FINAL PROJECT

On

Financial Statement Analysis of

GOODLUCK Industries Limited

SUBMITTED BY
ASHNA ASLAM 08
AYAT RIZWAN 10
LAIBA ARSHAD 17
SHEZRAY IKRAM 35

BBA-6

[2018-2022]

Management Sciences

LAHORE COLLEGE FOR WOMEN UNIVERSITY, LAHORE.

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 Executive Summary
Goodluck Industries Limited is engaged in milling of wheat and all kind of grains and wheat
products production, including maida, fine, atta, bran. The company's plant is located in
Karachi and its production capacity is 257 M.T per day. Goodluck Industries establishes its
own good business practices in its company managements - evaluation of integral
components, monitoring of the organization’s business activities, engagement in strategic
planning.
This report provides a comprehensive financial analysis of GOODLUCK INDUSTRIES limited.,
milling of wheat and all kind of grains and wheat products production. The report begins
with some general information pertaining to GOODLUCK INDUSTRIES, including company
background, products and services, current management, mission and objectives, and their
overall market position. The report will then discuss the state of the market, including
historic performance and future outlook like horizontal analysis of balance sheet and income
statement, vertical analysis of balance sheet and income statement, ratio analysis of
liquidity, market, activity, debt and profitability, including summary of ratio analysis,
recommendations and last but not the least is conclusion.
In simple terms, a financial report is critical for understanding how much money we have,
where the money is coming from, and where our money needs to go. Financial reporting is
important for management to make informed business decisions based on facts of the
company's financial health.
Horizontal analysis is used in the review of a company's financial statements over multiple
periods. It is usually depicted as percentage growth over the same line item in the base year.
Horizontal analysis allows financial statement users to easily spot trends and growth
patterns The statements for two or more periods are used in horizontal analysis. The earliest
period is usually used as the base period and the items on the statements for all later
periods are compared with items on the statements of the base period. The changes are
generally shown both in dollars and percentage. A vertical analysis is used to convert dollar
values to percentages.A vertical analysis is used to show the relative sizes of the different
accounts on a financial statement. In vertical analysis of income statement net income is
increasing over these years. Net income is what remains of a company's revenue after
subtracting all costs. Increasing net income is a good sign for a company's profitability.
Companies with consistent and increasing net income over time are looked at very
favourably by stockholders.
Ratio Analysis is done to analyze the Company's financial and trend of the company's results
over a period of years where there are mainly five broad categories of ratios like liquidity
ratios, solvency ratios, profitability ratios, efficiency ratio, coverage ratio which indicates the
company's performance. We have shown ratio analysis for year (2017-2020) of our company
GOODLUCK INDUSTRIES limited.

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Liquidity ratio analysis is the use of several ratios to determine the ability of an organization
to pay its bills in a timely manner. This analysis is important for lenders and creditors, who
want to gain some idea of the financial situation of a borrower or customer before granting
them credit. There are several ratios available for this analysis, all of which use the same
concept of comparing liquid assets to short-term liabilities. Market value ratios are used to
evaluate the current share price of a publicly-held company's stock. These ratios are
employed by current and potential investors to determine whether a company's shares are
over-priced or under-priced.
An activity ratio broadly describes any type of financial metric that helps investors and
research analysts gauge how efficiently a company uses its assets to generate revenues and
cash. Activity ratios may be utilized to compare two different businesses within the same
sector, or they may be used to monitor a single company's fiscal health over time. Activity
ratios can be subdivided into merchandise inventory turnover ratios, total assets turnover
ratios, return on equity measurements, and a spectrum of other metrics.
The debt ratio is defined as the ratio of total debt to total assets, expressed as a decimal or
percentage. It can be interpreted as the proportion of a company’s assets that are financed
by debt. A ratio greater than 1 shows that a considerable portion of debt is funded by assets.
In other words, the company has more liabilities than assets. A high ratio also indicates that
a company may be putting itself at risk of default on its loans if interest rates were to rise
suddenly. A ratio below 1 translates to the fact that a greater portion of a company's assets
is funded by equity.
Profitability ratio is used to evaluate the company’s ability to generate income as compared
to its expenses and other cost associated with the generation of income during a particular
period. This ratio represents the final result of the company.

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 Table of contents

Contents
1. Overview of company 5
1.1 Introduction: 5
1.2. Business Philosophy: 5
1.3 Our Vision: 6
1.4 Mission: 6
1.5 Status of Company: 6
1.6 Awards and achievements: 6
2. Horizontal Analysis 7
2.1 Horizontal analysis and interpretation of Balance sheet: 7
2.2 Horizontal analysis and interpretation of Income statement /Profit and Loss Statement: 8
3.Vertical Analysis 9
3.1 Vertical analysis and interpretation of Balance sheet/statement of Financial position 9
3.2 Vertical analysis and interpretation of Income statement 10
4. Ratio Analysis 12
4.1 Liquidity Ratio Analysis 12
4.1.1 Current Ratio 12
4.1.2 Quick Ratio: 13
4.2 Market Ratios Analysis 13
4.2.1 Price/earnings (P/E) Ratio: 14
4.2.2 Market/book (M/B) ratio: 15
4.3 ACTIVITY RATIO ANALYSIS: 16
4.3.1 INVENTORY TURNOVER: 16
4.3.3 AVERAGE PAYMENT PERIOD: 18
4.3.4 TOTAL ASSETS TURNOVER: 19
4.4 Debt Ratio Analysis 20
4.4.1: Debt Ratio 20
4.4.2. Times Interest Earned Ratio: 21
4.4.3. Fixed-payement coverage ratio: 22
4.5: Profitability: 23
4.5.1 Gross Profit Margin 23

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 4.5.2 Operating Profits Margin 24
4.5.3 Net Profit Margin 25
4.5.4 Earnings per Share(EPS) 26
4.5.5 Return on total Assets (ROA) 27
4.5.6 Return on Equity (ROF) 28
5. Summary 30
6. Recommendations 32
7. Conclusion 38
7.1 Future program: 39
8. Appendix: 39
8.1 Revenue: 39
8.2 Gross Profit: 40
8.3 Net Profit: 40
8.4 Break up Value of shares: 41
8.5 Balance sheet: 42
8.6 Income statement: 42

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1. Overview of company

1.1 Introduction:
Goodluck is a well known brand and its quality is widely preferred by bakeries and the
biscuit industry.Our brand is the symbol of quality in Karachi city. We serve the leading
wholesellers, retailers and food service distributors with a full line of high quality flour. We
believe in excellence in production, quality control and customer satisfaction through:
Quality improvement, on time delivery and compliance to customer requirements.
Goodluck Industries Limited was established in 1967. Our main line of business is milling of
wheat. We possess broad knowledge in flour production and are one of the major producers
of flour items such as
● Maida
● Fine
● Atta
● Bran
Our total wheat processing capacity is approximately 257 M.T/day.

