Sir.

Usman Akmal

Ratio Analysis of company report (2012/13)

Below is the ratio analysis of Faisal spinning mills Ltd. for the year 2014-2015-2016.
Short term solvency ratios/liquidity ratios

Current Ratio:

Current Ratio (2014) = Current assets = 8548335 = 1.66647

Current liabilities 5129606

Current Ratio (2015) = Current assets = 7918103 = 1.61456

Current liabilities 4,904,172

Current Ratio (2016) = Current assets = 7702646 = 1.53274

Current liabilities 5025409

xAnalysis:
The current ratio of the company has decreased in 2016 as compared to 2014 and 2015. The
current ratio of the company shows that liquidity position of the company is not very bad. The
company wants to increase its current assets as in 2014.

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Quick Ratio:

Quick Ratio = Current assets-Inventory = 1737076763 -319241243 = 3608806933.7628

(2012) Current liabilities 1443741362

Quick Ratio = Current assets-Inventory = 2856422242-397153858 = 5090568731.8090

(2013) Current liabilities 1443741362

Analysis:
The Quick ratio of the company was high in 2013 as compared to 2012.
Cash Ratio: 83427078

Cash Ratio = Cash = 35981200 = 0.0267

(2012) Current liabilities 259081188

Cash Ratio = Cash = 83427078 = 0.0401

(2013) Current liabilities 635533179

Analysis:
The cash ratio of the company was high in 2013 as compared to 2012 because in 2013
company has more cash and the total current liabilities of the company is increased overall.
Long Term Solvency Ratios/Leverage Ratios

Total Debt Ratio:

Total Debt Ratio = Total Assets-Total Equity = 3608806934 - 2263062272 = 0.3729

(2012) Total Assets 3608806934

Total Debt Ratio = Total Assets-Total Equity = 5090568732-3011294191 =5090568731.4

(2013) Total Assets 5090568732

Analysis:
The total debt ratio of the company was high in 2013 as compared to 2012 so it can be
infer that the company is not more relaying on its own financing with comparison to last year so
now it has high pressure of creditors.

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Debt to Equity Ratio:

Debt to Equity Ratio = Total Debt = 259081188 = 0.1145

(2012) Total Equity 2263062272

Debt to Equity Ratio = Total Debt = 635533179 = 0.4749

(2013) Total Equity 3011294191

Analysis:
The debt to equity ratio of the company was high in 2013 as compared to 2012 which
means that company is now more relaying on others money so this shows that company is now
using other people money more efficiently that must effect the company’s profit earning or
earning per share ratio.

Equity Multiplier:

Equity Multiplier = Total Assets = 3608806934= 1.5947

(2012) Total Equity 2263062272

Equity Multiplier = Total Assets = 5090568732 = 1.6905

(2013) Total Equity 3011294191

Analysis:
The Equity Multiplier of the company has decreased in 2012 as compared to 2013. It
means the company has decreased it equity multiplier but was not able to manage it functions
properly.

Interest Coverage Ratio:

Interest Coverage Ratio = Earnings before interest & tax =375498091 = 2-01
(2012) Interest 186617318
Interest Coverage Ratio = Earnings before interest & tax = 875947258 = 5.65908
(2013) Interest 154786233

Analysis:
The Interest Coverage ratio of the company was increased in 2013 as compared to
2012.

Cash Coverage Ratio:

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Cash Coverage Ratio = EBIT +Depreciation = 1073391+ 5242+ 5292 = 3.322

(2014) Interest 326251
Cash Coverage Ratio = EBIT +Depreciation = 1354939+7009+5900= 5.29
(2015) Interest 258301
Analysis:
The Cash Coverage ratio of the company has increased in 2015 as compared to
2014.the reason for this increase is increase in cash ratio.
Asset Management Turnover Ratios

Inventory Turnover Ratio:

Inventory Turnover Ratio = Cost of Goods Sold = -6772259668 = -5.69148606times

(2012) Inventory 1189893043

Inventory Turnover Ratio = Cost of Goods Sold = -7202119017= -3.4471times

(2013) Inventory 20892992

Days sales in Inventory = 365 = 64days

(2012) Inventory T/o Ratio

Days sales in Inventory = 365 = 105days

(2013) Inventory T/o Ratio

Analysis:
The Inventory Turnover Ratio of the company has increased in 2013 as compared to
2012 so now company is more quickly converting its inventory into sales.

