FINANCIAL MANAGEMENT

MID TERM PROJECT

FINANCIAL RATIOS

MBA- Professional (Sec-) 2nd Semester

Program MBA

Submitted To: Sir. Tariq Saleem

Submitted By: Zeeshan Tufail

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 Statement of Submission

I completed their task of Midterm PROJECT of Financial Management

TASK GIVEN: Ratios of Financial Management at Superior University
Lahore; to fulfill the partial requirement of the Semester of MBA 2nd
Semester.

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 Acknowledgement

We bow our head to Almighty Allah, the Omnipotent, the Merciful, who endeavor
our services towards his manuscript. All praises to Almighty Allah who gave us
the courage and patience for completion of this work. All the respects are for Holy
Prophet Muhammad (Peace Be upon Him) who se moral and spiritual teachings
enlightened our hearts.

We feel how weak and deficit in vocabulary to find suitable words that would fully
convey the sense of immense indebtedness and deep gratitude that we owe to our

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

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DYNEA PAKISTAN LIMITED

26TH ANNUAL REPORT

FOR THE YEAR ENDED
30TH JUNE 2008

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INTRODUCTION

We have reviewed the annexed interim condensed Balance Sheet of DYNEA

PAKISTAN LIMITED as at December 31, 2007, and the related interim condensed
Profit and Loss Account, interim condensed Cash Flow Statement and interim
condensed Statement of Changes in Equity together with the notes forming part thereof
(here-in-after referred to as the “interim condensed financial information”) for the half-
year then ended. Management is responsible for the preparation and presentation of
this interim condensed financial information in accordance with approved accounting
standards as applicable in Pakistan. Our responsibility is to express a conclusion on this
interim condensed financial information based on our review.

SCOPE OF REVIEW

We conducted our review in accordance with the International Standard on Review

Engagements 2410, “Review of Interim Financial Information Performed by the
Independent Auditor of the Entity”. A review of interim condensed financial
information consists of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A review
is substantially less in scope than an audit conducted in accordance with International
Standards on Auditing and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.

VISION

Dynea Pakistan is a Market Leader in its core and diversified business, delighting its
customers by providing quality products at competitive price through development of
Market , product range , technology and human capital whilst ensuring sound return
to stakeholders.

MISSION

Maximize productivity and sales of Formaldehyde , Amino Resins and Aminoplast

Moulding Compounds and provide satisfaction to customers.

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 1. ASSETS TURNOVER RATIO

FORMULA = SALES / TOTAL ASSETS

Name Year 2007 Year 2008 Differences Result

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

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

Calculation 3.86 Times 3.66 Times 0.21 Decrease

WORKING (Total Assets)

Name Year 2007 Year 2008

Current Assets 395,702,747 518,597,390
- Current Liabilities 240,205,345 307,703,547
+ Non- Current Assets 148,188,423 133,693,614
Total Assets 303,685,825 344,587,457

INTERPRETATION
This ratio reflects the productivity of the assets of the company .As the above result
shows that if we invest Rs.1 then generating sales Rs.3.87and Rs.3.66 in the year 2007
and 2008.Productivity of the assets of the company is less as compared to the last year
2007.

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 2. RETURN ON ASSETS RATIO

FORMULA = NET PROFIT / TOTAL ASSETS

Name Year 2007 Year 2008 Differences Result

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

Total Assets 303,685,825 344,587,457 40,901,632 Increase
Calculation 0.05 Times 0.11 Times (0.06) Decrease

INTERPRETATION
This ratio indicates the profitability of the assets of the company. The above result
shows that if we invest Rs.1 in the Dynea Pakistan Ltd. Generating profit Rs. 0.05 in
year 2007 and Rs.0.11 in 2008.

3. DEBT EQUITY RATIO

FORMULA =DEBT / TOTAL CAPITALIZATION

Name Year 2007 Year 2008 Differences Result

Debt 7,163,025 8,219,846 1,056,821 Increase

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

Calculation 0.02*100 0.02*100 0.02*100

2/98 2/98 2/98

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WORKING (Total Capitalization)

Name Year 2007 Year 2008

Debt 7,163,025 8,219,846
+ Equity 296,522.800 336,367,611
Total Capitalization 303,685,825 344,587,457

WORKING (Debt)

Name Year 2007 Year 2008

Total liability 543,891,170 652,291,004
- Current Liabilities 240,205,345 307,703,547
- Equity 296,522.800 336,367,611
Debt 7,163,025 8,219,846

INTERPRETATION
This ratio indicates the Capital Structure of the company. The capital structure of the
company in the year 2007 was composed of 2% debt and 98% of equity. It remain same
in the year 2008.

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 4. DEBT SERVICE COVERAGE RATIO

FORMULA = NET PROFIT + DEPRECIATION + INTEREST

INTEREST + PRINCIPLE AMOUNT

Name Year 2007 Year 2008 Differences Result

Net Profit 17,710,004 39,844,811 22,134,807 Increase
Depreciation 31,366,853 25,675,129 (5,691,724) Decrease
Interest 15,647,972 11,075,034 4,572,938 Decrease
Principle Amount 35,165,708 124,681,080 89,515,372 Increase
Calculation 1.27 Times 0.564 Times (0.706) Decrease

WORKING (Depreciation)

Name Year 2007 Year 2008

Cost of Sale 29,765,780 24,357,710
Distribution Cost 350,254 293,282
Admin Expense 1,250,819 1,024,137
Depreciation 31,366,853 25,675,129

WORKING (Principle Amount)

Name Year 2007 Year 2008

34,715,853 123,406,801
449,855 1,274,279
Principle Amount 35,165,708 124,681,080

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INTERPRETATION

This ratio reflects the debt service ability of the company. If the ratio is
greater than 1 it shows the satisfactory condition. The above result shows
that if we borrow Rs.1 we have the ability to repay Rs. 1.27 and Rs. 0.564 in
year 2007 and 2008.Condition of the year 2007 is satisfactory as compared
to 2008.

