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.

 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 paper provides a comprehensive financial analysis of GOODLUCK INDUSTRIES limited.,
milling of wheat and all kind of grains and wheat products production. The paper 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 paper 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.
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.
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. These ratios are:
Quick ratio: Same as the cash ratio, but includes accounts receivable as an asset. This ratio
explicitly avoids inventory, which may be difficult to convert into cash.
Current ratio: Compares all current assets to all current liabilities. This ratio includes
inventory, which is not especially liquid, and which can therefore mis-represent the liquidity
of a business.
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. The most common market
value ratios are as follows:
Book value per share: Calculated as the aggregate amount of stockholders' equity, divided
by the number of shares outstanding. This measure is used as a benchmark to see if the
market value per share is higher or lower, which can be used as the basis for decisions to
buy or sell shares.
Dividend yield: Calculated as the total dividends paid per year, divided by the market price
of the stock. This is the return on investment to investors if they were to buy the shares at
the current market price.
Earnings per share: Calculated as the reported earnings of the business, divided by the total
number of shares outstanding (there are several variations on this calculation). This
measurement does not reflect the market price of a company's shares in any way, but can
be used by investors to derive the price they think the shares are worth.
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.
A recommendation of something is the suggestion that someone should have or use it
because it is good.
 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
2.1 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 10
3.1 Vertical analysis and interpretation of Balance sheet/statement of Financial position 10
3.2 Vertical analysis and interpretation of Income statement 11
4. Ratio Analysis 13
4.1 Liquidity Ratio Analysis 13
4.1.1 Current Ratio 13
4.1.2 Quick Ratio: 14
4.2 Market Ratios Analysis 15
4.2.1 Price/earnings (P/E) Ratio: 15
4.2.2 Market/book (M/B) ratio: 16
4.3 ACTIVITY RATIO ANALYSIS: 18
4.3.1 INVENTORY TURNOVER: 18
4.3.2 AVERAGE COLLECTION PERIOD: 19
4.3.3 AVERAGE PAYMENT PERIOD: 20
4.3.4 TOTAL ASSETS TURNOVER: 21
4.4 Debt Ratio Analysis 22
4.4.1: Debt Ratio 22
4.4.2. Times Interest Earned Ratio: 23
4.4.3. Fixed-payement coverage ratio: 24
4.5: Profitability: 25
4.5.1 Gross Profit Margin 25
4.5.2 Operating Profits Margin 26
 4.5.3 Net Profit Margin 27
4.5.4 Earnings per Share(EPS) 28
4.5.5 Return on total Assets (ROA) 29
4.5.6 Return on Equity (ROF) 30
5. Summary 32
6. Recommendations 35
7. Conclusion 42
7.1 Future program: 43
8. FIVE YEARS ANALYSIS : 44
8.1 Revenue: 44
8.3 Net Profit: 45
8.4 Break up Value of shares: 45
9. Appendix 47
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.
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 .
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 you 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.
Horizontal analysis (also known as trend analysis) is a financial statement analysis technique
that shows changes in the amounts of corresponding financial statement items over a
period of time. It is a useful tool to evaluate the trend situations.
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 asstes for 2020 vs
2019 are calculated by substracting (assets) of 2020 from 2019 and divided by 2020.
Laibilities from column 2019 vs 2018 are calculated by (2019-2018)/2018, which is -8.88%.
The revenue reserve of 2020 vs 2019 is 0.64% , 2019 vs 2018 is 0.96% and 2018 vs 2017 is -
0.15%. 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.
2.2 Horizontal analysis and interpretation of Income statement /Profit and
Loss Statement:

Horizontal analysis is a procedure in financial analysis in which the amounts in financial

statements over a certain period of time is compared line by line in order to make related
decision.
For a horizontal analysis, you compare like accounts to each other over periods of time —
for example, accounts receivable (A/R) in 2017 to A/R in 2018. To prepare a vertical analysis,
you select an account of interest (comparable to total revenue) and express other balance
sheet accounts as a percentage. 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.

