FINANCIAL

ACCOUNTING
Project report

KOHINOOR ENERGY
Areej Ali
(24652)

1
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KOHINOOR ENERGY LIMITED

About

Kohinoor Energy Limited (KOHE) was established in April 1994 with the intention of
contributing to the nation's economic growth through the production of energy. KOHE was
jointly created by Toyota Tsusho Corporation and Saigols Organization of Companies, a
renowned multi-industrial group in Pakistan, with paid-up capital of Rupees 1,695 million (an
eminent consortium of multi-industrial undertakings of Japan).
The competitors to be used in analysis will be:
• Hub Power Limited
• Nishat Power Limited
• Pakgen Power Limited

STATEMENT OF FINANCIAL POSITION

Non-Current Assets (NCA)

In order to begin this research, let's take a closer look at Kohinoor Energy Limited's non-
current assets. Non-Current Assets (NCA),
also known as fixed assets, are corporate NCA
assets that are difficult to convert to cash
and whose value will not be realized for at 4,000,000

3,000,000
least a year. The following graph displays
2,000,000
trends for Kohinoor Energy Limited's NCA
1,000,000
over a three-year period.
0
Property, plant, and equipment are 2021 2020 2019
Kohinoor 2,845,589 3,219,285 3,549,660
these assets. Due to idle fixed assets being
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sold off in 2019—possibly as a result of COVID—and the fact that they require a significant
investment, it took some time before replacement assets could be obtained once the
epidemic ended. As a relatively prevalent Non-Current Asset in the energy sector, this asset is
owned by almost all of the rivals.
Next, we have intangible assets. A physical form is absent from this type of assets. The
financial statement's notes suggest that computer software makes up Kohinoor Energy's
intangible assets. The fact that there is once again a negative trend indicates that the software
was either sold out or reduced, maybe as a result of accumulated amortization. While HUBCO
and Nishat Power both experienced a decline in their software trends from 2019 to 2020,
Pakgen Power does not have any intangible assets.
Third, we have deposits and long-term loans. This money is kept in a bank account for
a lengthy time and accrues interest during that time. 2019 sees modest levels of long-term
deposits, followed by sharp increases in 2020 and 2021. This asset has increased over the
past two years and will increase by 35.39% in 2021. Along with PKGP, which will see an
increase in 2021, HUBCO will also get an increase of 2.49%. Overall, we can say that the
industry had an increase in long-term deposits, with Kohinoor Energy experiencing the biggest
rise relative to its rivals although having the lowest quantity.

Current Asset
Any asset that can be reasonably expected to be sold, consumed, or expended through
regular business operations within the current fiscal year, operational cycle, or financial year is
referred to as a current asset in accounting. The following graph displays, over a three-year
period, the trends of the CA of Kohinoor Energy Limited:
TCurrent Assets are comprised of ‘stores, spares and loose tools’, ‘Stock in trade’,
‘Trade Recievables’, ‘Loans, advancements, deposits, prepayment and other recievables’,
‘cash’, and ‘bank’. According to the graph
the Current Assets of KOHE are simply
CA
increasing in 2020 and decreasing in 2021.
10,000,000
However, there are number of things that 8,000,000
6,000,000
are contributing to this increase and
4,000,000
decrease. 2,000,000
If the notes are consulted to check 0
2021 2020 2019
the trends of each of the current assets and Kohinoor 7,367,352 9,156,796 7,974,127
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get a better insight of what results in this overall increase and then decrease of CA, we will
observe the following:
Stores, spares and loose tools: The spare parts needed for the production process
include stores and spares. In general, they are regarded as inventory. PKGP and HUBCO
experienced a consistent decline in their stocks, spares, and loose tools throughout the course
of the three-year period, whereas Nishat experienced nearly constant values. Stores and
spares remained essentially constant.
Stock in trade: These are items that should be bought and sold right away. The financial
statement's notes show that this asset is made up of fuel, lubricating oil, and furnace oil. Due
to business uncertainty in the nation, KOHE stock in trade asset started to decline in 2019 and
fell to an all-time low in 2020. It then began to rise again in 2021, reaching its highest level in
four years thanks to increased production. This was also true for KOHE's competitors as the
power industry as a whole experienced a boom in 2021, with HUBCO holding the largest share.
Trade Recievables: It refers to money that a company owes other companies for the
goods and services those companies have provided. Regarding Trade Receivables, KOHE is
on an upswing. It goes up by 9.81% in 2019, increases 13.02% in 2020, and falls 49.10% in
2021. The notes state that trade receivables worth 430,517 rupees were deducted from the
total debt receivable and added back to arrive at the current amount. While PKGP sees a
decline in 2021, Nishat Power and HUBCO both experience notable rises in their trade debt
assets. The company with the largest quantity of trade debt receivables is Kohinoor Energy
once more.
Loans, advancements, deposits, prepayment and other recievables: are liquid assets
created to offer a safe harbor for cash while it waits to be deployed into possibilities with higher
returns. These short-term assets, according to the notes for KOHE, consist of cash held in
mutual funds and term deposits. Throughout the year, additions and redemptions are made to
mutual funds. The loans are to suppliers and employees, according to the notes. One of its
rivals, PKGP, has no short-term investments. Moreover, like Nishat, HUBCO did not have any
short-term investments prior to 2021 but added them afterwards. The company with the most
short-term investments is HUBCO.
Cash and Bank balance: This represents the company's cash on hand and cash in the
bank. The financial statement's notes say that KOHE has funds in current and savings accounts
with both conventional and Islamic (shariah) banking systems. Of the 330,464,916 rupees total,
it had 1,930,890 rupees in cash on hand. The Cash and Bank Balances keep rising during the
course of the three years, reaching 1792370 at 3011% in 2021. The business will benefit from
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this upward trend because it suggests more growth and liquidity, and operations will also help
to keep the current ratio stable. In contrast to PKGP, which saw a 358.56% growth in 2021,
Nishat Power and HUBCO saw their balances decline. The largest balance belongs to KOHE,
as anticipated.
With that covered, let’s look at some ratios pertaining to current assets.

