

Semester.


3/18


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 se moral and spiritual teachings

enlightened our hearts.

We feel how weak and deficit in vocabulary to find suitable words that would fully

convey the sense of immense indebtedness and deep gratitude that we owe to our

teacher, Sir Saroop for his endless propitious guidance, illustration advice,keen interest, value able comments and encouragement throughout the course of

studies and completion of this work.


4/18


DYNEA PAKISTAN LIMITED

26TH ANNUAL REPORT

FOR THE YEAR ENDED

30TH JUNE 2008


5/18


INTRODUCTION

We have reviewed the annexed interim condensed Balance Sheet of DYNEAPAKISTAN LIMITED as at December 31, 2007, and the related interim condensedProfit and Loss Account, interim condensed Cash Flow Statement and interimcondensed Statement ofChanges in Equity together with the notes forming part thereof(here-in-after referred to asthe interim condensed financial information) for the half-year then ended. Management is responsible for the preparation and presentation ofthis interim condensed financial information in accordance with approved accountingstandards as applicable in Pakistan. Our responsibility is to express a conclusion on thisinterim condensed financial informationbased on our review.

SCOPE OF REVIEW

We conducted our review in accordance with the International Standard on ReviewEngagements 2410, Review of Interim Financial Information Performed by theIndependent Auditor of the Entity. A review of interim condensed financialinformation consists of making inquiries, primarily of persons responsible for financialand accounting matters, and applying analytical and other review procedures. A reviewis substantially less in scope than an audit conducted in accordance with InternationalStandards on Auditing and consequently does not enable us to obtain assurance that we

would become aware of all significant matters that might be identified in an audit.Accordingly, we do not express an audit opinion.

VISION

Dynea Pakistan is a Market Leader in its core and diversified business, delighting its

customers by providing quality products at competitive price through development of

Market , product range , technology and human capital whilst ensuring sound return

to stakeholders.

MISSION

Maximize productivity and sales of Formaldehyde , Amino Resins and Aminoplast

Moulding Compounds and provide satisfaction to customers.


6/18


1. ASSETS TURNOVER RATIOFORMULA = SALES / TOTAL ASSETS

Name Year 2007 Year 2008 Differences ResultSales 1,174,891,399 1,261,973,380 87,081,981 Increase

Total Assets 303,685,825 344,587,457 40,901,632 Increase

Calculation 3.86 Times 3.66 Times 0.21 Decrease

WORKING (Total Assets)

Name Year 2007 Year 2008

Current Assets 395,702,747 518,597,390- Current Liabilities 240,205,345 307,703,547

+ Non- Current Assets 148,188,423 133,693,614

Total Assets 303,685,825 344,587,457

INTERPRETATION

This ratio reflects the productivity of the assets of the company .As the above result

shows that if we invest Rs.1 then generating sales Rs.3.87and Rs.3.66 in the year 2007

and 2008.Productivity of the assets of the company is less as compared to the last year

2007.


7/18


2. RETURN ON ASSETS RATIOFORMULA = NET PROFIT / TOTAL ASSETS

Name Year 2007 Year 2008 Differences ResultNet Profit 17,710,004 39,844,811 22,134,807 Increase

Total Assets 303,685,825 344,587,457 40,901,632 Increase

Calculation 0.05 Times 0.11 Times (0.06) Decrease

INTERPRETATION

This ratio indicates the profitability of the assets of the company. The above result

shows that if we invest Rs.1 in the Dynea Pakistan Ltd. Generating profit Rs. 0.05 in

year 2007 and Rs.0.11 in 2008.

3. DEBT EQUITY RATIOFORMULA =DEBT / TOTAL CAPITALIZATION

Name Year 2007 Year 2008 Differences Result

Debt 7,163,025 8,219,846 1,056,821 IncreaseTotal Capitalization 303,685,825 344,587,457 40,901,632 Increase

Calculation 0.02*100 0.02*100 0.02*100

2/98 2/98 2/98


8/18


9/18


4. DEBT SERVICE COVERAGE RATIOFORMULA = NET PROFIT + DEPRECIATION + INTEREST

INTEREST + PRINCIPLE AMOUNT


Net Profit 17,710,004 39,844,811 22,134,807 Increase

Depreciation 31,366,853 25,675,129 (5,691,724) Decrease

Interest 15,647,972 11,075,034 4,572,938 DecreasePrinciple Amount 35,165,708 124,681,080 89,515,372 Increase

Calculation 1.27 Times 0.564 Times (0.706) Decrease

WORKING (Depreciation)


Cost of Sale 29,765,780 24,357,710

Distribution Cost 350,254 293,282

Admin Expense 1,250,819 1,024,137

Depreciation 31,366,853 25,675,129

WORKING (Principle Amount)


34,715,853 123,406,801

449,855 1,274,279

Principle Amount 35,165,708 124,681,080


10/18


INTERPRETATION

This ratio reflects the debt service ability of the company. If the ratio is

greater than 1 it shows the satisfactory condition. The above result shows

that if we borrow Rs.1 we have the ability to repay Rs. 1.27 and Rs. 0.564 in

year 2007 and 2008.Condition of the year 2007 is satisfactory as compared

to 2008.