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.The taxation of 2020 vs 2019 is 0.00% , 2019 vs 2018 is -
46.10% and 2018 vs 2017 is -54.64%. Cost of good sold of (2020 vs 2019) is declining 4.13%
from 6.30 % of (2019 vs 2018).
Net income in (2018 VS 2017) is low as compared to (2019 vs 2018) and in (2020 vs 2019) it
becom 0%. 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. Its  is a procedure in
financial analysis in which the amounts in financial statements over a certain period of time
is compared line by line in order to make related decisions
3.Vertical Analysis
3.1 Vertical analysis and interpretation of Balance sheet/statement of
Financial position
An approach to the analysis of financial statements,called common-size, is where each item
of the statement is converted to a percentage using a significant total. This indicates 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.
For example, For the balance sheet, the total assets of the company will show as 100%, with
all the other accounts on both the assets and liabilities sides showing as a percentage of the
total assets number.
Above picture shows the vertical conversion of the comparative balance sheet . The vertical
analysis of balance sheet shows that the Property, plant & equipments in Year 2017 is 88.61
percent of total assets, which was calculated by dividing the Property, plant & equipments
by total assets. Cash & bank balances in Year 2017 is 0.97 percent of total assets, which was
calculated by dividing the Cash & bank balances by total assets . Deferred liabilities in Year
2017 is 8.86 percent of total assets, which was calculated by dividing the Deferred liabilities
by total assets. In vertical analysis of balance sheet, each balance sheet item shown for
Year 2017 is divided by total assets of Year 2017. We also done the same procedure for year
2018, 2019 and 2020. We can see how much debt our 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 your 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 our company is headed in. Such comparisons help identify problems for which you
can find the underlying cause and take corrective action.

3.2 Vertical analysis and interpretation of Income statement

A vertical analysis is used to show the relative sizes of the different accounts on a financial
statement.

When a vertical analysis is done on an income statement, it show the top line sales number as
100%, and every other account will show as a percentage of the total sales number. Net
income is sharply increased for over this time period. The vertical analysis also shows that in
year one company’s cost of goods sold is 98.34%, 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 have risen. Total expenses have
decreased which is logical, given the decreased cost of goods sold. Profit from operation
increases. 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 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.
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

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:

Current Ratio
2.50

2.00

1.50

1.00

0.50

0.00
2017 2018 2019 2020

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

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

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:

quick Ratio
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
2017 2018 2019 2020

Interpretation:
1. As the above graph indicates the increase in quick ratio form 2017 to 2019 but
decrease in 2020.
2. Quick ratio in 2017 is 4.10, in 2018 is 11.41 , in 2019 is 13.59 , in 2020 is 6.95.
3. A firm is able to satisfy its short-term obligations as they come due.
4. 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.
 5. A low or decreasing ratio generally indicates that the company has taken on
too much debt
6. The company's sales are decreasing may be that’s why quick ratio is low.
7. 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.
8. In year 2020, 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
2017 2018 2019 2020
Market price per
share of common 500 497 493 490
stock
Earnings per share -2.32 8.25 13.71 3.45
Price ratio -215.51 60.24 35.95 142.02

Graphical Representation:

Price Ratio
200
150
100
50
0
-50 2017 2018 2019 2020
-100
-150
-200
-250
Interpretation:
1. As the above graph indicates the deteriorating in price/earning ratio in 2017 but in
2018 ratio is positive, in 2019 ratio is slighly decease as compared to 2018 but
greatly increase in 2020.
2. Price ratio in 2017 is(215.51), in 2018 is60.24, in 2019 is 35.95 , in 2020 is
142.02.
3. A high PE ratio indicates that a stock is expensive, while a low PE ratio
suggests that it is cheap.
4. A negative PE ratio means that a stock has negative earnings. In other words,
the company was losing money in the past.
5. In 2017, A negative P/E ratio means the company has negative earnings or is
losing money. Even the most established companies experience down periods,
which may be due to environmental factors that are out of the company's
control.
6. 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.
7. 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

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:

Market/Book ratio
0.41

0.40

0.39

0.38
2017 2018 2019 2020

Interpretation:
1. As the above graph indicates the deteriorating in market/book ratio.
2. The market-to-book ratio helps a company determine whether or not its asset
value is comparable to the market price of its stock
3. 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.
4. Market/book ratio in 2017 is 0.41 ,in 2018 is 0.40, in 2019 is 0.40, in 2020 is
0.39.
 5. 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.
6. In 2018 , ratio Is good but declining as compared to 2017
7. In 2019 , when we contrast it with 2018 the ratio is reducing.
8. In 2020 market ratio is declining form all other years.
9. Graph is not showing favourable situation.
10. A low ratio could also indicate that there is something wrong with the
company. This ratio can also give the impression that you 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

