Financial Ratio Analysis

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Table of ContentsLetter of Acknowledgement4Letter of Transmittal5Executive Summary6Introduction of the Industry7Problems faced by textile sector in Pakistan:82013 outlook for the textile industry of Pakistan8Gul Ahmed Textile Mills Ltd9Overview of company:9Industry overview and performance:9Common Size Income Statement10Common Size Balance Sheet12Financial Ratio Analysis Of Gul Ahmed17Liquidity ratios17Leverage Ratios18Efficiency Ratios19Profitability Ratios21Equity Ratios23Analysis24NISHAT TEXTILE MILLS26Overview of the Firm26Common Size Income Statement27Vertical27Common Size Balance Sheet28Common size income statement31Common size balance sheet32Horizontal32Financial Ratio Analysis of Nishat Mills35Liquidity ratios35Leverage ratios36Efficiency ratios37Profitability ratios39Equity Ratios41Analysis43KOHINOOR TEXTILE MILLS44Overview of the Company:44Kohinoor Textiles Mills:44Contribution to Pakistan:44Common Size Income Statement46Common Size Balance Sheet47Financial Ratio Analysis of Kohinoor Textiles50Liquidity ratios:50Leverage Ratios:51Efficiency Ratios51Profitability Ratios53Equity Ratios55Analysis56Comparative Analysis Among Firms57Explanation of Comparative Ratio Analysis59Liquidity RATIOS59current Raio59Quick Ratio59working Capital60Leverage ratios60Total debt ratio60Total debt to equity60Total capitalization:61Interest coverage61efficiency ratios:61Average collection period61Inventory turnover62Total Asset Turnover:62Payable Turnover63Profitability Ratio63Net Profit Margin63Gross Profit Margin64Returns Ratios64Return on Assets(also called Return on Investment)64Return on Equity64EQUITY RATIOS65Earning per share:65Price to earning ratio65Book value per share65References65APPENDIX66Appendix A-167Appendix A-268Appendix A-269Appendix B-168Appendix B-269Appendix B-270Appendix C-171Appendix C-272Appendix C-273Contribution Statement74

Letter of Acknowledgement

We are thankful to Almighty Allah for giving us the capability and strength to complete this Term Report Spring 2014 on Financial Ratio Analysis of Textile Industries of Pakistan of Introduction to Business Finance Course.We would also like to thank our course Instructor Ms. Najeha A. Bela whose utmost dedication and devotion provided us with the insight to analyze all the situations regarding this. It was due to her guidance and teachings that enabled us to finish this term report.

Report prepared by:

Wikash Kumar14291Rauha Rafiq13254Nauman Ali Khowaja14940

Letter of Transmittal

Ms. Najeha A. BelaApril 29, 2014Institute of Business Management,Karachi.

Dear Ms. Najeha,Here is our Term Report on Financial Ratio Analysis of Textile Industries of Pakistan, which is to be submitted on April 29, 2014. The report analyzes the various aspects of Business Finance, its application, implementation and practical work.We greatly benefited from this report. It helped us to widening our vision, improving our quality of work, building self-reliance work and gave us a vital experience in order to improve our analytical and practical skills. We hope it is up to your expectations and fulfills all the requirements given by you.

Yours Obediently,

Wikash Kumar14291Rauha Rafiq13254Nauman Ali Khowaja14940

Executive Summary

The report focuses mainly on the comparative analysis of three companies belonging to the same industry. The three companies we have worked with are Gul Ahmed Textiles, Nishat Mills Limited and Kohinoor Textile Mills Limited. This report comprises of the analysis of how the companies' ratios and values change from the year 2012 to 2013 and how the company has been performing in the previous years. The analysis provides an idea of how the companies respond to different economic changes through different indicators and financial ratios. The analysis also provides a brief idea of whether the liquidity or profitability of firm affects its other ratios and whether the company's functions are efficient and what are its earnings and payouts to its shareholders. This report would help in creating a better understanding as to how sales and changes made in the asset borrowings effects the company's decisions.

Introduction of the industry

Pakistan is one of the largest cotton-producing countries of the world. Both directly and indirectly, textile sector employs the largest number of the human resource. The industry contributes more than 60 % (US $ 9.6 billion) to the countrys total exports and contributes approximately 46 %t to the total output i.e 8.5%of the country GDP. In Asia, Pakistan is the 8th largest exporter of textile products, catering for 38% employment.Currently, major losses are being incurred by this industry with foreclosure looming around. The reasons of this decline are largely contributed by the high cost of production due to increase in the energy costs. Cost of import has risen due to a depreciating Rupee. Rise in inflation rate and high cost of financing has also effected seriously the growth in the textile industry. The sector recorded a 10.2 percent decline in output in the first four months, July-October of FY2011.The overall growth of textile industry is noteworthy and appreciable, and regardless of some hiccups general progress and development of Pakistani textile sector is really good. The performance of this sector could have been even better if some of the existing policies and practices get revised and critically reviewed.The industry's overall contribution of taxes in 2011-12 is expected to reach Rs. 23.5 billion, including payments of withholding taxes and applicability of lower rate of sales tax of 4% - 6% on local supplies. Textile exports stood at $12.5 billion from July 2010 to May 2011. During the last fiscal year, the tax department collected Rs. 10.5 billion as 1.0% withholding tax.Similarly, textile industry contributed Rs. 2.5 billion at the rate of 0.25% as Export Development Fund (EDF). Break-up shows that the applicability of lower rate of 4%-6% sales tax on local supplies would contribute an additional amount of Rs. 11 billion, annually, to the national exchequer. Moreover, the collection of withholding tax amounted to Rs. 10.5 billion during ongoing fiscal year.A leading textile exporter said that the Ministry of Textile had issued three notifications to facilitate the industry in the past. Textile manufacturers will receive 3% drawback on garments, 2% on home textile and 1% on fabrics. The government has yet to issue any notification in the extension for these facilities. Financial year 2011-2011 recorded a decent ratio of textile exports to many of the European, American and Middle Eastern markets. Not only the raw material, Pakistan also managed to export hundreds and thousands of finished products to these global markets, showing the real potential lying in our textiles and garments sectors. Following tables show the growth of cotton textile industry in Pakistan: The previous fiscal period starting from June 2010 to June 2011 experienced severe blows as a result of massive destruction of cotton crops due to massive floods and heavier rains throughout the country. Despite such positive figures and statistics, textile and garment industries in Pakistan have not shown any considerable progress in producing valued-added items. Our neighbouring countries like India and China, on the other hand, have achieved the largest share in the global market by exporting value-added textiles and garments products, while local manufacturers in Pakistan are way behind in this. Another mistake we have already made is that we tend to export raw materials to the global textile buyers, and the same raw material comes back to the Pakistani market in form of finished value-added textile products and fashion accessories on higher prices.Problems faced by textile sector in Pakistan:All things considered, it is apparent that the Pakistani Textile Industry is facing an uncertain environment. The increase in input cost of minimum wage by 50 percent, increasing interest rates, non-guaranteed energy supplies, lack of R&D and reduction in cotton production has had a negative impact on the industrys competitiveness internationally. In order to sustain the Textile Industry, the new Pakistani government has a tough task ahead and needs to urgently implement a suitable long-term strategy that provides a level-playing field against their regional competitors.2013 outlook for the textile industry of PakistanFiscal year 2011-12 (July 2011-June 2012) was indeed a very difficult year for the Pakistans textile industry. Extremely precarious energy situation, poor law and order and the deteriorating economic conditions put a great stress on the textile industry. Almost all the sectors of textile industry suffered in this period except spinning industry. Exports of yarn increased by 100% while all other downstream sectors suffered small decline or stagnancy at best. This increase in yarn exports was spurred by the low price of Pakistani yarn in international market, and emergence of China as a key buyer. China is moving out of basic textiles and this has benefitted our spinning industry. But yarn is a low margin commodity and the textile industry cannot thrive on exports of yarn, when the rest of the value added sectors are suffering due to unavailability of yarn and other challenges such as energy shortage. This was the scenario until June 2012. Now the good news is that the value added sectors have also started to show positive signs as indicated by the statistics for the first six months (July 2012- Dec 2012) of the fiscal year. Cotton yarn continued to show remarkable increase of 39% over the same period last year. However the encouraging signs are 12% increase in cotton fabrics exports, almost 13.3% for woven garments and 12.7% increase in towel exports. The sectors which continued to show decline were bedwear (-7.16%) and synthetic textiles (-51%)Pak rupee declined to reach almost Rs. 100/US$. This slide of Rupee can be accounted for the renewed exports. However the positive signal is that those categories which showed increase also registered increase in the unit value with an increase in both quantity as well as value. This means that Pakistani garments received better export price, an encouraging sign indeed.Gul Ahmed Textile Mills LtdOverview of company:The story of textiles in the subcontinent is the story of Gul Ahmed. The group began trading in textiles in the early 1900s. The group entered in the field of manufacturing with the establishment of today's iconic name of Gul Ahmed Textile Mills Ltd in the year 1953. Since its listing on the Karachi Stock Exchange in 1970, the company has been making rapid progress and enjoying a leading position in the world of textiles.With an installed capacity of more than 130,000 spindles, 300 state-of-the-art weaving machines and most modern yarn dyeing, processing & stitching units, Gul Ahmed is a composite unit making everything from cotton yarn to finished products. Gul Ahmed has its own captive power plant comprising of gas engines, gas & steam turbines, and backup diesel engines. Believing in playing its role in protecting the environment, Gul Ahmed has also set up a waste water treatment plant to treat 100% of its effluent, bringing it to NEQS levels.Gul Ahmed is playing a vital role not only as a textile giant, but has its strong presence in the retail business as well. The opening of its flagship store Ideas by Gul Ahmed marked the group's entry into the retail business. Starting from Karachi, Gul Ahmed now has an extensive chain of more than 40 retail stores across the country, offering a diverse range of products from home accessories to fashion clothing.More than 50 years since its inception, the name Gul Ahmed is still globally synonymous with quality, innovation & reliability.Industry overview and performance:Pakistan is one of the largest cotton-producing countries in the world. Both directly and indirectly textile sector employs largest number of human resource. The industry contributes more than 60% to countrys total exports and imports. Currently major losses are being incurred by this industry with foreclosure looming around. The reasons for this decline are largely contributed by the high cost of production due to increase in energy costs. Sector recorded 10.2 percent decline in output in first four months of 2011. Gul Ahmed textile Mills Limited is a company listed on Karachi and Lahore stock exchanges. Chairman and chief executive officer of GATM is Mr. Mohomed Bashir. It is composite textile mill and is engaged in the manufacture of textile products. it has state of art production facilities in its two segments yarn and processing. opening its first 'Ideas' store in 2003, the company was amongst the first-and subsequently one of the most successful-composite mills that went down the retail path. GulAhmed is the largest exporter to Europe for home textiles and governs domestic market with fashion products for quality conscious customer. In November 2013 Karachi stock exchange issued 20% of right shares of Gul Ahmed textile Mills Limited at par Rs.10.

