Finance Project on Gilitte Pakistan Limited

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Finance Project on Gilitte Pakistan Limited

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GILITTE PAKISTAN LIMITED

Submitted to:

MR. NADEEM AHMAD SHEIKH

Submitted by:

MUHAMMAD ZAHID ROLL # 13

MBAIT 3^rd Semester - Session: 2001-2003

TABLE OF CONTENTS

Introduction ------------------------------------------

Group of Financial Ratios ------------------------------------------

Liquidity Ratios. ------------------------------------------

Activity Ratios ------------------------------------------

Debts Ratios ------------------------------------------

Prfitability Ratios ------------------------------------------

Marketabilty Ratios ------------------------------------------

SUMMERY OF RATIOs -------------------------------------------------

VERTICAL ANALYSIS OF INCOME STATEMENT------------------

HORIZONTAL ANALYSIS OF INCOME STATEMENT-------------

VERTICAL ANALYSIS OF BALANCE SHEET -----------------------

HORIZANTAL ANALYSIS OF BALANE SHEET ---------------------

SOURCES AND USES OF CASH STATEMENT --------------------

CASH FLOW STATEMENT --------------------------------------------

Answers ----------------------

BALANCE SHEET OF ANNUAL REPORT --------------------------

INCOME STSTEMENT OF ANNUAL REPORT-----------------

Introduction

Gillette Pakistan Limited is a multinational Company. The company head office is in Karachi. The company chairman is Sanaullah Qureshi in Pakistan.

Purpose of Financial Analysis.

The financial statement is given below.

Income Statement
Retained Earning Statement
Balance Sheet
Cash Flow Statement

The purpose of analysis above stated Statements is to access and evaluate the performance and financial health of the Company.

Group of Financial Ratios.

Liquidity Ratios.
Activity Ratios
Debts Ratios
Prfitability Ratios
Marketabilty Ratios

Liquidity Ratio

Liquidity ratio mean the firm’s ability to satisfy its short term obligations as they come due.

Ø Current Ratio

Ø Shrinkage

Ø Quick Ratio

Ø Cash Ratio

Ø N.W.C

Ø Shrinkage of current ratio

Ø Working Capital to total asset

Ø Working Capital to total sale

	LIQUITDITY RATIO
				RUPEE ' 000
NO	DESCRIPTION	FORMULA	2001	2000
1	CURRENT RATIO	CURRENT ASSET/CURRENT LIAB.	333,618/134,130 = 2.487 TIME	294,881/121,360 = 2.429 TIMES
2	SHRINKAGE	*[1-[1/CURRENT RATIO]]100**	1-1/2.487] * 100 = 59.79%	1- 1/2.429] *100 = 58.83%
3	QUICK RATIO	*C.A -INV / C .L 100**	333618-141941/134130= 1.43%	294,881- 100552 /121,360 = 1.6%
4	CASH RATIO =	*CASH + M/S /TOTAL ASSET 100**	[43,423 / 371,813 ] *1`00=.1168	[49,596 / 336,068] * 100=14.76%
5	NET WORKING CAPITAL	C.A - C. L	33618-134130 = 199488	294,881- 121,360= 17351
6	SHRINKAGE =	*N. W. C / C.A 100**	199488/333618*100= 58.80%	173521 /294,881 * 100= 58.84%
7	working capital to T.A	N.W.C/TOTAL ASSET	199488 / 333,618 * 100=59.80%	173521/336068 =51.68%
8	working capital to T.S	*N.W.T/SALE100**	199488 /663344 = 30.07%	173521/538332*100 = 32.23%