  2017 2018 2019 2020

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
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.
Average payment period = Accounts payable/ Average purchases per day
= Accounts payable/ Annual purchases /365
  2017 2018 2019 2020
ACCOUNT 8195065 1407482 2276163 1887692
PAYMENT
AVERAGE
PURCHASES PER 761413503 834382608 868483406 873527205
DAY
AVERAGE PAYMENT
3.93 0.62 0.96 0.79
PERIOD

AVERAGE PAYMENT PERIOD

4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
2017 2018 2019 2020
 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
  2017 2018 2019 2020
SALES 786490279 843665617 896779683 859757469

TOTAL ASSETS 413575165 406059530 406360508 405097610

TOTAL ASSETS 1.90 2.08 2.21 2.12
TURNOVER

TOTAL ASSETS TURNOVER

2.30

2.20

2.10

2.00

1.90

1.80

1.70
2017 2018 2019 2020

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

  2017 2018 2019 2020

Total Liabilities 46,381,885 36,499,811 33,257,017 31,417,706
Total Assets 413,575,165 406,059,530 406,360,508 405,097,610
Debt Ratio 0.11 0.09 0.08 0.08
 Debt Ratio
0.12

0.10

0.08

0.06

0.04

0.02

0.00
2017 2018 2019 2020

Interpretation:
1. 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.
2. Debt ratio in 2017 is 0.11, in 2018 is 0.09, in 2019 is 0.08 and in 2020 is 0.08
3. Debt ratio is decreasing and it’s favourable for the company.
4. 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.
5. 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

  2017 2018 2019 2020

Earnings before
3,164,838
interest and 2,433,514 3,910,824 3,370,243
taxes
Interest 3,554 18,410 19,059 19,059

Times interest
684.73 212.43 176.83 166.05
earned ratio
 Times interest earned ratio
800.00

700.00

600.00

500.00

400.00

300.00

200.00

100.00

0.00
2017 2018 2019 2020

Interpretation:
1. As the above graph clearly indicates the decrease in times interesr earned ratio
throughout these years.
2. 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
3. As times interest earned ratio is decreasing it means that its not favourable for
the company.
4. 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)}]

  2017 2018 2019 2020

EBIT + Lease
2,718,014 4,115,688 4,130,876 3,779,406
payments
Interest + Lease
288,054 223,274 779,692 428,222
payments
Principal
payments + 33501806 31991501 28409302 26852678
preferred stock
 dividends*[1-1/T
]
Fixed payment
33501815.44 31991519.43 28409307.3 26852686.83
coverage ratio

Fixed payment coverage ratio

40000000

35000000

30000000

25000000

20000000

15000000

10000000

5000000

0
2017 2018 2019 2020

Interpretation:
1. As the above graph indicates the decrease in fixed payment coverage ratios.
2. Fixed payment coverage ratio in 2017 is 33501815.44, in 2018 is 31991519.43, in
2019 is 28409307.3 ans in 2020 is 26852686.83.
3. Decrease in fixed payment coverage ratio is not favourable for the company.
4. 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)

  2017 2018 2019 2020

 Gross Profit 13,035,216 16,615,649 17,512,095 18,957,572

Sales 786,490,279 843,665,617 896,779,683 859,757,469

Gross Profit Margin 0.02 0.02 0.02 0.02

Graphical Representation:
0.03
Gross Profit Margin

0.02

0.01

0.00
2017 2018 2019 2020

Interpretation
● Gross profit margin of 2020 is 0.0220.
● 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)

  2017 2018 2019 2020

Operating Profits 2,433,514 3,910,824 3,370,243 3,164,838

 896,779,68
Sales 786,490,279 843,665,617 859,757,469
3
Operating Profits
0.0031 0.0046 0.0038 0.0037
Margin

Graphical Representation:

Operating Profits Margin

0.0050
0.0045
0.0040
0.0035
0.0030
0.0025
0.0020
0.0015
0.0010
0.0005
0.0000
2017 2018 2019 2020

Interpretation
● Operating Profit Margin of 2020 is 0.0037.
● Company has a operating profit margin of 0.0038 in 2019, in 2018 it was 0.0046 and
in 2017 it's Operating Profit Margin was 0.0031.
● 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)

  2017 2018 2019 2020

Earnings -696,846 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
Net Profit -0.0009 0.0029 0.0029 0.0028
Margin

Graphical Representation:

Net Profit Margin

0.0035
0.0030
0.0025
0.0020
0.0015
0.0010
0.0005
0.0000
2017 2018 2019 2020
-0.0005
-0.0010
-0.0015

