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FM Project on Shahzad Textile Mills
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THE ORGANIZATION CONCERNED
Shahzad Textile Mills Limited is a textile company which is of their concern that has been introduced right below. They are going to make a full-fledge financial analysis of this textile company in order to check its financial situation in the market. The analysis of each and every major ratio has been involved in this financial analysis. Then furthermore the interpretation of each and every ratio has been given to elaborate it.
An Overview
Shahzad Textile Mills Limited is a renowned textile mill locally as well
as in the foreign export markets for the impressive quality of yarn productions,
highly competitive prices and matchless professional services. With a total
installed capacity of 30,720 spindles, the company is engaged in the productions
of ring spun cotton and synthetic blended yarns since it’s inception in 1980.
With the passage of time, the company continuously adopted latest and advanced
technologies to ensure the best possible quality standards and efficient
workings.
Shahzad Textile Mills Limited is comprised of two production units, built
in the heart of cotton growing belt in Pakistan at convenient locations and are
fully equipped with highly sophisticated and most modern spinning machinery with
a capacity to produce around 50 x40’FCLs per month.
Vision and mission
Vision Statement:
They aim at seeing their mills to be a model manufacturing unit producing high quality yam by complying with the requirements of Quality Management
System and continuously improving its effectiveness for total customer’s satisfaction. They wish to play a leading role in the spinning sector by keeping a substantial presence in the export and local markets.
Mission Statement – Action Plan:
·
To install state of the art machinery and to acquire sophisticated process technology to achieve highest quality levels in the competitive business environment.·
To make strenuous efforts to enhance profitability of the company and ensuring a fair return to the investors, shareholders and employees.§
To exercise maximum care for improvement of quality of their products by employing a team of highly skilled technicians and professional managers/supervisors.§
To strive hard to develop new markets for the sale of their products both in export and local markets.§
To improve customer satisfaction level by adhering strictly to quality requirements of their customers in local and export markets and by improving communications with customers for receiving prompt feed backs about quality of their products.§
To attend to the prompt resolution of customer complaints by taking timely corrective & preventive measures to address the quality complaints.§
To improve logistic facilities for their customers dispatch plan and issue all shipments / delivery documents well in time.§
To make comprehensive arrangements for the training of their workers / technicians.§
To promote team work, sense of transparency, creativity in their professionals and technical people.
Products and services
The two independent productions units of the company are involved in the
productions of ring spun yarn counts for various applications with details as
follows:
Unit – 1: This unit presently produces their “Super Unicorn” brand of
polyester/viscose blended ring spun yarn counts for weaving and knitting
applications. Here, they also have the possibilities to produce 100% polyester
and 100% viscose spun yarn counts on special requirements.
Unit – 2: This unit produces their “Dynacon” brand of prime quality
polyester/cotton blended ring spun yarn counts in various blends like PC 52:48,
PC 65:35, CVC 60:40, CVC 70:30, etc. with Carded/Combed cotton portion to suit
weaving and knitting applications. In this unit, they have also have facilities
to provide their customers with TFO yarns from 2-ply up to 7-ply for special
applications. All the productions are guaranteed for even dyeing.
Markets:
Beside serving local market requirements of yarn, they are a major
exporter from Pakistan and successfully serving a large number of high quality
conscious customers in USA, Germany, Portugal, Spain, Hong Kong, S. Korea,
Taiwan, China, Japan, Singapore, Sri Lanka, Malaysia, Phillipines, Mauritius,
Middle East, etc.
Machinery:
Machinery in use consists of Blow Room from Trutzschler (Germany),
cards from Crosrol UK (MK4), Draw/Simplex Frames from Toyota (Japan), Combers
from Rieter (Switzerland), Automatic winders with Splicers & Uster from Murat
(Japan), and TFO Twisters from Volkmann (Germany).