1.2. Business Philosophy:

Our organization and team comprising of staff, clients and shareholders follow certain sound
policies that enable us to understand the requirements of the clients. Owing to these values,
we aim to become the leading export house in the country. The organization is dedicated to
meet the client’s demands first, by developing ideas and supplying products for creating
mutual growth.

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1.3 Our Vision:

To be a nationally recognized brand in flour milling and allied products landscape.

1.4 Mission:
Our mission is to exceed the expectation of our customer in providing highest quality
products. With determination of greater returns to shareholder and goods opportunities to
employees, to make the company a high flyer of all times.

1.5 Status of Company:

The company is a public listed entity shares of which are listed at the Pakistan Stock
Exchange.

1.6 Awards and achievements:

We at GoodLuck Industries Ltd company, delivering high quality products to ensure customer
satisfaction. Empowered with team of experts, we are monitoring different stages of
production which includes pre-production in process and post production. Seeing our
immense hard work, we are honored with Certificate of Export Excellence and all Quality
System Certificate

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2. Horizontal Analysis
2.1 Horizontal analysis and interpretation of Balance sheet:
A basic set of financial statements includes a balance sheet at a specific date and an income
statement for the accounting period ended on that date. Some sets of financial statements
may include a balance sheet and income statement for both the previous and current
accounting periods. When prior and current period statements are provided, changes
occurring between the two consecutive years or periods can be seen. However, these
changes might not be as obvious as we would expect. It is not easy to mentally compare the
differences between two Horizontal analysis is used in the review of a company's financial
statements over multiple periods. It is usually depicted as percentage growth over the same
line item in the base year. Horizontal analysis allows financial statement users to easily spot
trends and growth patterns.

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Horizontal analysis compares account balances and ratios over different time periods.
The statements for two or more periods are used in horizontal analysis. The earliest period is
usually used as the base period and the items on the statements for all later periods are
compared with items on the statements of the base period. The changes are generally
shown both in dollars and percentage. This analysis shows that the company’s growth
pattern is good.

2.2 Horizontal analysis and interpretation of Income statement /Profit and

Loss Statement:

Above picture shows , the values from the column 2018 vs 2017 conclude by
(2018-2017)/2017 and same for 2019 vs 2018 and 2020 vs 2019 column. The cost of sales for
2020 vs 2019 are calculated by substracting (cost of sale) of 2020 from 2019 and divided by
2020. Other operating expenses from column 2019 vs 2018 are calculated by
(2019-2018)/2018, which is 271.29.

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Net income in (2018 VS 2017) is low as compared to (2019 vs 2018) and in (2020 vs 2019) it
becom -7.94%. In 2018 vs 2017 its low because there is increase in the cost of sales as
compared to other years. The percentage change in gross profit has been relatively higher
than that of net sales due to a lower increase in the cost of goods sold. The overall growth
has been relatively higher in the year (2019 vs 2018) compared to that of the year ( 2020 vs
2019 ) and in (2018 vs 2017). Horizontal analysis compares account balances and ratios over
different time periods. Horizontal analysis allows investors and analysts to see what has
been driving a company's financial performance over several years and to spot trends and
growth patterns. This type of analysis enables analysts to assess relative changes in different
line items over time and project them into the future. Overall it shows that net income is
decreasing from (2019 vs 2018). A drop in net income refers to a decrease in the amount of
money you have left over after you subtract your expenses from your revenues for one
specific period compared to another.

3.Vertical Analysis
3.1 Vertical analysis and interpretation of Balance sheet/statement of
Financial position

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Noncurrent assets are a company’s long-term investments that have a useful life of more
than one year. Noncurrent assets cannot be converted to cash easily. So in 2017 non current
assets total is 88.69% and in 2018 it is it 87.84 % in 2019 it is 85.53 % and in 2020 it is 84.5
8%. As we can clearly see that non current assets from 2017 to 2020 are declining slightly.
Current assets are considered short-term assets because they generally are convertible to
cash within a firm's fiscal year. Current assets in 2017 is 11.31% in 2018 it is 12.16% in 2019
it is 14.47% in 2020 it is 15.4 42%. These percentages are showing that current assets are
increasing from 2017 to 2020.
Vertical analysis of balance sheet shows the overall favourable increase in assets.
Vertical analysis of equity shows that in 2017 equity is 88.79% in 2018 it is 91.01% in 2019 it
is 91.82% and in 2020 is 92.24%. these percentage shows that equity side is positively
increasing that is favourable for company.
When we observe the liabilities side. The non current liabilities for 2017 is 8.86 % in 2018 it
is 8.23 % in 2019 it is 7.18 % in 2020 is 6.82 %. The non current liabilities percentages
showing liabilities are declining that is favourable for a company.
Current liabilities in 2017 is 11.21% in 2018 it is 8.99 % in 2019 it is 8.18 % in 2020 it is 7.76
%. Are also declining that is a good condition, favourable position for a company.
We can see how much debt a company holds in proportion to its assets and how short-term
debt directly compares to short-term assets. The higher the proportion of short-term assets,
the stronger were company's working capital position and its ability to meet its near-term
obligations. When we compare these percentages to prior year numbers, we can see trends
and develop a clearer understanding of the financial direction of company is headed in. Such
comparisons help identify problems for which we can find the underlying cause and take
corrective action.

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3.2 Vertical analysis and interpretation of Income statement

The vertical analysis also shows that in year one company’s cost of goods sold is 98.33%, in
year two it drops to 98.03% in year three it slightly increases to 98.05% and in year four it
decreases to 97.80%. That's driving a significant increase in gross profits throughout these
years.  Administrative expense is increasing over these years. A higher ratio is favourable
because it demonstrates that the company's central functions have a better amount of
operating leverage. A climbing Sales to Administrative Expense Ratio indicates that the firm
is capable of increasing its sales using the same fixed expenses. There is a slight variation in
selling expense, in year 2017 is 0.02%, in year 2018 is 0.01%, in year 2019 is 0.02% and in
year 2020 is 0.01%.  Salaries and marketing expenses are referred as operating expense in
2017 is 0.04%, in 2018 is 0.02%, in 2019 is 0.08% and in 2020 is 0.05%. Total expenses
have decreased which is logical, given the decreased cost of goods sold. Profit from operation
first increased in 2018 then decreased in 2019 and 2020. Decline in profit from operations are
not favourable for the company. A higher operating margin is more favourable for the
company because this shows that the company is making enough money from its
ongoing operations to pay for its variable costs as well as its fixed costs. Net income is
decreasing over these years. Net income is what remains of a company's revenue after
subtracting all costs. Decreasing net income is not a good sign for a company's profitability.
A declining net income means you effectively have to take a pay cut to keep your business
operating at normal capacity. This can have an adverse effect on your personal finances
including your ability pay your personal debts.