Interpretation
● Net Profit Margin of 2020 is 0.0028.
● Company has a Net profit margin of 0.0029 in 2019, in 2018 it was same 0.0029 and
in 2017 it was in minus 0.0009 means it suffers from loss.
● 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]
  2017 2018 2019 2020
Earnings available -696,846 2,473,955 2,586,704 2,381,299
for common
stockholders
Number of shares 300000 300000 300000 300000
of common
stockholders
Earnings per share -2.3 8.2 8.6 7.9
(EPS)

Graphical Representation:

Earnings per share (EPS)

10.0

8.0

6.0

4.0

2.0

0.0
2017 2018 2019 2020

-2.0

-4.0

Interpretation
● Earnings per share of 2020 is 7.9.
● Company has earnings per share of 8.6 in 2019, in 2018 it was 8.2 and in 2017 it was
in minus - 2.3 means it suffers from loss.
● It tells us that there's an increase in Net profit margin in 2019 after that it decreases.
● 2020's Net profit margin is less than 2019's.
● Company has ups and downs in earnings of share still its OK
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]
  2017 2018 2019 2020
Earnings -696,846 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 -0.0017 0.0061 0.0064 0.0059
Assets (ROA)

Graphical Representation:

Return on total Assets (ROA)

0.0070

0.0060

0.0050

0.0040

0.0030

0.0020

0.0010

0.0000
2017 2018 2019 2020
-0.0010

-0.0020

-0.0030

Interpretation
● Return on total assets in 2020 is 0.0059.
 ● Company has a return on total assets of 0.0064 in 2019, in 2018 it was 0.0061 and in
2017 it was in minus -0.0017.
● 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]
  2017 2018 2019 2020

Earnings -696,846 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 -0.0019 0.0067 0.0069 0.0064
Equity (ROF)

Graphical Representation:
 Return on Equity (ROF)
0.0080

0.0060

0.0040

0.0020

0.0000
2017 2018 2019 2020

-0.0020

-0.0040

Interpretation
● Return on Equity in 2020 is 0.0064.
● Company has a return on Equity of 0.0069 in 2019, in 2018 it was 0.0067 and in 2017
it was in minus -0.0019.
● 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

