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SUBMITTED TO : Dr. Ammarah Mubashir
SUBMITTED BY : Alishba Sajid
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Bushra Saleem
Fareeha Azhar

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Maryam Waqas
Sareena Eman
Sabrina Jennifer
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COURSE: Principles Of Finance

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Department Of Business Administration
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Principles of Finance

Contents
Overview ....................................................................................................................................................... 2
Key points ..................................................................................................................................................... 3
Cement Production: .................................................................................................................................. 3
Product Range: .......................................................................................................................................... 3
Market Presence: ....................................................................................................................................... 3
Quality Standards: ..................................................................................................................................... 3
Sustainability Initiatives: .......................................................................................................................... 3
6. Competitive Landscape:........................................................................................................................ 3
Vertical Analysis........................................................................................................................................... 3
Income statements..................................................................................................................................... 3
Interpretation :........................................................................................................................................... 5
Balance Sheets .......................................................................................................................................... 6
Interpretation:............................................................................................................................................ 7
Horizontal Analysis ...................................................................................................................................... 7
Interpretation of Financial Report: ........................................................................................................... 8
Interpretation of Financial Statement:.................................................................................................... 10
1. Net Sales: .................................................................................................................................... 10
2. Cost of Sales: .............................................................................................................................. 10
3. Gross Profit: ................................................................................................................................ 10
4. Operating Expenses: ................................................................................................................... 10
5. Other Expenses: .......................................................................................................................... 10
6. Operating Profit (Loss): .............................................................................................................. 10
7. Finance Costs: ............................................................................................................................. 10
8. Profit (Loss) Before Tax: ............................................................................................................ 11
9. Tax Expense: ............................................................................................................................... 11
10. Net Profit (Loss): .................................................................................................................... 11
RATIO ANALYSIS.................................................................................................................................... 11
Analysis .................................................................................................................................................. 12
Liquidity Ratios: ..................................................................................................................................... 12
1. Working Capital: ......................................................................................................................... 12
2. Current Ratio:.............................................................................................................................. 12

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3. Quick Ratio: ................................................................................................................................ 12

Solvency Ratios: ..................................................................................................................................... 12
1. Debt to Asset Ratio: .................................................................................................................... 12
2. Debt to Equity Ratio ................................................................................................................... 12
3. Times Interest Earned: ................................................................................................................ 12
4. Net Plant Asset to Long-Term Liability: .................................................................................... 13
Profitability Ratios: ................................................................................................................................. 13
1. Net Margin Ratio: ....................................................................................................................... 13
2. Asset Turnover Ratio: ................................................................................................................. 13
3. Receivables Turnover: ................................................................................................................ 13
4. Return on Interest:....................................................................................................................... 13
5. Return on Equity: ........................................................................................................................ 13
Recommendations: ...................................................................................................................................... 13

Overview
Dewan Cement Ltd is a Pakistani cement manufacturing company. However, please note that the
information provided is based on the knowledge cutoff of September 2021, and there may have been
some changes or developments since then. Dewan Cement Ltd is part of the Dewan Group, which is a

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prominent conglomerate in Pakistan with diverse business interests. The company primarily operates in
the cement sector and is involved in the production and sale of cement and related products.

Key points
Here are some key points about Dewan Cement Ltd:

Cement Production:
Dewan Cement Ltd operates a cement manufacturing plant located in Karachi, Pakistan. The plant has
the capacity to produce a significant amount of cement annually.

Product Range:
The company offers various types of cement products to cater to different construction requirements. This
includes Ordinary Portland Cement (OPC), Sulphate Resistant Cement (SRC), and Low Alkali Cement,
among others.

Market Presence:
Dewan Cement Ltd has a presence in both domestic and international markets. In the domestic market,
the company supplies cement to construction projects across Pakistan. It also exports its cement products
to countries like Sri Lanka, India, and South Africa.

Quality Standards:
The company emphasizes maintaining high-quality standards in its cement production. Dewan Cement
Ltd has implemented quality control measures to ensure that its products meet industry standards and
customer expectations.

Sustainability Initiatives:
Like many cement manufacturers, Dewan Cement Ltd is likely to focus on sustainable practices. This
may include implementing energy-efficient technologies, using alternative fuels, and minimizing
environmental impact through proper waste management.

6. Competitive Landscape:
The cement industry in Pakistan is highly competitive, with several established players. Dewan Cement
Ltd faces competition from other major cement manufacturers operating in the country.

