Business School

“Financial Management”

BS-A&F-4A

Financial Ratios

Date with Day: 29th Nov, 2020 (Sunday)

Group members/submitted by
Names (Registration ID)

1. Omar Hashmi 02-112191-009

2. Shameen Ahmed 02-112191-004
3. Amber Alam 02-112191-005
4. Fahad Mehmood 02-112191-038

Submitted to: / Supervised by: / checked by:

Maam Shumaila Israr

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 CONTENTS
RATIO CALCULATIONS.................................................................................................................3
LIQUIDITY RATIOS.....................................................................................................................3
ASSET MANAGEMENT RATIOS...............................................................................................4
DEBT MANAGEMENT RATIO...................................................................................................6
PROFITABILITY RATIOS...........................................................................................................7
MARKET VALUE RATIOS..........................................................................................................9
CONCLUSION..............................................................................................................................10
SUMMARY OF THE RATIO ANALYSIS.................................................................................11
DuPont ANALYSIS......................................................................................................................12
STRENGTHS AND WEAKNESSES...............................................................................................13
PERCENTAGE ANALYSIS INCOME STATEMENT.....................................................................14
PERCENTAGE ANALYSIS BALANCE SHEET.............................................................................15
CONCLUSION..............................................................................................................................16
Error! Hyperlink reference not valid.RATIO CALCULATIONS......................................................2
Error! Hyperlink reference not valid.LIQUIDITY RATIOS..........................................................2
Error! Hyperlink reference not valid.ASSET MANAGEMENT RATIOS....................................3
Error! Hyperlink reference not valid.DEBT MANAGEMENT RATIO........................................5
Error! Hyperlink reference not valid.PROFITABILITY RATIOS................................................6
Error! Hyperlink reference not valid.MARKET VALUE RATIOS...............................................8
Error! Hyperlink reference not valid.Conclusion............................................................................9
Error! Hyperlink reference not valid.SUMMARY OF THE RATIO ANALYSIS......................10
Error! Hyperlink reference not valid.DuPont ANALYSIS...........................................................11
Error! Hyperlink reference not valid.STRENGTHS AND WEAKNESSES....................................12
Error! Hyperlink reference not valid.PERCENTAGE ANALYSIS INCOME STATEMENT..........13
Error! Hyperlink reference not valid.PERCENTAGE ANALYSIS BALANCE SHEET..................14
Error! Hyperlink reference not valid.CONCLUSION...................................................................15

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 RATIO CALCULATIONS
LIQUIDITY RATIOS
HINO PAK
Liquidity
Formula 2018 2019
Ratio

Current Ratio 11,330,872/

(Current assest )/(Current liabilities)8,885,622
1.28 11,105,189 /10,431,950
1.06

Quick Ratio (Current assest −inv .)/(Current liabilities ) ,0.73

(11,330,872−4,934 , 313)/8,885,622 1.26
(11,105,189−8,038,091)/10,431,950

GANDHARA NISSAN
Liquidity
Formula 2018 2019
Ratio

Current Ratio 2,672,025/835,684

(Current assest )/(Current liabilities) 3.2 2,285,843/606,333 3.77

Quick Ratio (Current assest −inv .)/(Current liabilities ) 2.31

(2,672,025−738,323)/835,684 2.01
(2,285,843−1,069,654)/606,333

INTERPRETATION:

In the above calculated ratios, Hino Pak’s current ratio has decreased slightly depicting that
company’s short-term debts (current liabilities) have increased while current assets have
decreased slightly. The company is either required to pay of its liabilities or increase current
assets. The quick ratio has increased showing that company can pay off its current liabilities
more efficiently without selling inventory.

Gandhara Nissan’s current ratio has increased. Company has paid off its liabilities through
current assets which is showing a slight decrease. The quick ratio has decreased depicting
that the company relies on inventory to pay off its current liabilities.

Comparatively, Nissan’s ability to pay off its debt without raising external capital or funds is
better than Hino Pak.