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4. Ratio Analysis
4.1 Liquidity Ratio Analysis
A firm’s ability to satisfy its short-term obligations as they come due.
4.1.1 Current Ratio
A measure of liquidity calculated by dividing the firm’s current assets by its current
liabilities.
Current ratio formula : Current Assets/Current Liabilities
Table 1

2017 2018 2019 2020

Current Assets 46,763,903 49,368,609 58,809,392 62,461,784
Current Liabilities 46,381,885 36,499,811 33,257,017 31,417,706
Current Ratio 1.01 1.35 1.77 1.99

Graphical Representation:

Figure 1

Interpretation:
As the above graph clearly indicate the increase in current ratio form 2017 to 2020. Current
ratio in 2017 is 1.01, in 2018 is 1.35 , in 2019 is 1.77 , in 2020 is 1.99. A firm is able to satisfy
its short-term obligations as they come due. Current ratio is increasing means company is
better and improving. A high current ratio is generally considered a favorable sign for the
company. Creditors are more willing to extend credit to those who can show that they have
the resources to pay obligation. Higher the current ratio, more liquid the company is.

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4.1.2 Quick Ratio:
A measure of liquidity calculated by dividing the firm’s current assets minus inventory by its
current liabilities.

Quick ratio formula: (current assets-inventories)/current liabilities

Table 2

2017 2018 2019 2020

Quick Assets 39,986,349 35,258,415 55,483,380 26,408,464
Current Liabilities 9,753,273 3,089,852 4,083,235 3,800,547
quick Ratio 4.10 11.41 13.59 6.95

Graphical Representation:

Figure 2

Interpretation:
As the above graph indicates the increase in quick ratio form 2017 to 2019 but
decrease in 2020. Quick ratio in 2017 is 4.10, in 2018 is 11.41 , in 2019 is 13.59 , in
2020 is 6.95. A firm is able to satisfy its short-term obligations as they come due.
Quick ratio is increasing from 2017 to 2019 means company is better and improving
but in 2020 quick ratio is not negitive but declining as compared to previous years.A
low or decreasing ratio generally indicates that the company has taken on too much
debt. The company's sales are decreasing may be that’s why quick ratio is low. May
be the reason behinde declining quick ratio is that the company is struggling to
collect accounts receivable or the company is paying its bills too quickly. In year 2020,

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quick ratio is much lower than the current ratio, this means that current assets
heavily depend on inventories.

4.2 Market Ratios Analysis

Relate a firm’s market value, as measured by its current share price, to certain
accounting values.
4.2.1 Price/earnings (P/E) Ratio:
Measures the amount that investors are willing to pay for each dollar of a firm’s
earnings; the higher the P/E ratio, the greater the investor confidence.
Price/earnings (P/E) Ratio Formula:
Market price per share of common stock /Earnings per share
Table 3

2017 2018 2019 2020

Market price per
share of common 500 497 493 490
stock
Earnings per share 3.38 8.25 13.71 3.45
Price ratio 59.67 60.24 35.96 142.03

Graphical Representation:

Figure 3

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Interpretation:
As the above graph indicates the fluctuation in price/earning ratio but ratio is
positive, in 2019 ratio is slighly decease as compared to 2018 but greatly increase in
2020. Price ratio in 2017 is 59.67, in 2018 is60.24, in 2019 is 35.96 , in 2020 is 142.03.
A high PE ratio indicates that a stock is expensive, while a low PE ratio suggests that it
is cheap. A negative PE ratio means that a stock has negative earnings. In other
words, the company was losing money in the past.. Even the most established
companies experience down periods, which may be due to environmental factors
that are out of the company's control. In year 2018 to 2020, A higher P/E ratio shows
that investors are willing to pay a higher share price today because of growth
expectations in the future. The high multiple indicates that investors expect higher
growth from the company compared to the overall market.
4.2.2 Market/book (M/B) ratio:
Provides an assessment of how investors view the firm’s performance. Firms
expected to earn high returns relative to their risk typically sell at higher M/B
multiples.
Market/book (M/B) ratio formula:
Market price per share of common stock /Book value per share of common stock

Table 4

2017 2018 2019 2020

Market price per
share of common 500 497 493 490
stock
Book value per
share of common 1,223.98 1,231.87 1,243.68 1,245.60
stock
Market/Book ratio 0.41 0.40 0.40 0.39

Graphical Representation:

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 Figure 4

Interpretation:
As the above graph indicates the deteriorating in market/book ratio. The
market-to-book ratio helps a company determine whether or not its asset value is
comparable to the market price of its stock. In 2017 market ratio is high, in 2018 ratio
is positive but decreasing, in 2019 ratio is declining as compared to 2018 but greatly
decrease in 2020.Market/book ratio in 2017 is 0.41 ,in 2018 is 0.40, in 2019 is 0.40, in
2020 is 0.39. In 2017, market ratio is high. A company's market value is a good
indication of investors' perceptions about its business prospects. The higher the
valuations, the greater the market value. In 2018 , ratio Is good but declining as
compared to 2017.In 2019 , when we contrast it with 2018 the ratio is reducing. In
2020 market ratio is declining form all other years. Graph is not showing favourable
situation. A low ratio could also indicate that there is something wrong with the
company. This ratio can also give the impression that we are paying too much for
what would be left.

4.3 ACTIVITY RATIO ANALYSIS:

Measure the speed with which various accounts are converted into sales or
cash—inflows or outflows.
4.3.1 INVENTORY TURNOVER:
Measures the activity, or liquidity, of a firm’s inventory.
Inventory turnover = Cost of goods sold / Inventory
Table 5

  2017 2018 2019 2020

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COST OF GOOD
773455063 827049968 879267588 840799897
SOLD

INVENTORY 6,777,554.00 14,110,194.00 3,326,012.00 36,053,320.00

INVENTORY
114.12 58.61 264.36 23.32
TURNOVER

Figure 5

INTERPRETATION:
In this graph its shows that in 2017 inventory turnover is higher than 2018 but as
compared to 2019 its have the higher inventory turnover from all the previous and
upcoming years. Inventory turnover in 2017 is 114.12 , 2018 is 58.61, 2019 is 264.36
and in 2020 its 23.32. The year 2020 have the lowest inventory turnover from all the
years A low inventory turnover ratio shows that a company may be overstocking or
deficiencies in the product line or marketing effort. Higher inventory turnover ratios
are considered a positive indicator of effective inventory management. However, a
higher inventory turnover ratio.
4.3.2.AVERAGE COLLECTION PERIOD:
The average amount of time needed to collect accounts receivable.
Average collection period = Accounts receivable/ Average sales per day
= Accounts receivable/ Annual sales /365

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 Table 6

  2017 2018 2019 2020

ACCOUNT
25328174 19155691 24061657 9164035
RECEIVABLE

AVERAGE SALES 2,456,930.6 2,355,499.9

2,154,767.89 2,311,412.65
PER DAY 4 2

AVERAGE
COLLECTION 11.75 8.29 9.79 3.89
PERIOD

Figure 6

INTERPRETATION:
In this graph the average collection period for 2017 is 11, 2018 is 8 , 2019 is 9 and
2020 is 3 that’s shows lower average collection period . From the following years
2020 have the lowest average collection period. A lower average collection period is
generally more favorable than a higher average collection period. A low average
collection period indicates the organization collects payments faster. There is a
downside to this, though, as it may indicate its credit terms are too strict.
4.3.3 AVERAGE PAYMENT PERIOD:
The average amount of time needed to pay accounts payable.