Receivable Turnover Ratio:

Receivable Turnover Ratio = Sales = 7632725213=23.908 times

(2012) Account receivable 319241243

Receivable Turnover Ratio = Sales = 8488787464=21.37 times

(2013) Account receivable 397153858

Days sales in Receivable = 365 = 15days

(2012) Receivable T/o Ratio

Days sales in Receivable = 365 = 17days

(2013) Receivable T/o Ratio

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Analysis:
The Receivable Turnover Ratio of the company has increased in 2012 as compared to
2013 this is why the company debt to equity ratio is increased in 2013 because increase in debts
borrowing and then increase in credit sale which is a bad thing for company because now
company is taking more time to recover its debts as compared previous year.

Payable Turnover Ratio:

Payable Turnover Ratio = Cost of goods Sold = -6772259668 =-520.4 times

(2012) Account Payable 13012924

Payable Turnover Ratio = Cost of goods Sold = -7202119017 = -558.3times

(2013) Account Payable 12899343

Days sales in Payable = 365 = 35 days

(2012) Payable T/o Ratio

Days sales in Payable = 365 = 36.5 days

(2013) Payable T/o Ratio

Analysis:
The Payable Turnover Ratio of the company was increased in 2012 as compared to
2013 which is a good thing for company because now company is paying its payables not so
early as compared to previous year. This is because company does not want to increase its
creditability.

Macro Level Ratios

Total Asset Turnover Ratio

Total Asset Turnover Ratio = Sales = 7632725213 = 2.12 times

(2012) Total Assets 3608806934

Total Asset Turnover Ratio = Sales = 8488787464= 1.668 times

(2013) Total Assets 5090578732

Analysis:
Now assets are more batter use by the company. So that the turnover is increased. The inventory
turnover is also one of the major effect of this change.

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Capital intensity Ratio:

Capital intensity Ratio = Total Assets = 3608806934= 0.47 times

(2012) Sales 7632725213

Capital intensity Ratio = Total Assets = 5090578732 = 0.60times

(2013) Sales 848878732

Analysis:
The capital intensity ratio was high in 2014 so it signifies that now less assets are required to
generate the sale if one rupees.

Profitability Ratios

Gross Profit Margin:

Gross Profit Margin = Gross Profit = 860465545= 11.27%

(2012) Sales 7632725213

Gross Profit Margin = Gross Profit = 1286668447 = 15.16%

(2013) Sales 848878732

Analysis:
The Gross Profit Margin of the company was high in 2013 and in 2012 it decreases so
sales decrease and the cost of goods sold is also decreased.

Net Profit Margin:

Net Profit Margin = Net Profit = 298997452 =3.92 %

(2012) Sales 7632725213

Net Profit Margin = Net Profit = 798231919 =9.40%

(2013) Sales 848878732

Analysis:
The net Profit Margin of the company has decreased in 2013 as compared to 2012
because selling expenses is decreases and finance cost is also increased.

Return on Assets:

Return on Assets = Net Profit = 2989974552 = 8.29%

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(2012) Total Assets 3608806934

Return on Assets = Net Profit = 798231919= 15.68%

(2013) Total Assets 509056873

Analysis:
The Return on Assets of the company has decreased in 2012 as compared to 2013 .
Now they are using their assets efficiently and cost of finance is also decreased and they have
decreased the time for account receivable and increase the time for paying account payable.

Return on Equity:

Return on Equity = Net Profit = 298997452 = 13.21%

(2012) Total Equity 2263062272

Return on Equity = Net Profit = 798231919=26.51%

(2013) Total Equity 30112941

Analysis:
The Return on Assets of the company has decreased in 2012 as compared to 2013.
Now finance cost is decreased .debt to equity ratio is decreased so the portion which is borrowed
for business is not paid so that return on equity is increased.

Earnings per share:

Earnings per share = Net Profit = 298997452= 2.99 RS

(2012) No. of shares outstanding 100000000

Earnings per share= Net profit = 798231919= 7.98RS

(2013) Shares outstanding 100000000

Analysis
In 2012 earnings per share is less than 2013.
Book value per share:

Book value per share = Total Equity = 2263062272=22.631

(2014) No. of shares outstanding 100000000

Book value per share = total equity = 3011294191 =30.113

(2015) No.of shares outstanding 100000000

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Analysis
This shows that the company book value is increasing at a good rate.