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ASSET MANAGEMENT RATIOS
HINO PAK
Asset
management Formula 2018 2019
Ratio
Inventory
Sales/Inventory 26,615,071/ 4,935,313
5.31 19,130,839/8,038,0912.38
Turnover
Average
Collection ( Account Recievable)/(Sales
714,935/(
Per Day)
26,615,071/365)
10 Days 959,682/( 19,130,839/365)
18 Days
period
Fixed Asset
Sales/(Net ¿ Asset) 26,615,071/3,109,376
8.56 19,130,839/3,135,510
6.10
Turnover
Total Asset
Sales/(Total Asset) 26,615,071/ 14,469,534
1.84 19,130,839/14,290,676
1.34
Turnover

Gandhara Nissan
Asset
management Formula 2018 2019
Ratio
Inventory
Sales/Inventory 2,218,734 /738,323 3.01 2,373,750/1,069,654 2.22
Turnover
Average
Collection ( Account Recievable)/(Sales
260,537
Per/(2,218,734/365)
Day) 43 Days 252,479/( 2,373,750/365)
39 Days
period
Fixed Asset
Sales/(Net ¿ Asset) 2,218,734 /2 , 133,465
1.04 2,373,750/3,912,4360.61
Turnover
Total Asset
Sales/(Total Asset) 2,218,734 /5,825,3530.38 2,373,750/7,097,9880.33
Turnover

INTERPRETATION:

From the above calculation, Hino Pak inventory turnover has reduced from previous year.
This indicates that company is holding more inventory then 2018. In 2019, the revenue is
dropped drastically, and inventory holding is increased notifying that company is not

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manufacturing more than the demand, or the inventory is obsolete and EOQ model is not
followed. Similarly, the credit policy of the company is not renewed according to industry as
shown above. The average collection period has rose showing that receivables are not
collected as early as before. Fixed asset turnover and Total asset turnover has decreased
showing that assets are not being efficiently used to produce revenue. Fixed assets are not
being used to full capacity and other assets are inefficiently used in production.

Gandhara Nissan is reduced depicting that company is holding more inventory and not
rolling it. Sales has also reduced slightly. Nissan is producing more than demand and not able
to sell its production and EOQ model is not being followed. The days sales outstanding is
improved indicating the beneficial changes in credit policy. Fixed asset and Total asset
turnover declined slightly illustrating company has increased its fixed and total assets, but
this purchase was inefficiently used in generating revenue. In depth, the increase in total asset
whereas, they are not used to full capacity.

Comparatively, Hino Pak’s asset management is highly efficient than Gandhara Nissan.
Nissan’s fixed and total assets are not efficiently used in generating assets. Similarly, Hino
Pak’s average collection period is better than Nissan’s. the credit policy needs to improve the
company should provide more incentives and discount to its creditors. Hino Pak rolls the
inventory more efficiently as its sales revenue is much higher and holding of inventory is
lower as compared to Nissan.

DEBT MANAGEMENT RATIO

HINO PAK
Debt
Managemen Formula 2018 2019
t Ratio

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Debt To Asset
(Total Debts )/(Total Assets) 291,813/14,469,5342% 298,314 /14,290,676
2.08 %
Ratio
Liability To
(Total Liabilities)/(Totsl Asset)9,177,435/14,469,534
63% 10,730,264 /14,290,676
75%
Asset Ratio
Debt To Equity
291,813/5,292,099
(Total Debts )/(Total Common Equity ) 6% 298,314 /3,560,412 8%
Ratio
Equity
14,469,534
(Total Asset)/(Total Common Equity ) 2.73x
/5,292,099 14,290,676/3,560,412
4.01x
Multiplier
Times Interest
EBIT /Interest 2,348,550/0 - 501,620/187,502 2.66
Earned Ratio

GANDHARA NISSAN
Debt
Management Formula 2018 2019
Ratio
Debt To Asset
(Total Debts )/(Total Assets) 321,788/5,825,3535.5% 407,690 /7,097,9885.74%
Ratio
Liability To
(Total Liabilities)/(Totsl Asset)( 1,157,472)/5,825,353
20% 1,014,023/7,097,988
14%
Asset Ratio
Debt To Equity
321,788/4,667,881
(Total Debts )/(Total Common Equity ) 7% 407,690 / 6,083,965 7%
Ratio
Equity
5,825,353/4,667,881
(Total Asset)/(Total Common Equity ) 1.25x 7,097,988/6,083,965
1.17x
Multiplier
Times Interest
EBIT /Interest 1,315,575/19,354 67.97 449,626 /105,566 4.26
Earned Ratio

INTERPRETATION

As compared to Nissan, Hino Pak’s assets are more debts and liability financed meaning that
the assets are purchased using external funds. Therefore, Hino Pak’s asset are in high amount
and the equity multiplier is also better than that of Nissan as total asset against common
equity is improved in Hino Pak’s Financial statements whereas, in Nissan’s financial