	ACTIVITY RATIO

1	I.T.O	C.G.S/INV	395553 /141941= 2.79 TIME	285076 /100552 = 2.86TIME
2	A.A.I	NO.OF WORKING DAYS/I.T.O	360 /2.786 =129.24 DAYS	360 /2.835 127 DAYS
3	A.C.P	A/R / AV.SALE PER DAY	66946 /1842.62 = 36.33	77981 /1495.37 = 52.12
4	AV.SALE PER DAY=	TOTAL CREDIT SALE / 360	663344/360 = 1842.62	538332/360 = 1495.37
5	A./R T.O =	360/A..C.P	360/36.33 = 9.91	360/54.15 = 6.65
6	AV. PAYMENT PERIOD	A/P / AV . PUR.PER DAY	76530/25.05 = 3055 TIME	82960/15.78 = 5257 TIME
7	AV . PURCHASE PER DAY	TOTAL CREDIT/360	9017/360 = 25.05	5679/360 = 15.78
8	A/P TURN OVER	NO. OF W.DAYS/A.P.P	360/3055 = 0.118 TIMES	360/5257 = 0.068 TIMES

		FIXED ASSET RATIO

1	FIXED ASSET RATIO	SALE/ F.A	663344/36117=18.37TIME	538332/37698 = 14.28 TIME
2	TOTAL ASSET TURN OVER	NET SALE/ TOTAL ASSET	663344/371813 = 1.78 TIME	538332/336068 = 1.60 TIME

		DEBTS / LEVERAGE RATIO

1	DEBT RATO	*TOTAL LIBILITIES / TOTAL ASSET 100**	134130/371813 *100 = 36.07%	121360/336068 * 100 = 65.87 %
2	DEBT EQUITY RATIO	*TOTAL DEBT/ S.H.E 100**	134130/237683 *100 = 56.43 %	121360/214708 *100 = 56.52 %
		ABILITY TO PAY THE DEBTS
3	TIME INTEREST EARNING	E .B.I.T / INTEREST	95488+15904 /739 = 150.73	73677+18427 / 3230 = 28.51

		POFITABILITY RATIO

1	GROSS PROFIT RATIO	*GROSS PROFIT / SALE100**	267791 / 663344 * 100= 40.37%	253256 / 538332 * 100 = 47.04 %
2	OPERATING PROFIT RATIO	*O.P / SALE 100**	95488/663344 *100 = 14.39 %	73677 /538332B *100 = 13.69 %
3	NET PROFIT MARGIN	*N.P .A.T / SALE 100**	80575 / 663344 *100 = 12.15 %	71803 / 536332 *100 = 13.15%
4	RETURN ON ASSET	*N.P .A.T / T.A100**	80575 /371813 *100 = 21.67 %	71803 / 336068 *100 = 21.36%
5	RETURN ON EQUITY	*N . P. A .T / S.H.E 100**	80575 / 237683 *100 = 33.90 %	71803 /214360 * 100 = 33.50 %

		MARKETABILITY RATIO
	DESCRIPTION
1	EARNING PER RATIO	*NPAT- DIVI T.P STOCK100**	4.20 PER SHARE	3.74 PER SHARE
2	PRICE EARNING RATIO	MKT PRICE OF SHARE/EPS	15.36	16.11
3	BREAKUP VALUE RER SHAR	COMMEN S.H.E /OUTST.STOCK	12.37 PER SHARE	11.18 PER SHARE

SUMMERY OF RATIOS
			RS,000
NO	DESCRIPTION	2001	2000
1	CURRENT RATIO	2.48 TIME	2.43 TIME
2	SHRINKAGE	59.79%	58.83%
3	QUICK RATIO	1.43%	1.60%
4	CASH RATIO	11.68%	14.76%
5	NET WORKING CAPITAL	199488.00%	173521.00%
6	SHRINKAGE	59.80%	58.54%
7	working capital to total asset	52.65%	51.63%
8	working capital to total SALE	30.07%	32.23%
9	I.T.O	2.79%	2.84%
10	A.A.I	129 DAYS	127 DAYS
11	A.C.P	36.33 TIMES	52.15 TIMES
12	AV.SALE PER DAY	184262 TIME	1495.37 TIME
13	A./R T.O	9.91 TIME	6.65 TIME
14	AV. PAYMENT PERIOD	84 TIME	788 TIME
15	AV . PURCHASE PER DAY	25.05	15.78
16	A/P TURN OVER	4.29 TIME	.461 TIME
17	FIXED ASSET TURN OVER	18.37 TIME	14.28 TIME
18	TOTAL ASSET TURN OVER	1.78 TIME	1.6 TIME
19	DEBT RATO	36.07%	65.87%
20	DEBT EQUITY RATIO	56.43%	56.52%
21	TIME INTEREST EARNING	150.73%	28.51%
22	GROSS PROFIT RATIO	40.36%	47.84%
23	OPERATING PROFIT RATIO	14.39%	13.69%
24	NET PROFIT MARGIN	12.51%	13.15%
25	RETURN ON ASSET	21.67%	21.36%
26	RETURN ON EQUITY	33.90%	33.50%
27	EARNING PER RATIO	4.20 P S	3.74 P S
28	PRICE EARNING RATIO
29	BREAKUP VALUE RER SHAR	12.37 P S	11.18 P S