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Average payment period = Accounts payable/ Average purchases per day
= Accounts payable/ Annual purchases /365
Table 7

  2017 2018 2019 2020

ACCOUNT PAYMENT 8195065 1407482 2276163 1887692
AVERAGE
PURCHASES PER 761413503 834382608 868483406 873527205
DAY
AVERAGE PAYMENT
3.93 0.62 0.96 0.79
PERIOD

Figure 7

INTERPRETATION:
In this graph the average payment period for 2017 is 3.9, 2018 is 0.62 , 2019 is 0.96
and 2020 is 0.79. A very short payment period may be an indication that the
company is not taking full advantage of the credit terms allowed by suppliers. There
is decrease in average payment period. Most companies try to decrease the average
payment period to keep their larger suppliers happy and possibly take advantage of
trade discounts.
4.3.4 TOTAL ASSETS TURNOVER:
Indicates the efficiency with which the firm uses its assets to generate sales.
Total asset turnover = Sales /Total assets
Table 8

  2017 2018 2019 2020

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SALES 786490279 843665617 896779683 859757469

TOTAL ASSETS 413575165 406059530 406360508 405097610

TOTAL ASSETS 1.90 2.08 2.21 2.12

TURNOVER

Figure 8

INTERPRETATION:
Total assets turnover of 2017 is 1.90, 2018 is 2.08, 2019 is 2.21 and 2020 is 2.12. In the retail
sector, an asset turnover ratio of 2.5 or more could be considered good, while a company in
the utilities sector is more likely to aim for an asset turnover ratio that's between 0.25 and
0.5. Its shows total assets turnover (2017-2020) is cloes to 2 or 2.5 so for retailed sector it
considered to be good.The higher the asset turnover ratio is, the more efficient a company
is. Conversely, a low asset turnover ratio indicates that a company is failing to efficiently
employ its assets to generate sales. ... This means that for every $1 worth of assets, that
company earned just $0.17 in revenues

4.4 Debt Ratio Analysis

The debt position of a firm indictaes the amount of other people’s money being used
to generate profits
4.4.1: Debt Ratio
Debt ratio measures the proportion of total assets financed by the firms creditors.
Debt ratio formula : Total Liabilities /total Assets
Table 9

  2017 2018 2019 2020

Total Liabilities 46,381,885 36,499,811 33,257,017 31,417,706

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 Total Assets 413,575,165 406,059,530 406,360,508 405,097,610
Debt Ratio 0.11 0.09 0.08 0.08

Figure 9

Interpretation:
As the above graph clearly indicated the decrease in debt ratio from 2017 to 2018 and in
2020 it remains the same as in 2019. Debt ratio in 2017 is 0.11, in 2018 is 0.09, in 2019 is
0.08 and in 2020 is 0.08. Debt ratio is decreasing and it’s favourable for the company. A
lower debt ratio usually implies a more stable business with potential and lonetivity because
a copmany with lower ratio also has lower overall debt. Lower the debt ratio, lower will be
the portion of debt and it is favourable.

4.4.2. Times Interest Earned Ratio:

Times interest earned ratio measures the firm’s ability to make constractual interest
payments; sometimes called the interest coverage ratios.
Times Interest Earned Ratio formula: Earnings before interest and taxes/ Interest
Table 10

  2017 2018 2019 2020

Earnings before
2,550,609 3,910,824 3,370,243 3,164,838
interest and taxes
Interest 3,554 18,410 19,059 19,059
Times interest
717.67 212.43 176.83 166.05
earned ratio

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 Figure 10

Interpretation:
As the above graph clearly indicates the decrease in times interesr earned ratio throughout
these years. Times interest earned ratio in 2017 is 717.67, in 2018 is 212.43, in 2019 is
176.83 and in 2020 is 166.05. As times interest earned ratio is decreasing it means that its
not favourable for the company. Times interest ratio indicated how many times a company
could pay the interest with its before tax income, so obviously the larger ratios are
considered more favourable than smaller ratios. This graphs shows a decline in ratios which
is not faourable.

4.4.3. Fixed-payement coverage ratio:

Fixed-payement coverage ratio measures the firm’s ability to meet all fixed-payment
obligations.
Fixed-payment coverage ratio formula: EBIT + Lease payments/int. + Lease pay.
+{(principal pay. + preferred stock dividends)*[1/(1-T)}]
Table 11

  2017 2018 2019 2020

EBIT + Lease
2,841,272 4,115,688 4,130,876 3,574,001
payments
Interest + Lease
294,217 223,274 779,692 428,222
payments
Principal payments
+ preferred stock 36596879 31991501 28409302 26852678
dividends*[1-1/T]
Fixed payment
36596888.66 31991519.43 28409307.3 26852686.35
coverage ratio

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 Figure 11

Interpretation:
As the above graph indicates the decrease in fixed payment coverage ratios. Fixed payment
coverage ratio in 2017 is 36596888.66, in 2018 is 31991519.43, in 2019 is 28409307.3 ans in
2020 is 26852686.35. Decrease in fixed payment coverage ratio is not favourable for the
company. A low ratio often reveals a lack of ability to make payments on fixed charges. The
lenders try to avoid since it increases the risk that they will not be paid back.

4.5: Profitability:
The degree to which a business or activity yields profit or financial gain.
4.5.1 Gross Profit Margin
Gross profit margin is a metric analysts use to assess a company's financial health by
calculating the amount of money left over from product sales after subtracting the
cost of goods sold (COGS).

Gross Profit Margin: (Gross Profit/Sales)

Table 12

  2017 2018 2019 2020

Gross Profit 13,158,474 16,615,649 17,512,095 18,957,572

896,779,68 859,757,46
Sales 786,490,279 843,665,617
3 9
Gross Profit Margin 2% 2% 2% 2%

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Graphical Representation:

Figure 12

Interpretation
Gross profit margin of 2020 is 0.022(2%). Company has a Gross profit margin of 0.0195 in
2019, in 2018 it was 0.0197 and in 2017 it's Gross Profit Margin was 0.0166. We can see a
slightest increase in Gross Profit Margin of our company each year. It is favorable for the
company. Because there’s an increase in gross profit margin.