CURRENT AND QUICK RA TIO

current ratio quick ratio

5 5
4 4 Kohinoor
3
3 Hubco
2
1 2 Nishat
0
1 Pakgen Power
2021 2020 2019
0
Kohinoor Hubco Nishat Pakgen Power 2021 2020 2019

The Current ratio is a liquidity ratio that measures a company’s ability to pay short-term
obligations or those due within one year. As you can see, KOHE has a Current ratio of greater
than 1 and seems to be on par with its other competitors except Nishat Power and somewhat
PKGP, which are miles above everybody indicating smooth liquidity, especially in 2021.
The Quick Ratio assesses a company's capacity to satisfy its short-term obligations
using its most liquid assets and serves as an indicator of its short-term liquidity position. As
long as the Quick Ratio remains over 1, which it does with KOHE, the company will be able to
meet its obligations without using inventory. This should be considered a precaution, and KOHE
should make use of it to strengthen its market position and investor reputation. Other rivals,
excluding HUBCO, are following a similar trend. Both, Nishat Power and Pakgen Power have
an increasing quick ratio which is also much higher than KOHE throughout three-year period.
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ASSET TURNOVER AND RETURN ON ASSETS RATIO

asset turnover Return on Assets

80 20
60 Kohinoor 15 Kohinoor
Hubco Hubco
40 10
Nishat Nishat
20 5
Pakgen Power Pakgen Power
0 0
2021 2020 2019 2021 2020 2019

Since Kohinoor Energy has more assets than its rivals, as we've already stated, its asset
turnover is undoubtedly very high. In this aspect, it outperformed the opponents, with HUBCO
having a ratio that was one-fourth that of Kohinoor and PKGP having almost same ratio
as Nishat Power. An asset turnover ratio shows how successfully a business has managed
the assets to produce revenue. The more effectively a corporation uses its assets to generate
revenue, the greater its asset turnover ratio. With a return of 14.96% in 2021, Pakgen Power is
presumably the most effective in that regard.

Equity
On a company's balance sheet, equity is the ownership interest of the shareholders.
The authorized share capital comes first. The maximum number of shares that a company is
legally permitted to issue or offer in accordance with its corporate charter is known as
authorized share capital. The authorized share capital for all 3 years, according to the financial
statement's notes, was 1700,000 shares.
Next up we have issued, subscribed, and paid up capital. Issued Occasionally, is the Issue
Capital by the company. When members subscribe for the company's shares, subscribed
capital grows. The total sum of funds received from shareholders for shares issued is known
as paid-up share capital. They are referred to as share capital as a whole. The share capital of
KOHE has been purposefully held constant over a period of three years at 1694,586 thousand
rupees.
The next category is unallocated profit, which is also referred to as retained earnings of a
business and has not been set aside for a particular use. The following graph displays the
change in total equity over a 4-year period. The majority of it stayed the same, although there
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were little increases and decreases, such as an increase of up to 18% in 2020, the greatest
increase ever, and a subsequent fall of up to 9% in 2021.