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statements the number assets and equity is increased but the ratio has decreased slightly.
Debt and liability financing is more riskier but it is also highly beneficial. Debt to equity ratio
of both companies are almost same but Hino Pak’s ratio has slightly increased than Nissan’s.
Gandhara Nissan’s ability to pay its liabilities is much more efficient than the other company
as Nissan’s assets are more equity financed than liability and debt whereas, other
organization’s ability to pay its liabilities can be improved if it decreases its operating
expenses which will increase its operating profit

PROFITABILITY RATIOS
HINO PAK
Profitability
Formula 2018 2019
Ratios
Net Profit
( Net Income)/Sales 1,149,375/26,615,071
4.32% (4.56%)
((873,297))/19,130,839
Margin
Gross Profit
(Gross Profit )/Sales 3,034,440/26,615,071
11.4% 1,113,314 /19,130,8395.82%
Margin
Operating Profit
EBIT /Sales 2,348,550/26,615,071
8.82% 501,620/19,130,839 2.62%
Margin
Basic Earning
EBIT /(Total Asset) 2,348,550/14,290,676
16.4% 501,620/14,469,534 3.5%
Power
Return On
1,149,375/14,290,676
( Net Income)/(Total Asset) 8.04% ((873,297))/ 14,469,534
(6.04%)
Asset
Return On
1,149,375/3,560,412
( Net Income)/(Common Equity ) 32.2% ((873,297))/ 5,292,099
(16.5%)
Equity

GANDHARA NISSAN
Profitability
Formula 2018 2019
Ratios
Net Profit
( Net Income)/Sales 1,037,521/2,218,73446.7% ((28,806))/2,373,750(1.21%)
Margin
Gross Profit
(Gross Profit )/Sales 320,089/2,218,734 14.43% 433,304 /2,373,750 18.25%
Margin

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 Operating
EBIT /Sales 1,315,575/2,218,73459.3% 449,626 /2,373,750 18.94%
Profit Margin
Basic Earning
EBIT /(Total Asset) 1,315,575/5,825,35322.6% 449,626 / 7,097,988 6.33%
Power
Return On
( Net Income)/(Total 1,037,521/5,825,353
Asset) 17.8% (0.41%)
((28,806))/(7,097,988)
Asset
Return On
1,037,521/4,667,881
( Net Income)/(Common Equity ) 22.2% ((28,806))/6,083,965(0.47%)
Equity

INTERPRETATION

Nissan’s ability to generate profit is well organized than Hino Pak’s. As shown through
above calculations, both bared losses in 2019 and had almost same net income in 2018 but
Nissan’s managed lesser loss than Hino Pak. This is shown through ratios that Nissan’s
operating profit and net profit are efficiently generated through sales in 2018 whereas gross
profit is almost same. Therefore, Nissan faced lesser loss than Hino Pak.

In 2018, Hino Pak paid 8.36% interest and tax and Nissan Paid 4.8% interest and tax as
Nissan has less debt financing. Hino Pak should have either increased its income or lower the
amount of interest, but it faced a loss in 2019. Showing that its assets are not efficient enough
to generate net income. Nissan also faced a loss in 2019 but it has also increased the amount
of assets and the ratio is much lesser than Hino Pak making the loss recoverable and assets if
used efficiently can generate a higher profit.

In 2018, Hino Pak’s ability to generate profit against common equity is more than that of
Nissan sowing that Hino Pak was able to maximize shareholder’s wealth whereas, In 2019,
due to loss it was providing negative returns against Nissan which in 2019 was providing
very less negative returns.

MARKET VALUE RATIOS

HINO PAK
Market Value Formula 2018 2019

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 Ratios

EPS ( Net Income)/(Outsatnding 1,149,375/12,401

Shares) 92.69 (70.42)
((873,297))/(12,401)

Price Earning
( Price Per Share)/ EPS (1,160.31)/92.69 12.52 395.10/((70.42)) (5.61)
Ratio
Price/Cashflow
( Price Per Share)/( Cashflow Per Share)
(1,160.31)/92.92 12.49 395.10/((69.97)) (5.65)
Ratio
Price To Book
( Price Per Share)/(Book Value Per Share)
(1,160.31)/426.76 2.72 395.10/((287.12)) (1.38)
Value Ratio

GANDHARA NISSAN
Market Value
Formula 2018 2019
Ratios

EPS ( Net Income)/(Outsatnding 1,037,521/(

Shares) 49,503)20.96 ((28,806))/(57,003)(0.51)