4.5.2 Operating Profits Margin

Operating Profit Margin is a profitability or performance ratio that reflects the
percentage of profit a company produces from its operations, prior to subtracting
taxes and interest charges. It is calculated by dividing the operating profit by total
revenue.

Operating Profits Margin (Operating Profits/Sales)

Table 13

  2017 2018 2019 2020

2,550,609
Operating Profits 3,910,824 3,370,243 3,164,838

896,779,68 859,757,46
Sales 786,490,279 843,665,617
3 9
Operating Profits
0.31% 0.46% 0.38% 0.37%
Margin

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Graphical Representation:

Figure 13

Interpretation
Operating Profit Margin of 2020 is 0.37%. Company has a operating profit margin of 0.38% in
2019, in 2018 it was 0.46% and in 2017 it's Operating Profit Margin was 0.31%. It tells us
that there's an increase in operating profit margin in 2018 after that it is still decreasing
point by point. 2020's operating profit margin is less than 2019's. If this decrease continues
it will lead the company to loss. It is unfavorable for the company

4.5.3 Net Profit Margin

The net profit margin, or simply net margin, measures how much net income or profit is
generated as a percentage of revenue.

Net Profit Margin (Earnings available for common stockholders/ Sales)

Table 14

  2017 2018 2019 2020

Earnings 2,515,322 2,473,955 2,586,704 2,381,299

available for
common
stockholders
Sales 786,490,279 843,665,617 896,779,68 859,757,46
3 9

Page | 26
Net Profit 0.32% 0.29 0.29 0.28
Margin

Graphical Representation:

Figure 14

Interpretation
Net Profit Margin of 2020 is 0.28%. Company has a Net profit margin of 0.29% in 2019, in
2018 it was same 0.29% and in 2017 it was 0.32%. It tells us that there's an increase in Net
profit margin in 2018 and remains same ins 2019 after that it is decreasing point by point.
2020's Net profit margin is less than 2019's. It is a bit unfavourable.

4.5.4 Earnings per Share(EPS)

Earnings per share (EPS) is calculated as a company's profit divided by the outstanding
shares of its common stock. The resulting number serves as an indicator of a company's
profitability. It is common for a company to report EPS that is adjusted for extraordinary
items and potential share dilution.

Earnings per Share(EPS) [Earnings available for common stockholders/

Number of shares of common stockholders]
Table 15

  2017 2018 2019 2020

Earnings available 2,515,322 2,473,955 2,586,704 2,381,299
for common
stockholders

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Number of shares 300000 300000 300000 300000
of common
stockholders
Earnings per share 8.3 8.2 8.6 7.9
(EPS)

Graphical Representation:

Figure 15

Interpretation
Earnings per share of 2020 is 7.9. Company has a Net profit margin of 0.29% in 2019, in 2018
it was same 0.29% and in 2017 it was 0.32%. It tells us that there's an increase in Net profit
margin in 2018 and remains same ins 2019 after that it is decreasing point by point. 2020's
Net profit margin is less than 2019's. It is a bit unfavourable.

4.5.5 Return on total Assets (ROA)

Return on assets (ROA) is an indicator of how profitable a company is relative to its total
assets. ROA gives a manager, investor, or analyst an idea as to how efficient a company's
management is at using its assets to generate earnings. ROA is displayed as a percentage;
the higher the ROA the better.

Return on total Assets (ROA) [Earnings available for common stockholders/

Total Assets]
Table 16

  2017 2018 2019 2020

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Earnings 2,515,322 2,473,955 2,586,704 2,381,299
available for
common
stockholders
Total Assets 413,575,165 406,059,530 406,360,50 405,097,61
8 0
Return on total 0.61% 0.61% 0.64% 0.59%
Assets (ROA)

Graphical Representation:

Figure 16

Interpretation
Return on total assets in 2020 is 0.61%. Company has a return on total assets of 0.64% in
2019, in 2018 it was 0.61% and in 2017 it was 0.61%. It tells us that there's an increase in
Return on total assets in 2019 after that it decreases. 2020's Return on total assets is less
than 2019's. Company has ups and downs in Return on total assets still its OK

4.5.6 Return on Equity (ROF)

Return on equity (ROE) is a measure of financial performance calculated by dividing net
income by shareholders' equity. Because shareholders' equity is equal to a company's assets
minus its debt, ROE is considered the return on net assets.

Return on Equity (ROF) [Earnings available for common stockholders/

Common Stock Equity]
Table 17

  2017 2018 2019 2020

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Earnings 2,515,322 2,473,955 2,586,704 2,381,299
available for
common
stockholders
Common Stock 367,193,280 369,559,719 373,103,492 373,679,900
Equity
Return on 0.69% 0.67% 0.69% 0.64%
Equity (ROF)

Graphical Representation:

Figure 17

Interpretation
Return on Equity in 2020 is 0.69%. Company has a return on Equity of 0.69% in 2019, in
2018 it was 0.67% and in 2017 it was 0.69%. It tells us that there's an increase in Return
on equity in 2019 after that it decreases. 2020's Return on equity is less than 2019's.
Company has ups and downs in Return on Equity still its OK

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5. Summary
We use GOODLUCK INDUSTRIES LIMITED ratios to perform a complete ratio
analysis using both cross-sectional and time-series analysis approaches. Using
these data, we can discuss the five key aspects of GOODLUCK
performance—liquidity, activity, debt, profitability, and market. We have
calculated 4 years data from (2017 to 2020).
Liquidity:
Current ratio in 2017 is 1.01, in 2018 is 1.35 , in 2019 is 1.77 , in 2020 is 1.99. A firm is able to
satisfy its short-term obligations as they come due. Current ratio is increasing means
company is better and improving. A high current ratio is generally considered a favorable
sign for the company. Creditors are more willing to extend credit to those who can show that
they have the resources to pay obligation.
Quick ratio in 2017 is 4.10, in 2018 is 11.41 , in 2019 is 13.59 , in 2020 is 6.95. A firm is able
to satisfy its short-term obligations as they come due. Quick ratio is increasing from 2017 to
2019 means company is better and improving but in 2020 quick ratio is not negitive but
declining as compared to previous years. A low or decreasing ratio generally indicates that
the company has taken on too much debt. The company's sales are decreasing may be that’s
why quick ratio is low. May be the reason behinde declining quick ratio is that the company
is struggling to collect accounts receivable or the company is paying its bills too quickly.
Market:
There is fluctuation in price/earning ratio but ratio is positive, in 2019 ratio is slighly
decease as compared to 2018 but greatly increase in 2020. Price ratio in 2017 is 59.67, in
2018 is60.24, in 2019 is 35.96 , in 2020 is 142.03. A high PE ratio indicates that a stock is
expensive, while a low PE ratio suggests that it is cheap. A negative PE ratio means that a
stock has negative earnings. In other words, the company was losing money in the past..
Even the most established companies experience down periods, which may be due to