total equity Return on equity

40
7,000,000
30 Kohinoor
6,500,000
Hubco
20
6,000,000 Nishat
10
5,500,000 Pakgen Power
2021 2020 2019 0
Kohinoor 6,072,699 6,542,591 5,870,624 2021 2020 2019

Non-Current Liabilities
The business's non-current liabilities are the next topic we'll cover. These are debts that
a business has that won't be paid off for another accounting year.
In 2019 and 2020, Kohinoor Energy had no long-term liabilities.
The long-term financing is secured first. It's
a long-term security, as the name implies, Non Current Liabilities
typically with a payback duration longer
30,000
than three years. Nishat Power, one of 25,000
20,000
KOHE's rivals, had long-term finance for all
15,000
three years, although HUBCO only has it 10,000
5,000
for 2021, like Kohinoor, and PKGP only 0
2021 2020 2019
has it for 2020, so each rival has it in a Kohinoor 28,560 0 0
different way. A smaller payment for KOHE
is advantageous because it lowers its financial responsibilities and maintains business risk to
a minimum.
The next category is lease liabilities. The cost of the lease-related payments is known
as a lease liability. Here, the two-year trend is equally good and upward, with a rise of 26.99%
in 2021. Only in the HUBCO Financial Statement does this liability appear, and it does so with
a decline from the prior year. Inferred from this is that HUBCO is settling its lease liabilities and
lessening its financial commitments.

Current Liabilities
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We can now turn to Current Liabilities to finalize the statement of financial positions. The short-
term financial commitments of a business that are due within one accounting year are known
as current liabilities. The trend is depicted in the graph below:
According to the graph the Current
current liabilities
Liabilities of KOHE are simply increasing
in 2020 and significantly decreasing in
6,000,000
5,000,000 2021. However, there are number of
4,000,000
things that are contributing to this
3,000,000
2,000,000 increase and decrease. These include,
1,000,000 ‘trade and other payables’, ‘accrued
0
2021 2020 2019 finance cost’, ‘short term finances’, and
Kohinoor 4,111,682 5,833,490 5,653,163
‘unclaimed dividend’. We will discuss the
impacts of each of these on the total Current Liabilities now.
Trade and Other Payables: We shall begin with Trade and Other Payables first. Trade
payables are debts that must be paid for products or services that a company has bought from
suppliers normally. According to the notes to the financial accounts, this liability is made up of
trade creditors, customer advances, accumulated liabilities, and provident fund, among other
things. KOHE's trade payables had been increasing, they increased by 362.29% in 2020 and
52.48% in 2021. As a result, there are now more trade creditors, which suggests more
purchases and ultimately higher cost of items offered. The trend in trade payables for
competitors is the same, suggesting that all of them made bigger purchases throughout the
year.
Accrued finance cost: We now move on to accrued finance cost. The interest on a loan
or other financial obligation that has accrued but has not yet been paid out is referred to as
accrued interest. The notes state that in 2020, this included running finance on short-term loans
and markup on related party loans. In 2021, it only contains the latter. This responsibility is on
the rise and is substantially rising year after year. In 2021, it climbed by 221.32%. In 2021,
HUBCO had reduced this obligation by 32.02%, whereas PKGP had kept it unchanged.
Short term finances: The third option is short-term finance. These loans, as the name
implies, are meant to be repaid within a year. With a massive 302.29% increase in 2021, they
continue the previous obligations' upward trend. Both HUBCO and Nishat's short-term
borrowings are on the similar track, with Nishat's rising by around 400% in 2021.
Unclaimed dividend: We also have a loan from a linked party and an unclaimed dividend.
Unclaimed dividends are those that are being paid out by the corporation to shareholders but
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have not yet been taken or claimed. Unclaimed dividends are a problem for the corporation
because the company must pay them as and when they are requested. The obligation for
unclaimed dividends at KOHE decreases with time, falling by 37% in 2020 and then by 10.51%
in 2021. HUBCO and PKGP are examples of this pattern. Loans from connected parties are on
the decline and will cease to exist in 2021.

That concludes our discussion of the Statement of Financial Position's main

components. The Profit and Loss Account (Statement of Comprehensive Income) will now be
discussed.