Price Earning
( Price Per Share)/ EPS (155.14)/20.96 7.4 95.03 /((0.51)) (186.03)
Ratio
Price/Cashflow
( Price Per Share)/( Cashflow Per Share)
(155.14)/21.23 7.31 95.03 /((0.32)) (296.96)
Ratio
Price To Book
( Price Per Share)/(Book Value Per Share)
(155.14)/94.29 1.65 95.03 /((106.73)) (0.89)
Value Ratio

INTERPRETATION

In 2018, Hino Pak is providing a higher amount of Earning per share than Nissan. the
companies generated same amount of net profit but no. of outstanding shares for Nissan is
more than Hino Pak which lowered the EPS. Hence Nissan was not able to maximize share
holder’s profit. In return in 2019, Hino Pak provided a Negative earning (loss) greater than
Hino Pak.

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In 2018, Hino Pak’s investors were willing to pay 12 times for the required profit which is
higher than 7 times of required profit of Nissan. Similarly, Hino Pak has higher price to
cashflow and price to book value ratios than Nissan. This shows that in 2018, Hino Pak’s
investor were more satisfied with companies share value. But in 2019, Hino Pak was not able
to restrict its losses regardless of high earning power. Nissan was able to restrict its loss to
minimum making companies finance stable and increasing its credibility than that of Hino
Pak’s.

CONCLUSION
Overall, both the companies were not well managed as they both faced financial challenges
in pandemic. The companies faced losses in 2019 which in contrast was recoverable in case
of Nissan as the loss incurred was recoverable whereas Hino Pak faced a high amount of loss
and it was not easily recoverable as shown by negative return in both companies.

In 2018 both companies were profitable but Hino Pak was a hand away from Nissan as it
generated ahigh amount of revenues by efficiently managing its assets and produce a high
rate of returns whereas Nissan managed a low return and revenue its assets were not
efficiently managed. Both companies produced a high amount of profit. Considering the
performance in 2019, without pandemic both would have generated high profits

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 SUMMARY OF THE RATIO ANALYSIS
Ratio Hino Pak Hino Pak Gandhara Gandhara
2018 2019 Nissan Nissan
2018 2019
Liquidity Ratio:
1.28 1.06 3.2 3.77
1. Current Ratio
0.73 1.26 2.31 2.01
2. Quick Ratio

Asset management Ratio:

5.31 2.38 3.01 2.22
3. Inventory Turnover Ratio
10 Days 18 Days 43 Days 39 Days
4. Avg. Collection Period
8.56 6.10 1.04 0.61
5. Fixed Asset Turnover
1.84 1.34 0.38 0.33
6. Total Asset Turnover

Debt Management Ratio:

7. Debt Ratio
2% 2.08 % 5.5% 5.74%

6% 8% 7% 7%
8. Equity Ratio
- 2.66 67.97 4.26
9. TIER

Profitability Ratio:
4.32% (4.56%) 46.7% (1.21%)
10. Profit Margin
11.4% 5.82% 14.43% 18.25%
11. Gross Profit Margin
16.4% 3.5% 22.6% 6.33%
12. Basic Earning Power
8.04% (6.04%) 17.8% (0.41%)
13. Return on Asset
32.2% (16.5%) 22.2% (0.47%)
14. Return on Equity

Market Value ratio:

92.69 (70.42) 20.96 (0.51)
15. Earnings Per share
12.52 (5.61) 7.4 (186.03)
16. P/E

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 12.49 (5.65) 7.31 (296.96)
17. CFS
2.72 (1.38) 1.65 (0.89)
18. Market/Book Ratio

DuPont ANALYSIS
Profit Margin 0.0432
Return On
¿ ¿ 7.95%
Asset
Total Asset Turnover 1.84
HINO PAK Profit Margin 0.0432

(2018) ¿ ¿
Return On
Total Asset Turnover 1.84 21.7%
Equity
¿ ¿
Equity multiplier 2.73
Profit Margin (0.04 56)
Return On
¿ ¿ (6.11%)
Asset
Total Asset Turnover 1. 3 4
HINO PAK Profit Margin (0.0456)

(2019) ¿ ¿
Return On
Total Asset Turnover 1.34 (24.5%)
Equity
¿ ¿
Equity multiplier 4.01
Profit Margin 0.467
Return On
¿ ¿ 17.75%
Asset
GANDHARA Total Asset Turnover 0.38
Profit Margin 0. 467
NISSAN ¿ ¿
Return On
(2018) Total Asset Turnover 0.38 22.18%
Equity
¿ ¿
Equity multiplier 1.25
GANDHARA Return On Profit Margin (0.0 121) (0.4%)
NISSAN Asset ¿ ¿
Total Asset Turnover 0.33