It's important to note that the current status and specific details about Dewan Cement Ltd may have
evolved since the information was last updated in September 2021. For the most accurate and up-to-date
information, it's recommended to refer to official sources, company announcements, and financial reports.

Vertical Analysis
Income statements

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Dewan Cement Limited

Income statement
For the year 2021

2021 Vertical analysis

Net sales 6259915 100%
Cost of sales 5900233 (94%)
Gross profit/loss 359682 6%
Operating expenses:
Distribution cost 73056 1%
Administration expenses 561618 9%
Other operating expenses 3935 0.06%
638,609 10%
Operating loss (278,972) 4.4%
Other income 19414 0.3%
Finance cost 12,415 0.1%
Loss before taxation (271928) 4.3%
Taxation net 394510 6%
Loss for the year (666,438) 11%

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Dewan Cement Limited

Income statement

For the year 2022

2022 Vertical analysis

Net sales 16518299 100%
Cost of sales 15293538 (93%)
Gross profit/loss 1224761 7%
Operating expenses:
Distribution cost 228758 1%
Administration expenses 880778 5%
Other operating expenses 183645 1%
1293181 7%
Operating loss (68,420) 0.4%
Other income 96995 0.6%
Finance cost 27366 (0.2%)
Loss before taxation 1209
Taxation net 704241 4%
Loss for the year (703032) 4.2%

Interpretation :
While comparing the income statement of Dewan cement limited for the year 2021 and 2022, it
is revealed that the gross profit is increased by 1% due to decrease of cost of sales in the year
2022.

Distribution cost remains the same. Administration expenses are decreased by 4% in the year
2022.Other operating expenses are slightly increased by 0.04%. Operating loss has decreased by
4%. While other income is increased by 0.3% in the year 2022.Finance cost is increased by
0.1%. Loss for the year 2022 has decreased by 5.8%. It shows that overall the company is in a
better position in the year 2022 as compared to the previous year 2021.

Sales increased by 62 percent in 2022 as compared to previous year. Loss due to high cost of
sales. Company is still in loss due to high cost of sales despite sales increased by 62 percent.

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Balance Sheets
Dewan Cement Limited

Balance sheet

As on 31 December 2021

2021 Vertical analysis

Assets:
Non-current assets: 34,188,387 93%
Property, plant equipment
Current assets 2743399 7.4%
Total assets 36931789 100%
Equity & Liability:
Share capital & reserves 20935377 57%
Non-current liabilities 9719974 26%
Current liabilities 6276435 17%
Total 36931786 100%

Dewan Cement Limited

Balance sheet

As on 31 December 2022
2022 Vertical analysis
Assets:
Non-current assets: 33335622 88%
Property, plant equipment
Current assets 4565285 12%
Total assets 37900907 100%
Equity & Liability:
Share capital & reserves 19617911 52%
Non-current liabilities 11118242 29%
Current liabilities 7164754 19%
Total 37900907 100%

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Interpretation:
While comparing the balance sheet of the two years of the company Dewan cement limited, it is
revealed that the non-current assets are decreased by 7% in the year 2022 as compared to the
previous year 2021. Current assets are increased by 6.8% in the year 2022. Share capital and
reserves are decreased by 5% as compared to the previous year 2021. Non- current liabilities are
increased by 3% as compared to the previous year 2021. Current liabilities are increased by 2%
in the year 2022.

The balance sheet shows that the overall assets of the company are increased by 2.55% over the
last year but company is in loss due to high cost of sales.

Horizontal Analysis
Dewan Cement Limited

Balance Sheet

June 30, 2021-2022

Assets 2021 2022 Dollar Change Percentage

change
Non-current 34188387 33335622 (852765) (2.5%)
assets
Current Assets 2743399 4565285 1821886 66%
Total Assets 36931786 37900907 969121 2.6%

Equity & 2021 2022 Dollar Change Percentage

Liabilities change
Share Capital 20935377 19617911 (1317466) (6.3%)
and Reserves
Non-Current 9719974 11118242 1398268 14%
liabilities
Current 6276435 7164754 888319 14%
Liabilities

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Total 36931786 37900907 969121 2.6%

Interpretation of Financial Report:

 Current assets are increased by 66% which indicates an increase in inventories cash or
receivables whereas a decline of 2.5% is contributed by non-current assets.

The high rise in inventories is one of the main causes of the increase in current assets. This
results from the business's deliberate choice to increase stock levels in anticipation of increased
demand or probable supply chain interruptions. The company's attempts to guarantee a steady
supply of raw materials and finished items to quickly meet consumer demand can be seen in the
growth in inventory.