Quality Control & Laboratory
Equipment:
The satisfaction of their customers is all important to us and the use of
technologically advanced laboratory equipment assures the highest possible
quality of yarn. They have a comprehensive periodic testing procedure in place
which monitors product quality at every stage of spinning process by frequent
sample collections and tests. The laboratory is equipped with HVI-900 with ultra
violet light for color shade check of raw cotton and grading. The yarn is
checked through the Uster Tester – 3 / Tensorapid and finally, each cone of
finished yarn is passed through UV lights capable of detecting even the
slightest color variation.
Packing & Loading:
The finished product is packed with the utmost care by trained personnel,
and loaded directly in to containers for export purposes. All packing and
loading is done under strict supervision, while maintaining maximum quality and
safety standards. To facilitate their customers, they provide yarn packed in
100Lbs and 50Lbs sea-worthy export cartons. They also have facility to provide
customers with polythene film shrink wrapped Pallet packing to specially
accommodate customers in Europe/USA and help them reduce the labor handling
costs.
Business practice
Shahzad Textile Mills Limited has laid
down the following business ethics and
principles, the observance of which is compulsory for all the directors /
employees of the company in the conduct of company’s business in order to
protect and safeguard the reputation and integrity of the
company at all levels of its operations.
Any contravention of these ethics is regarded as misconduct.
The company will ensure that all the executives and subordinate staff members
are fully aware of these standards and principles.
Conflict of interest:
All staff members are expected not to engage in any activity which
can cause conflict between their personal interests and company’s interest, such
as:
·
In effecting the purchases for company and selling its products the directors and the staff members are forbidden from holding any personal interest in any organization supplying goods or services to the company or buying its products.·
The staff members should not engage in any outside business while serving the company.·
Staff members are not permitted to conduct personal business in company’s premises or use company’s facilities for the same.·
If a staff member has direct or indirect relationship with an outside organization dealing with the company he must disclose the same to the management.
Confidentiality:
All staff members are required not to divulge any secrets / information of the company to any outsider even after leaving the service of the company unless it is so required by a court of law. During the course of service in company they should not disseminate any information relating to business secrets of the company without the consent of management.
Kickbacks:
All staff members are strictly forbidden not to accept any favors, gifts or kick backs from any organization dealing with the company. In case if such a favor is considered, in the interest of the company, the same should be disclosed clearly to the management.
Proper Books of Accounts:
All funds, receipts and disbursements should be properly recorded in the books of accounts of the company. No false or fictitious entries should be made or misleading statement pertaining to the company or its operations should be issued. All agreements with agents, dealers and consultants should be made in writing supported with required evidence.
Relationship with Government officials, suppliers, agents etc. :
The dealings of the company with Government officials, suppliers, buyers, agents and consultants of the company should always be such that the integrity of the company and reputation is not damaged. Members having queries in connection with how to deal with these requirements should consult the management.
Health and Safety:
Every staff members is required to take care of his health and safely and those working with him. The management is responsible for keeping its staff members insured as per government rules and regulations.
Environment:
To preserve and protect the environment all staff members are required to operate the company’s facilities and processes so as to ensure maximum safety of the adjoining communities, and strive continuously to improve environmental awareness and protections.
Alcohol, Drugs:
All types of gambling and betting at the company’s working places are strictly forbidden. Also taking of any alcohols or drugs inside the work places is not allowed and any member of the staff, not abiding by these prohibitions will attract disciplinary as well as penal action under the law.
Coordination among staff members to maintain Discipline:
All staff members will work in close coordination with their co-workers, superiors and colleagues. Every member will cooperate with other members so that the company’s work is carried out effectively and efficiently. All cases of non-cooperate among staff members should be reported to the management for necessary and suitable action. Strict disciplinary action will be taken against those staff members who violate the rules regulations of the company.
Workplace harassment:
All members of the staff will provide an environment that is free from harassment and in which all employees are equally respected. Work place harassment means any action that creates an intimidating, hostile or offensive environment which may include sexual harassment, disparaging remarks based on gender, religious, or race ethnicity.
Certification & Achievement:
Shahzad Textile Mills Limited has always placed special emphasis on
maintaining high quality world standards and in this regard ISO 9001:2000
certifications for both units are regularly maintained for last many years which
itself is a proof their achievements in quality and service.