Common Size Income Statement

Note2012201320122013

Sales 24 Cost of Sales 25Gross ProfitDistribution cost 26Administrative expenses 27Other operating expenses 28

Other income 29Operating profit Finance cost 30Profit/(loss) before taxationProvision for taxation 31Profit/(loss) after taxation

30,201,58825,502,3364,699,2521,509,8861,086,92072,3562,669,1622,030,09038,5582,068,6481,227,520841,128139,050702,078

24,918,48021,432,7463,485,7341,322,582955,0706532,278,3051,207,429166,6171,374,0461,375,463(1,417)238,947(240,364)

100%84.5%15.5%5%3.59%0.24%8.84%6.72%0.13%6.85%4.06%2.8%0.46%2.33%

100%86%14%5.3%3.83%0.0026%9.14%4.85%0.67%5.51%5.52%(0.0057%)0.96%(0.96%)

Earnings/(loss) per share - basic and diluted (Rs.) 32

4.84

(1.73)0.16%0.69%

Indicators/Symptoms:Gul Ahmed s cost of goods sold cover the major part of its net sales As cost of goods sold increases price of product it leads to decline in gross profit of Gul Ahmed covering lower part of net sales being down from 15.5% to 14% in the years of 2012-2013. The finance cost of the company has increased from 4.06% to 5.52% which portrays a substantial increase in interest expense over time period. Over all the net profit of company has decreased from 2.33% to 0.96% which is due to increase in cost of goods sold , increase in taxation , finance cost and administrative expenses. As a result of these factors earning per share has decreased considerably in these two years of 2012-2013. Common Size Balance SheetNOTE2012201320122013

ASSETSNON-CURRENT ASSETSProperty, plant and equipmentIntangible assetsLong term investmentLong term loans and advancesLong term deposits

CURRENT ASSETSStores, spare parts and loose toolsStock-in-tradeTrade debtsLoans and advancesShort term prepaymentsIncome tax refundable-payments less provisionOther receivablesTax refunds due from GovernmentCash and bank balances

EQUITY AND LIABILITIESSHARE CAPITAL AND RESERVESShare capitalReservesUn-appropriated profit/(accumulated loss)

NON-CURRENT LIABILITIESLong term financingDeferred liabilities Deferred taxation - net Staff retirement benefits

CURRENT LIABILITIESTrade and other payablesAccrued mark-upShort term borrowingsCurrent maturity of long term financingProvision for taxation - net of payments

CONTINGENCIES AND COMMITMENTS

4567

891011

12 13 14

1516

17

1819

202122

23

6,828,92026,53558,4502,90047,8016,964,606

739,9867,415,4512,074,159169,61227,361

-182,69924,871120,01310,754,152

17,718,758

1,269,5713,430,000(227,062)

4,472,509

2,096,432

273,96923,894297,863

2,716,990171,6127,289,065

664,636

9,651

10,851,954

17,718,758

7,132,11223,13058,4502,06151,3127,267,065

723,4359,555,2242,573,268346,42928,172

190,248173,714229,454101,92113,921,865

21,188,930

1,523,4863,180,000725,016

5,428,502

2,154,999

316,02833,637349,665

4,211,618191,7928,290,416

561,938

-

13,255,764

21,188,930

38.5%0.15%0.33%0.016%0.27%39.3%

4.17%41.8%11.7%0.95%0.15%

-1.03%0.14%0.67%60.7%

7.17%19.35%(1.28)%

25.24%

11.83%

1.55%0.135%1.68%

15.33%0.97%41.13%

3.75%

0.054%

61.2%

33.7%0.11%0.33%0.0097%0.24%34.3%

3.41%45%12.14%1.64%0.13%

0.89%0.82%1.08%0.48%65.7%

7.2%15%3.42%

25.6%

10.17%

1.49%0.16%1.65%

19.9%0.9%39.12%

2.65%

-

62.6%

Indicators/Symptoms:Gul Ahmeds balance sheet clearly shows that its current assets make a greater proportion of total assets as compared to fixed assets over the years of 2012-2013. And non-current assets have considerably decreased from 39.3% to 34.3% from 2012 to 2013 among which long term investment remains the same however long term deposits and property, plant and equipment have decreased rapidly from 38.5% to 33.7%. Among the total assets property, plant and equipment , trade debts and stock-in-trade make up the major part of total assets. In the current assets stock-in-trade increased rapidly from 41.8% to 45% while other receivables and cash and bank balances decreased gradually.Total equity has increased in smaller extent from 25.24% to 25.6% due to lower increase in share capital and decrease in reserves from 19.35% to 15%. In liabilities section current liabilities make greater proportion of total liabilities that have increased from 61.2% to 62.6% in the years 2012-2013 while non-current liabilities cover smaller portion of total liabilities.

Financial Ratio Analysis of Gul AhmedLiquidity ratiosCurrent Ratio = Total Current Assets/Total Current LiabilitiesCurrent Ratio =Current Asset 13921865

Current Liability 13255764

1.05

Current Ratio =Current Asset 10754152

Current Liability 10851954

0.99

The current ratio for Gul Ahmed Textiles limited is in 2012 is 0.99 whereas in 2013. It becomes 1.05 this shows that current ratio is increasing as year goes through. It is because current assets are increasing whereas current liabilities are decreasing. Quick RatioQuick Ratio =

Current AssetsInventoryLoans and advancesPrepayments

Current liabilities 13921865955522434642928172

13255764

3992040

0.30

Quick Ratio =

Current AssetsInventoryLoans and advancesPrepayments

Current liabilities 10754152741545116961227361

10851954

3141728

0.29

If we talk about quick ratio, from 2012 to 2013 It has increased from 0.24 to 0.27 . the increased ratio from 2012 to 2013 shows slight increase in liquid assets of company which also means that they have increased their current assets.Leverage RatiosTotal Debt to Total AssetsTotal debt to total asset =Total debt13605429

Total asset21188930

Current maturities have not been deducted from total debt 0.64

Total debt to total asset =Total debt11149817

Total asset17718758

Current maturities have not been deducted from total debt0.63

In 2013 it shows that the ratio of the firm is 0.64 which means that 64% of the companys total assets are financed by Total debt, whereas in 2012 the ratio is less to 0.63 which means that 63% of the companys total assets were financed by total debt.Total Debt to Total Equity:Total debt to total asset =Total debt 13605429

