**Financial Statement Analysis of

Lucky Cement **

Presented to:* Mr. Shoaib

Presented By:* Raja Umair Shahzad

Neelma Shafqat
Nadia Shaheen
 Lucky Cement
Financial Statement Analysis : It is the process of
identifying financial strengths and weaknesses of the firm
by properly establishing relationship b/w the balance sheet
& P/L Account.
 Tools & techniques of Financial
statement Analysis

• Horizontal Analysis
• Vertical Analysis
• Ratio Analysis
 Ratio Analysis
Types of Ratios & their Purposes
• Profitability ratios .Measures the profitability of the business organization.

• Liquidity ratios measures whether a company is able to pay its short term
obligations.

• Leverage ratios show how a company’s operations are financed. Or Ability

to pay Long term obligations.

• Activity ratios: It measure that how efficiently the resources have been
utilized.
 Profitability Ratios
• Gross Profit Ratio
• Net Profit Ratio
• Operating Profit Ratio
• Admin Expense Ratio
• Return on Investment ratio/Net worth
• Return on Equity Ratio
• Return on Asset Ratio
1. Gross Profit ratio = Gross profit/Net Sales * 100

For 2008: 4357173 / 1695787 *100 = 25.6 %

For 2009: 9811266/26330404 *100 = 37.2%

For 2010: 7978861/24508793 *100 = 32.5%

Interpretation: In 2008 cost of sales is 74% which is

more than the 2009 & 2010 (62.74% & 67.44%).
2. Net Profit Ratio = Net Profit after tax / net sales *100
For 2008: = 2677670 / 16957879 *100 = 15.7%

For 2009 = 4596549 / 26330404*100 = 17.45%

For 2010 = 3137457 / 24508793*100 = 12.8%

• Interpretation: In 2010 our operating expenses are

more than the previous years due to which our profit
margin reduce.
3. Return on Investment ratio/ Net worth = Net income after tax *100
.
Total Liabilities + Owners Equity
For 2008 2677670 / 3423907 *100 = 7.8%

For 2009 4596549/ 38392362*100 =11.97%

For 2010 3137457 / 38310244*100 = 8.18%

• Interpretation: In 2010 our return on investment

is less than the 2009 because In 2010 our profit
margin reduce
4. Return on equity = Net profit after tax *100
Shareholder fund

For 2008 2677670 / 18655423*100 = 14.3%

For 2009 4596549 / 23251972*100 = 19.76%

For 2010 3137457 / 25092929*100 = 12.5%

• Interpretation: 2009 is more favourable

as compare to other 2 years because return
on shareholder investment is increased.
5. Return on Asset Ratio = Net Income after tax * 100
Total Assets

For 2008 2677670 / 34239077 *100 = 7.8%

For 2009 4596549 / 38392362*100 = 11.9%

For 2010 3137457 / 38310244*100 = 8.2%

6. Admin Expense ratio= Admin. Expense/ Net Sales*100

For 2008 125752 / 16957879*100 = 0.74%

For 2009 165936/26330404*100 = 0.63%

For 2010 303244/2450879*100 = 1.2%

• Interpretation: 2009 is more favourable

7 Operating Profit Ratio =Operating Profit / Net Sales*100

• For 2008 3076367 /16957879 *100= 18%

• For 2009 7217793/26330404*100=27%
• For 2010 4242570/24508793*100=17%
 Liquidity Ratios
The Ability of a company to Pay short term obligations

1. Current Ratio

2. Quick or Acid test or Liquid Ratio

3. Absolute Liquid Ratio

1. Current Ratio = Current Assets / Current Liabilities

• For 2008 8,355,524 / 7,686,897 = 1.08 :1

• For 2009 7,857,942 / 9098678 = 0.86 :1
• For 2010 6,871,464 / 9,641,691 = 0.70 :1

• Interpretation: In 2008 as we see that , to pay off the liability of

Rs1 Lucky cement have assets of Rs. 1.08.But in 2009 and 2010 it
is declined to 0.86 & 0.70 and it is very difficult for lucky cement to
pay off its liability because assets are less than the liabilities.
2. Liquid Ratio = Liquid Assets / Current Liabilities

Liquid Assets = current assets - Inventories (stock in trade)

• For 2008 7646152 / 7686897 = 1 :1

• For 2009 6661334 / 9098678 = 0.73 :1
• For 2010 6262651/9641691 = 0.65 : 1

• Interpretation :Here the liquid ratio of the year 2010 is declining

because company is holding huge amount of inventory as
compared previous year .
3. Absolute Liquid Ratio = Absolute assets / Current
Liabilities

Absolute Assets = Liquid assets – Receivables

• For 2008 270011 / 7686897 = 0.035 :1

• For 2009 1049091/9098678 = 0.115 :1

• For 2010 333629 /9641691 = 0.035 :1

 Activity/ Efficiency Ratios
Measures how efficient the resources have been utilized.

