Assignment: Corporate Reporting

Submitted By: Amad Ahmad

Id # F2017045014
Submitted to: Sir Gulzar

University of Management & Technology

 Report on Financial Ratio Analysis

1. Operating Cycle

 Number of Days of Inventory: It’s an efficiency rate that measures the avg. number of
days the company holds its inventory before selling it. If compare between S & H
Limited, shorter days in S ltd. Which is 33 days being good because early stock realizes
from warehouse and converted in sales on the other hand, H ltd. Was req. 48 days.
 Number of Days of Receivables: In S Ltd. Shows that usually received payments as after
36 days which is not good on the other hand H Ltd. 24 days are required that usually
received payments which is good because its liquidity position is good.
 Number of Days of Payables: In S Ltd. Shows that 110 days are required to pay our debts
or loans which is good as compared to H Ltd. 102 days. More days are required to S Ltd.
That’s it a good sign for company.

Comparison Between S & H Ltd.

120
100
80
60
40
20
0
No. of Days of Invt. No. Of Days of Rec. No. of Days of Payabl es
S Ltd. H Ltd. Seri es 3
 2. Liquidity Ratio
 Current Ratio: Current Ratio shows that company have or have not resource to meet
short term activities. It compares C.A to C.L. Compare between S & H Ltd. Can I say that
S ltd. Company is stable because its ratio is 1.2 is better than H ltd. Is 0.67. Reason is,
liquidity position us S ltd. Is good. Solution is, H ltd. Should improve our liquidity
position.
 Quick Ratio: Quick ratio also known as Acid test ratio. Measures the ability of a company
to use its near cash or quick assets to extinguish or retire its current liability immediately.
When compare between S & H ltd. Can I say that S ltd. Quick ratio position is far better
than H ltd with the ratio of 1.14. Reason is short term investment is better and stock are
not place more days in warehouse. If we improve this situation of H ltd, we should
increase in short term investment.
 Net Working Capital to Sales Ratio: Ratio which is measures how efficiency a company is
using its working capital to support a given level of sales. Compare that, S ltd. Is good
because its ratio is +0.05, because funds use in operations & generate revenue at highest
level. Solution is H Ltd. Finance position should be improved.

Comparison betwwen S & H Ltd

1.4

1.2

0.8

0.6

0.4

0.2

0
Current Ratio Qui ck Ratio Net Worki ng Capi tal to Sal es ratio
-0.2
S Ltd. H Ltd. Col umn1

3. Profitability Ratio
 Gross Profit Margin: Financial matric used to assess a company’s financial health &
business model by relating the proportion of money left over from resources after
accounting for cost of goods sold. Compare that H Ltd. Gross Profit margin 48.59% as
compared to S Ltd. 45%. Reason is H Ltd. Makes after paying off it Cost of Goods
Sold. Solution is S Ltd. CGS should be at minimum level if stable in profitability ratio.
 Operating Profit Margin: In this ratio, how much profit a company male on a dollar
of sales, after paying for variable cost of production such as wages & raw materials,
but before paying interest on tax. If comparison between S & H Ltd, S Ltd is good
because its ratio is 27.5%, reason is good because the expense & cost are in
controlled. Solution is for H Ltd. It should control in cost and expenses.
 Net Profit Margin: Represent how much profit each dollar of sales generates.
Compare that S Ltd. In more stable because net profit is higher 13.5% as compared
to H Ltd, reason is company is more efficient to converting sales into actual profit.

Comparison Between S & H Ltd.

60

50

40

30

20

10

0
Gros s Profit Ma rgi n Operating Profit Margi n Net Profit Margi n
S Ltd. H Ltd. Col umn1
 4. Activity Ratio

 Inventory Turnover: This ratio shows how many times a company has sold and
replaced inventory during a period. Compare that, S Ltd. Is good because high
inventory turnover have excellent sales and moving inventory quickly it 11 times.
Solution for H Ltd. Should increase inventory turnover.
 Account Receivable Turnover: Is the ratio of net credit sales to account receivable.
This ratio indicated how many times in the period credit sales have been create and
collected. Compare that S Ltd is good because issue credit to its customers and
collect funds in a timely manner.
 Total Assets Turnover: Company’s ability to generate sales from its assets by
comparing net sales with avg. total assets. Compare that H Ltd is more stable
because its ratio is 1.046 on the other hand S Ltd is 1.025. solution is total assets is
higher, sales volume should be on higher level.
 Fixed Assets Turnover: It indicates how well the business is using its fixed assets to
generate sale. Compare that, declining in H Ltd. Ratio 1.29 as compared to S Ltd. Is
1.33 shows that over invested in FA.

Comparison between S & H Ltd.

16

14

12

10

0
Inventory turnover Account Rec. Turnover Tota l As s ets Turnover Fi xed As s ests Turnover
S Ltd. Col umn1
 5. Financial Leverage

 Total Debt to Equity Ratio: Indicates the relative uses debt and equity as sources of
capital to finance the company’s assets, evaluating using bool value of the capital
sources. This rate is used to evaluate company’s financial leverage. Comparison that,
H Ltd. Ratio id 0.95 is higher indicates higher risk on the other hand S Ltd. Is less high
ratio being 0.5. solution is financing is less in the company.
 Interest Coverage Ratio: Is a debt ratio and profitability ratio used to determine how
easily a company can pay interest on its outstanding debts. In H Ltd. Interest
coverage ratio is 3.3 is lower it means more debt burden expense of the company.
 Capital Gearing Ratio: Focus on the CS of the business. It means proportion of
finance that is provided by debit relative to the finance provided by equity. In H Ltd.
Higher ratio means that higher risk when company is downturn result is company file
to bankruptcy.

Comparison between S & H Ltd.

6

0
Tota l Debt to Equi ty Ratio Interest Covera ge Rato Ca pi gtal Geari ng Ratio
S Ltd. H Ltd. Col umn1
 6. Shareholder Ratio

 Earnings per Share: Is the monetary value of EP outstanding shares of common stock
for a company. Comparison between S & H Ltd. H Ltd. Is 0.1/share better than S Ltd.
And is more profitability.
 Dividends per Share: is the sum of declared dividends issued by a company for every
ordinary share outstanding. Comparison between S & H Ltd, S Ltd earning growth is
sustained because ratio 0.04 is better than H Ltd. Ratio is 0.093.
 Dividends Payout Ratio: Is the fraction of net income a firm pays to its stockholder in
dividends. Gives investor a view how much a company’s keeps to put into growth.
Comparison is, S Ltd ratio is 0.16 and H Ltd. Ratio is 0.58.
 Price Earnings Ratio: Price to earnings ratio indicators the expected price of a share
based on its earnings. Comparison that H Ltd ratio is 20 which is good as compared
to S Ltd.

Comparison between S & H Ltd.

25

20

15

10

0
Earning per Share Di vi dends per Share Di vi dends payout Sha re Price Ea rni ngs ratio
S Ltd. H Ltd. Seri es 3