Total Equity 5428502

2.51

Total debt to total asset =Total debt11149817

Total Equity 4472509

2.49

In 2012 the total debt to equity ratio was 2.49 which increased to 2.51 in 2013 which clearly indicates that extent to which firm has financed by its debts has increased from 2012 to 2013 it shows that total equity that is financed by debt has increased by 0.8% in 2013.Total Capitalization:Total Capitalization : Total DebtTotal Capitalization136054295778167

2.35

Total Capitalization : Total DebtTotal Capitalization111498174770372

2.33

In 2012 ratio of total capitalization was 2.33 which now increased to 2.35 in 2013 this means that Gul Ahmed Textiles Ltd has increased amount of long term debt for long term financing of the firm by 0.85%.Time Interest EarnedTimes Interest Earned =Operating Income2068648

Interest expense1227520

Operating income is after taxes but before distribution 1.69

Times Intrest Earned =Operating Income1374046

Interest expense1375463

Operating income is after taxes but before distribution 1

In comparison to 2011, in 2012 the company was fully able to stabilize its financial issues. And their TIE ratio increased from 1 to 1.69 the main reason for increase in TIE ration is increase in operating income from 2012 to 2013 by 50.5%Efficiency RatiosAverage Collection Period : Average Collection Period: (Receivables x 360)/Net SalesYear Ratio (Days)

201328

201230

In 2013, they give 28 days to their customers to pay back their liabilities. But in 2012 ratio was considerably at the rate of 30 days to pay back their debts.Inventory Turnover: cost of goods sold /InventoryYear Ratio (Times)

20133.01

20122.41

In 2012, the inventory turnover was 2.41 and in 2013 the ratio became 3.01 which means that as the year passes, the company is efficiently converting the inventory into sales and they are not stocking up the inventory , decreasing their holding cost and in turn increasing their inventory turnover ratio.Payable Turnover : COGS / Accounts PayablePayable Turnover = Cost Of Goods SoldAccounts Payable255023364211618

6.05

Payable Turnover = Cost Of Goods SoldAccounts Payable214327462716990

7.88

Payable Turnover Ratio in 2012 was 7.88 which got decreased to 6.05 in 2013 so promptness of customers to pay back their liabilities got decreased in 2013 and average payable outstanding in 2012 was 45 days that got increased to 60 days in 2013 bringing negative effect on payable turnover in Gul Ahmed Textiles Limited.Total Assets Turnover: Net Sales/Total AssetTotal Asset Turnover = Net sales Total assets3020158821188930

1.43

Total Asset Turnover = Net sales Total assets2491848017754152

1.41

From 2012 to 2013 it increases from 1.41 to 1.43, which indicates that in 2012 the company was able to convert 1.41 times of their assets into sales but in the next year, the company utilized 1.43 of its assets in generating sales.Net Worth TurnoverNetworth turnover Net salesEquity302015885428502

5.56

Networth turnover Net salesEquity249184804472509

5.57

In 2012 turnover was 5.57 whereas in case of 2013, the ratio decreased to 5.56 times which tells us that they have decreased their level of utilization of shareholders' equity. Profitability Ratios Net Profit MarginProfit MarginNet profitNet sales70207830201588

2.32

Profit MarginNet profitNet sales(204364)24918480

(0.96)

In 2012 firm had profit margin of 0.96% which was due to loss born by Gul Ahmed textile mills limited which was mainly due to low sales and high administrative expenses whereas in 2013 profit margin got up to 2.23% and lead to greater increase in net income and hence greater ratio as compared to 2012.Gross Profit Margin:Profit MarginGross profitNet sales469925230201588

15.56

Profit MarginGross profitNet sales348573424918480

13.99

In 2012 , gross profit margin of Gul Ahmed Textiles Limited was 13.99% which increased to 15.56% in 2013 which indicated that efficiency of operations and firm pricing policies increased to greater extent by 11%.Return on Total AssetsReturn on total assetsNet profit Total assets70207821188930

3.31

Return on total assetsNet profit Total assets(240364)17718758

1.36

Return on investment or return on assets ratio in 2012 was 1.36% however in 2013 it got increased to 3.31% which indicates that profitability on assets of firm in 2013 was comparatively greater as compared to that of 2012.Return on Equity:Return on EquityNet profit Total Equity7020785428502

12.93

Return on EquityNet profit Total Equity(240364)4472509

(5.37)

In 2012, the company has ratio of 5.37% which shows that the stockholders had no return on investment and the net loss prevailed therein. However, in 2013, the ratio increased slightly to 12.93% giving the stockholders high return on investment and showing that the firms net income increased.Equity RatiosPrice/Earnings RatioP/E ratioPrice per shareEarning per share23.7164.84

4.9

P/E ratioPrice per shareEarnings per share21.071(1.73)

(12.18)

If we look at P\E ratio, in 2012 the ratio was (12.18) which interprets that investors were willing to pay a low amount for each dollar of earnings made by the company and EPS at (1.73) suggests that company is losing money per share its stock whereas in 2013 price earnings ratio increased to 4.9 being good sign that investors are willing to pay higher amount for each dollar of earnings made by company. Book Value per share Book ValueTotal EquityNo of common shares outstanding5428502152348515

3.56

Book ValueTotal EquityNo of common shares outstanding4472509126957096

3.52

In 2012 the firms book value is 3.52 whereas in 2013, the book value has increased to 3.56 which show that the shareholders will be happy as they get higher amount. AnalysisThe liquidity ratios include Current and Quick ratios only. The current ratio for the year 2013 is higher than the previous years which result in 0.06% of the overall increment and the quick ratio increases hand by hand with 0.01% which clearly shows that the firm has the ability to meet its financial obligations and inventory is utilized effectively to convert it into the cash.Leverage Ratios include Total Debt to total assets , Total Debt to Total Equity ,Total Capitalization and Times interest earned. The total debt to total asset ratio increases by 0.01% which is higher than last years and total debt to total equity ratio increases by 0.02% , total capitalization by 0.02% and times interest earned by 0.69% which is enhancing Gul Ahmeds capability to cover its interest expenses from funds available through operations but it does not possess much capability of financing its assets through debts.Profitability ratios include Net profit margin which has increased by 3.28% than 2012, Gross profit margin increased by 1.57% increment , Return on Total Assets by 1.95% overall increment and Return on Equity gets increased by 18.3%. it indicates that Gul Ahmed as compared to previous year has shown greater results in terms of increasing its profitability and reducing its taxes expense and finance cost simultaneously and increasing its profitability to shareholders of firm by greatest extent. Efficiency ratios include Average Collection period which has decreased by 2 days making Gul Ahmeds efficiency for quick receivables than last years, Inventory turnover which is increased from 2.41 to 3.01 it means that firm has increased the efficiency of converting its inventory into sales by 0.6% increment. Assets turnover is increased slightly by 0.02% than 2012 which gives a highlight that Shell is effectively utilizing its assets in generating sales and Net worth turnover which also seems to be decreased by 0.01%. The overall analysis puts the results that Gul Ahmed is effectively using its resources in terms of Inventory turnover and total assets turnover which shows that Shell has been effectively utilizing its resources however some measures needs to be taken for quick receivables and net worth turnover. Equity ratios include price to earnings ratio which has increased as compared to last years by 17.08% , Dividend Payout is zero, dividend yield is also zero and also the book value has also increased by 0.04% . This shows that the P/E ratio has become much attractive enough to the stock holders which results positively in companys benefits.

NISHAT TEXTILE MILLS

Overview of the Firm

Nishat Mills Limited ("Nishat") is a public company incorporated in Pakistan and listed on all three Pakistani stock exchanges. Nishat is engaged in textile manufacturing.

Which involves spinning, combing, weaving, bleaching, dyeing, and printing, stitching, buying, and selling of textiles? They deal with yarn, linen, cloth and other goods including fabrics made from raw cotton, synthetic fiber and cloth.

The Company is engaged in the business of textile manufacturing and of spinning, combing, weaving, bleaching, dyeing printing, stitching, buying, selling and otherwise dealing in yarn, linen, cloth and other goods and fabrics made from raw cotton, synthetic fiber and cloth, and to generate, accumulate, distribute and supply electricity.

Company is providing quality products to its customers within the Pakistan and outside the Pakistan. Presently company is exporting its all kinds if apparel products.