1. Inventory/Stock turnover ratio

2. Debtor/ Receivable turnover ratio
3. Creditor/ Payable turnover ratio
4. Working capital ratio
5. Fixed Asset turnover ratio
Inventory turnover ratio= CGS / Average Inventory

• For 2008 12600706 / (709372)/1 = 18 times

• For 2009 16519138 /(709372+1196608)/2 = 17 times
• For 2010 16529732 /(1196608+608813)/2 = 19 times

• Interpretation: Inventory turnover ratio indicates

the effectiveness of the inventory management practices
of the firm. The inventory turnover ratio in 2010 is
increasing as compared to the previous years, this
shows that 19 times in a year the inventory of the firm is
converted in to receivables or cash.
Average Conversion Period= No of working days / ITR

• For 2008 360 / 17.76 = 20.2 or 20 days

• Fro 2009 360/ 17.33 = 20.77 or 21 days
• For 2010 360/ 18.31= 19 days

• Interpretation : Lower the conversion period better for the Org.

The Average collection period in year 2008 was 20 days which
means that the firm is able to collect its receivables within 20 days.
However in 2009 it increased to 21 days which means that
company is able to collect their receivables in a period of 21 days.
However in 2010 it is 19 days. This is because of the efficiency of
the management that the lucky cement is collecting fast as compare
to the previous year.
Working Capital turnover ratio= CGS / Net Working Capital

• Net Working Capital = Current Assets – Current Liabilities

• For 2008 12600706/18655423 = 0.67 or 67%

• For 2009 16519138 /23251972 = 0.71 or 71 %
• For 2010 16529932/25095929 = 0.65 or 65%

• Interpretation: The working Capital ratio measures the efficiency with

which the working capital is being used by a firm. A high ratio indicates
efficient utilization of working capital and a low ratio indicates otherwise.
Debtor turnover ratio = Net sales / Average A/R

For 2008: = 16957879 / 720314 = 24 times

For 2009: = 26330404 /993781 = 27 times

For 2010: = 24508793/ 922289 = 26 times

In 2009 27 times , receivables is received from the govt, so

we can say that company is working efficiently in 2009.
Average Collection Period = No of working days / DTR

• For 2008 360 /24 = 15 days

• For 2009 360/27 = 13 days
• For 2010 360/26 = 14 days
Creditor turnover ratio = Net credit purchases/ Average A/P

Purchases= CGS + closing inventory – Opening inventory

• For 2008 13310178 / 3549543 = 3.74 times

• For 2009 17006374/ 3113449.5 =5.46 times
• For 2010 15942137/ 2860338 =5.57 times
Average payment period = No of working days/ CTR

• For 2008 360/4.95 = 96.25 or 72 days

• For 2009 360/5.46 = 65.93 or 66 days
• For 2010 360/5.57 = 64.63 or 65 days
Leverage / solvency Ratios
Ability to pay Long term obligations

1. Debt Equity Ratio

2. Proprietary Ratio/ Equity Ratio
3. Debt Service/ Interest coverage ratio
4. Capital Gearing Ratio
Debt Equity Ratio =Long term debt/ Long term Funds

• Long term funds = Long term debt + Share Holder Funds

• For 2008 7896754 / 7896794+18655723 = 0.30

• For 2009 6041712 / 6041712 +23251972= 0.21
• For 2010 3572624/ 3572624 + 25092929 = 0.12

• Interpretation: As we see that debt equity ratio in 2010 is decreasing as

compared to previous years which means that shareholders are investing
more as compared to previous years to pay off long term obligations.
Proprietary Ratio = Shareholders funds / Total Assets

• For 2008 18655423 /34239072 = 0.54 or 54%

• For 2009 23251972/38392362 = 0.61 or 61 %
• For 2010 25092929/38310392 =0.65 or 65 %

• Interpretation = This means that out of every 1 Rs employed in the

business ,Sharholders contribution is about 54 % in 2008
….Accordingly the creditors contribution would be the remaining 36
%.