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environmental factors that are out of the company's control. In year 2018 to 2020, A higher
P/E ratio shows that investors are willing to pay a higher share price today because of growth
expectations in the future. The high multiple indicates that investors expect higher growth
from the company compared to the overall market.
The market-to-book ratio helps a company determine whether or not its asset value is
comparable to the market price of its stock. In 2017 market ratio is high, in 2018 ratio is
positive but decreasing, in 2019 ratio is declining as compared to 2018 but greatly decrease
in 2020. Market/book ratio in 2017 is 0.41 ,in 2018 is 0.40, in 2019 is 0.40, in 2020 is 0.39. In
2017, market ratio is high. A company's market value is a good indication of investors'
perceptions about its business prospects. The higher the valuations, the greater the market
value. A low ratio could also indicate that there is something wrong with the company. This
ratio can also give the impression that we are paying too much for what would be left.
Activity:
Measure the speed with which various accounts are converted into sales or cash—inflows or
outflows. Inventory turnover in 2017 is 114.12 , 2018 is 58.61, 2019 is 264.36 and in 2020 its
23.32. A low inventory turnover ratio shows that a company may be overstocking or
deficiencies in the product line or marketing effort. Higher inventory turnover ratios are
considered a positive indicator of effective inventory management. However, a higher
inventory turnover ratio does not always mean better performance. The average collection
period for 2017 is 11, 2018 is 8 , 2019 is 9 and 2020 is 3 that’s shows lower average
collection period .From the following years 2020 have the lowest average collection period.
A lower average collection period is generally more favorable than a higher average
collection period. A low average collection period indicates the organization collects
payments faster. There is a downside to this, though, as it may indicate its credit terms are
too strict. Also, there is decrease in average payment period. Most companies try to
decrease the average payment period to keep their larger suppliers happy and possibly take
advantage of trade discounts. Total assets turnover (2017-2020) is cloes to 2 or 2.5 so for
retailed sector it considered to be good. The higher the asset turnover ratio is, the more
efficient a company is. Conversely, a low asset turnover ratio indicates that a company is
failing to efficiently employ its assets to generate sales.
Debt:
The debt position of a firm indictaes the amount of other people’s money being used to
generate profits Debt ratio is decreasing and it’s favourable for the company. A lower debt
ratio usually implies a more stable business with potential and lonetivity because a copmany
with lower ratio also has lower overall debt. Lower the debt ratio, lower will be the portion
of debt and it is favourable. Times interest earned ratio in 2017 is717.67, in 2018 is 212.43,
in 2019 is 176.83 and in 2020 is 166.05. As times interest earned ratio is decreasing it means
that its not favourable for the company. Times interest ratio indicated how many times a
company could pay the interest with its before tax income, so obviously the larger ratios are
considered more favourable than smaller ratios. Fixed payment coverage ratio in 2017 is

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36596888.66, in 2018 is 31991519.43, in 2019 is 28409307.3 and in 2020 is 26852686.35.
Decrease in fixed payment coverage ratio is not favourable for the company.
Profitability:
Company has a Gross profit margin of 0.0195(2%) in 2019, in 2018 it was 0.0197(2%) and in
2017 it's Gross Profit Margin was 0.0166. We can see a slightest increase in Gross Profit
Margin of our company each year. It is favorable for the company. Because there’s an
increase in gross profit margin. Company has a operating profit margin of 0.38% in 2019, in
2018 it was 0.46% and in 2017 it's Operating Profit Margin was 0.31%. It tells us that there's
an increase in operating profit margin in 2018 after that it is still decreasing point by point.
2020's operating profit margin is less than 2019's. If this decrease continues it will lead the
company to loss. It is unfavorable for the company. Company has a Net profit margin of
0.29% in 2019, in 2018 it was same 0.29% and in 2017 it was 0.32%. It tells us that there's
an increase in Net profit margin in 2018 and remains same ins 2019 after that it is
decreasing point by point. 2020's Net profit margin is less than 2019's. It is a bit
unfavourable. Company has a return on total assets of 0.64% in 2019, in 2018 it was 0.61%
and in 2017 it was 0.61%. It tells us that there's an increase in Return on total assets in 2019
after that it decreases. 2020's Return on total assets is less than 2019's. Company has ups
and downs in Return on total assets still its OK. Return on Equity in 2020 is 0.69%. Company
has a return on Equity of 0.69% in 2019, in 2018 it was 0.67% and in 2017 it was 0.69%. It
tells us that there's an increase in Return on equity in 2019 after that it decreases. 2020's
Return on equity is less than 2019's. Company has ups and downs in Return on Equity still its
OK.

6. Recommendations
HORIZONTAL ANALYSIS OF INCOME STATEMENT
The overall growth has been relatively higher in the year (2019 vs 2018) compared to that of
the year (2020 vs 2019) and in (2018 vs 2017). Because the percentage change in gross profit
has been relatively higher than that of net sales due to a lower increase in the cost of goods
sold. Net income in (2018 VS 2017) is low as compared to (2019 vs 2018) and in (2020 vs
2019) it become 0%. In 2018 vs 2017 its low because there is increase in the cost of sales as
compared to other years. We can decrease our cost for increasing net income by these
ways.
● Changing supplier: Another way to decrease the Cost of Goods Sold can be to
substitute some materials for lower-cost materials. Technology is constantly
improving, and it’s easier to pay less for something and have the quality still
be the same. However, it’s important to think about all factors when
switching to a lower-priced material. For example, substituting materials may
result in the actual product being of inferior quality.