Common Size Income StatementVertical201220132012 (%)2013 (%)

Sales44,924,10152,426,030100100

COGS(38,134,910)(43,381,545)84.882.7

Gross profit6,789,1919,044,48515.117.25

Distribution cost(2,555,327)(2,529,455)5.74.8

Administrative expense(731,740)(870,269)1.61.6

Other expense(343,699)(409,429)0.70.7

3,158,4255,235,332710

Other income2,683,6852,739,1025.95.2

Profit from operations5,842,1107,974,4341315.2

Finance cost(1,760,543)(1,617,581)3.93

Profit before taxation4,081,5676,356,853912.1

taxation(553,000)(510,000)1.21

Profit after taxation3,528,5675,846,8537.811

Indicators/Symptoms:If we compare common sized profit and loss account of 2012 and 2013 of nishat we can conclude that cost of good sold has decreased by 2.1 % in 2013 whereas gross profit is increased by 2.15%. distribution cost is also declined by 0.9% which can be due to more production as there sales have also been increased. Finance cost is decreased by 0.9% which indicates that firm reduced its long term debts by paying them back in 2013. Net income is increased by 3.2% which indicates that nishat is doing well.

Common Size Balance Sheet Vertical201220132012 (%)2013 (%)

Equity and liability

Issued, subscribed and paid up share capital3,515,9993,515,99964.3

reserves34,246,75055,401,03660.468.7

Total equity37,762,74958,917,03566.6873.06

liabilities

Non current liabilities

Long term financing3,289,5383,083,4105.83.82

Liabilities against assets subject to finance lease137,04066,3220.240.08

Deffered income tax liability310,305499,4150.540.619

3,736,8833,649,1476.584.52

Current liability

Trade and other payables3,397,6403,785,50164.69

Accrued mark-up269,579300,7550.470.37

Short term borrowings9,665,84911,939,02817.0614.8

Current portion of non current liabilities1,106,9021,310,7691.951.625

Provision for taxation686,781732,3591.120.9

15,126,75118,068,4122622.4

Total liability18,863,63421,717,55933.326.9

Total equity and liability56,626,38380,634,594100100

assets

Non current assets

Property, plant and equipment14,318,63915,530,32025.2819.2

Investment properties241,969394,7450.420.48

Long term investments21,912,79037,378,22438.6946.3

Long term loan268,33084,9970.470.10

Longterm deposits and prepayments36,98441,7480.060.05

36,778,71253,430,03464.9466.26

Current assets

Store, spare parts and loose tools1,019,0411,285,3711.791.59

Stock in trade9,695,13310,945,43917.113.5

Trade debts3,489,0706,243,5356.167.7

Loan and advances867,6311,898,3341.52.3

Short term deposits and prepayments41,00840,0180.070.04

Other receivables758,0771,019,1641.31.2

Accrued interest30,06213,5500.050.016

Short term investment1,589,0934,362,8802.85.4

Cash and bank balances2,358,5561,128,8624.161.3

19,847,67126,937,15335.033.4

Non current assets held for sale-267,407-0.33

19,847,67127,204,56035.033.7

Total assets56,626,38380,634,594100100

Indicators/Symptoms:If we analyze nishats common size balance sheet comparing years 2012 & 2013 we can conclude that there are significant changes in some of its accounts. If we look upon the assets side of nishats balance sheet we can see that current asstes are decreased by 1.6% which is because company is keeping less inventory and spare parts and losse tools as compared to 2012. Non current assets are increased by 1.32% because company has increased its long term investments.Non current liabilities are decreased by2.06% because company has reduced its long term financing by paying of the debts because of which cash is also reduced by 3.3%. we can see that company has reduced its risk by decreasing their financing through short term running finance.

Common size income statementHorizontal20112012201320112012 (%)2013 (%)

Sales48,565,14444,924,10152,426,03010092.5107.9

COGS(40718697)(38,134,910)(43,381,545)10093.6106.5

Gross profit7,846,4476,789,1919,044,48510086.5115.2

Distribution cost(2,190,496)(2,555,327)(2,529,455)100116.65115.47

Administrative expense(656,756)(731,740)(870,269)100111.4132.50

Other expense(431,220)(343,699)(409,429)10079.7094.9

4,567,9753,158,4255,235,332

Other income2,444,9852,683,6852,739,102100109.76112.02

Profit from operations7,012,9605,842,1107,974,43410083.30113.7

Finance cost(1,601,048)(1,760,543)(1,617,581)100109.96101.03

Profit before taxation5,411,9124,081,5676,356,85310075.4117.46

taxation(568000)(553,000)(510,000)10097.389.7

Profit after taxation4,843,9123,528,5675,846,85310072.84120.70

Indicators/Symptoms:Company is running well in 2013. Sales and gross profit is increased by a great margin however distribution cost is decreased because of increased sales. Finance cost is also decreased which indicates that company has paid of some of its longterm debt obligations. Overall profit is increased by 47.86% which is a good indicator about companys health.

Common size balance sheetHorizontal2011201220132011(%)2012 (%)2013 (%)

Equity and liability

Issued, subscribed and paid up share capital3,515,9993,515,9993,515,999100100

100

reserves31,877,96034,246,75055,401,036100107.4173.7

Total equity35,393,95937,762,74958,917,035

liabilities

Non current liabilities

Long term financing2,659,3283,289,5383,083,410100123.69115.9

Liabilities against assets subject to finance lease202,628137,04066,32210069.632.79

Deffered income tax liability510,640310,305499,41510060.0797.8

3,372,5963,736,8833,649,147

Current liability

Trade and other payables2,577,0203,397,6403,785,501100131.8146.8

Accrued mark-up358,454269,579300,75510075.283.9

Short term borrowings10,471,6859,665,84911,939,02810092.3114.0

Current portion of non current liabilities1,283,8651,106,9021,310,76910086.2102.09

Provision for taxation631,325686,781732,359100108.7116.0

15,322,34915,126,75118,068,412

Total liability18,694,94518,863,63421,717,559100100.9116.1

Total equity and liability54,088,90456,626,38380,634,594100104.6149.07

assets

Non current assets

Property, plant and equipment13,303,51414,318,63915,530,32010025.2819.2

Investment properties126,834241,969394,745100190.7311.2

Long term investments21,337,88921,912,79037,378,224100102.6175.17

Long term loan849,206268,33084,99710031.5910.0

Longterm deposits and prepayments29,50236,98441,748100125.3141.5

35,646,94536,778,71253,430,034

Current assets

Store, spare parts and loose tools955,1361,019,0411,285,371100106.6134.5

Stock in trade9,846,6809,695,13310,945,43910098.4111.15

Trade debts2,481,2593,489,0706,243,535100140.6251.6

Loan and advances756,351867,6311,898,334100114.7250.98

Short term deposits and prepayments47,21141,00840,01810086.884.4

Other receivables1,406,890758,0771,019,16410053.8872.4

Accrued interest34,26030,06213,55010087.739.5

Short term investment1,781,4711,589,0934,362,88010089.2244.9

Cash and bank balances1,132,7012,358,5561,128,862100208.299.6

18,441,95919,847,67126,937,153100107.6146.0

Non current assets held for sale--267,407-

18,441,95919,847,67127,204,560100107.6147.5

Total assets54,088,90456,626,38380,634,594100104.6149.07

Indicators/Symptoms:Current assets are increased which is mainly due to increase in inventory and receivables. Company has highly invested in properties and paid of its longterm debt obligations because of which its cash balance has become low. Because of increased sales, account payable is also increased. Overall company is doing well, its current assets have been increased due to growth in business of the company

Financial Ratio Analysis of Nishat Mills

Liquidity ratiosCurrent Ratio = Total Current Assets/Total Current LiabilitiesYear Ratio

20121.31

20131.4

Current ratio is increased from 1.31 to 1.41 which indicates that company is in a better position to meet its current financial obligations. Company is having Rs. 1.4 of current assets for every Rs. 1 of liabilities.

Quick Ratio = (Total Current Assets Inventories- prepaid)/Total Current LiabilitiesYear Ratio

20120.668

20130.882

Quick ratio is below 1 which is because company is relying too much on its inventory to pay its short term obligations.in 2012 it low but company has somehow managed to increase it in 2013 by increasing the sales which resulted in more account receivbles.

Networking Capital = Current Assets Current LiabilitiesYear Ratio

20124720920

20138868741

Net working capital is increased from 2012 to 2013 which is a good indicator of companys progress. This increase is mainly due to increase in sales. The company has more flexibility to spend on growing its business.

Cash ratio = Cash/Current LiabilitiesYear Ratio

20120.156

20130.06

Cash ratio is decreased from 2012 to 2013 which is mainly because company has invested a huge amount in long term investments. It may be a good decision to invest money rather than keeping idle cash.

Leverage ratios

Total Debt to Total Assets Ratio: Total Debt/Total AssetsYear Ratio

20120.33

20130.26

These ratios indicates that majority of assets of nishat mills are financed thorugh its equity. This indicates that the company has Rs. 0.26 in long term debt for each dollar it has in assets. Ratio is decreasing because companys non current liabilities are decreased in 2013.

