Financial Leverage
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LOGO
Financial Leverage of Pakistani Companies
Final Project Presentation
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Financial Leverage of Pakistani Companies
Topic Introduction
Randomly Selected Companies Financial Statements Equity and Debt Proportions Financial Analysis Comments/Conclusion
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Financial Leverage of Pakistani Companies
Leverage
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Financial Leverage of Pakistani Companies
Operating Leverage
Financial Leverage
Combined Leverage
Types Of Leverage
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Financial Leverage of Pakistani Companies
High Leverage
Financial Leverage
Low Leverage
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Financial Leverage of Pakistani Companies
Dawood
SapphireNoon
Pepsi
Nishat
Companies
Randomly Selected
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Financial Leverage of Pakistani Companies
Sapphire Textile Limited
Comments
Introduction
Mission
Values
Proportions
Ratios
Data Collection
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Financial Leverage of Pakistani Companies
Sapphire Textile IntroductionSapphire Textile Introduction
NewestInnovation
TechnologyLargest
ManufacturersTextile Company
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Financial Leverage of Pakistani Companies
Mission
To build flexible manufacturing capabilities in the textile industry to cater to the growing and evolving global demands, keeping a lead position in our business, maintaining our values based on good business and ethics, and at the same time contributing in the development of the community in which we work and live in.
ValuesP eople R elationship I ntegrity D iversity E nvironment
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Financial Leverage of Pakistani Companies
Data Collected
Sources of BorrowingUtilization of Borrowing
Rate of Interest
Reason of Debt Financing
Other Sources of Financing
Meeting Debt Requirement
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Financial Leverage of Pakistani Companies
2005 2006 2007 2008
Shareholder’s Equity
2797.114 3893.928 6018.868 5577.492
Long term Debt
1174.78 934.54 722.264 446.199
total3971.894 4828.468 6740.95 6023.691
Proportion of Equity
70% 81% 89% 93%
Proportion of Debt
30% 19% 11% 7%
Equity and Debt Proportions
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Financial Leverage of Pakistani Companies
2005 2006 2007 20080%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Equity
Debt
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Financial Leverage of Pakistani Companies
Debt Equity Ratio
Debt Equity Ratio = Long Term Debt/ Shareholder’s Equity
Ratios 2005 2006 2007 2008
Debt to Equity
0.42 0.24 0.12 0.08
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Financial Leverage of Pakistani Companies
Debt to Equity0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Debt to Capital Ratio
Debt to Capital = Debt/Shareholder’s Equity + Debt
Ratio 2005 2006 2007 2008
Debt to Capital
0.30 0.19 0.11 0.07
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Financial Leverage of Pakistani Companies
Debt to Capital0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Debt to Asset Ratio
Debt to Assets Ratio = Debt/Total Assets
Ratio 2005 2006 2007 2008
Debt to Assets 0.16 0.10 0.06 0.04
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Financial Leverage of Pakistani Companies
Debt to Assets0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Financial Leverage
Ratio 2005 2006 2007 2008
Financial Leverage
30:70 19:81 11:89 7:93
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Financial Leverage of Pakistani Companies
CommentsIncreaseIn Profits
LowLeverage
Reliance On Equity
Ratios Decreasing
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Financial Leverage of Pakistani Companies
NoonPakistanLimited
Comments
Introduction
Mission
Vision
Proportions
Ratios
Data Collection
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Financial Leverage of Pakistani Companies
Noon Pakistan Limited IntroductionNoon Pakistan Limited Introduction
NurpurUHT
Tetrapakplant
First Milk Powder
IncorporatedIn 1966
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Financial Leverage of Pakistani Companies
Mission
Noon is committed to supplying the consumer and our customers with the finest, high-quality products and to leading the industry in healthy and nutritious products.Noon supports these goals with a corporate philosophy of adhering to the highest ethical conduct in all its business dealings, treatment of its employees, and social and environmental policies.
