Profitability Ratio

Profitability ratio measures company ability to generate earnings with respect to expenses and
other relevant costs incurred during a specific period of time. Profitability ratio is measured in
three different relations:
a. Profitability in relation to sales
i.

Gross profit margin

ii.

Net profit margin

b. Profitability in relation to investment

i.

Return on equity capital.

ii.

Return on shareholders investment(ROSI)

iii.

Return on capital employed

c. Profitability in terms of earnings and dividends

i.

Earnings per share (EPS)

ii.

Dividend per share (DPS).

iii.

Price earnings ratio

iv.

Dividend yield ratio

v.

Earning yield ratio

Profitability In Relation To Sales

Gross Profit Margin
The ratio of gross profit margin expresses the gross profit as a percentage of total sales. It is used
as an indicator of the financial health of a business. Without an adequate gross margin, a
company will be unable to pay its operating and other expenses and build for the future.
Formula:

Gross Profit / Sales * 100

ATLAS BATTERY

EXIDE PAKISTAN

Years

Formula/Calculation

Ratio

Formula/Calculation

Ratio

2007

291,622 / 1,585,648 * 100

18.40

314,084 / 1,931,459

16.3

2008

386,883 / 2,628,820 * 100

15.0

361,265 / 3,022,276

12.0

2009

530,067 / 3,156,807 * 100

17.0

620,572 / 5,630,385

11.02

2010

591,200 / 4,024,422 * 100

15.0

775,207 / 6,189,135

12.52

2011

860,839 / 5,868,260 * 100

15.0

1,067,822 / 7,711,452

14.0

2012

1,167,682 / 7,217,116 *100

16.20

1,274,244 / 9,465,724

13.5

2013

1,315,167 / 8,875,114 * 100

15.0

1,580,249 / 11,145,295

14.2

2014

1,621,558 / 12,242,719 * 100

13.24

1,433,076 / 11,593,822

12.4

Graphical Representation
20
18
16
14
12
Atlas Battery

10

Exide Pakistan

8
6
4
2
0
2007

2008

2009

2010

2011

2012

2013

2014

Analysis
The Gross Profit Margin of both companies has been satisfactory. When we compare both
companies Atlas Battery has high gross profit margin in all the years which is favorable to the
company and generates a high level of revenue to pay its operating expenses and also better
control to its cost of production while Exide Pakistan has low gross profit margin and generate a
lower sales to pay its operating expenses.

Net Profit Margin

The profit margin tells you how much profit a company makes for every Rs. 1 it generates in
revenue or sales. Net profit margin is an indicator of how efficient a company is and how well it
controls its costs. The higher the margin is more effective the company is in converting revenue
into actual profit.
Formula:

Net Profit After Tax / Net Sales * 100

ATLAS BATTERY

EXIDE PAKISTAN

Years

Formula/Calculation

Ratio

Formula/Calculation

Ratio

2007

87,510 / 1,585,648 * 100

5.12

91,642 / 1,931,459

5.0

2008

106,797 / 2,628,820 * 100

4.1

93,799 / 3,022,276

3.10

2009

177,678 / 3,156,807 * 100

6.0

182,003 / 5,630,385

3.23

2010

222,534 / 4,024,422 * 100

5.53

197,287 / 6,189,135

3.2

2011

354,502 / 5,868,260 * 100

6.1

276,390 / 7,711,452

3.6

2012

486,014 / 7,217,116 * 100

7.0

320,145 / 9,465,724

3.4

2013

582,113 / 8,875,114 * 100

6.56

486,426 / 11,145,295

4.36

2014

741,150 / 12,242,719 * 100

6.05

401,092 / 11,593,822

3.4

Graphical Representation

8
7
6
5
Atlas Battery

Exide Pakistan
3
2
1
0
2007

2008

2009

2010

2011

2012

2013

2014

Analysis
The net profit margin is not maintained by both companies, both companies have irregular
trends. When we compare Atlas Battery and Exide Pakistan, Atlas Battery has a high net profit
margin in all the years, they generate more than 5% in the seven years, they generate the high
profit margins, and better control to its costs against Exide Pakistan. While Exide Pakistan has
low net profit margin, they only one time generate profit margins 5% in 2007 and they could not
better control to its sales costs.