Times Interest Earned: Operating Income/Interest ExpenseYear Ratio

20123.3

20134.9

Company has sufficient profitability to bear four times the amount of its current finance cost. Profit from operations increased and finance cost is decreased decreased because of which ratio is increased in 2013. This interest ratio may be the result of the fact that the company is unnecessarily careful about its debts and is not taking full advantage of the debt facilities.

Debt to equity ratio: total debt/total equityYear Ratio

20120.49

20130.37

The ratio is decreased in 2013 because of increase in equities. This ratio indicates that much of companys assets are provided by stockholders because of which company is in a safe position and having low risk. The other side of coin can be that company is not taking advantage of financial leverage to increase its profitability.

Equity multiplier: total assets/total equitiesYear Ratio

20121.49

20131.36

This indicates that 0.73 of companys assets are financed by equity in 2013. The ratio decreased from 2012 to 2013 which indicates that firm has increased its equity.

Efficiency ratiosDebtor turnover ratio: sales/accounts receivableYear Ratio (Days)

201212.87

20138.39

In 2012 the receivables are more liquid and are being collected promptly but this ratio decreased in 2013 because of a huge increase in account receivables. The fall of ratio in 2013 is mainly due to increase in accounts receivables which is almost doubled.

Average Collection Period: (Receivables x 360)/Net SalesYear Ratio (Days)

201228

201343

Because of decrease in debtors turnover ratios average collection period is increased, previoulsy it took 28 days but now it takes 43 days to collect receivables. This may be an alarming situation for the company because it indicates that companys accounts receivables aren't as liquid or aren't being converted to cash as quickly as needed..

Inventory Turnover: cost of goods sold /InventoryYear Ratio (Times)

20123.93

20133.96

The inventory turnover ratio is quite low in both years which indicates that company has more inventory than it really needs. Therefore too much of its capital is tied up in goods that will take long time to sell

Number of days in inventory: 360/inventory turnoverYear Ratio (Times)

201292

201391

According to these ratios it takes quite long for the company to sell of its inventory this is because company is buying excessive inventory.

Credit turnover: cogs/accounts payableYear Ratio (Times)

201211.2

201311.4

This ratio indicates the prompt payment to suppliers for the goods purchased. Company is able to attract more suppliers because its quick payments.Days payable outstanding: 360/credit turnoverYear Ratio (Times)

201232

201331

Company takes 31 days to payoff its outstanding invioces in 2013 and in 2012 it takes 32 days.

Operating cycle: DIO + DSO - DPOYear Ratio (Times)

2012120

2013134

The companys operating cycle is increased which is not a good indicator at all. This indicates that an investment is locked up in production for 134 days which is quite much.

Total Assets Turnover: Net Sales/Total AssetYear Ratio (Times)

20120.79

20130.65

This ratio indicates that for every dollar of companys assets, company is generating Rs. 0.65 in revenue. This ratio falls from 2012 to 2013 which shows that company has been less effective in the use of its total assets.

Net Worth Turnover: Net Sales/Net WorthYear Ratio (Times)

20121.2

20130.88

Profitability ratios

Profit Margin = EAIT/NetsalesYear Ratio

20120.07

20130.11

Ratio is increased from 2012 t0 2013 which indicates that business is improving its profitability. However company can increase its profitability to a great extent if it stops playing the safe game.Gross Profit Margin = Gross Profits / Net SalesYear Ratio

20120.15

20130.17

Gross margin is increased from 2012 to 2013 which is a good indicator.this indicates that company would retain Rs. 0.17 from each dollar of revenue generated, to be put forward paying off selling, general and administrative expenses, interest expenses and distribution to share holders.

EBIT Margin = EBIT / Net SalesYear Ratio

20120.13

20130.15

Ratio is increased which is a good sign for the company. This means that a net profit of Rs. 0.15 is made on each rupee of sales. Increase in ratio indicates that more proportion of revenue is converted to operating income.

EBT MARGIN= EBT/ NET SALESYear Ratio

20120.09

20130.12

Companys profit before tax is increased form 2012 to 2013.Return on Total Assets = Net Profits/Total AssetsYear Ratio

20120.06

20130.07

This indicates that on each rupee of asset Rs. 0.07 is earned. Increse in return on assets indicates that company is earning more money on its assets.Return on Net Worth = Net Profits/Net WorthYear Ratio

20120.09

20130.1

Return on equity is increased from 2012 to 2013 which is a good indicator for companys health. This indicates that company generates Rs. 0.1 of profit from its equity. The ratio is increased because of increase in companys equities.Equity RatiosEarnings per share = net income/num of shares out standingYear Ratio

201210.03

201316.62

There is a consistent improvement in eps figure which indicates the improvemnet in earning power of the company. It means every share of the common stock earns Rs. 16.62 of net income.Price to Earnings Ratio = Price/EarningsYear Ratio

20124.4

20135.6

Price earning ratios is incresed which can serve as a great attraction for investors and stock holders. The ratio is increased due to increase in eps. Dividend Payout = Dividends / Net ProfitYear Ratio

201232.8

201321

Company is paying back 21% of its total earnings to shareholders which is quite an attractive percentage from investment point of view. The percentage is decreasing due to increase in eps amount.DIVIDEND YEILD = DIVIDEND PER SHARE /CURRENT PER SHAREYear Ratio

20126.9

20133.7

Dividends yield is decreased because of increase in the market value per share. This ratio indicates that an investor earns 3.7% on his investment if he buys the common stock of the company at current market price

AnalysisAll the liquidity ratios are increasing from 2012 to 2013 except the cash ratio. This shows that company is in a better position to pay off its short term financial obligations. Cash ratio is decresing because company has invested a huge amount in long term investments and it also ha spaid off some of its long financing debts. Over all company is in a good position to meet financial obligations.By analyzing all the leverage ratios it is quite clear that company is playing safe game by not taking much outside financing. Interest coverage ratio is quite high which clearly indicate sthat company is very careful about its debts and taking full advantage of debt facilities. Most of the companys assets are provided by stock holders this shows that company is more equity financed. Overall company is playing good but it can increase its profitability by taking more advantage of the financial facilities available.Efficiency ratios of nishat textiles are quite alarming. Collection period is longer than the payment period. Days in inventory is also very high this is because company is buying excessive inventory. Company takes a long period in completing its operating cycle and this period is increased in 2013.All the Profitability ratios of the company are increasing which is a good sign. Profitability ratios are increasing very slowly because company is focusing more on its equity rather than on outside financing. The overall analysis says that nishat is keeping good profit margin however some measures needs to be taken if they want to increase their profits. Equity ratios of the company are attractive. Company is giving handsome amount of dividends to its stock holders. Company is in a positio0n to attract more investors.

Kohinoor Textile Mills(A Kohinoor Maple Leaf Group Company)Overview of the Company:The Kohinoor Maple Leaf Group was born from the trifurcation of the Saigol group of companies and is a reputable and leading manufacturer of textiles and cement. KMLG comprises of Kohinoor Textile Mills limited (KTML) and Maple Leaf Cement factory limited (MLCF). Both companies are incorporated in Pakistan and are listed on three stock exchanges of the country.Kohinoor Mills Limited with its state-of-the-art facilities spread over an area of 103 acres is located at 8th KM Manga Raiwind Road near provincial capital city Lahore.Kohinoor Mills Limited is one of the largest vertically integrated textile manufacturers, started its successful journey back in 1949. The company has achieved annual sales of US$ 140 million to customers based in Americas, Europe, Africa, Australia and Asia. We have diversified products and engaged in manufacturing of Greige and Dyed Fabrics exported to major brands and retail chains.Kohinoor Mills Limited has employed a highly qualified and technically trained workforce of 1500 people working as a closely knitted family based on corporate culture, values and beliefs. Our team is capable of taking on challenges for fulfilling every work related task with dynamism and dedicated efforts. Kohinoor is socially responsible company complying with all labour laws of Pakistan and ILO standards and is certified for :ISO 9001:2000, Oekotex 100, SA 8000:2001, WRAP and C-TPAT.Kohinoor Textiles Mills:KTML was established in 1953 at Rawalpindi and is one of the oldest companies of Pakistan with over 50 years experience in textile manufacturing. It was initially set up as a spinning and weaving project with 25,000 spindles and 600 looms. However, after decades of aggressive expansion and modernization KTML has emerged into a fully vertically integrated home textiles company with state of the art capabilities for spinning, weaving, dyeing, printing and stitching. The company has a diverse customer base with sales in both the local and export markets. The main international markets include Asia, Europe, USA and Australia.Contribution to Pakistan:Contribution to GDP and Employment: ThecontributionofthisindustrytothetotalGDPis8.5%. Itprovides employment to 38% of the work force in the country, which amounts to a figure of 15million. However, the proportion of skilled labor is very less as compared to that ofunskilled labor.Finishing Look And Control ComponentsThe products manufactured locally, when displayed against foreign goods -offer a poor look primarily because of the unsightly finishing of welding seams,electroplating, painting and other surface treatments. In addition, the adoption ofwrong design parameters, or the attempt to reduce the cost of production, lead to theincorporation of under-sized electrical motors and electric / electronic control panels

Need For Training InstitutionsDiploma LevelCourses onthe patternofPak-SwissTrainingCentreinKarachi should also be opened in the Textile Institutions in Faisalabad and Karachiand more such courses should beintroduced inthe Polytechnics in areas likeMultan,Hyderabad, Lahore and Gujranwala.