A large increase in cash holdings is also included in the growth in current assets. This may be the
outcome of better working capital management techniques, more effective cash management
procedures, or increased cash inflows from operational activities. The corporation may have seen
increased sales, efficient collection methods, or decreased costs, all of which contributed to a
bigger buildup of cash resources.

The rise in accounts receivable has a further impact on the expansion of current assets. This
shows that Dewan Cement Limited made sales to consumers who may pay later on terms of
credit. The increase in receivables might be a sign of increased sales volume, longer credit terms,
or alterations in the company's clientele. To reduce the risk of bad debts, it is crucial to keep
track of how long receivables have been outstanding and to implement effective collection
methods.

 There’s a 6.3% decline in share capital that can be considered good because it might be
used to distribute dividends to shareholders.

The company's issued shares have decreased, which is reflected in the drop in capital stock.
Share repurchases or the retirement of treasury stock could be to blame for this. The decrease in
capital stock could signify a tactical choice to raise shareholder value and boost financial ratios.

The rise in equity was probably aided by retained earnings.

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Comprehensive income or additional paid-in capital, are two examples of supplementary equity
elements.

 Increase in liabilities shows an increase in the cash inflow that can be due to an increase
in loans or accounts payables.

Current liabilities have increased due to higher accounts payable, short-term borrowings, and
accrued expenses. These changes reflect increased operational activities and short-term financing
needs.

Non-current liabilities have also risen, primarily due to the incurrence of long-term debt and
deferred tax liabilities associated with the company's expansion plans.

Dewan Cement Limited

Income Statement

June 30, 2021-22

2021 2022 Dollar Change Percentage

Change
Net Sales 6259915 16518299 10258384 160%
Cost of sales 5900233 15293538 9393305 160%
Gross profit/Loss 359682 1224761 865079 240%
Operating Expense
Distribution Cost 73056 228758 155702 213%
Administrative Expense 561618 880778 319160 56%
Other Expense 3935 183645 179710 4567%
638609 1293181 654572 102%
Operating Loss (278927) (68420) 210507 (75)%
Other Income 19414 96995 77581 399%

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Finance Cost 12415 27366 14951 120%

Loss before Taxation (271928) 1209 273137 (100)%
Taxation Net 394510 704241 309731 78%
Loss of year (666438) (703032) (36594) 6%

Interpretation of Financial Statement:

1. Net Sales:
Net sales increased in 2022 compared to 2021 by 1.6%. This indicates a growth in revenue
generated from the company's core operations.

2. Cost of Sales:
The cost of sales also increased by 1.6%, which indicates that the company experienced a
proportional increase in the expenses associated with producing and delivering its products or
services.

3. Gross Profit:
Despite the increase in net sales, the company achieved a gross profit margin of 2.4%. This
indicates that the company's ability to generate profits from its core operations was impacted by
the increase in costs.

4. Operating Expenses:
Operating expenses experienced a significant increase of 46% in 2022. This suggests that the
company faced higher expenses related to its day-to-day operations, such as administrative costs,
marketing expenses, and employee-related expenses.

5. Other Expenses:
The company also incurred other expenses that saw a notable increase, further impacting its
overall profitability.

6. Operating Profit (Loss):

As a result of the increased operating and other expenses, the company's operating profit (loss)
for 2022 was adversely affected.

7. Finance Costs:
The finance costs incurred by the company remained relatively stable or may have increased,
contributing to the overall expenses and reducing profitability.

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8. Profit (Loss) Before Tax:

The combination of operating profit (loss) and finance costs resulted in a profit (loss) before tax
figure for 2022.

9. Tax Expense:
The company incurred tax expenses based on the applicable tax rates and regulations.

10. Net Profit (Loss):

After accounting for taxes, the company reported a net profit (loss) for 2022, which was
significantly lower than the previous year, indicating a greater loss for the company.

RATIO ANALYSIS

Liquidity ratios: 2021 2022

Working capital -3533036 -2599469
Current ratio 0.43 0.63
Quick ratio 0.44 0.62

Solvency ratios:
Debt to asset ratio 0.43 0.48
Debt to equity ratio 0.76 0.9
Times interest earned 2.2 times 2.4 times
Net plant asset to long term liability 3.51 times 2.9 times

Profitability ratio:
Net Margin ratio 0.08 0.09
Asset turnover ratio 0.16 0.43
Activity ratio
-receivables turnover 1.01 times 1.9 times
-payables turnover -
Return on interest -0.44 -0.1
Return on equity 0.59 0.6

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Analysis

Liquidity Ratios:
1. Working Capital:
The working capital has improved from -3,533,036 in 2021 to -2,599,469 in 2022. While
the improvement is positive, having negative working capital suggests a potential
liquidity issue. It is important to address this by either increasing current assets or
reducing current liabilities.