Page | 33
 ● Increase efficiency: It may also be better not to substitute the material at all –
instead, use better machinery, so less material is used with the least amount
of wastage and higher production. Better machinery will lead to improved
efficiency and fewer COGS.
● Quality over quantity: It’s also very crucial to research how many suppliers
are offering the same materials for different prices. Find out which supplier
delivers quickly, offers more discounts, has lower shipping costs, and overall is
a better supplier to deal with. It’s okay to pay more for the materials if the
supplier’s service is better, even if the COGS are increased.
● Cash discount :If a company starts bulk buying their materials, it will affect
the Cost of Goods Sold. When buying in larger quantities from the same
supplier, the supplier will offer quantity based discounts and decrease the
COGS
Vertical analysis of income statement tells us that Net income in year 2017 is -0.09%, in
year 2018 is 0.29%, in year 2019 is 0.29% and in year 2020 is 0.30%. Net income is increasing
over these years. Net income is what remains of a company's revenue after subtracting all
costs. Increasing net income is a good sign for a company's profitability. Companies with
consistent and increasing net income over time are looked at very favourably by
stockholders. Ways to increase net income are as follows:
● Reduce utilities: Try reducing wer utility use. We might find ways to limit power, gas,
or water consumption. Try turning down heating and cooling outside of business
hours.
● Reduce Insurance Premiums: We might be able to save money on our insurance
premiums.
● Reduce labour costs: We might be able to reduce business expenses by reducing our
labour costs.
● Reduce operational cost: Look for ways to limit operational costs, such as finding
cheaper resources for raw materials, office supplies and repair service calls.
Increase sales revenue: We aren’t limited to only reducing expenses to increase our net
profit. We can also increase how much revenue our business brings in. Find ways to sell
more of our products or services. Research ways to better advertise to our target customers.
Increasing Liquidity Ratios:
One way to quickly improve a GOODLUCK INDUSTRIES ’S liquidity ratio is by using sweep
accounts that transfer funds into higher interest rate accounts when they're not needed, and
back to readily accessible accounts when necessary. Paying off liabilities also quickly
improves the liquidity ratio, as well as cutting back on short-term overhead expenses such as
rent, labor, and marketing.Additional means of improving a our copmany’s liquidity ratio
include using long-term financing rather than short-term financing to acquire inventory or
finance projects. Removing short-term debt from the balance sheet allows good luck

Page | 34
company to save some liquidity in the near term and put it to better use. What makes the
current ratio “good” or “bad” often depends on how it is changing. A company that seems to
have an acceptable current ratio could be trending toward a situation where it will struggle
to pay its bills. Conversely, a company that may appear to be struggling now, could be
making good progress toward a healthier current ratio.
The higher the ratio result, the better a company's liquidity and financial health; the lower
the ratio, the more likely the company will struggle with paying debts.
Market ratio:
The price-to-earnings (P/E) ratio is calculated by dividing a stock's market price per share by
its earnings per share. Thus, when the price of a stock rises and earnings remain constant,
the P/E ratio will rise, diluting the stock's value. There are a number of factors that can cause
a stock's value to increase or decrease when investors buy or sell shares in response to
them.
● Exploring Company Growth
Companies that reinvest earnings, building new factories and otherwise expanding
their operations, sometimes have relatively high P/E ratios. This occurs because many
investors are willing to buy the stock at higher and higher share prices in expectation
of a future payoff from the company's investment. Likewise, investing in future
growth does not always immediately translate into higher current earnings.
● Dividends and the Ratio
Paying dividends can cause a company's P/E ratio to rise. Paying dividends does not
increase earnings, yet many investors are willing to pay higher prices for stocks to
receive regular dividend payments. Demand for divident-paying stock goes up when
interest rates are low, since dividends can be a good alternative to low interest, and
goes down when interest rates are high. Thus, it makes sense that investors would be
willing to pay higher share prices to earn cash dividends.
● Fear and Greed
Stock prices are not always determined as a result of rational investor behavior. Stock
prices also rise and fall in response to fear and greed, whether in response to overall
market conditions or prevailing investor wisdom about a particular company and its
stock. When stock prices are steadily rising, investors can become greedy, buying
shares at higher prices in expectation of even higher prices. When stocks are falling,
investors can panic and sell their shares out of fear they will fall even further,
bringing prices down. Fear and greed do not have the same impact on earnings, so
P/E ratios will rise and fall with rising and falling stock prices.
● Evaluating Company Debt
When a company increases its debt, it can cause the P/E ratio for its stock to fall.
Many investors concerned that the costs of higher debt will negatively impact the
company's future earnings sell their shares in response, causing share prices to
decline. Thus, a lower P/E ratio does not always indicate higher stock value.
Sometimes P/E ratios fall in response to increased risk. This is effectively the opposite

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 of P/E ratios rising in response to expectations of future growth. Investors believe
that debt will constrain the company's growth and price the stock accordingly.
ACTIVITY RATIO ANALYSIS
After checking the GOODLUCK INDUSTRIES LIMITED performance of activity ratio analysis,
we came to know that the overall it’s favourable for the company in following years (2017
-2020) .
DEBT RATIO ANALYSIS
Times interest earned ratio in 2017 is 684.73, in 2018 is 212.43, in 2019 is 176.83 and in 2020 is
166.05. As times interest earned ratio is decreasing it means that it is unfavourable for the company.
Ways to improve Times interest earned ratio are as follows:
● Pay down debt
Reducing the amount of debt on the company’s balance sheet will serve to lower the
company’s interest payments. Depending upon the terms of the debt and the type of debt, the
company may be able to retire some of it, this will generally reduce the company’s interest
payments making the ratio more favourable all else being equal.
● Use greater levels of equity in the company’s capital structure
In order to properly capitalize the business, companies will need to either issue debt or use
equity as a source of capital. For most companies this portion of their balance sheet is a
combination of the two. Reducing the proportion of debt to equity will generally reduce the
company’s level of interest payments.
● Increase earnings
This may be easier said than done but increasing the company’s earnings will improve this
ratio. The company profitably increasing its sales will help increase earnings before interest
and taxes. This in turn will help improve the times interest earned ratio.
● Decreasing expenses is, of course, another way to increase earnings. Lowering expenses can
add to the company’s bottom line as well.

Fixed payment coverage ratio in 2017 is 33501815.44, in 2018 is 31991519.43, in 2019 is

28409307.3 and in 2020 is 26852686.83. Decrease in fixed payment coverage ratio is not favourable
for the company.
Improving our fixed payment coverage ratio concentrates on taking steps to improve earnings without
a significant increase in costs. Ways to improve fixed payment coverage ratio are as follows:
● Increase sales in less expensive ways
There are a number of ways to increase a company’s sales without incurring significant costs.
For instance, a business owner can review their marketing campaigns and revise their strategy
to get better quality leads. They can also focus on improving their team’s sales techniques to
close more deals. Collaborating with other non-competitor businesses for sales and marketing
campaigns can also decrease budget requirements.
● Negotiate for a lower rental or lease rates
Most often than not, landlords or lessors will consider a request for a lower rental rate from
long time renters/lessees, assuming that their payment history is spotless. Negotiating lower
payments here will lower our fixed charge and improve fixed payment coverage ratio.
● Refinance loans with high interest rates
It’s not unusual for a firm to pay off a loan with another loan if the interest rate is significantly
lower. A business owner can review its loans and consolidate those with high interest rates

Page | 36
 and refinance it by taking another loan with lower interest rates. This will bring down interest
expense which is a factor in determining fixed payment coverage ratio.

