Profitability

Profitability is the ability to generate earnings as compared to its expenses and other relevant
costs incurred during a specific period of time. For most of these ratios, having a higher value
relative to a competitor's ratio or the same ratio from a previous period is indicative that the
company is doing well.

Net Profit Margin

This ratio gives a measure of net income rupees generated by each rupee of sales. It is desirable
to be high.

Net Profit Margin= Net income before noncontrolling interest, equity income and non recurring items

Net Sales

For Mahmood Textiles

578199790
2010 =
8135551381

= 7%
1123428617
2011 =
15133883247

= 7.4%
474653358
2012 =
14145533660

=3.36%

Interpretation
NPM for Mahmood textiles is showing a trend firstly increasing from 2010-2011 and then again
decreasing in 2012. The possible reason for this trend is due to the fluctuations in the operating
income because of the expenses and other operating income.
For Maqbool Textiles
88978899
2010 =
2183978491

=4%
105117654
2011 =
3970775521

=2.69%
126270919
2012 =
3421881369

= 3.7%

Interpretation
If we see the trend of Maqbool textiles it is decreasing in year 2011 as compared to 2010 while
again increasing in 2010. The reason of this decrease and then again increase is operating
income decreased in 2011 and then again increased in 2012 and this is because of the also that
also fluctuated in these three years.

Companies 2010 2011 2012

Mahmood 7% 7.4% 3.36%
Maqbool 4% 2.69% 3.7%
 8%

7%

6%

5%

4% Mahmood
Maqbool
3%

2%

1%

0%
2010 2011 2012

Interpretation
If we compare the NPM of both the companies then we can see that Maqbool Textiles has low
NPM than Mahmood textiles. The reason is Maqbool Textiles has low sales as compared to
Mahmood Textiles.

Total Asset Turnover

This ratio measures the activity of the assets and the ability of the firm to generate sales
through the use of the assets. A lower turnover ratio tells that the company is not using its
assets optimally.
Net Sale s
Total Asset Turnover =
Average Total Assets

For Mahmood Textiles

8135551381
2010 =
4581542757

= 1.77 times
15133883247
2011 =
5876866789

= 2.6 times
141453660
2012 =
6848068223

= 2 times
Interpretation
If we see the trend it shows that Mahmood textiles have increasing trend from 2010 to 2011
and then decreasing again from 2011 to 2012. There are two main reasons of this trend for
Mahmood. One reason is increase in construction in progress from 2010 to 2011 and then
decreasing again from 2011 to 2012. Other reason is increase in long term investment from
2010 to 2011 and then decreasing again from 2011 to 2012.

For Maqbool Textiles

2183978491
2010 =
1176199104

= 1.86 times
3970775521
2011 =
1098735439

= 3.61 times
3421881369
2012 =
1352903901

= 2.5 times

Interpretation
If we see the trend it shows that Maqbool textiles have increasing trend from 2010 to 2011 and
then decreasing again from 2011 to 2012. Maqbool textiles have also the same reason as
Mahmood Textiles have. One reason is increase in construction in progress from 2010 to 2011
and then decreasing again from 2011 to 2012. Other reason is increase in long term investment
from 2010 to 2011 and then decreasing again from 2011 to 2012.

2010 2011 2012

Mahmood 1.77 2.6 2
Maqbool 1.86 3.61 2.5
 4

3.5

2.5

2 Mahmood
Maqbool
1.5

0.5

0
2010 2011 2012

Interpretation
But still it shows that both the companies are using their assets efficiently. If we compare both
companies with each other we can see that Maqbool Textiles is using its assets more efficiently
as compared to Mahmood textiles.

Return on Assets

Return on assets measures the firm’s ability to utilize its assets to create profits by comparing
profits with the assets that generate the profits. The only common rule is that the higher return
on assets is, the better, because the company is earning more money on its assets. A low return
on assets compared with the industry average indicates inefficient use of company's asset
Net Income before Noncontrolling Interest ∧Nonrecurring items
ROA =
Average Total Assets

For Mahmood Textiles

578199790
2010 =
4581542757
 = 12.6%
1123428617
2011 =
5876866789

= 19%
474653358
2012 =
6848068223

= 7%

Interpretation
ROA for Mahmood group shows that it is increasing from 2010 to 2011 and again decreasing
from 2011 to 2012. The reason of this increase and then decrease is net income which is
showing the same trend as the ratio. It’s because of other operating income which is higher in
2011.