They feel proud to state that their hectic efforts in improvement of quality and
service has brought us rewards in terms of a very satisfied customer base
spanning across North America, Europe, Far East, Asia, Australia and other
regions of the world.
Besides the improvements in quality of their products & services, the company is
very much concerned on the growing environment and health issues. They are
firmly committed to play a positive role in this regard and would do their best
to make this world a better place to live in for their future generations.
They are presently in the advance stages to achieve “Oeko-Tex Standard 100”
certification from International Association for Research and Testing in the
Field of Textile Ecology. After “Oeko-Tex Standard 100” certification, their
customers will have more confidence in their textile productions and will
manufacture / sell their products with a globally acceptable guarantee / mark
that their products are free from any harmful substances
Health & Safety:
Shahzad Textile Mills Limited (STML) undertakes that HSE is a management
responsibility and is committed to give priority to the health and safety of all
its employees and of other personnel effected and involved in its activities.
STML also confers its overriding commitment towards minimizing impact of its
activities on the natural environment.
The Chief Executive Officer carries the responsibility for the company’s commitment to Health, Safety & Environment. Each and every employee is an integral part of this commitment and it is the responsibility of line managers to ensure that employees and contractors are aware of company HSE policies and procedures. They must also ensure that these policies and procedures are duly enforced.
Employees are required to become familiar with, adhere to and promote the company policies throughout all aspects of their duties.
TO CARRY OUT THIS POLICY, SHAHZAD TEXTILE MILLS LTD. WILL:
§
Promote its conviction that accidents can be avoided.§
Minimize risks by investigating incidents to determine their causes and as well as impact, both physical and financial, and to develop actions & policies that shall suitably prevent recurrence.§
Train its personnel in Health, Safety & Environment protection.§
A high level of safety awareness shall be maintained by means of safety programs, safety review meetings, internal auditing and general communications.§
Persist and promote protective equipment culture at all STML working areas.§
Develop and implement emergency evacuation procedures to minimize the consequences of accidents at its working areas.§
Have its operating areas, storage facilities and other locations regularly inspected and audited by management & independent auditors.§
Incorporate HSE principles, policies and procedures into the key responsibilities of all personnel and ensure that their HSE performance is accurately reflected in their appraisals.§
Actively participates with government and other responsible institutions in meeting applicable national and international Health, Safety & Environment rules and regulations.§
Define practical means for taking into account and minimize environment impact.§
Develop and implement procedures for proper storage, transportation and disposal of waste materials and minimize pollutant emissions.§
Actively encourage its employees to participate in the conduct and management of HSE by means of achieving defined objectives and standards.§
Encourage its employees to suggest positive changes and improvements in HSE policies and procedures by means of internal protocols and communications.§
Provide resources to ensure that the best possible HSE standards are maintained.§
Insists on HSE policy from its suppliers, customers and other business associates.The company Health, Safety & Environment policy is built on a “NO BLAME” culture. They are more concerned with recognizing, identifying and eliminating risk than they are with looking for someone to blame.
The Organization of Comparison
The organization with whom the comparison of Shahzad textile mills is to be done is Shaheen Cotton Mills Ltd. The comparison can only be done by making the financial analysis of this particular cotton mills in a similar way in which the analysis of Shahzad textile mills Ltd is to be done by first of all calculating all the major five ratios and interpreting them one by one thereby gaining a position to make a comparison become their financial situation.
An Overview
Shaheen Cotton Mills Limited, is a renowned cotton mill locally as well as in the foreign export markets for the impressive quality of yarn productions, highly competitive prices and matchless professional services. With a total installed capacity of 33,600 spindles, the company is engaged in the productions of ring spun cotton and synthetic blended yarns since it’s inception in 1976. With the passage of time, the company continuously adopted latest and advanced technologies to ensure the best possible quality standards and efficient workings.