Increasing the profit margin:

Operating profit margin indicates how well we manage our company, as it’s calculating the
operating expenses such as salaries, rent, and equipment leases are variable costs rather
than fixed costs. We might have little control over direct production costs, such as the cost
of raw materials required to produce the products. However, our management team has a
great deal of discretion in areas such as how much we choose to spend on office rent,
equipment, and staffing. Therefore, a company’s operating profit margin is usually seen as a
superior indicator of the strength of a company’s management team, as compared to gross
or net profit margin. The operating profit margin also provides an insight into how well our
company performs in comparison to our competitors, in particular, how efficiently our
company manages its expenses to maximize profitability.
The items that makeup costs of goods sold include:
● Cost of items intended for resale
● Cost of raw materials
● Cost of parts used to make a product
● Direct labor costs
● Supplies used in either making or selling the product
● Overhead costs, like utilities for the manufacturing site
● Shipping or freight in costs
● Indirect costs, like distribution or sales force costs
● Container costs
1. Reduce cost of goods
Work with our suppliers to reduce our cost of goods sold. If we can negotiate a lower price, a
volume discount, or other cost-savings deal, we can reduce our expenses. Product
packaging, although often overlooked, is another contributing expense. Consider a
product-packaging design that is less expensive to save additional cost per item. Reducing
our cost increases the profit margin on our products if we keep our pricing at current levels,
increasing our income.
2. Improve inventory management
Always know the amount of products we have on hand, as well as how fast they can sell.
Conduct daily inspections every pre-opening, shift change, and closing time. Ask our
employees to stock-take and write down the amount of stock returned or broken at the end
of every shift. We can use a digital checklist management like Nimbly to perform reporting
and stock-taking easily and effectively. Good inventory management will help we make
better decisions around purchasing, sales, and marketing, allowing we to sell more products
and reduce the need for markdowns.

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3. Boost staff productivity
According to the Harvard Business Review, companies lose over 20% of their productive
capacity to organizational drag — “the structures and processes that consume valuable time
and prevent people from getting things done.” For that reason, we must evaluate our store
processes to ensure that they’re not slowing people down. The key is to come up with
procedures that can easily be replicated and implemented by our staff even when we’re not
around.
4. Automate specific tasks in our business
Another great way to streamline our operations is to automate specific tasks in our business.
By digitizing repetitive activities, we can reduce the time, manpower, and operating
expenses required to run our business. Go through all the tasks that we and our employees
complete day-to-day, and see if we can digitize any of them. Are there burdensome activities
that are consuming our team time? Do we have to re-enter any data from report to
spreadsheet or following up on issues resolution through various chat groups?
5. Increase average order value
Increase the basket size from shoppers that already buy from our store is a great way to
improve our profits. We’ve already succeeded in getting them to buy from our store; now go
and find ways to maximize their spending.
Start by finding products likely to be purchased together. Recommend relevant items when a
user has committed to purchase a product. We can also place our most profitable products
in the shop window and in the best area customers naturally go to in the store, or now on
the first page of our e-commerce. Another tactic is to put our best sellers and up-sells near
the counter for impulse buys to increase average order value. Recommend the relevant
items before customers check-out their purchase.
6. Retention, retention, retention
Do all we can to keep our customers purchasing from we. Perhaps we can better
communicate on how to use the product, or give them personalized promotion. Nurturing
our current customers eliminates or considerably reduces the acquisition or marketing cost
on that second and all following transactions.

Increase in Earnings per share:

The Earnings Per Share (EPS) is a key measure for a company’s profitability since it
represents the earnings of the business on a per-share basis. The EPS can be calculated by
dividing the total net income of a business within the measured time period by the number
of existing shares within the company.
Based on the formula of earnings per share, the only determining factors for an increasing
EPS can either be an increase in net income or a decrease in the total number of
outstanding shares. A higher net income figure will depend on increasing revenues or
lower costs that are associated with that revenue.

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1. Increase in Net Income
Here is the formula of Net Income:The net income figure is the end resulting profit of a
business. It’s essentially the amount of money that a company makes as a profit after
subtracting all costs and expenses that are associated with that revenue during the reported
time period.
Net income can either increase by
An increase in revenue. Revenue is the raw income that is generated by the business and its
operations. The revenue figure depends on the price of each sold product and the number
of products sold. A business can, for example, increase revenue by accomplishing more
sales.
A decrease in costs. All the money that had to be spent to generate that revenue and
operate the business costs and expenses that need to be subtracted accordingly. These costs
and expenses are generally grouped into several different categories such as costs of goods
sold (COGS), sales & marketing, research and development (R&D), taxes, and interest. Any
decrease in those categories will result in a decrease bottom line (net income) and thus a
higher EPS figure.
2. Decrease in the Total Count of Shares
Each company has a certain number of outstanding shares. The count of shares may always
change throughout the lifespan of a company. Since EPS represents the earnings of a
company for each share, a decrease in the total amount of shares will result in a higher EPS.

Page | 39
7. Conclusion

There is fluctuation in revenue throughout this time period. In 2017 it decreased, in 2018 and
2019 revenue increases but in 2020 there is decline in revenue which is not favourable for the
company. Gross profit is increasing over these years. But profit after taxation is fluctuating
over these years. In 2017 it is in negative then it increased in 2018 and 2019 but in
comparison to 2019 the profit after taxation in 2020 decreased. Net cash flow shows the
deteriorating position of a company because it is in negative and it’s not favourable for the
company. Current ratio is increasing means company is better and improving. There is
increase in quick ratio from 2017 to 2019 but decrease in 2020. There is slightly fluctuation
in price/earnings ratio but ratio is positive, in 2019 ratio is slightly decease as compared to
2018 but greatly increase in 2020. In 2017 market ratio is high, in 2018 ratio is positive but
decreasing, in 2019 ratio is declining as compared to 2018 but greatly decrease in 2020.
Inventory turnover is higher than 2018 but as compared to 2019 it’s have the higher inventory
turnover from all the previous and upcoming years. From the following years 2020 have the
lowest average collection period. There is decrease in average payment period. Its shows total
assets turnover (2017-2020) is close to 2 or 2.5 so for retailed sector it considered to be good.
Debt ratio is decreasing and it’s favourable for the company. As times interest earned ratio is
decreasing it means that it’s not favourable for the company. Decrease in fixed payment
coverage ratio is not favourable for the company. Gross Profit Margin is favourable for the
company. Because there’s an increase in gross profit margin. Operating Profit Margins

Page | 40
unfavourable for the company. Net Profit Margin is a bit unfavourable. Earnings per share are
low means it suffers from loss. Company has ups and downs in Return on total assets still it’s
OK. Company has ups and downs in Return on Equity but it’s OK.

7.1 Future program:

Considering the prevailing situation in the country the Board of Directors of the company has
decided to run the business of the factory as usual and that no major changes or new
investment whatsoever is proposed during the forthcoming year.

8. Appendix:
FIVE YEARS ANALYSIS :
8.1 Revenue:

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8.2 Gross Profit:

8.3 Net Profit:

Page | 42
8.4 Break up Value of shares:

Page | 43
8.5 Balance sheet:

8.6 Income statement:

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