Profitability In Relation To Investment

Return On Equity Capital
The amount of net income returned as a percentage of shareholders equity. Return on
equity measures a corporation's profitability by revealing how much profit a company
generates with the money shareholders have invested.
Formula:

Net Profit After Tax Preferred Dividend / Equity Share Capital

ATLAS BATTERY

Years

Formula/Calculation

EXIDE PAKISTAN
Ratio

Formula/Calculation

Ratio

2007

87,510 / 60,805

144

91,642 / 54,057

169

2008

106,797 / 69,926

153

93,799 / 54,057

173

2009

177,678 / 69,926

254

182,003 / 54,057

337

2010

222,534 / 83,911

265

197,287 / 56,499

349

2011

354,502 / 100,693

352

276,390 / 56,499

489

2012

486,014 / 120,832

402

320,145 / 70,624

453

2013

582,113 / 144,998

401

486,426 / 70,624

689

2014

741,150 / 173,998

426

401,092 / 77,686

516

Graphical Representation
800
700
600
500
Atlas Battery

400

Exide Pakistan
300
200
100
0
2007

2008

2009

2010

2011

2012

2013

2014

Analysis
Both companies have increasing trends but Exide Pakistan has better performance against Atlas
Battery. Exide Pakistan has high equity capital and them efficiently increasing every year which
is a good indicator and showing that the company is efficiently utilizing its Equity share capital
for generating the profits. Atlas Battery also increasing efficiently in every year but Exide
Pakistan has high equity capital.

Return On Shareholders Investment (ROSI)

The ROI is a financial technique to measure the loss or gain of money invested in a business,
relative to the total amount of investment and is expressed in terms of percentages.
Formula:

Net Profit After Interest & Tax / Shareholders Fund * 100

ATLAS BATTERY

EXIDE PAKISTAN

Years

Formula/Calculation

Ratio

Formula/Calculation

Ratio

2007

87,510 / 335,998 * 100

26.04

91,642 / 505,021

18.15

2008

106,797 / 406,312 * 100

26.30

93,799 / 590,314

16.0

2009

177,678 / 531,546 * 100

33.42

182,003 / 725,964

25.07

2010

222,534 / 684,154 * 100

32.53

197,287 / 900,499

22.0

2011

354,502 / 954,745 * 100

37.13

276,390 / 1,148,488

24.1

2012

486,014 / 1,340,066 * 100

36.27

320,145 / 1,444,724

22.1

2013

582,113 / 1,801,347 * 100

32.31

486,426 / 1,898,765

23.0

2014

741,150 / 2,384,566 * 100

31.10

401,092 / 2,281,470

18.0

Graphical Representation
40
35
30
25
Atlas Battery

20

Exide Pakistan
15
10
5
0
2007

2008

2009

2010

2011

2012

2013

2014

Analysis
The ratio of return on Shareholders investment calculated for the last eight years of both
companies is showing that the both companies is efficiently utilizing its shareholders fund in
generating the net profit and is also indicating that the primary objective of maximizing the
earnings is achieved. When we compare both companies Atlas Battery has high ratio throughout
the years. Atlas Battery has efficiently achieved its primary objective of maximizing its earnings
and also efficiently utilizing its shareholders fund in generating the net profit. Exide Pakistan
ratio satisfactory but as compare to Atlas Battery they inefficiently achieved its primary
objective of maximizing its earnings.