2. Current Ratio:
The current ratio has increased from 0.43 in 2021 to 0.63 in 2022. Although the ratio has
improved, it is still below 1, indicating that the company may have difficulty meeting its
short-term obligations. Increasing current assets or reducing current liabilities would be
beneficial to enhance liquidity further.

3. Quick Ratio:
The quick ratio has also shown improvement, increasing from 0.44 in 2021 to 0.62 in
2022. Similar to the current ratio, this ratio is still below 1, suggesting a reliance on
inventory or other less liquid assets to meet short-term obligations. Continuously
monitoring and managing inventory levels can help improve this ratio.

Solvency Ratios:
1. Debt to Asset Ratio:
The debt to asset ratio has increased from 0.43 in 2021 to 0.48 in 2022. This indicates
that the company's debt level has increased relative to its total assets. It is important to
carefully manage debt to avoid excessive financial risk and maintain a healthy balance
between debt and assets.
2. Debt to Equity Ratio:
The debt to equity ratio has increased from 0.76 in 2021 to 0.9 in 2022. This suggests that
the company relies more on debt financing compared to equity. While some level of debt
is normal, a high debt to equity ratio may indicate increased financial leverage and
potential risks. Evaluating the debt structure and considering alternative financing options
could be beneficial.

3. Times Interest Earned:

The times interest earned ratio has slightly improved from 2.2 times in 2021 to 2.4 times
in 2022. While the ratio indicates that the company is generating enough earnings to
cover its interest expenses, it is still relatively low. Increasing earnings or reducing
interest expenses would enhance the company's ability to meet its interest obligations
more comfortably.

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4. Net Plant Asset to Long-Term Liability:

The ratio has decreased from 3.51 times in 2021 to 2.9 times in 2022. This suggests a
decrease in the ability to cover long-term liabilities with net plant assets. Reviewing the
company's asset and liability structure and ensuring sufficient coverage of long-term
liabilities would be beneficial.

Profitability Ratios:
1. Net Margin Ratio:
The net margin ratio has improved slightly from 0.08 in 2021 to 0.09 in 2022. This
indicates that the company is generating a slightly higher profit margin on each dollar of
revenue. Continuing efforts to improve efficiency and control costs can further enhance
profitability.

2. Asset Turnover Ratio:

The asset turnover ratio has significantly increased from 0.16 in 2021 to 0.43 in 2022.
This suggests that the company is generating more revenue per dollar of assets, indicating
improved efficiency in asset utilization. Maintaining this trend or further optimizing asset
utilization can continue to drive profitability.

3. Receivables Turnover:
The receivables turnover has increased from 1.01 times in 2021 to 1.9 times in 2022. This
indicates that the company is collecting receivables more efficiently, which is a positive
sign. Continued focus on timely collection of receivables can help improve cash flow

4. Return on Interest:
The return on interest ratio is negative, indicating that the company is not generating
sufficient income to cover its interest expenses. It is crucial to address this issue by
improving profitability or exploring alternative financing options with lower interest
burdens.

5. Return on Equity:
The return on equity ratio has remained relatively stable, with a slight increase from 0.59
in 2021 to 0.6 in 2022. This suggests that the company is generating a reasonable return
on shareholders' equity. Continuously striving to improve profitability and efficiently
allocate resources can further enhance this ratio.

Recommendations:
 The company should focus on improving liquidity by increasing working capital and
maintaining higher current and quick ratios.
 Managing debt levels and interest expenses, as well as optimizing asset utilization and
profitability, will contribute to overall financial health.

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 Regular monitoring and adjustments based on these ratios can guide strategic decision-
making and improve the company's financial performance.
 The company should implement cost control mechanisms, such as budgeting and regular
monitoring of expenses, to ensure effective cost management.
 Implement effective working capital management practices to improve cash flow and
reduce reliance on short-term borrowing.
 Provide regular updates on the progress of cost-saving initiatives, revenue growth
strategies, and other key initiatives to demonstrate proactive management and
commitment to delivering value to shareholders.

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