	VERTICAL ANALYSIS OF I / S

DESCRIPTION	2001	% AGE	2002	% AGE

SALE	663344	100%	538332	100%
LESS C.G.S	395553	59.63%	285076	52.96%
G.P	267791	40.37%	253256	47.06%
LESS OP.EXP	172303	25.97%	179579	33.36%
	95488	14.39%	73677	13.68%
LESS FIN EXP	739	0.11%	3230	0.60%
	94749	14%	70447	13.08%
ADD OTHER INCOME	15904	2.40%	18427	3.42%
PROFIT BEFORE TAX	110653	16.68%	88874	16.50%
LESS TAXES	33078	4.53%	17071	3.07%
NET PROFIT AFTER TAX	80575	12.15%	71803	13.33%

HORIZONTAL ANALYSIS OF I / S

DESCRIPTION	2001	2000	DIFERANCE	% AGE

SALE	663344	538322	125022	23.20%
LESS C.G.S	395553	285076	110477	38.75%
G.P	267791	253256	14535	6%
LESS OP.EXP	172303	176579	-4276	-2.42%
	95488	73677	21811	29.60%
LESS FIN EXP	739	3230	-2491	-77.12%
	94749	70447	24302	34.50%
ADD OTHER INCOME	15904	18427	-2523	-13.92%
PROFIT BEFORE TAX	110653	88874	21779	24.51%
LESS TAXES	30078	17071	13007	76.19%
N.P.A.T	80575	7803	8954	12.47%

VERTICAL ANALYSIS OF BALANCE SHEET

DESCRIPTION	2001	%AGE	2000	%AGE
TOTAL ASSETS	371813	100%	336068	100%
CURRENT ASSETS	333618	89.73%	294881	87.74%
TOTAL FIXED ASSETS	36117	9.71%	37698	11.21%
LONG TERM DEPOSITS	896	0.24%	894	0.27%
LONG TERM LOANS	1182	0.31%	2595	0.77%

OWNER EQUITY + LIAB		371813		336068
CURRENT LIAB	134130	36.07%	121360	36.11%
OWNER EQUITY	237683	63.93%	214708	63.89%

HORIZANTAL ANALYSIS OF BALANE SHEET

DESCRIPTION	2001	2000	DIFF	%AGE
TOTAL ASSETS	371813	336068	-35745	10.10%
CURRENT ASSETS	333618	294881	38737	13.14%
TOTAL FIXED ASSETS	36117	37698	-1581	4.19%
LONG TERM DEPOSITS	896	894	2	0.22%
LONG TERM LOANS	1182	2595	-1413	-54.45%

O. E + LIAB	371813	336068	35745	10.64%
CURRENT LIAB	136130	121360	12770	10.52%
OWNER EQUITY	237683	214708	22975	10.70%

SOURCES AND USES OF CASH STATEMENT

DESCRIPTION	CHANGE	SOURCE	USUAGE
CASH	-6173	6173
TRADE DEBTS	-11035	11035
LOAN AND ADVANCES	-10945	10945
RECIEVABLE	12732		12732
STOCK IN TRADE	41389		41389
TAXATION - NET	12769		12769
LONG TERM LOANS	1413	1413
LONG TERM DEPOSITS	2		2
TANGIBLE FIXED ASSET	-1581	1581
CURRENT LIABILITIES	12770	12770
OWNERSEQUITY	22975	22975
TOTAL		66892	66892