Vision
Our vision at Noon is to be a transformative force in our community and world at large and to serve as a model of a sustainable business alternative that nurtures social and economic well-being in an environmentally sensitive manner
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Financial Leverage of Pakistani Companies
Data Collected
Sources of BorrowingUtilization of Borrowing
Rate of Interest
Reason of Debt Financing
Other Sources of Financing
Meeting Debt Requirement
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Financial Leverage of Pakistani Companies
2005 2006 2007 2008
Shareholder’s Equity
127514 109018 108758 169836
Long term Debt
250731 329699 286235 303591
total378245 438717 394993 473427
Proportion of Equity
34% 25% 28% 36%
Proportion of Debt
66% 75% 72% 64%
Equity and Debt Proportions
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Financial Leverage of Pakistani Companies
2005 2006 2007 20080%
10%
20%
30%
40%
50%
60%
70%
80%
Equity
Debt
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Financial Leverage of Pakistani Companies
Debt Equity Ratio
Debt Equity Ratio = Long Term Debt/ Shareholder’s Equity
Ratios 2005 2006 2007 2008
Debt to Equity
0.74 0.85 0.65 0.85
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Financial Leverage of Pakistani Companies
Debt to Equity0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Debt to Capital Ratio
Debt to Capital = Debt/Shareholder’s Equity + Debt
Ratio 2005 2006 2007 2008
Debt to Capital
0.66 0.75 0.72 0.64
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Financial Leverage of Pakistani Companies
Debt to Capital0.58
0.6
0.62
0.64
0.66
0.68
0.7
0.72
0.74
0.76
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Debt to Asset Ratio
Debt to Assets Ratio = Debt/Total Assets
Ratio 2005 2006 2007 2008
Debt to Assets 0.48 0.59 0.52 0.41
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Financial Leverage of Pakistani Companies
Debt to Assets0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Financial Leverage
Ratio 2005 2006 2007 2008
Financial Leverage
66:34 25:75 28:72 36:64
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Financial Leverage of Pakistani Companies
Interest Coverage Ratio
Interest Coverage Ratio = EBIT/Interest Payment
Ratio 2005 2006 2007 2008
Interest Coverage
3.15 0.61 1.5 2.37
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Financial Leverage of Pakistani Companies
Interest Coverage0
0.5
1
1.5
2
2.5
3
3.5
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
CommentsLow Profits
HighLeverage
Reliance On Debt
Ratios Increasing
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Financial Leverage of Pakistani Companies
PepsiCo
Comments
Introduction
Mission
Values
Proportions
Ratios
Data Collection
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Financial Leverage of Pakistani Companies
PepsiCo IntroductionPepsiCo Introduction
Food & Beverages
World Leader
EnvironmentallyResponsibleCompany
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Financial Leverage of Pakistani Companies
Mission
Our mission is to be the world's premier consumer Products Company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.
VisionOur vision is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company.