Shaheen Cotton Mills Limited is comprised of two production units, built in the cotton growing belt in Pakistan at convenient locations and are fully equipped with highly sophisticated and most modern spinning machinery with a capacity to produce around 55 x40’FCLs per month.
Vision and mission
Vision Statement:
They aim at seeing their mills to be a model manufacturing unit producing
high quality yam by complying with the requirements of Quality Management System
and continuously improving its effectiveness for total customer’s satisfaction.
They wish to play a leading role in the spinning sector by keeping a substantial
presence in the export and local markets.
Mission Statement – Action Plan:
·
To install state of the art machinery and to acquire sophisticated process technology to achieve highest quality levels in the competitive business environment.·
To make strenuous efforts to enhance profitability of the company and ensuring a fair return to the investors, shareholders and employees.·
To exercise maximum care for improvement of quality of their products by employing a team of highly skilled technicians and professional managers/supervisors.·
To strive hard to develop new markets for the sale of their products both in export and local markets.·
To improve customer satisfaction level by adhering strictly to quality requirements of their customers in local and export markets and by improving communications with customers for receiving prompt feed backs about quality of their products.·
To attend to the prompt resolution of customer complaints by taking timely corrective & preventive measures to address the quality complaints.·
To improve logistic facilities for their customers dispatch plan and issue all shipments / delivery documents well in time.·
To make comprehensive arrangements for the training of their workers / technicians.To promote team work, sense of transparency, creativity in their professionals and technical people.
RATIO ANALYSIS
(Shahzad Textile Mills Ltd.)
Ratios simply mean a number expressed in terms of another. A ratio is a statistical yardstick by mean of which relationship between two or various figures can be compared or measured. Thus Ratio Analysis shows the relationship between accounting data. Ratio can be found out by dividing on number by another number.Ratio analysis is an important and age old technique of financial analysis. Following are some of the advantages of ratio analysis.
Advantages:
It simplifies the comprehension of financial statements.
·
Ratios tell the whole story of changes in the financial condition of the business.·
It provides data for inter-firm comparison. Makes inter-firm comparison possible·
Ratio analysis also makes possible comparison of the performance of different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future.·
Ratios highlight the factors associated with successful and unsuccessful firm. They also reveal strong firms and weak firms, over-valued under-valued firms.·
It helps in planning and forecasting. Ratios can assist management, in its function of forecasting, planning, co-ordination, control and communications.·
It helps in investment decisions in the case of investors and lending decisions in the case of investors and lending decisions in the case of bankers’ etc.Types of Ratios Analysis:
Let us now have a detailed analysis of all the following four ratios for Shahzad Textile Mills Ltd:
Ø
Liquidity RatiosØ
Leverage RatiosØ
Activity RatiosØ
Profitability Ratios
Liquidity Ratios:
Current Ratio:
Current Ratio is equal to current assets divided by current liabilities
Current Ratio = Current Assets
Current liabilities
2006 – 2007:
Current Ratio = 155,423,687
235,258,292
Current Ratio = 0.6666
2005 - 2006:
Current Ratio = 211,443,611
245,562,802
Current Ratio = 0.861
2004 - 2005:
Current Ratio = 231,538,514
206,990,030
Current Ratio = 1.118
Comparison over the years / Interpretation:
Current ratio is a general and quick measured of liquidity of firm. It represents the margin of safety or cushion available to the auditor. It is the index of the firm’s financial stability. It is also an index of the financial solvency and index of strength of working capital.
The current ratio of the firm is decreasing over the years right from 2004-07 constantly, that is, it was 1.118 in 2004-05 and it was 0.6666 in 2006-07.
Acid Test (Quick) Ratio:
Acid Test (Quick) ratio is equal to Current assets less inventories divided by current liabilities. It gives more liquid amount of assets to cover your liabilities.