ExhibitionsMostofthesesmallworkshopsareshyorafraidofgettingregisteredordisplayingtheirproducts,mainlyfrom thefearoftherevenuecollection,laborcontrolling and other government regulating agencies. This fear keeps them awayfrom the mainstream Industry. This also leads to the lack of interaction among thesmallscale,mediumscaleandhigherlevelindustryforapurposefulvendordevelopment.National Exhibitions held annually can be very helpful in bringing out theskills, the range of products and opportunities of group collaboration. It will help theplanners and large scale engineering industry in defining the way for developing skillsin order to make this sector strong and viableThe interaction between the foreign textile manufacturing industries could alsobe enhanced byfacilitating theindigenous Textile Engineering Industry toparticipatein the specialized Exhibitions and fairs being held in those countries

Common Size Income Statement

PARTICULARSNote2013201220132012

Sales271425043911146698100100

Cost of Sales28(1211618)(9310049)85.0283.52

Gross Profit2134252183664914.9816.48

Distribution Cost29(438598)(402526)3.083.61

Administration Expense30(258398)(210356)1.811.89

Other Expenses31(50733)(116011)0.361.04

32(747729)(728893)5.256.54

Other Income13865231107756 9.739.94

Profit from Operations335245567273 0.370.60

Finance Cost14389781175029 10.1010.54

Profit Before Taxation34(640543)(870740)4.497.81

Taxation798435304289 5.602.73

Profit After Taxation(313903)(187860)2.201.69

484532116429 3.401.04

Earnings Per Share1.97 0.47 0.1380.042

Indicators/Symptoms:If we look at the Gross Profit of Kohinoor Textile Mills in 2012 we have 16.48% which has decreased to 14.98% in 2013. The reason behind decreasing the profit margin rate by KTM is that they have lowered the cost of goods it sells or by using higher quality, and thus more expensive material to make the goods. However if we look at the Net profit of KTM, they have increased their profit from 2.73 to 5.60% annually which is quite good and appreciable.

Common Size Balance SheetEquities & Liabilities:Equity and Liabilities

PARTICULARSNote2013201220132012

Equity

Share Capital and Reserves

Authorized share capital3700000370000024.1524.35

3000003000001.961.97

4000000400000026.1126.32

Issued, subscribed and paid up share capital32455262245526216.0316.16

Reserves42544007205947516.6113.55

Total Equity4999269451473732.6329.71

Surplus on revaluation of land and investments properties53673825367382523.9824.17

Liabilities

Non-Current Liabilities

Long term financing6389585191350.253.42

Liabilities against assets subject to finance lease7-20501-0.13

Deferred income tax liability83505491401752.290.92

3895076798112.544.47

Current Liabilities

Trade and other payables9124831511618928.157.65

Accrued mark up101041011856980.681.22

Short term borrowings114329341436411128.2628.72

Current portion of non-current liabilities125762396178563.764.07

6257996632955740.8541.65

Total Liabilities6647503700936843.3946.12

Total Equity & Liability1532059715197930100.00100.00

PARTICULARSNote2013201220132012

Assets

Non-Current Assets

Property, plant and equipment145959112616138138.9040.54

Intangible asset15300662840.020.04

Investment properties161729843172888611.2911.38

Long term investment173248680324868021.2021.38

Long term deposits1840382505150.260.33

109810231119574671.6773.67

Current Assets

Stores, spare parts and loose tools193652813204862.382.11

stock in trade201768203152994911.5410.07

Trade debts2110667249866836.966.49

Advances222232723124061.462.06

Security deposits and short term prepayments2332585259090.210.17

Accrued interest62292170.040.00

Other receivables244125213084942.692.03

Short term investments2510406110.010.00

Taxation recoverable1428671319260.930.87

Cash and back balances263208523855032.092.54

4339574400218428.3326.33

Total Assets1532059715197930100100

Indicators/Symptoms:Current assets are a greater proportion of the total assets as compared to fixed assets over the years 2013 to 2012. Out of all the assets, fixed assets (property, plant and equipment) and Stock-in-trade are the largest percentage of the total assets. Fixed assets and inventory show a gradual increase from 2012 to 2013. However, stores and spares increase gradually. There is an increase in trade debts from 2012 to 2013. Loans and advances have been quite decreased in 2013. There is a slow incline in other receivables from 2012 to 2013. Total equity has gradually inclined from 2012 to 2013, due to incline in inappropriate profit and reserves. Current liabilities have decreased at a rate of 40.85% to 41.65% from 2012 to 2013.Current liabilities make up a larger proportion of total equity and liabilities as compared to non-current liabilities.

Financial Ratio Analysis of Kohinoor TextilesLiquidity ratios:

Current Ratio = Total Current Assets/Total Current LiabilitiesYear Ratio

20130.693

20120.632

Current ratios obtained by dividing total Current assets by total current liabilities. The current ratio for Kohinoor Textile Mills (KTM) in 2012 is 0.632% where as in 2013 it becomes 0.693 %. This shows that the Current Ratio is increasing as year passes through. It is because the current assets are increasing and current liabilities are decreasing.Quick Ratio = (Total Current Assets Inventories- prepaid)/Total Current LiabilitiesYear Ratio

20130.375

20120.341

If we talk about the quick ratio, from 2012 to 2013 it increases from 0.34 to 0.37 percent. from 2012-13 , the company's ratio increased slightly which indicates that they had increased their current assets.

Networking Capital = Current Assets Current LiabilitiesYear Ratio

2013(1918422)

2012(2327373)

Leverage Ratios:

Total Debt to Total Assets Ratio: Total Debt/Total AssetsYear Ratio

20130.434

20120.461

In 2012 it shows that the ratio of the firm is 0.461 which means that 46% of the companys total assets are financed by Total debt, whereas in 2013 the ratio is decreased to 0.43 which means that only 43% of the companys total assets are financed by total debt.Times Interest Earned: Operating Income/Interest ExpenseYear Ratio

20132.246

20121.349

In comparison to 2012, in 2013 the company was able to stabilize its financial issues. And their TIE ratio increased from 1.349 to 2.246.Efficiency RatiosAverage Collection Period: (Receivables x 360)/Net SalesYear Ratio (Days)

201326.94 or 27

201231.86 or 32

In 2012, they give 32 days to their customers to pay back. But in 2013, they decreased their collection period from 32 days to 27 days.Inventory Turnover: cost of goods sold /InventoryYear Ratio (Times)

20136.852

20126.085

In 2012, the inventory turnover was 6.085 and in 2013 the ratio became 6.852 which indicate that as the year passes, the company is efficiently converting the inventory into sales and they are not stocking up the inventory and hence not increasing their holding cost.Total Assets Turnover: Net Sales/Total AssetYear Ratio (Times)

20130.930

20120.733

From 2012 to 2013 it increases from 0.733 to 0.930, which indicates that in 2013 the company was not able to convert much of their assets into sales but in the previous year, the company utilized more of their assets in generating sales.Net worth Turnover: Net Sales/Net WorthYear Ratio (Times)

20131.643

20121.361

In 2012 turnover was 1.36 whereas in case of 2013, the ratio increased to1.643 times which tells us that they have increased their level of utilization of shareholders' equity.

Net Working Capital Turnover: Net Sales/Net Working CapitalYear Ratio

2013(7.428)

2012(4.789)

NWC turnover for 2012 is (4.789), which shows that the firm has no more current liability than current asset and it 2013 its current liabilities increases, increasing the NWC ratio to (7.428)Profitability RatiosProfit Margin = EAIT/Netsales Year Ratio

20130.034

20120.010

The firm had a profit margin of 0.010 in 2012. In 2013 there was an increase in net income which resulted in the increase of ratio to 0.034, hence not giving a good turnover yield.