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Financial Leverage of Pakistani Companies
Data Collected
Sources of BorrowingUtilization of Borrowing
Rate of Interest
Reason of Debt Financing
Other Sources of Financing
Meeting Debt Requirement
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Financial Leverage of Pakistani Companies
2005 2006 2007 2008
Shareholder’s Equity
14320 15447 17325 12203
Long term Debt
2313 2550 4203 7858
total16633 17997 21528 20061
Proportion of Equity
86% 86% 80% 61%
Proportion of Debt
14% 14% 20% 39%
Equity and Debt Proportions
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Financial Leverage of Pakistani Companies
2005 2006 2007 20080%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Equity
Debt
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Financial Leverage of Pakistani Companies
Debt Equity Ratio
Debt Equity Ratio = Long Term Debt/ Shareholder’s Equity
Ratios 2005 2006 2007 2008
Debt to Equity
0.161 0.165 0.24 0.21
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Financial Leverage of Pakistani Companies
Debt to Equity0
0.05
0.1
0.15
0.2
0.25
0.3
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Debt to Capital Ratio
Debt to Capital = Debt/Shareholder’s Equity + Debt
Ratio 2005 2006 2007 2008
Debt to Capital
0.14 0.14 0.20 0.39
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Financial Leverage of Pakistani Companies
Debt to Capital0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Debt to Asset Ratio
Debt to Assets Ratio = Debt/Total Assets
Ratio 2005 2006 2007 2008
Debt to Assets 0.07 0.085 0.121 0.21
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Financial Leverage of Pakistani Companies
Debt to Assets0
0.05
0.1
0.15
0.2
0.25
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Financial Leverage
Ratio 2005 2006 2007 2008
Financial Leverage
14:86 14:86 20:80 39:61
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Financial Leverage of Pakistani Companies
Interest Coverage Ratio
Interest Coverage Ratio = EBIT/Interest Payment
Ratio 2005 2006 2007 2008
Interest Coverage
23.13 26.94 32.01 21.07
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Financial Leverage of Pakistani Companies
Interest Coverage0
5
10
15
20
25
30
35
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
CommentsLow Profits
HighLeverage
Reliance On Debt
Ratios Increasing
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Financial Leverage of Pakistani Companies
Nishat Textile Limited
Comments
Introduction
Mission
Values
Proportions
Ratios
Data Collection
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Financial Leverage of Pakistani Companies
Nishat Textile IntroductionNishat Textile Introduction
Core Business
PrincipalActivity
MultinationalOperations5 Listed
Companies
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Financial Leverage of Pakistani Companies
Mission
To provide quality products to customers and explore new markets to promote/expand sales of the Company through good governance and foster a sound and dynamic team, so as to achieve optimum prices of products of the company for sustainable and equitable growth and prosperity of the company.
VisionTo transform the Company into a modern and dynamic yarn, cloth and processed cloth and finished product manufacturing Company with highly professionals and fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.
To transform the Company into a modern and dynamic power generating company with highly professionals and fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.
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Financial Leverage of Pakistani Companies
Data Collected
Sources of BorrowingUtilization of Borrowing
Rate of Interest
Reason of Debt Financing
Other Sources of Financing
Meeting Debt Requirement
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Financial Leverage of Pakistani Companies
2005 2006 2007 2008
Shareholder’s Equity
16563.14 32935.5 49269.2 35452.7
Long term Debt
2858.16 3015.38 1773.82 1047.79
total19421.30 35950.58 51043.02 36500.5
Proportion of Equity
86% 92% 97% 98%
Proportion of Debt
14% 08% 03% 02%
Equity and Debt Proportions
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Financial Leverage of Pakistani Companies
2005 2006 2007 20080%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Equity
Debt
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Financial Leverage of Pakistani Companies
Debt Equity Ratio
Debt Equity Ratio = Long Term Debt/ Shareholder’s Equity
Ratios 2005 2006 2007 2008
Debt to Equity
0.17 0.09 0.03 0.02
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Financial Leverage of Pakistani Companies
Debt to Equity0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Debt to Capital Ratio
Debt to Capital = Debt/Shareholder’s Equity + Debt
Ratio 2005 2006 2007 2008
Debt to Capital
0.14 0.08 0.03 0.02
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Financial Leverage of Pakistani Companies
Debt to Capital0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Debt to Asset Ratio
Debt to Assets Ratio = Debt/Total Assets
Ratio 2005 2006 2007 2008
Debt to Assets 0.13 0.09 0.04 0.02
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Financial Leverage of Pakistani Companies
Debt to Assets0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Financial Leverage
Ratio 2005 2006 2007 2008
Financial Leverage
14:86 08:92 03:97 02:98
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Financial Leverage of Pakistani Companies
Interest Coverage Ratio
Interest Coverage Ratio = EBIT/Interest Payment
Ratio 2005 2006 2007 2008
Interest Coverage
4.9 2.6 2.5 7.4
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Financial Leverage of Pakistani Companies
Interest Coverage0
1
2
3
4
5
6
7
8
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
CommentsIncreaseIn
Profits
LowLeverage
Reliance On Equity
Ratios Decreasing
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Financial Leverage of Pakistani Companies
DawoodHercules
Comments
Introduction
Mission
Values
Proportions
Ratios
Data Collection
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Financial Leverage of Pakistani Companies
Dawood Hercules IntroductionDawood Hercules Introduction
First Manufacturing
Co
Tallest IndustrialStructure
LatestTechnology
IncorporatedIn 1968
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Financial Leverage of Pakistani Companies
Mission & Vision
• To excel in the fertilizer and allied business at national and international level by maintaining highest standards of product quality thereby playing our role in the development of the country's economy and adding value to the shareholders' investment.