5. CURRENT RATIO

FORMULA = CURRENT ASSETS / CURRENT LIABILITIES

Name Year 2007 Year 2008 Differences Result

Current Assets 395,702,747 518,597,390 122,894,643 Increase
Current Liabilities 240,205,345 307,703,547 283,683,002 Increase
Calculation 1.647:1 1.685:1 0.038:1 Increase

INTERPRETATION

This ratio shows the “Short Term Liquidity” of the company. If the ratio is
greater than unity it is satisfactory, if less than unity it shows that the
company face “Working Capital Or Short Term Liquidity Problem”. The
above result shows that we have current assets Rs.1.647 and Rs.1.685 to pay
Rs.1 liability that is satisfactory condition in 2008 as compared to year 2007.

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 6. ACID TEST / QUICK RATIO

FORMULA = CURRENT ASSETS - INVENTORY

CURRENT LIABILITIES

Name Year 2007 Year 2008 Differences Result

Current Assets 395,702,747 518,597,390 122,894,643 Increase
Current Liabilities 240,205,345 307,703,547 283,683,002 Increase
Inventory 163,818,967 233,112,330 69,293,363 Increase
Calculation 0.965:1 0.927:1 .038 Increase

FORMULA = (INVENTORY/CURRENT ASSETS) 100

Name Year 2007 Year 2008 Differences Result

41% 44% 3% Increase

INTERPRETATION
This ratio reflects the “Immediate Liquidity Position” of the company. If the percentage
of inventory in current assets is higher than acid-test ratio will be lower. The above
result shows that the acid test ratio in year 2007 & year 2008 are 41% and 44%, therefore
in year 2008 the “Immediate Liquidity Position” is high so it is unsatisfactory while 2007
is satisfactory.

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7. GROSS PROFIT RATIO

FORMULA = (GROSS PROFIT/SALE) 100

Name Year 2007 Year 2008 Differences Result

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

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

Calculation 11.248% 14.896% 3.648% Increase

INTERPRETATION

This ratio reflects the gross profit of the company. The above result shows
that in year 2007 & year 2008 the gross profit is 11.248% and 14.896% respectively
while total increment is 3.648

8. OPERATING PROFIT RATIO

FORMULA = (OPERATING PROFIT/SALE) 100

Name Year 2007 Year 2008 Differences Result

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

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

Calculation 3.869% 6.932% 3.063% Increase

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INTERPRETATION

This ratio shows that in year2007 and 2008 the operating profit ratio is
3.869% and 6.932% while increment is 3.063% that is good for the company. The above
result shows that operating profit and net sale both are increased.

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Assets Turn Over Ratio

2007 2008 Difference

Sales 1174891399 1261973380 87081981
Total Assets 303685825 344587457 40901632

Assets Turn Over

Sales
Total Assets

2007 2008 Difference

Return On Assets Ratio

2007 2008 Difference

Net Profit 17710004 39844811 22134807
Total Assets 303685825 344587457 40901632

Return On Assets Ratio

Net Profit
Total Assets

2007 2008 Difference

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Debt Equity Ratio

2007 2008 Difference

Debt 7163025 8219846 1056821
Total Capitalization 303685825 344587457 40901632

Debt Equity Ratio

Debt
Total Capitalization

2007 2008 Difference

Debt Service Coverage Ratio

2007 2008 Difference

Net Profit 17710004 39844811 22134807
Depreciation 31366853 25675129 -5691724
Interest 15647972 11075034 -4572938
Principle Amount 35165708 124681080 89515372

Debt Service Coverage Ratio

2007
2008
Difference

Net Profit Depreciation Interest Principle Amount

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Current Ratio

2007 2008 Difference

Current Assets 395702747 518597390 122894643
Current Liabilities 240205345 307703547 67498202

Current Ratio

Current Assets
Current Liabilities

Acid Test /2007

Quick Ratio 2008 Difference

2007 2008 Difference

Current Assets 395702747 518597390 122894643
Current Liabilities 240205345 307703547 67498202
Inventory 163818967 233112330 69293363

Acid Test/Quick Ratio

Current Assets
Current Liabilities
Inventory

2007 2008 Difference

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Gross Profit Ratio

2007 2008 Difference

Sales 1174891399 1261973380 87081981
Gross profit 132162723 187990553 55827830

Gross Profit Ratio

Sales
Gross profit

2007 2008 Difference

Operating profit Ratio

2007 2008 Difference

Sales 1174891399 1261973380 87081981
Operating Profit 45466175 87482885 42016710

Operating Profit Ratio

Sales
Operating Profit

2007 2008 Difference

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Return On Sale

2007 2008 Difference

Sales 1174891399 1261973380 87081981
Net Profit 17710004 39844811 22134807

Return On Sale Ratio

Sales
Net Profit

2007 Ratio
Return On Equity 2008 Difference

2007 2008 Difference

Net Profit 17710004 39844811 22134807
Equity 296522800 336367611 39844811

Return On Equity Ratio

Net Profit
Equity

2007 2008 Difference

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