For Maqbool Textiles

88978899
2010 =
1176199104

= 7.56%
105117654
2011 =
1098735439

= 9.6%
126270919
2012 =
1352903901

= 9.3%

Interpretation
If we talk about Maqbool textiles it shows that ROA increasing from 2010 to 2011 and then
slightly decreasing from 2011 to 2012. All these distortions are because of changes in net
income.

Companies 2010 2011 2012

Mahmood 12.6% 19% 7%
Maqbool 7.56% 9.6% 9.3%

20.00%

18.00%

16.00%

14.00%

12.00%

10.00% Mahmood
Maqbool
8.00%

6.00%

4.00%

2.00%

0.00%
2010 2011 2012

Interpretation
While comparing both the companies we can see the graph which is depicting that Mahmood
group is utilizing its assets more efficiently than Maqbool Textiles to create profits. Mahmood
group has more assets than Maqbool textiles. So the ROA is also higher for it.

Dupont Analysis

Mahmood Group

Year Return on Assets = Net profit Margin × Total Asset Turnover

2010 12.6% = 7% × 1.7
2011 19% = 7.4% × 2.6
2012 7% = 3.36% × 2
Maqbool Textiles

Year Return on Assets = Net profit Margin × Total Asset Turnover

2010 7.56% = 4% × 1.86
2011 9.6% = 2.6% × 3.61
2012 9.3% = 3.74% × 2.5

Interpretation
This shows that increase or decrease in NPM use to cause variations in ROA. While asset
turnover also shows that assets are generating how much revenues.

Operating Profit Margin

The Operating Income Margin gives an idea of how much a company makes earning (before
interest and taxes) on each rupee of sales. Operating margin shows the profitability of sales
resulting from regular business. Operating income results from ordinary business operations
and excludes other revenue or losses, extraordinary items, interest on long term liabilities and
income taxes.
operating Income
Operating Income Margin =
Net Sales

For Mahmood Textiles

933129406
2010 =
8135551381

= 11%
1604443550
2011 =
15133883247

= 10.6%
1011935716
2012 =
14145533660

= 7.1%
Interpretation
Operating income margin is decreasing from 2010 to 2012. The reason of this ratio is because of
decreasing net income generated from operations which is fluctuating due to the fluctuating
sales and other operating income.

For Maqbool Textiles

−86432944
2010 =
2183978491

= -4%
−113476908
2011 = 3970775521

= -3%
−129791203
2012 = 3421881360

= -4%

Interpretation
While the operating income margin of Maqbool Textiles is negative because the revenue
generated from sales are less than the expenses.

2010 2011 2012

Mahmood 11% 10.6% 7.1%
Maqbool -4% -3% -4%
 12%

10%

8%

6%

4%
Mahmood
Maqbool
2%

0%
2010 2011 2012
-2%

-4%

-6%

Interpretation
Graph shows that sales are generating income for Mahmood textiles but have the declining
trend because of decreasing sales and increased administrative expenses. While Maqbool
textiles has negative OPM.

Operating Asset Turnover

This ratio measures the ability of operating assets to generate sales rupees.

Net Sales
Operating Asset Turnover =
average operating assets

For Mahmood Textiles

8135551381
2010 =
4669991879

= 1.74 times
 15133883247
2011 = 5790509759

= 2.61 times
14145533660
2012 = 6791870185

= 2 times

Interpretation
This ratio for Mahmood group shows that it is first increasing and then decreasing. The reason
of this trend is the net sales and operating assets which are increasing from 2010 to 2011 and
then again decreasing from 2011 to 2012.

For Maqbool Textiles

2183978491
2010 = 702168856

= 3.1 times
3970775521
2011 = 678535462

= 5.8 times
3421881360
2012 = 659728005

= 5.1 times

Interpretation
Maqbool textiles have also the same trend of this ratio as of Mahmood textiles that is first
increasing and then decreasing. Both the companies have same reason of this trend that is the
net sales and operating assets which are increasing from 2010 to 2011 and then again
decreasing from 2011 to 2012.

2010 2011 2012

Mahmood 1.74 2.61 2
Maqbool 3.1 5.8 5.1

4
Mahmood
3 Maqbool

0
2010 2011 2012

Interpretation
If we compare both companies with each other graph shows that Maqbool textiles is using its
operating assets more efficiently than Mahmood Group to generate revenues.