• To offer consistent dividends to the shareholders.• To chalk out a plan to improve production techniques and quality standards.• To provide career grooming opportunities to the talented professionals.• To become a good corporate citizen.• To develop long-term relationship with the employees.• To create high performing Organizational Environment in which ideas are generated and nurtured.• To inculcate honest and ethical behavior.• To create safe, healthy environment and friendly atmosphere for the employees.• To improve quality of life for the employees.• To make the farmer community prosper.
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Financial Leverage of Pakistani Companies
Data Collected
Sources of BorrowingUtilization of Borrowing
Rate of Interest
Reason of Debt Financing
Other Sources of Financing
Meeting Debt Requirement
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Financial Leverage of Pakistani Companies
2005 2006 2007 2008
Shareholder’s Equity
9355.24 9273.14 18889.33 17382.66
Long term Debt
- - 6500 6302.5
total9355.24 9273.14 25389.33 23685.16
Proportion of Equity
100% 100% 75% 74%
Proportion of Debt
0% 0% 25% 26%
Equity and Debt Proportions
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Financial Leverage of Pakistani Companies
2005 2006 2007 20080%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Equity
Debt
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Financial Leverage of Pakistani Companies
Debt Equity Ratio
Debt Equity Ratio = Long Term Debt/ Shareholder’s Equity
Ratios 2005 2006 2007 2008
Debt to Equity
- - 0.34 0.36
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Financial Leverage of Pakistani Companies
Debt to Equity0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Debt to Capital Ratio
Debt to Capital = Debt/Shareholder’s Equity + Debt
Ratio 2005 2006 2007 2008
Debt to Capital
- - 0.25 0.26
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Financial Leverage of Pakistani Companies
Debt to Capital0
0.05
0.1
0.15
0.2
0.25
0.3
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Debt to Asset Ratio
Debt to Assets Ratio = Debt/Total Assets
Ratio 2005 2006 2007 2008
Debt to Assets - - 0.22 0.24
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Financial Leverage of Pakistani Companies
Debt to Assets0
0.05
0.1
0.15
0.2
0.25
0.3
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
Financial Leverage
Ratio 2005 2006 2007 2008
Financial Leverage
0:100 0:100 25:75 26:74
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Financial Leverage of Pakistani Companies
Interest Coverage Ratio
Interest Coverage Ratio = EBIT/Interest Payment
Ratio 2005 2006 2007 2008
Interest Coverage
3.87 1.81 1.36 2.82
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Financial Leverage of Pakistani Companies
Interest Coverage0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2005
2006
2007
2008
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Financial Leverage of Pakistani Companies
CommentsIncreaseIn Profits
LowLeverage
Reliance On Equity
Ratios Decreasing
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Financial Leverage of Pakistani Companies
Risk factor
Reliance on equity
Raise capital
Low leveragedcompanies
• Sapphire• Nishat
• Dawood
High leveragedcompanies
• PepsiCo• Noon
Findings
Overall Performance
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Financial Leverage of Pakistani Companies
Low leverage
Reduce risk of bankruptcy
Increase borrowing capacity
High availability of lenders
Recommendations