A/c receivable turnover in days: (avg gross rec/net sales/365):

A/c receivable turnover in days (avg gross rec/net sales/365)

Year Engro

  Avg gross rec net sales/365 A/c rec turnover

2006 591255.5 48224.063 12.26059073

2007 1024158 63515.667 16.12449413

2008 530531 35062.087 15.13118714

2009 540885 50071.992 10.80214664

2010 6354245 5234.1446 13.54855368

It will take almost 16 days to convert Ac rec into cash. The information about the credit terms are not
given in the annual report of Engro and we even can’t judge from the competitors because there is a
large difference of the A.R.T.O between the two organizations.
A/c receivable turnover in times (net sales/avg gross rec):
A/c receivable turnover in times (net sales/avg gross rec)

Year Engro

  Net sales Avg gross rec A/c rec turnover

2006 17601783 591255.5 29.77018057

2007 23183222 1024158 22.63637251

2008 12797662 530531 24.1223642

2009 18276277 540885 33.78958004

2010 24346889 5346796 34.45550245

The results from the last ratio are been confirmed by this ratio that the control on the Ac rec increased
in the year 2010. There is no specific information about the credit terms are given in the report so that
we could find out what is the reason behind the decrease in the control.

Day’s sales in inventory (ending inventory/(CGS/365)

Days sales in inventory (ending inventory/(CGS/365)

Year Engro

  Ending inventory CGS/365 Days sales in invt

2006 484748 26104.6989 18.56937718

2007 1922982 39268.06 48.97063924

2008 923448 36615.134 25.22039111

2009 2690153 50035.049 53.76537155

2010 3545524 5355.2559 54.9388541

2006 and 2007 were the years of the low sales as shown by the figures. But with ratio shoes the
increasing trend every year

Inventory turnover in days (Avg inventory/CGS/365):

 Inventory turnover in days (Avg inventory/CGS/365)

Year Engro

  Avg Inventory CGS/365 Inventory turnover

2006 484748 26104.6989 18.56937718

2007 1203865 39268.06 30.65761334

2008 1423215 36615.134 38.86958327

2009 1806800.5 50035.049 36.11069712

2010 19254655 4.2453458 37.11557461

The data shows that the inventory took more time to be converted into sales in the year 2010.

Operating cycle:

A/c rec turnover (in days+ Inventory turnover in days):

Operating cycle (A/c rec turnover in days+ Inventory turnover in days)

Year Engro

  A/c rec TO in days Inv TO in days O.cycle

2006 15.13118714 18.56937718 33.70056432

2007 10.80214664 30.65761334 41.45975998

2008 12.26059073 38.86958327 51.130174

2009 16.12449413 36.11069712 52.23519125

2010 16.95424235 36.54285962 53.43555645

This shows the increase in the number of days for the conversion of inventory into cash. The
operating cycle is within a band in the 5 years . This might be because of the taking averages,
which minimizes the high differences.

Cash ratio
[(Cash equivalents +Marketable securities)/current liabilities]

Cash ratio [(cash equivalents +Marketable securities)/current liabilities]

Year Engro

  Cash +MS C.L Cash ratio

2006 2305371 2985149 0.772280044

2007 1280501 2800094 0.457306433

2008 2033758 3642415 0.558354279

2009 7771472 5264674 1.476154459

2010 8112565 6244889 1.81225453

It showed normal results in the first three years but in 2010 it shows high risks as this can result in the
low returns. The increase in the cash is not noticeable but there is high increase in the short-term
investment. This is been done in open mutual funds and been reported at their purchase price.

Debt to tangible net worth ratio

(Total liabilities/shareholders equity-intangibles)

 Year T.L SHE-intangibles Debt to tangible NW ratio

2006 6599473 1519462 4.343295851

2007 6736064 1507782 4.467531778

2008 6610719 1664278 3.972124248

 2009 22674734 1916630 11.83052232

2010 35642754 1357569 12.1445834

In 2010 it is the highest because of major increase in deferred taxes and increase in the value of
intangibles.

Net worth (total assets-total liabilities)

 Year TA TL net worth

2006 13,185,357 6599473 6,585,884

2007 14,111,630 6736064 7,375,566

2008 15980816 6610719 9,370,097

2009 38156651 22674734 15,481,917

2010 13422507 16208664 14866157

Current debt to net worth ratio (current debt/net worth)

 Year C.debt net worth current debt to net worth

2006 2985149 6585884 0.45326474

2007 2800094 7375566 0.379644627

2008 3642415 9370097 0.388727566

2009 5264674 15481917 0.340053108

2010 2464288 14866157 0.335425572

The current debt to net worth ratio indicates the portion of the funds provided by the C. L and Share
holders. The risk is the highest in 2006 because in this year majority of the funds are provided by the
short term financing. The risk is less in 2010 because the contribution of Current debt in comparison to
SHE is less.

Total capitalization ratio (long term debt/(Long term debt+PS+CS)

 Year LTD LTD+PS+CS Capitalzation ratio

2006 3614324 5143724 0.702666784

2007 283935970 285465370 0.994642432

2008 2968304 4650644 0.638256551

2009 17410060 19344752 0.899988793

2010 16369454 136792452 0.922456404

The capitalization ratio is gradually increasing from 2006 to 2007. The risk was minimum in 2008
because of issuance of ordinary right shares. The risk is the highest during the year 2007.