Quick Ratio = Current assets – Inventories - Preapids
Current liabilities
2006 – 2007:
Quick Ratio = 155,423,687 – 78,466,960 – 1,032,634
235,258,292
Quick Ratio = 0.322
2005 - 2006:
Quick Ratio = 211,443,611 – 103,171,510 -10,775
245,562,802
Quick Ratio = 0.4408
2004 - 2005:
Quick Ratio = 231,538,514 – 85,121,508 – 1,197,161
206,990,030
Quick Ratio = 0.7015
Comparison over the years / Interpretation:
The quick test ratio is a very useful measuring of the liquidity position of the firm. It means that firm’s ability to pay its short-term obligations or current liabilities immediately and is a more rigorous test of liquidity than the current ratio.
The quick ratio of the firm as is shown by the above calculations is decreasing over the years, that is, the company is getting lesser and lesser liquid current assets to cover its current liabilities.
Leverage ratios:
Debt Equity Ratio:
Debt equity ratio is equal to long term debts divided by stockholder’s equity.
Debt Equity ratio = Long Term Debts
Stockholder’s equity
2006 – 2007:
Debt equity ratio = 331,932,701
216,260,913
Debt equity ratio = 1.5348
2005 - 2006:
Debt equity ratio = 370,501,304
233,187,729
Debt equity ratio = 1.588
2004 - 2005:
Debt equity ratio = 316,314,578
190,255,511
Debt equity ratio = 1.6625
Comparison over the years / Interpretation:
This ratio indicates the proprietor’s claims of owners and outsiders against the firm’s assets. The purpose is to get an idea of the cushion available to outsiders and the liquidity of the firm. The interpretation of the ratio depends upon the financial and business policy of the firm.
The debt ratio of the company has decreased constantly over the years right from 2004-07 which is actually a positive sign for the company.
Debt Equity ratio increment is a negative point to management that the more of their business is financed by debts this will increase their financial charges or interest expense and firm’s liquidity and hence decreasing the company’s profit. The lower the ratio the higher the firm’s financing that is provided by the shareholders and larger the creditors cushion (margin of protection) in the extent of shrinkage of assets values or outright loss.
Debt Ratio:
Debt ratio is equal to total liabilities divided by total assets.
Debt Ratio = Total liabilities
Total assets
2006 – 2007:
Debt Ratio = 567,195,993
977,927,145
Debt Ratio = 0.57999
2005 - 2006
Debt Ratio = 616,064,106
1,052,511,963
Debt Ratio = 0.585
2004 - 2005
Debt Ratio = 523,304,608
940,390,441
Debt Ratio = 0.5564
Comparison over the years / Interpretation:
It can be defined as how much sufficient our assets are in retrieving the total debts. The debt ratio of the company has remained stagnant almost over the last three years as shown clearly by the above calculations.
Times Interest Earned (Coverage Ratio):
It briefs that how many times the firm has earned the interest. Or how many times the firm has user its earning before interest and taxes to cover the interest expense.
Times Interest Earned = Profit before Interest and Taxes
Interest expense
2006 – 2007:
Interest coverage Ratio = 19,617,194
11,881,311
Interest Coverage Ratio = 1.65 times
2005 - 2006:
Interest coverage Ratio = 69,154,874
6,331,039
Interest Coverage Ratio = 10.923 times
2004 - 2005:
Interest coverage Ratio = 26,685,569
5,331,875
Interest Coverage Ratio = 5.0049 times
Comparison over the years / Interpretation:
The interest coverage ratio is a very important from the lender point of view. It indicates the number of times interest is covered by the profit available to pay interest charges. It is an index of the financial strength of the enterprise. A high ratio assures the lender a regular and periodic interest income. But weakness of the ratio may create some problems for the firm’s financial manager in raising funds from the debts sources.
The no. of times the firm earns interest has fluctuated dramatically, that is, it was 5.0049 in 2004, increased up to 10 and fell down to 1.65
Activity Ratios:
Inventory Turnover Ratio:
Inventory Turnover Ratio is equal to Cost of Goods Sold divided by Average Inventory.