	CASH FLOW STATEMENT


A	CASH FROM OP. ACTIVITIES	RS ' 000	RS ' 000

	NET PROFIT AFTER TAX	80575
	+ DEPRICIATION	0
		80575	80575
	CHANGE IN CURRENT ASSET

	INCREASE IN STOCK IN TRADE	-41389
	DECREASE IN TRADE DEBTS	11035
	DECREASE IN LOANS AND ADVANCES	10945
	INCREASE IN RECIEVEABLE	-12732
	INCREASE IN TAXATION - NET	-12769
	CHANGE IN LIABILITIES

	DECREASE IN CREDITORS, ACCRUED&LIA.	-6430
	INCREASE IN PROPOSED DIVIDEND	19200
		-32140	-32140
B	CASH FROM INV. ACTIVITIES

	DECREASE IN FIXED ASSETS	1581	1581

C	CASH FROM FIN. ACTIVITIES

	DECREASE IN LONG TERM LIABILITIES	-2
	DECREASE IN LONG TERM DEPOSITES	1413
	DIVIDEND PAID (NPAT - CHANGE IN R .E)
	80575 - (237683 - 214708)	-57600
		-56189	-56189

	NET DECREASE IN CASH		-6173
	OPENING BALANCE		49596
	ENDING BALANCE OF CASH		43426

Answers

Question 1:

Would you like to extend the short-term loan to Gillete Pakistan Ltd.

I. Supplier of funds

II. Supplier of goods

Answer

To answer this question we have to keep in mind the following ratios:

Current ratio
Quick ratio
Inventory Turn Over
Average payment period

v Current ratio for year 2000 is 2.43 times and for year 2001 is 2.49 times. It shows the firms ability to pay its short term obligation has been increased.

v Current ratio is greater than standard that is 2:1. The shrinkage ratio for 2000 is 58.83% and for year 2001 is 59.7%. It shows firm has still capacity to pay the liabilities if the current asset is shrinkaged by 59.75%.

v Quick ratio for year 2000 is 1.6% and for year 2001 is 1.4%. Although it is greater than standard i.e., 1:1 but it decreases during the recent year but it did’t much affect on new investor.

v Inventory Turn Over for year 2000 is 2.835 times and for year 2001 is 2.78 times. Although there is a decrease in ITO but it does not much affect on new investment.

v Average payment period for year 2000 is 788 times and for year 2001 is 84 times. It shows the suppliers are not confident as compared the year 2000.

CONCLUSION

In the light of the above factors short – term loan will be extended to Gillete Pakistan Ltd.

Question 2:

Would you like to extend the long-term loan to Gillete Pakistan Ltd.

Answer

To answer this question we have to keep in mind the following ratios:

Debt Ratio
Debt Equity Ratio
Time Interest Earning Ratio

Debt Ratio for year 2000 is 65.9% which is risky situation for the new investment and for year 2001 is 36.1% which shows the only 36.1% of finances are contributed by the outsiders. The investor will invest in that firm whose more than 50% finances are contributed by internal sources. So it will attract the new investors.

Debt Equity Ratio for year 2000 is 56.5% and for year 2001 is 56.4%. So the situation is risky one. The earning before taxes increases , so it will attract new investors.

CONCLUSION

In the light of the above factors long – term loan will be extended to Gillete Pakistan Ltd.

Question 3:

Would you like to invest as an equity investor in the Gillete Pakistan Ltd.

For the purpose we have to keep in mind the following ratios:

Net profit ratio
Return on equity
Earning per share
Price earning ratio

v Net profit ratio for year 2000 is 13.15% and for year 2001 is 12.15%. It shows the net profit margin is decreasing the year 2001.

v Return on equity for year have been increased from33.50% to 3.90% for year 2001. . So it will attract the new investors .

v Earning per share have been increased from 3.74per share to 4.92 per share. so it will attract new investor in the company.

v Price earning ratio for year 2000 is 15.36 and for year 2001 is 14.78. It shows that Price earning ratiois also increase during the year 2001.

CONCLUSION

In the light of the above information it is clear that the Gillete Pakistan Ltd has the ability to attract the new investors. Because the investors would like to invest in that company from where they can earn profit.

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