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:
Price ratio in 2017 is(215.51), in 2018 is60.24, in 2019 is 35.95 , in 2020 is 142.02. 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. In 2017, A negative P/E ratio means the company has negative
earnings or is losing money. Even the most established companies experience down periods,
which may be due to environmental factors that are out of the company's control.
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 you 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 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 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 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.
Profitability:
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. Company has a operating profit margin of 0.0038 in 2019, in 2018 it was
0.0046 and in 2017 it's Operating Profit Margin was 0.0031. 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
0.0029 in 2019, in 2018 it was same 0.0029 and in 2017 it was in minus 0.0009 means it
suffers from loss. 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 0.0064 in 2019, in
2018 it was 0.0061 and in 2017 it was in minus -0.0017. 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. Company has
a return on Equity of 0.0069 in 2019, in 2018 it was 0.0067 and in 2017 it was in minus -
0.0019. 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.
● 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 your utility use. You might find ways to limit power,
gas, or water consumption. Try turning down heating and cooling outside of business
hours.
 ● Reduce Insurance Premiums: You might be able to save money on your insurance
premiums.
● Reduce labour costs: You might be able to reduce business expenses by reducing
your 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: You aren’t limited to only reducing expenses to increase your net
profit. You can also increase how much revenue your business brings in. Find ways to sell
more of your products or services. Research ways to better advertise to your 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
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 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 your 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 your 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 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 you manage your company, as it’s calculating the
operating expenses such as salaries, rent, and equipment leases are variable costs rather
than fixed costs. You might have little control over direct production costs, such as the cost
of raw materials required to produce the products. However, your management team has a
great deal of discretion in areas such as how much you 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 your
company performs in comparison to your competitors, in particular, how efficiently your
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 your suppliers to reduce your cost of goods sold. If you can negotiate a lower
price, a volume discount, or other cost-savings deal, you can reduce your 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 your cost
increases the profit margin on your products if you keep your pricing at current levels,
increasing your income.
2. Improve inventory management
Always know the amount of products you have on hand, as well as how fast they can sell.
Conduct daily inspections every pre-opening, shift change, and closing time. Ask your
employees to stock-take and write down the amount of stock returned or broken at the end
of every shift. You can use a digital checklist management like Nimbly to perform reporting
and stock-taking easily and effectively. Good inventory management will help you make
better decisions around purchasing, sales, and marketing, allowing you to sell more
products and reduce the need for markdowns.
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, you must evaluate your
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 your staff even when you’re
not around.
4. Automate specific tasks in your business
Another great way to streamline your operations is to automate specific tasks in your
business. By digitizing repetitive activities, you can reduce the time, manpower, and
operating expenses required to run your business. Go through all the tasks that you and
your employees complete day-to-day, and see if you can digitize any of them. Are there
burdensome activities that are consuming your team time? Do you have to re-enter any
data from paper 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 your store is a great way to
improve your profits. You’ve already succeeded in getting them to buy from your 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. You can also place your 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 your e-commerce. Another tactic is to put your 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 you can to keep your customers purchasing from you. Perhaps you can better
communicate on how to use the product, or give them personalized promotion. Nurturing
your 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.
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.
7. Conclusion
1. Current ratio in 2017 is 1.01, in 2018 is 1.35 , in 2019 is 1.77 , in 2020 is 1.99.
Current ratio is increasing means company is better and improving. A firm is able to
satisfy its short-term obligations as they come due.
2. Quick ratio in 2017 is 4.10, in 2018 is 11.41 , in 2019 is 13.59 , in 2020 is 6.95.
There is increase in quick ratio form 2017 to 2019 but decrease in 2020. A low or
decreasing ratio generally indicates that the company has taken on too much debt
3. Price ratio in 2017 is(215.51), in 2018 is60.24, in 2019 is 35.95 , in 2020 is 142.02.
There is deteriorating in price/earning ratio in 2017 but in 2018 ratio is positive, in
2019 ratio is slighly decease as compared to 2018 but greatly increase in 2020.
4. 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, in 2018 ratio is positive but decreasing, in 2019 ratio is
declining as compared to 2018 but greatly decrease in 2020.
5. Inventory turnover in 2017 is 114.12 , 2018 is 58.61, 2019 is 264.36 and in 2020 is
23.32. Inventory turnover is higher than 2018 but as compared to 2019 its have the
higher inventory turnover from all the previous and upcoming years.
6. 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.
7. Average payment period for 2017 is 3.9, 2018 is 0.62 , 2019 is 0.96 and 2020 is
0.79. There is decrease in average payment period.
8. Total assets turnover of 2017 is 1.90, 2018 is 2.08, 2019 is 2.21 and 2020 is 2.12. Its
shows total assets turnover (2017-2020) is cloes to 2 or 2.5 so for retailed sector it
considered to be good.
9. Debt ratio in 2017 is 0.11, in 2018 is 0.09, in 2018 is 0.08 and in 2020 is 0.08. Debt
ratio is decreasing and it’s favourable for the company.
10. 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 its not
favourable for the company.
11. Fixed payment coverage ratio in 2017 is 33501815.44, in 2018 is 31991519.43, in
2019 is 28409307.3 ans in 2020 is 26852686.83. Decrease in fixed payment coverage
ratio is not favourable for the company.
12. Gross profit margin of 2020 is 0.0220. 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. It is favorable for the company. Because there’s an increase in gross profit
margin.
13. Operating Profit Margin of 2020 is 0.0037. Company has a operating profit margin
of 0.0038 in 2019, in 2018 it was 0.0046 and in 2017 it's Operating Profit Margin was
0.0031. It is unfavorable for the company.
14. Net Profit Margin of 2020 is 0.0028. Company has a Net profit margin of 0.0029 in
2019, in 2018 it was same 0.0029 and in 2017 it was in minus 0.0009 means it suffers
from loss. It is a bit unfavourable.
15. Earnings per share of 2020 is 7.9. Company has earnings per share of 8.6 in 2019, in
2018 it was 8.2 and in 2017 it was in minus - 2.3 means it suffers from loss.
16. Return on total assets in 2020 is 0.0059. Company has a return on total assets of
0.0064 in 2019, in 2018 it was 0.0061 and in 2017 it was in minus -0.0017. Company
has ups and downs in Return on total assets still its OK.
 17. Return on Equity in 2020 is 0.0064. Company has a return on Equity of 0.0069 in
2019, in 2018 it was 0.0067 and in 2017 it was in minus -0.0019. Company has ups
and downs in Return on Equity still its 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. FIVE YEARS ANALYSIS :
8.1 Revenue:

8.2 Gross Profit:

8.3 Net Profit:

8.4 Break up Value of shares:

9. Appendix