Inventory Turnover ratio = Cost of Goods Sold
Avg Inventory
2006 – 2007:
Inventory Turnover Ratio = 1,037,707,262
22,571,693
Inventory Turnover Ratio = 45.97 times
2005 - 2006:
Inventory Turnover Ratio = 804,424,768
17,679,208.5
Inventory Turnover Ratio = 45.5011 times
2004 - 2005:
Inventory Turnover Ratio = 630,000,839
12,750,484.5
Inventory Turnover Ratio = 49.4099 times
Comparison over the years / Interpretation:
Inventory turn over ratio measures the velocity of conversion of stock into sales. In other words how rapidly inventory is turning into receivables through sales.
In 2006 it was 6.74 times and in 2007 it was 8.01 times. In 2006 the ratio was low because of over investment in inventories. In year 2007 it is better that is 8.01 times in the year, which is quite good because of good management and polices.
Inventory Holding Period in months:
Inventory holding period in months is equal to number of months in a year divided by inventory turnover ratio.
Inventory Holding Period in months = No of months in a year
Inventory turnover ratio
2006 – 2007:
Inventory turnover in months = 12
45.97
Inventory turnover in months = 0.26102 months
2005 - 2006:
Inventory turnover in months = 12
45.5011
Inventory turnover in months = 0.2637 months
2004 - 2005:
Inventory turnover in months = 9
(because 9 months ended) 49.4
Inventory turnover in months = 0.182 months
Comparison over the years / Interpretation:
Inventory turn over ratio measures the velocity of conversion of stock into sales. In other words how rapidly inventory is turning into receivables through sales.
In 2006 it was 54 days times and in 2007 it was 46 days. In year 2007 it is quite good and in 2006 it was better that is 56 days in a year to move inventory through sales, which is quite good because of good management and polices.
Net Fixed Assets Turnover Ratio:
Net Fixed assts turnover ratio is obtained by dividing sales with net fixed assets, where,
(Net fixed assets = Total fixed Assets – Accumulated Depreciation)
Net Fixed Asset Turnover Ratio = Sales
Net Fixed assets
2006 – 2007:
Fixed asset turnover ratio= 1,100,181,111
567,187,294
Fixed asset turnover ratio = 1.939 times
2005 - 2006:
Fixed asset turnover ratio = 909,784,346
600,565,280
Fixed asset turnover ratio = 1.5148 times
2004 - 2005:
Fixed asset turnover ratio = 693,800,355
480,566,483
Fixed asset turnover ratio = 1.4437 times
Comparison over the years / Interpretation:
Fixed asset turnover ratio measures sales productivity and plant and equipment utilization. It is clear that this ratio is declining from 2006 which is 4.36 to 2.76 in 2007
Total Asset Turnover:
Total asset turnover ratio measures that how much sales are generated through the total assets of the organization.
Total Asset Turnover Ratio = Sales
Total assets
2006 – 2007:
Total asset turnover ratio= 1,100,181,111
977,927,145
Total asset turnover ratio = 1.125 times
2005 - 2006:
Total asset turnover ratio = 909,784,346
1,052,511,963
Total asset turnover ratio = 0.8643 times
2004 - 2005:
Total asset turnover ratio = 693,800,355
940,390,441
Total asset turnover ratio = 0.7377 times
Comparison over the years / Interpretation:
It shows that firms must manage its total assets efficiently and should generate maximum sales through their proper utilization. As the ratio, increases there are more revenue generated per rupee of total investment in asset. The firm ability to produce a large volume of sales on a small total asset based is an important part of the firms overall performance in terms of profits. In 2007, 2006. The ratio was 1.51, 1.99 times respectively. In 2007, the ratio indicates that it is producing RS 1.51 sales per
rupees of investment in total assets. So as time is going by this ratio is decreasing which means company performance is not up to mark in terms of profits.
Receivables Turnover Ratio:
Receivables turnover ratio is equal to net credit sales divided by average receivables.