Return On Capital Employed

This ratio is used to measure the efficiency and profitability of the capital investment of any
company. This capital investment is invested by the shareholders. It also shows that what portion
of investment the shareholders are getting in the form of return or profit and whether they are
making good use of their investment in the company or not.
Formula:

Operating Profit / Capital Employed * 100

NOTE: Capital employed = Total Assets Current Liabilities

ATLAS BATTERY

EXIDE PAKISTAN

Years

Formula/Calculation

Ratio

Formula/Calculation

Ratio

2007

144,299 / 755,242 - 356,363 * 100

36.20

172,774 / 1,303,162 - 479,882 * 100

21.0

2008

205,667 / 1,206,736 - 564,815 * 100

32.04

192,253 / 1,847,474 - 895,686 * 100

20.2

2009

316,417 / 1,300,156 - 564,815 * 100

40.00

264,524 / 2,036,587 - 1,011,724 * 100

26.0

2010

341,146 / 1,513,940 - 564,815 * 100

35.20

382,502 / 2,904,612 - 1,710,480 * 100

32.0

2011

562,616 / 2,080,667 - 813,725 * 100

44.41

558,215 / 4,010,501 - 2,366,350 * 100

34.0

2012

759,545 / 2,631,723 - 938,546 * 100

45.00

658,025 / 3,933,246 - 1,993,234 * 100

34.0

2013

882,844 / 3,637,143 - 1,462,754 * 100

40.60

792,656 / 3,803,185 - 1,421,511 * 100

33.3

2014

1,148,793 / 5,326,994-2,557,886 * 100

41.50 699,880 / 6,069,410 3,302,413 * 100

25.3

Graphical Representation
50
45
40
35
30
Atlas Battery

25

Exide Pakistan

20
15
10
5
0
2007

2008

2009

2010

2011

2012

2013

2014

Analysis
As it is visible from the above graphical representation of ROCE that it is showing Atlas Battery
has high ROCE against Exide Pakistan. Atlas Battery has higher value of return on capital
employed it is favorable indicating that the company generates more earnings per dollar of
capital employed and the Exide Pakistan has lower value of return on capital employed it is
unfavorable for the company and they generates lower profitability.

Profitability In Terms Of Earnings and Dividends

Earnings Per Share (EPS)
It is one of the common financial measures that all companies include in their annual reports, and
is used to calculate the price earnings ratio and is sometimes referred to as a profitability ratio.
Earnings per share are a measure of profitability and it is viewed as the comparative earnings or
the earning power of the respected firms.
Formula:

Net Profit After Tax Preferred Dividend / Number of Equity Share

Note: The company has not issued any preference shares therefore there is no amount for
preferred dividend.
ATLAS BATTERY

EXIDE PAKISTAN

Years

Formula/Calculation

Ratio

Formula/Calculation

Ratio

2007

87,510,000 / 6,080,500

14.39

91,642,000 / 5,405,700

16.95

2008

106,797,000 / 6,992,600

15.27

93,799,000 / 5,405,700

17.35

2009

177,678,000 / 6,992,600

25.41

182,003,000 / 5,405,700

33.67

2010

222,534,000 / 8,391,100

26.52

197,287,000 / 5,649,900

34.92

2011

354,502,000 / 10,069,300

35.21

276,390,000 / 5,649,900

48.92

2012

486,014,000 / 12,083,200

40.22

320,145,000 / 7,062,400

45.33

2013

582,113,000 / 14,499,800

40.15

486,426,000 / 7,062,400

68.88

2014

741,150,000 / 17,399,800

42.6

401,092,000 / 7,768,600

51.63

Graphical Representation
60

50

40
Atlas Battery

30

Indus Motor
20

10

0
2007

Analysis

2008

2009

2010

2011

2012

2013

2014

The Earnings per Share is increasing trends of both companies specially Atlas Battery because
the company has continuous growing year by year while Exide Pakistan also growing and has
high earnings per share. Exide Pakistan is capable to generating a significant dividend for
investors, strong financial position and, therefore and a reliable company to invest money. Atlas
Battery also reliable for investing, in comparison to Exide Pakistan they unable to generate more
significant dividend for investor and continuous growing its earnings year by year.