PROFIT AND LOSS STATEMENT

SALES

16218296
16929085
2019
58128888
7,504,738

12185385 Pakgen Power

15581918 Nishat Power
2020
48321335
Hubco
7,548,782
Kohinoor

10645671
11738487
2021
54639435
6,752,330

0 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000

Sales is the first line item on this list. By 2021, in the industry of the four companies,
HUBCO has the largest sales at roughly 54.6 million Rupees, followed by Nishat with 11.7
million, PKGP with 10.6 million, and KOHE with the lowest sales at 6.7 million.
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COGS
13792637
10584021
2019
36640036
5,946,315

7618200 Pakgen Power

5390640 Nishat Power
2020
17830929
Hubco
5,391,882
Kohinoor
5078317
7989362
2021
21768718
4,983,277

0 10,000,000 20,000,000 30,000,000 40,000,000

The cost of sales for the power sector follows, where it is evident that Kohinoor has the
lowest cost of sales compared to its rivals while HUBCO again has the greatest proportion.

gross profit
2425659
4997897
2019
21488852
1,558,423

4567185 Pakgen Power

6347847 Nishat Power
2020
30490406
2,156,900 Hubco
Kohinoor
5567354
3443209
2021
32870717
1,769,053

0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000

COGS are subtracted from Sales in order to get Gross Profit. The gross profit margin
varies across products and sectors and is often used to measure the profitability of a single
product. It indicates how efficiently you are using your resources to produce your goods or
deliver your services. Here again HUBCO has highest gross profits, mostly because of its high
number of sales. It is followed by Nishat Power, Pakgen and Kohinoor respectively for 2019
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and 2020. However, in 2021, Pakgen has higher gross profit as it surpasses Nishat power.
Kohinoor is still placed last in terms of Gross Profit amount.

Gross Profit Margins

70

60

50
Kohinoor
40 Hubco
30 Nishat

20 Pakgen Power

10

0
2021 2020 2019

Kohinoor seems to be doing really bad if we just look at the amount of Gross Profits. To
get better insights of how a company is doing in respect to Gross Profit, according to their sales
we calculate gross profit margins by dividing the gross profits by number of net sales. This
shows that Kohinoor is not doing so bad as compared to its rivals and HUBCO is not beating
them by that huge margin as shown in the Gross Profit graph.

operating profit
2251134
4723774
2019
19882858
850,445

4338402 Pakgen Power

6011206 Nishat Power
2020
28990616
1,866,975 Hubco
Kohinoor
5351245
3140986
2021
31491727
1,473,553

0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000

The operating profit (or operating income) can be found on the income statement and
calculated as revenue - cost of goods sold (COGS) - operating expenses - depreciation -
amortization. It shows you how much money you're making before you have to pay for things
that are beyond your control, such as interest payments and taxes. The trend for these is the
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same for all the companies as it was for Gross Profit.

Operating Profit Margins

60

50

40 Kohinoor
Hubco
30
Nishat
20 Pakgen Power

10

0
2021 2020 2019

This is further elaborated by using operating profit margins, which are calculated by dividing
operating income by revenue. The trend for this is again same as gross profit margin excluding
Pakgen’s operating profit margin in 2020, which was less than Kohinoor by a very small margin
i.e. 23.89 for Pakgen and 24.73 for Kohinoor, even though the amount of Operating Profit was
much larger i.e. 4.34 million for Pakgen and 1.86 million for Kohinoor.

Net Profit
1485141
3769549
2019
11240837
551,477

2911041 Pakgen Power

4870585 Nishat Power
2020
25044209
1,036,658 Hubco
Kohinoor
4411282
2681134
2021
33688086
1,199,421

0 10,000,000 20,000,000 30,000,000 40,000,000

A measure of net income generation is net profit. It is a critical component of assessment

since it reveals if the business can make enough money from its sales and whether operational
and overhead expenditures are kept in check. If these factors are not taken into account when
evaluating the company's financial health, it is extremely detrimental.
Here, we can see that HUBCO, which also had the greatest cost of sales, had the largest
net profit. Nishat, PKGP, and Kohinoor were the next three companies. This demonstrates that
HUBCO is the most prosperous business in its sector.
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The study of the profit and loss statement is now complete. The statement of cash flows
analysis is the final step.