5. CURRENT RATIO

FORMULA = CURRENT ASSETS / CURRENT LIABILITIES


Current Assets 395,702,747 518,597,390 122,894,643 Increase

Current Liabilities 240,205,345 307,703,547 283,683,002 Increase

Calculation 1.647:1 1.685:1 0.038:1 Increase

INTERPRETATION

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.


11/18


6. ACID TEST / QUICK RATIOFORMULA = CURRENT ASSETS - INVENTORY

CURRENT LIABILITIES


Current Assets 395,702,747 518,597,390 122,894,643 Increase

Current Liabilities 240,205,345 307,703,547 283,683,002 Increase

Inventory 163,818,967 233,112,330 69,293,363 Increase

Calculation 0.965:1 0.927:1 .038 Increase

FORMULA = (INVENTORY/CURRENT ASSETS) 100


41% 44% 3 % Increase

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.


12/18


7. GROSS PROFIT RATIO

FORMULA = (GROSS PROFIT/SALE) 100


Gross Profit 132,162,723 187,990,553 55,822,830 Increase

Net Sales 1,174,891,399 1,261,973,380 87,081,981 Increase

Calculation 11.248% 14.896% 3.648% Increase

INTERPRETATION

This ratio reflects the gross profit of the company. The above result shows

that in year 2007 & year 2008 the gross profit is 11.248% and 14.896% respectively

while total increment is 3.648

8. OPERATING PROFIT RATIO

FORMULA = (OPERATING PROFIT/SALE) 100


Operating Profit 45,466,175 87,482,885 42,016,710 Increase

Net Sales 1,174,891,399 1,261,973,380 87,081,981 Increase

Calculation 3.869% 6.932% 3.063% Increase


13/18


INTERPRETATION

This ratio shows that in year2007 and 2008 the operating profit ratio is

3.869% and 6.932% while increment is 3.063% that is good for the company. The above

result shows that operating profit and net sale both are increased.


14/18


Assets Turn Over Ratio

2007 2008 Difference

Sales 1174891399 1261973380 87081981

Total Assets 303685825 344587457 40901632

Return On Assets Ratio


Net Profit 17710004 39844811 22134807

Total Assets 303685825 344587457 40901632


Assets Turn Over

Sales

Total Assets


Return On Assets Ratio

Net Profit

Total Assets


15/18


Debt Equity Ratio


Debt 7163025 8219846 1056821

Total Capitalization 303685825 344587457 40901632

Debt Service Coverage Ratio


Net Profit 17710004 39844811 22134807

Depreciation 31366853 25675129 -5691724

Interest 15647972 11075034 -4572938

Principle Amount 35165708 124681080 89515372


Debt Equity Ratio

Debt

Total Capitalization

Net Profit Depreciation Interest Principle Amount

Debt Service Coverage Ratio

2007

2008

Difference


16/18


Current Ratio


Current Assets 395702747 518597390 122894643

Current Liabilities 240205345 307703547 67498202

Acid Test / Quick Ratio


Current Assets 395702747 518597390 122894643

Current Liabilities 240205345 307703547 67498202

Inventory 163818967 233112330 69293363


Current Ratio

Current Assets

Current Liabilities


Acid Test/Quick Ratio

Current Assets

Current Liabilities

Inventory


17/18


Gross Profit Ratio


Sales 1174891399 1261973380 87081981

Gross profit 132162723 187990553 55827830

Operating profit Ratio


Sales 1174891399 1261973380 87081981

Operating Profit 45466175 87482885 42016710


Gross Profit Ratio

Sales

Gross profit


Operating Profit Ratio

Sales

Operating Profit


18/18


Return On Sale


Sales 1174891399 1261973380 87081981

Net Profit 17710004 39844811 22134807

Return On Equity Ratio


Net Profit 17710004 39844811 22134807

Equity 296522800 336367611 39844811


Return On Sale Ratio

Sales

Net Profit


Return On Equity Ratio

Net Profit

Equity

Documents

Ratio Analysis by Zeeshan Tufail