Return on Operating Assets

The return on operating assets measurement focuses attention on only those assets used to
generate revenue. It shows that how much operating profits are contributing to generate sales.
Operating Income
Return on Operating Assets =
Average Operating Assets

For Mahmood Textiles

933129406
2010 =
4669991879

= 20%
 1604443550
2011 =
5790509759

= 28%
1011935716
2012 =
6791870185

= 15%

Interpretation
The ratio is clearly showing the trend that is first increasing from 2010 to 2011 then again
decreasing from 2011 to 2012 for Mahmood Group. This is because of variations in operating
income.

For Maqbool Textiles

−86432944
2010 =
702168856

= -12.3%
−113476908
2011 =
678535462

= -16%
−129791203
2012 = 659728005

= -19%

Interpretation
But the Maqbool Group’s ratio shows that the company is going in loss consistently and
operating assets are not even able to generate enough revenues to meet the expenses.

Companies 2010 2011 2012

Mahmood 15% 28% 15%
Maqbool -12.3% -16% -19%
 40.00%

30.00%

20.00%

10.00%
Mahmood
Maqbool
0.00%
2010 2011 2012

-10.00%

-20.00%

-30.00%

Interpretation
Graph shows that Mahmood group has fluctuating trend as mentioned earlier but Maqbool
textiles has negative return on operating assets means going totally in loss.

Dupont Analysis
Mahmood Group

Year Return on Operating = Operating Income × Operating Asset

Assets Margin Turnover
2010 20% = 11% × 1.74
2011 28% = 10.6% × 2.61
2012 15% = 7.1% × 2

Maqbool Textiles

Year Return on Operating = Operating Income × Operating Asset

Assets Margin Turnover
2010 -12.3% = -4% × 3.1
2011 -16% = -3% × 5.8
2012 -19% = -4% × 5.1
Interpretation
This dupont analysis shows a minor increase and decrease in operating income margin and
operating asset turnover results in significant changes in return on operating assets. While
negative operating income margin results in negative return on operating assets for Maqbool
textiles.

Sales to Fixed Assets

This ratio measures the firm‘s ability to make productive use of its property, plant and
equipment by generating sales rupee. Since construction in progress does not contribute to
current sales, it should be excluded from net fixed assets.
Net Sales
Sales to Fixed Assets= Assets¿
Average Net ¿

For Mahmood Textiles

8135551381
2010 = 1656611050

= 4.9 times
15133883247
2011 =
1949457601

=7.7 times
14145533660
2012 =
2305419475

= 6.1 times

Interpretation
Ratios show the trend for Mahmood Group that is first increasing and then decreasing. The
company has the reason of this trend for sales to fixed assets ratio that is the net sales which
are increasing from 2010 to 2011 and then again decreasing from 2011 to 2012.

For Maqbool Textiles

 2183978491
2010 = 702168856

= 3.1 times
3970775521
2011 = 678535462

= 5.8 times
3421881360
2012 =
659728005

= 5.1 times

Interpretation
This ratio for Maqbool textiles shows the same trend as for Mahmood group that is first
increasing and then decreasing. Both the companies have same reason of this trend for sales to
fixed assets ratio that is the net sales which are increasing from 2010 to 2011 and then again
decreasing from 2011 to 2012.

2010 2011 2012

Mahmood 4.9 7.7 6.1
Maqbool 3.1 5.8 5.1
 9

5
Mahmood
4 Maqbool

0
2010 2011 2012

Interpretation
If we compare both the companies with each other we can see that Maqbool Textiles has low
sales to fixed assets ratio as compared to Mahmood Group because of the low sales in
comparison of Mahmood Group.

Return on Investment

ROI applies to ratios measuring the income earned on the invested capital. These types of
measures are widely used to evaluate enterprise performance. Since return on investment is a
type of return on capital, this ratio measures the ability of the firm to reward those who
provide long term funds and to attract providers of future funds.

Net Income+ Interest Expense (1−T )

Return on Investment=
Average ¿¿

For Mahmood Textiles

882917654
2010 = 2752548495
 = 32%
1547922977
2011 = 3722084134

= 41%
828376656
2012 =
4469126827

= 18.5%

Interpretation
This ratio for Mahmood textiles is firstly inceasing and then decreasing. This trend is because of
variations in net income.

For Maqbool Textiles

−2906522759
2010 = 355687281

= -8.17%
−232427112
2011 = 454374991

= -5.1%
4165469664
2012 = 528383140

= 7.9%

Interpretation
Maqbool Textiles has negative ROI in first two years due to negative interest and taxation
expense and lower income while in 2012 due to low tax rate and finance cost it becomes
positive but still very low as compared to Mahmood Group.