Gross Profit Margin = Gross Profits / Net SalesYear Ratio

20130.150

20120.165

EBIT Margin = EBIT / Net SalesYear Ratio

20130.101

20120.105

EBT MARGIN= EBT/ NET SALESYear Ratio

20130.056

20120.027

Return on Total Assets = Net Profits/Total AssetsYear Ratio

20130.032

20120.008

In 2012 the company had a 0.008 return on its assets. However, it increased to 0.032 in 2013which shows that the company was using its assets efficiently.Return on Net Worth = Net Profits/Net WorthYear Ratio

20130.056

20120.014

In 2012, the company had ratio of 0.014 which shows that the stockholders had less return on investment and the net income was low. However, in 2013, the ratio increased to 0.056 giving the stockholders more return on investment and showing that the firms net income increased.Return on Net Working Capital = Net Profits/Net Working CapitalYear Ratio

2013(0.253)

2012(0.050)

In 2012, the ratio was -0.050.This shows us that the firm was not using its resources efficiently and they did not have good resources to carry receivables and inventory. In 2013, however, the firm was not able to recover a bit. Return on Working capital increased to -0.253%. This shows us that firm was not able to use its resources efficiently as compared to 2012.Equity RatiosPrice to Earnings Ratio = Price/EarningsYear Ratio

201312.69

201253.19

If we look at P/E ratio, in 2012 the ratio is 53.19 times which tells us that the investors are willing to pay a good price for companys share. The firms balance sheet and profit loss account for 2013 shows that it has decreased to 12.69 times, which is not good and insufficient price to earnings ratio as compared to 2012.Dividend Payout = Dividends / Net ProfitYear Ratio

2013-

2012-

No dividend paid in 2012 and 2013. Therefore, no dividend payout ratio will be calculated.DIVIDEND YEILD = DIVIDEND PER SHARE /CURRENT PER SHAREYear Ratio

2013-

2012-

No dividend paid therefore no dividend yield in 2012 and 2013.Book Value per Share = Net Worth/SharesYear Ratio

20133.532

20123.335

In 2012 the firms book value is 3.335 whereas in 2013, the book value has increased to 3.532 which show that the shareholders will be quite happy as they get at least some lower amount.

AnalysisThe liquidity ratios include Current and Quick ratios only. The current ratio for the year 2013 is higher than the previous years i.e. 2012 which result in 0.632 of the overall increment and the quick ratio is also increased hand by hand with 0.375 in 2013 from 0.341 in 2012 which clearly shows that the firm has to meet up with the financial obligations.

Leverage Ratios include Total Debt to total assets and Times interest earned. The total debt to total asset ratio is 0.434 which is lesser than last year i.e. 2012 with 0.461and time interest earned is 2.246 higher than last years which does allow KTM with much capabilities to face its interest expenses from funds available through operations.

Efficiency ratios include Average Collection period which has decreased by 5 days (in 2012 it was 32 and now in 2013 it is 27) which points out the KTMs efficiency for quick receivables than last years, Inventory Turnover which is increased from 6.085 to 6.852 which points out that the firm not have appropriate inventories given the sales volume. Total Assets turnover is increased by slightly than 2012 which gives a highlight that KTM is effectively utilizing its assets in generating sales and Net worth turnover which also seems to be increased to 1.643 from 1.361. The overall analysis says that KTM is effectively using its resources in terms of Inventory turnover and total assets turnover which shows that KTM has been effectively utilizing its resources effectively however some measures needs to be taken for quick receivables.

Profitability ratios include profit margin which has increased from 0.010 to 0.341, Return on total assets which increased to 0.032 from 0.008, Return on equity which also increased and return on Net working capital also seems to be increased. The overall analysis says that KTM is keeping good profit margin however some measures needs to be taken in terms of increasing its profitability and investments in current assets.Equity ratios include price to earnings ratio which decreased as compared to last years, Dividend Payout is zero, dividend yield is also zero and also the book value which has decreased. This explains that the P/E ratio is not attractive enough to the stock holders which can result negatively. COMPARATIVE ANALYSIS among Firms GUL AHMED KOHINOOR NISHAT INDUSTRY AVERAGE

20122013201220132012201320122013

CURRENT RATIO0.991.050.6320.6931.311.40.9771.047

QUICK RATIO0.290.30.3410.3750.6680.8820.4330.52

NET WORKING CAPITAL(97802)666101(2327373)(1918422)4720920886874122957457616420

TOTAL DEBT-ASSET RATIO0.630.640.4610.4340.330.260.4730.444

TOTAL DEBT-EQUITY RATIO2.492.511.551.320.490.371.511.4

TOTAL CAPITILIZATION2.332.351.3921.3190.450.341.391.33

TIMES INTEREST EARNED11.691.3492.2463.334.91.92.945

AVERAGE COLLECTION PERIOD3028322728433033

INVENTORY TURNOVER2.413.016.086.853.933.964.144.6

PAYABLE TURNOVER7.886.058.9912.6711.211.49.3610.04

TOTAL ASSET TURNOVER1.411.430.7330.9300.650.790.9311.05

NET WORTH TURNOVER5.575.561.3611.6431.20.882.712.69

NET PROFIT MARGIN(0.96)2.320.0100.0340.070.11(0.293)0.821

GROSS PROFIT MARGIN13.9915.560.1650.1500.150.174.765.3

RETURN ON TOTAL ASSETS1.363.310.0080.0320.060.070.4761.14

RETURN ON TOTAL EQUITY(5.57)12.930.0140.0560.090.1(1.822)4.4

EARNING PER SHARE(1.73)4.840.471.9710.0416.62.927.68

PRICE EARNING RATIO(12.18)4.98.878.534.45.615.137.73

DIVIDEND YIELD RATIO----6.9%3.7%0.070.03

DIVIDENT PAYOUT RATIO----32.8%21.0%0.450.34

BOOK VALUE PER SHARE3.523.563.3353.532107.4167.538.08558.19

Explanation of Comparative Ratio Analysis Liquidity RATIOS CURRENT RAIO: For any company current ratio must be equal to 1 or more than 1. In the case of GUL AHMED , KOHINOOR and NISHAT current ratio is above 1 which means that current assets of all 3 companies are greater than their current liabilities and possess the ability to cover its current liabilities with its current assets. Among three , NISHAT has comparatively higher current ratio that is sign that company possesses greater current assets that lead towards higher liquidity. If comparing them yearly , Gul Ahmed has improved its current ratio by 6% and Kohinoor by 9% and Nishat By 7% from 2012 to 2013. Gul Ahmed in 2012 was below industry average due to higher current liabilities including taxes for provision but now it has average industry average and has improved current assets level by greater extent. Taking into consideration KOHINOOR had the below industry average in 2012 as well and has not improved considerably in 2013 as ratio is 0.693 while industry average is 1.047. This indicates that it own less current assets and higher current liabilities as compared to NISHAT and GUL AHME while NISHAT in 2012 and 2013 both is above industry average and comparatively among other two , it has higher current assets to cover its current liabilities.QUICK RATIO: In quick ratio we just deduct inventories and prepaid from current assets and then divide it by current liabilities that shows extent of liquid assets to cover its current liabilities. Gul Ahmed possesses strong current ratio and weak quick ratio as compared with industry average taking into consideration inventory as potential problem for Co. Same is the case with Kohinoor Co while Nishat owns strong current ratio and strong quick ratio compared with industry average which means that inventory holding is Nishat is less than other two companies and is selling its inventory to greater extent in both the years of 2012 and 2013. WORKING CAPITAL : Working Capital is the amount of current assets that is left after passing current liabilities. There it is derived by subtracting current assets with current liabilities. Net working capital of Gul Ahmed in 2012 was poorer than industry average putting into fact higher current liabilities and less assets but it has improved significantly in 2013 but if compared with industry average it is still far from industry average while in case of Kohinoor its current liabilities are much higher than current assets in both years of 2012 and 2013 and it has poorest ratio as compared with industry average whereas net working capital of NISHAT Textiles Limited is stronger in both years of 2012 and 2013 compared with industry average so NISHAT has higher liquidity and less risk for current assets. Leverage ratiosTotal debt ratio: This is a ratio of total debt to total asset of the business. This shows how much of the company is financed by debts and how much is not. In the case of Gul ahmed, it is highly geared company which means most of its assets are financed through debts, not equity. However nishat and kohinoor are below industry average which indicates that much of its assets are owned which means they are financed through companys equity not debt. The ratios of nishat and kohinoor are good, because the company have low amount of debt, and is therefore exposed to less risk then gul ahmed.Total debt to equity: this compares a company's total liabilities to its totalshare holders equity. This is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed.kohinoor is below industry average but it is in stable position which means that they are using less leverage and has stronger equity position. Nishat is very much below than the industry average which indicates that it is not taking advantage of the increased profits that financial leverage may bring. On the other hand gul ahmeds ratio is above industry average which means the company is being financed by creditors rather than from its own financial sources which may be a dangerous trend. Lenders and investors usually prefer low debt-to-equity ratios because their interests are better protected in the event of a business decline. Thus, there is a risk that because of high debt-to-equity ratios gul ahmed may not be able to attract additional lending capital.