Dividend Payout Ratio

Dividend Payout ratio measure that how much a company pays the dividend to its shareholders,
it tells either the company holds the earning or not. If the payout ratio is more than 100%, it
means that the firm is paying the shareholders of all its current year profits as well as some of the
retained earnings. But is not considered to be sustainable an often a sign of problems. Desirably
the payout ratio must be less than 100%. Because this gives some of the safety that profit may
fluctuate a little bit without affecting the dividend. Some of the shareholders rely on the
dividends and they want some insurance to the flow of income and reluctant to cut the dividends.
So they tend to pay less than 100 percent so that they can hold the dividend.
Formula:

Dividend per share / Earning per Share

ATLAS BATTERY

EXIDE PAKISTAN

Years

Formula/Calculation

Ratio

Formula/Calculation

Ratio

2007

6 / 14.39

42.00

6 / 16.95

35.38

2008

6 / 15.27

39.30

6 / 17.35

32.58

2009

10 / 25.41

39.35

6 / 33.67

17.82

2010

10 / 26.52

38.00

6 / 34.92

17.18

2011

10 / 35.21

28.40

6 / 48.92

12.26

2012

10 / 40.22

25.00

6 / 45.33

13.24

2013

10 / 40.15

25.00

6 / 68.88

9.0

2014

10 / 42.6

23.50

6 / 51.63

12.0

Graphical Representation

45
40
35
30
25

Atlas Battery

20

Exide Pakistan

15
10
5
0
2007

2008

2009

2010

2011

2012

2013

2014

Analysis
The Dividend Payout Ratio is going down year by year it means both companies have to invest a
large portion of its earnings for future growth. When we compare both companies, Atlas Battery
gives high dividend to its common stockholders in all the years against Exide Pakistan. While
Exide Pakistan reinvesting its large portion of profits to its future growth rather than to pay the
dividend to its common stockholders.

Dividend Yield Ratio

It is calculated by dividend per share divided by current share price. It tells us what percentage
an investor is receiving in the form of dividends. Dividend yield is a sort of measure of investor
return. While dividend payout ratio judges the amount of dividend in relation to the company's
earnings for the period, dividend yield ratio presents a contrast of sum of dividend in relation to
investment required to purchase its share.
Formula:

Dividend Per Share / Current Share Price * 100

ATLAS BATTERY

Years

Formula/Calculation

EXIDE PAKISTAN
Ratio

Formula/Calculation

Ratio

2007

6 / 167.8

3.60

6 / 85

7.06

2008

6 / 154.88

4.0

6 / 220.75

2.72

2009

10 / 144

7.0

6 / 110.27

5.44

2010

10 / 181.47

5.51

6 / 199.42

3.01

2011

10 / 217.02

5.0

6 / 193.41

3.10

2012

10 / 201.69

5.0

6 / 177

3.39

2013

10 / 338

3.0

6 / 359

1.67

2014

10 / 450

2.22

6 / 369.73

1.62

Graphical Representation
8
7
6
5
Atlas Battery

Exide Pakistan
3
2
1
0
2007

2008

2009

2010

2011

2012

2013

2014

Analysis
Most rationale investors happen to be risk averse. Investors will not invest where there is high
share price whatever the rate of dividend is being paid to him as investing in high priced shares
may earn them a good dividend but risk will also be higher. Dividend yield will be low in case of
high share price.

Here Atlas Batterys dividend yield ratio is high then Exide Pakistan but both companies stock
prices almost same. Atlas Battery gives better dividend as compare to Exide Pakistan. Exide
Pakistan gives Rs. 6 per dividend in all the years while Atlas Battery gives Rs. 10 from past six
years.