STATEMENT OF CASHFLOW

Cash Flow statement is a type of financial statement that gives total information about
all of the cash inflows a business makes from continuing activities and outside investment
sources. It also includes any cash outflows made within a specific time period to cover
investments and business expenses.
The first line of business here is Cash Flows from Operating Activities. Here we have
Cash generated from operating activities. In the notes to the financial statement, adjustments
for non-cash items and changes in working capital had been made to get to this figure. Then
taxes, which declined by 15.33% in 2021, donations, staff gratuity and long-term deposits
adjustments were made. All of these were subtracted to bring us to the figure for Net Cash used
in operating activities.
This figure is the lowest figure in the 3-year period. It is a negative figure implying that
the company has more outflows than inflows when it comes to operating activities. When
comparing to its competitors, we
Operating Profit Margins
can see that Nishat Power has a
positive net cash from operating 60
50 Kohinoor
activities figure, implying more 40
Hubco
30
inflows than outflows. PKGP also Nishat
20
has a consistently positive figure, 10 Pakgen Power
0
once again implying smooth 2021 2020 2019
inflows in operating activities.
HUBCO is in the same boat as KOHE in that it has a negative figure in both 2020 and 2021,
implying more outflows than inflows.
Next up, we have the Cash Flows from Investing activities section. Cash flows from
investing activities is a section of the cash flow statement that shows the cash generated or
spent relating to investment activities. Investing activities include purchases of physical assets,
investments in securities, or the sale of securities or assets. The line items present here are:
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Purchase of property, plant and equipment, proceeds from disposal of property, plant and
equipment, Purchase of intangible assets, Investment in shares of the Subsidiary, Short term
investment, Profit received on short term investment and Recovery of long-term deposits.
All of these items are self-explanatory and do not require much explanation. Ultimately,
the addition and subtraction of these items leads us to the Net Cash Used in investing activities
figure. This figure follows a declining trend with a slight improvement in 2020 of 69.87% but
then further decreases by 1538.01% in 2021. Its figure in 2021 is the worst it has ever been
and is obviously a negative figure. Nishat Power too has a negative figure but better than KOHE
and HUBCO are in the same boat.
Next, we move on to Cash Flows from Financing Activities. Cash flow from financing
activities (CFF) is a section of a company's cash flow statement, which shows the net flows of
cash that are used to fund the company. Financing activities include transactions involving
debt, equity, and dividends. This section contains many line items which are again self-
explanatory or already discussed such as long-term loans received, long term loans paid,
dividends paid, finance costs paid etc.
All of this is summed up to generate Net cash from financing activities. The figures for
this in the 3-year period follow a positive trend with a 1614.03% increase in 2021. These figures
are positive implying cash inflows rather than outflows. This figure for Nishat Power and
HUBCO is negative whereas HUBCO is positive. In this regard, KOHE has done better than
the competition.
Ultimately, the Net Cash used in operating activities and financing activities is subtracted
from the Net cash from financing activities figure leading to an overall Net decrease in Cash
and Cash equivalents. This figure has been consistently negative for KOHE with improvements
in 2019 and 2020, but these improvements are then faced with further decline of -2093.60% in
2021. HUBCO Figure declines by about 98% but maintains to be positive. HUBCO also has a
positive figure but Nishat Power has a negative one.
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New Concepts Learned

• Market Risk: The risk of incurring losses due to change in exchange rates, interest rates, or
market conditions such as recession. The risk is associated to external factors because
company cannot change the market situation on their own. And the risk cannot be eliminated
through diversification.
• Interest Rate Risk: The risk of the future cash flows of an investment being fluctuated because
of the changes in interest rates in the market. The risk is associated to external factors as the
market situations are uncontrollable.
• Capital Risk Management: The risk of managing the capital to safeguard the company’s ability
to provide higher returns and remain stable to operate in foreseeable futures. The risk is
associated to internal factors as it depends upon the management’s decisions.
• Reimbursement: It is the compensation paid by a company for overpayment made by
management or another party, or out of pocket expenses incurred
• Risk of Counterfeit products: The risk of reputation and loss of market share because of
company’s products being copied or smuggled. The risk is associated to external factors by
launch of competitor’s product in the market.
• Liquidity Risk: The risk of incapability to meet financial obligations of the company when they
are due. The risk is associated to internal factors because it will be caused due to
mismanagement of cash flows.
• Currency Risk: The risk that the company’s return will be negatively affected by the currency
devaluation. The risk is associated to external factors by current account deficit and currency
devaluation.
• Code of Business Conduct: The code of business conduct is the basis for ethical conduct at
a company which employees need to follow. The code incorporates Company’s values and
expectations.
• Legal and Regulatory Risk: The risk of non-compliance with laws and regulations, and
negatively affected by imposition of new laws. The risk is associated to external factors because
of imposition of new laws.
• Credit Risk: The risk of losing the payment from creditors because of their inability to pay off
their debts. It is estimated by checking the creditors credit history and ability to pay the loan as
it cannot be calculated. The risk is associated to external factors as it is up to the financial
position of the borrower.
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• Catastrophic Risk and Loss of Assets: The risk of operations to be disrupted due to natural
disaster. This risk is associated to external factors because it is natural disaster.