Total capitalization: It tells the investors about the extent to which the company is using its equity to support its operations and growth. Gul ahmed is having ratios above industry average and its ratio is increasing from 2012 to 2013 which indicates that the finance of company mainly comes from debt which is quite risky and gul ahmed may find it difficult to get more loans in future. however kohinoor is having ratio above industry average in 2012 but its ratio fell in 2013 which shows that there is an increase in stock holders equity. Nishats ratios are below industry average which indicate sthat the company is not much involved in taking risks and it is using its equity for its operations and growth purposes.

Interest coverage: this ratio is used to determine how easily a company can pay interest expenses on outstanding debt.Gul ahmed and kohinoor both are below industry averages ut they are increasing from year to year which is the positive signal for companys overall health. In 2012 gul ahmeds ratio was so low that its ability to meet interest expenses is questionable however this ratio increased in 2013 but it is still not up to the mark. By contrast, nishat sustains its earnings well above its interest requirements is in an excellent position to weather possible financial storms.

EFFICIENCY RATIOS:Average collection period: Gul Ahmed in 2012 has same average collection period as compared to industry average of 30 where it has improved its collection period in 2013 which is 28 days as compared to 33 days. In addition to increasing its sales , Gul Ahmed has collected receivables quickly by providing discounts etc whereas in case of KOHINOOR Co , average collection period in 2012 was weaker as compared with industry average but in 2013 it has improved its collection period significantly . when comparing these both firms with NISHAT textiles , it had strong receivable turnover in 2012 but in 2013 it has much weaker receivable turnover and its collection period has risen to 43 days with industry average of 33 days due to flexible credit policies . Inventory turnover: inventory turnover shows extent to which firm is converting its inventory into sales . in Gul Ahmed , inventory turnover has increased from 2012 to 2013 but compared with industry average it lacks far behind as it is stocking higher inventory as compared to inventory of other two giant firms whereas in case of KOHINOOR Co, inventory turnover is stronger in both years of 2012 and 2013 as compared with industry average so it is converting its inventory quickly into sales while in case of NISHAT Textiles limited , is inventory turnover is low compared with industry average .its inventory stock out is low which leads to low sales of NISHAT Co.Total Asset Turnover: Total Asset turnover of Gul Ahmed Co is stronger with industry average so it has been utilizing efficiently its assets into generating sales. In Gul Ahmed stores, spare tools and loose parts have been utilized effectively from 2012 to 2013 leading to increase in sales whereas in case of KOHINOOR , total asset turnover is low and weaker compared with industry average so it has not been utilizing its property , plant and equipment into generation of sales however ratio has improved from 2012 to 2013. Same is case with NISHAT CO as it is farer away from industry average and not making efficient look on its total assets especially inventory and equipment into creation of sales in the company.PAYABLE TURNOVER: Payable turnover indicates extent to which the firm makes payments to suppliers of the firm. Payable turnover ratio of GUl AHMED TEXTILES LIMITED is lower than industry averages as in 2012 it took 45 days to make payment to suppliers whereas in 2013 it takes 60 days to make payment to suppliers as compared with industry average of 35 days in 2013. In case of KOHINOOR TEXTILES LIMITED , payable turnover ratio was lower than industry average in 2012 as it took 40 days to make payment to suppliers while industry average was 38 days however it increased its turnover ratio to 12.67 with payment period of 28 days making it stronger as compared with industry average. Comparing these both firms with NISHAT TEXTILES Co, payable turnover ratio was stronger compared with industry average as in 2013 company took 32 days to make payment while industry average stood at 38 days of payment period.Profitability RatioEvery firm is most concerned with its profitability. One of the most frequently used tools of financial ratio analysis is profitability ratios which are used to determine the company's bottom line and its return to its investors. Profitabilityratios show a company's overall efficiency and performance. Here we will discuss about the profitability ratio analysis of Gul Ahmed, Nishat and Kohinoor Textile Mills with the average ratio of industry.Net Profit MarginWhen doing a simple profitability ratio analysis, net profit margin is the most often margin ratio used. The net profit margin shows how much of each sales dollar shows up as net income after all expenses are paid. By calculating our ratios, Nishat is on top with 0.11 in 2013 and 0.07 in 2012. Then Kohinoor on second with 0.034 in 2013 and Gul Ahmed on third with 0.0232 in 2013. If we compare these ratios with the Average Industry ratios of 2013 i.e. 0.821 we can say that overall Nishat in on top at .11 whereas the other companies are also progressing with average ratios per year.

Gross Profit Margin

Thegross profit marginlooks at cost of goods sold as a percentage of sales. These ratios look at how well a company controls the cost of itsinventoryand the manufacturing of its products and subsequently pass on the costs to its customers. The larger the gross profit margin, the better for the company. Currently Nishat is on lead with 17 percent in 2013 where as Gul Ahmed is on second with 15.56 ratio and Kohinoor on third with 15 percent in 2013. If we compare these ratios with the industry ratio it has 5.3 in 2013. We can say that Nishat has quite good progress in Gross Profit Margin comparing to industry. We can say that these ratios are quite considerable.Returns RatiosReturn on Assets(also called Return on Investment)The Return on Assets ratio is an important profitability ratio because it measures the efficiency with which the company is managing its investment in assets and using them to generate profit. It measures the amount of profit earned relative to the firm's level of investment in total assets. The return on assets ratio is related to theasset managementcategory of financial ratios. If we talk about the ROA ratio currently Nishat is on top with 0.07 or 7%. Then Gul Ahmed on second and Kohinoor on third. Comparing these ratios with the average industry ratios, are good

Return on EquityThe Return on Equity ratio is perhaps the most important of all the financial ratios to investors in the company. It measures the return on the money the investors have put into the company. This is the ratio potential investors look at when deciding whether or not to invest in the company. Currently Gul Ahmed is at top with 12.93 in 2013 then Nishat on second with 10% and Kohinoor on third with 5.6% in 2013. Comparing these ratios with the industry average we can say that industry is also normal in the year 2013. In general, the higher the percentage, the better, with some exceptions, as it shows that the company is doing a good job using the investors' money. EQUITY RATIOSEarning per share: EPS tells you how well a company is generating profit for its shareholders. Gul ahmed Is having negative EPS in 2012 which means that it is losing money. kohinoor and gul ahmed are below industry average which indicates that they need to work out on their earnings in order to attract investors and retain the curent stock holders. On the other hand nishat is having a really favorable EPS which indicates that it is generating more profit for its share holders.Price to earning ratio: The P/E ratio tells how much the market is willing to pay for a companys earnings. Kohinoor is showing a higher P/E ratio which indicates that the market is more willing to pay for the earnings of the company and the market has high hopes for the future of the share and therefore it has bid up the price.On the other hand, gul ahmed and nishat are having a lower price to earnings ratio indicates the market does not have much confidence in the future of the share and people are not willing to pay. Gul ahmed is having negative price earning ratio on 2012 which shows that it is losing money per share of its stock.Book value per share: the purpose of calculating book value per share is to relate shareholder's equity to the number of shares of common stock outstanding. Since the number of shares of preferred stock are not considered, this gives a more "real" value to the common shares outstanding. Nishat is currently having very high book value and on the other hand kohinoor and gul ahmed are much behind. However book value alone cannot provide the proper picture of the situation.Dividend yield and dividend payout: Gul ahmed and kohinoor are not giving any dividends to their stock holders in concerned years however Nishat is giving a satisfactory rate of dividend to its stake holders.

References:http://www.kse.com.pk/http://www.nishatmillsltd.com/http://www.gulahmed.com/http://www.kohinoormills.com/

We also referred: IBF Handouts and Notes given by our respective teacher Books (Our text, essential and reference books) Website (Such as Wikipedia and Google) Personal Visit at Karachi Stock Exchange (KSE) for Annual Report Collection

APPENDEX

A:Gul Ahmed1. Profit and Loss Account2. Balance SheetB:Nishat1. Profit and Loss Account2. Balance SheetC:Kohinoor1. Profit and Loss Account2. Balance Sheet

Appendix A-1

Appendix A-2

Appendix A-2Appendix B-1Appendix B-2

Appendix B-2

Appendix C-1

Appendix C-2

Appendix C-2

CONTRIBUTION STATEMENT

NAMECONTRIBUTION

Wikash KumarGul Ahmed TextilesLiquidity RatiosEfficiency Ratios

Rauha RafiqNishat Textile MillsLeverage RatiosEquity Ratios

Nauman Ali KhowajaKohinoor Textile MillsProfitablity RatiosAnalysis

Term Report 2014IBFFinancial Ratio Analysis