2010 2011 2012

Mahmood 32% 41% 18.5%
Maqbool -8.17% -5.1% 7.9%

50%

40%

30%

20%
Mahmood
Maqbool
10%

0%
2010 2011 2012

-10%

-20%

Interpretation
The graph shows that Maqbool textiles has very low return on investment as compared to
Mahmood group as it is going in loss for last few years.

Return on Equity

The ROTE measures the return to both common and preferred stockholders.

net income−dividends
Return on total Equity= =
average total Equity

For Mahmood Textiles

578199790
2010 = 1980586428

= 29%
 1123428617
2011 =
2766430654

= 41%
474653358
2012 =
3445471641

= 14%

Interpretation
The ratio is clearly showing the trend that is first increasing from 2010 to 2011 then again
decreasing from 2011 to 2012 for Mahmood Group. This is because of variations in net income
as it is increasing over the years but in 2012 the total equity is increased enough that it resulted
the ratio to decrease up to 14%.

For Maqbool Textiles

88978899
2010 =
205878249

= 43%
105117664
2011 =
284026525

= 37%
126270919
2012 = 359820812

= 35%

Interpretation
The Maqbool Group’s ratio shows that the company has ROTE higher in 2010 then decreasing in
the upcoming years.

Companies 2010 2011 2012

Mahmood 29% 41% 14%
Maqbool 43% 37% 35%
 50.00%

45.00%

40.00%

35.00%

30.00%

25.00% Mahmood
Maqbool
20.00%

15.00%

10.00%

5.00%

0.00%
2010 2011 2012

Interpretation
Comparing both the companies it shows that in 2011 Maqbool Textiles ratio decreased due to
less total equity otherwise it is higher than Mahmood Group because of higher equity in
contrast of net income.

Return on Common Equity

This ratio measures the return to the common to the common stockholders. Both the
companies don’t have the preferred stock so we will take the net income only. There will be the
similar results as in the ratio of return on total equity.

net incom
Return on Common Equity=
average common Equity

For Mahmood Textiles

578199790
2010 =
1980586428
 = 29%
1123428617
2011 =
2766430654

= 41%
474653358
2012 =
3445471641

= 14%

Interpretation
The ratio is clearly showing the trend that is first increasing from 2010 to 2011 then again decreasing
from 2011 to 2012 for Mahmood Group. This is because of variations in net income as it is increasing
over the years but in 2012 the total equity is increased enough that it resulted the ratio to decrease up
to 14%. This ratio is same as ROTE because the company don’t have the preferred stock.

For Maqbool Textiles

88978899
2010 =
205878249

= 43%
105117664
2011 =
284026525

= 37%

126270919
2012 =
359820812

= 35%

Interpretation

The Maqbool Group’s ratio shows that the company has ROCE higher in 2010 then decreasing
in the upcoming years. The reason is same as for ROTE because the company don’t have the
preferred stock.
Companies 2010 2011 2012
Mahmood 29% 41% 14%
Maqbool 43% 37% 35%

50.00%

45.00%

40.00%

35.00%

30.00%

25.00% Mahmood
Maqbool
20.00%

15.00%

10.00%

5.00%

0.00%
2010 2011 2012

Interpretation
Comparing both the companies it shows that in 2011 Maqbool Textiles ratio decreased due to
less total equity otherwise it is higher than Mahmood Group because of higher equity in
contrast of net income.

Gross Profit Margin

Gross profit margin measures company's manufacturing and distribution efficiency during the
production process. It is a measurement of how much from each rupee of a company's revenue
is available to cover overhead, other expenses and profits.

Gross Profit
Gross profit Margin=
Net Sales
For Mahmood Textiles

1507128176
2010 =
8135551381

= 18.5%
2263072896
2011 =
15133883247

= 14.9%
1656421510
2012 = 14145533660

= 11.7%

Interpretation
GPM is decreasing over the three years for Mahmood Group. The reason of this decline is the
increasing cost of goods sold.

For Maqbool Textiles

293408224
2010 =
2183978491

= 13%
383665297
2011 =
3970775521

=9.6%
348113332
2012 = 3421881360

= 10%
Interpretation
While for Maqbool textiles it is first decreasing in 2011 and then slight increase in 2012. It is
because of increasing and then again decreasing in 2012 CGS.

2010 2011 2012

Mahmood 18.5% 14.9% 11.7%
Maqbool 13% 9.6% 10%

20%

18%

16%

14%

12%

10% Mahmood
Maqbool
8%

6%

4%

2%

0%
2010 2011 2012

Interpretation
Combining the two companies Mahmood Group has higher GPM as compared to Maqbool
group due to higher sales.