Price Earnings Ratio

A firms price-earnings ratio the most commonly used method for comparing and understanding
the value of stock of the company. It measures effectively the price that shareholder pay for each
share to the earnings they currently expect to receive from the company. High price earnings
ratio is not always acceptable. The higher the P/E ratio, the more the market is willing to pay for
each dollar of annual earnings. Firms with high P/E ratios are most of the time to be considered
"risky" investments as compared with the firms having low P/E ratios. A high P/E ratio means
the high expectations. Comparing the P/E ratios within the industry is useful. The
last year's price/earnings ratio (P/E ratio) will be the actual, while current years and forward
years price/earnings ratio (P/E ratio) will be the estimates, but in each case, the P in the
formula is always the current price. Companies that are not currently profitable or having
negative earnings do not have this ratio.
Formula:

Market Price Per Share / Earning Per Share

ATLAS BATTERY

EXIDE PAKISTAN

Years

Formula/Calculation

Ratio

Formula/Calculation

Ratio

2007

167.8 / 14.39

12.0

85 / 16.96

5.01

2008

154.88 / 15.27

10.14

220.75 / 17.35

12.72

2009

144 / 25.41

5.67

110.27 / 33.67

3.27

2010

181.47 / 26.52

6.84

199.42 / 34.92

5.71

2011

217.02 / 35.21

6.2

193.41 / 48.92

3.95

2012

201.69 / 40.22

5.01

177 / 45.33

3.90

2013

338 / 40.15

8.42

359 / 68.88

5.21

2014

450 / 42.6

10.6

369.73 / 51.63

7.16

Graphical Representation
14
12
10
8
Atlas Battery
6

Exide Pakistan

4
2
0
2007

2008

2009

2010

2011

2012

2013

2014

Analysis
Both companies Price to Earnings Ratio are not sufficient. On the behalf of graph both
companies expected future growth looking not good. In the last two years 2003 and 2014 both
companies again increasing their price to earnings ratio it means they growing our future growth.
When we compare both companies, Atlas Battery has high price to earnings ratio and its future
growth is better than Exide Pakistan. Exide Pakistan has low price to earnings and its future
growth is no good.

Earning Yield Ratio

This ratio indicates the percentage of each dollar invested in the stock of any company that was
earned by the company previously. It is the result of the earnings per share for the most recent
12-month period divided by the current market price per share. This ratio is an inverse of P/E
ratio. The earnings yield is most of the time used by many investment managers to determine
optimized asset allocations. The earnings yield is a process to measure the returns, and is helpful
for investors to evaluate whether the returns are in proportion to the investment's risk. It is
important to be kept in mind that earnings yield not always represent cash available to the

investor, because companies can decide to reinvest the earnings rather than paying dividends to
its shareholders. This ratio is not dependent on managers allocation decisions.
Formula:

Earnings Per Share / Market Price Per Share

ATLAS BATTERY

EXIDE PAKISTAN

Years

Formula/Calculation

Ratio

Formula/Calculation

Ratio

2007

14.39 / 167.8

8.60

16.9685 / 85

19.95

2008

15.27 / 154.88

9.9

17.35 / 220.75

7.85

2009

25.41 / 144

17.64

33.67 / 110.27

30.53

2010

26.52 / 181.47

14.61

34.92 / 199.42

17.51

2011

35.21 / 217.02

16.22

48.92 / 193.41

25.29

2012

40.22 / 201.69

20.0

45.33 / 177

25.61

2013

40.15 / 338

11.9

68.88 / 359

19.19

2014

42.6 / 450

9.5

51.63 / 369.73

13.96

Graphical Representation
35
30
25
20
Atlas Battery
15

Exide Pakistan

10
5
0
2007

2008

2009

2010

2011

2012

2013

2014

Analysis
Both companies has irregular trends and as compare to last seven years both companies giving
low return to investors but when we compare the earning yield ratio, Exide Pakistan has high
ratio against the Atlas Battery because the Exide Pakistan gives high return to its investors while
Atlas Battery has low ratio and they unable to pay high return to its investors.