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 Profit Margin (0.0121)
¿ ¿
(2019) Return On
Total Asset Turnover 0.33 (0.47%)
Equity
¿ ¿
Equity multiplier 1.17

STRENGTHS AND WEAKNESSES

HINO PAK
STRENGTHS WEAKNESSES

 Efficient use of assets and adequate  Insufficient liquid assets

credit policies in generating revenue
 Low debt financing i.e. less risky and
less beneficial
 Increased earnings per share and
willingness of investors to invest
 Higher share price against book value
 Lower gross profit margin making it
unable to face loss
 Low return on equity and increased
interest expenses
 High amount of loss faced

GANDHARA NISSAN
STRENGTHS WEAKNESSES

 Sufficient liquid assets to steer through  Inefficient use of asset and inadequate
pandemic credit policies.
 Higher gross profit margin to bear losses  High Debt financing i.e. more risky and
more beneficial
 High return on equity and less interest  Low earnings per share and investors
expense not willing to invest
 Sufficient loss that can be covered  Low share price against book value

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 PERCENTAGE ANALYSIS INCOME STATEMENT
Hino Pak Gandhara Nissan
2018 2019 2018 2019
Sales 100.00% 100.00% 100.00% 100.00%
COGS 88.60% 94.18% 80.47% 86.52%
Gross Profit 11.40% 5.82% 19.53% 13.48%
Distribution Cost 1.65% 1.98% 2.42% 2.95%
Administrative 1.58% 1.98% 9.61% 9.62%
Expenses
Other income 1.13% 0.77% 50.94% 10.95%
Other expenses 0.46% 0.01% 0.98% 0.52%
Profit From 8.82% 2.62% 57.46% 11.34%
Operation
Finance cost 2.55% 5.34% 1.03% 11.11%
(Loss)/Profit 6.27% -2.72% 56.44% 0.23%
Before Taxation
Taxation 1.95% 1.85% 9.68% 1.44%
(Loss)/Profit 4.32% -4.57% 46.76% -1.21%
After Taxation

PERCENTAGE ANALYSIS BALANCE SHEET

Hino Pak Gandhara Nissan
2018 2019 2018 2019
Property, Plant and Property, plant 36.62% 55.12%
Equipment 21.40% 21.89% and equipment

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Other non current Intangible assets 0.05% 0.04%
assets 0.09% 0.05%
Long term Long term 3.83% 3.14%
investments 0.00% 0.00% investments
Long term deposits 0.05% 0.06% Long term loans 0.12% 0.14%
Long term loans and Long term 0.35% 0.19%
advances 0.15% 0.17% deposits
Employee benefits Due from 13.17% 9.17%
prepayments Subsidiary
0.00% 0.12% Company
Current Assets Stores, spares 0.00% 1.75%
78.31% 77.71% and loose tools
Total Assets 100.00 100.00 Stock-in-trade 1.58% 15.07%
% %
Shareholder’s Equity 36.57% 24.91% Trade debts 12.67% 3.56%
Deferred Taxation Loans and 4.47% 0.40%
0.85% 0.82% advances
Other Non-Current Deposits and 1.24% 0.27%
Liabilities 1.16% 1.27% prepayments
Short Term Debt 0.01% 47.35% Investments 0.19% 5.49%
Other Current Other 1.73% 2.27%
Liabilities 61.41% 25.65% receivables
Total Equity And Accrued 1.11% 0.39%
Liabilities 100.00 100.00 interest / mark-
% % up
Taxation - net 0.30% 0.89%
Bank balances 22.57% 2.11%
Total assets 100.00% 100.00%
Shareholder's 80.13% 85.71%
equity
Non current 5.52% 5.74%
liabilities
Trade and other 11.94% 5.37%
payables
Accrued mark- 0.12% 0.31%
up
Short term 0.00% 2.45%

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 borrowings
Unclaimed 0.18% 0.15%
dividend
Total liabilities 19.87% 14.29%
Total Equity & 100.00% 100.00%
Liabilities

CONCLUSION
From the percentage analysis it is seen that both the companies went head to head in both
year whereas Hino Pak performed better against the revenue it generated. Hino Pak
performed better in generating profit and increasing its revenue many folds the amount of
total asset held by Hino Pak is high against the amount of Gandhara Nissan. Similarly
amount of liabilities held by Hino Pak is also against which shareholder’s Equity is less than
that of Nissan’s. this shows that regardless of performances Hino Pak is unable to hold its
investors.

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