Receivables Turnover Ratio = Net credit Sales
Avg Receivables
2006 – 2007:
Receivables Turnover Ratio = 1,100,181,111
16,481,740.5
Receivables Turnover Ratio = 66.751 times
2005 - 2006:
Receivables Turnover Ratio = 909,784,346
15,193,435
Receivables Turnover Ratio = 59.88 times
2004 - 2005:
Receivables Turnover Ratio = 693,800,355
21,300,565.5
Receivables Turnover Ratio = 32.571 times
Comparison over the years / Interpretation:
Receivables turnover ratio measures the average length of time it takes a firm to collect credit sales in percentage terms. So Receivables is better in 2006 as compare to 2007 which is 18.19 times
Average Collection Period in months:
Average collection period in months is equal to months in year divided by Receivables turnover ratio.
Average Collection Period in months = No of months in a year
Receivables turnover ratio
2006 – 2007:
Receivables turnover ratio in months = 12
66.751
Receivables turnover ratio in months = 0.179 months
2005 - 2006:
Receivables turnover ratio = 12
59.88
Receivables turnover ratio = 0.2 months
2004 - 2005:
Receivables turnover ratio = 9
(9 months ended) 32.57
Receivables turnover ratio = 0.2763 months
Comparison over the years / Interpretation:
Average collection period shows the average length of time it takes affirm to collect credit sales in months. From above analysis it is clear that average collection period was 17 days respectively in year an2006. But it is best in 2007 which is 20 days.
Payables Turnover Ratio:
Payable turnover ratio is equal to net credit purchases divided by average payables.
Payables Turnover Ratio = Net credit Purchases
Avg payables
2006 - 2007:
Payable Turnover Ratio = 751,225,511
591,630,049
Payable Turnover Ratio = 1.2969 times
2005 - 2006:
Payable Turnover Ratio = 598,780,067
569,684,357
Payable Turnover Ratio = 1.051 times
2004 - 2005:
Payable Turnover Ratio = 457,326,068
481,757,914
Payable Turnover Ratio = 0.949 times
Comparison over the years / Interpretation:
The firm pays off its payables out of its cash 15.22 times in a year.
Avg Payment Period Ratio in months:
Payable turnover ratio in months is equal to months in year divided by payable turnover ratio.
Avg Payment Period in months = No of months in a year
Payables turnover ratio
2006 – 2007:
Payable Turnover Ratio in months = 9
1.2969
Payable Turnover Ratio in months = 9.4 months
2005 - 2006:
Payable Turnover Ratio in months = 12
1.051
Payable Turnover Ratio in months = 11.4 months
2004 - 2005:
Payable Turnover Ratio in months = 9
(9 months ended) 0.949
Payable Turnover Ratio in months = 9.48 months
Comparison over the years / Interpretation:
It shows or represents the no of days taken by the firm to pay to its debtors. If it is higher than it is beneficial for the management.
.In 2006 it is 24 days and in year 2007 it was 33 days. In year 2006 the company was having low
ratio. In 2007 it is best which means that the company is taking the advantage of credit facilities allowed by the creditors.
Profitability Ratios:
Gross Profit Margin:
Gross profit margin is equal to the ratio of gross profit to sales.
Gross Profit Margin = Gross Profit
Sales
2006 – 2007:
Gross profit margin = 62,473,849 X 100
1,100,181,111
Gross profit margin = 5.67 %
2005 - 2006:
Gross profit margin = 105,309,578 X 100
909,784,346
Gross profit margin = 11.57 %
2004 - 2005:
Gross profit margin = 63,799,516 X 100
693,800,355
Gross profit margin = 9.196%
Comparison over the years / Interpretation:
Gross profit margin or gross profit ratio is the ratio of gross profit to net sales expressed as percentage. In 2006 it increased slightly to 7.73 % and in 2007 it increased to 10.22 %. The gross profit is sufficient to recover all operating expenses and to build up reserve after paying all fixed interest charges and all dividends.
Operating Profit Margin:
Operating Profit Margin is equal to earning before interest and tax divided by sales.
Operating Profit Margin = EBIT/Operating Profit
Sales
2006 – 2007:
Operating Profit Margin = 19,617,194 X 100
1,100,181,111
Operating Profit Margin = 1.78%
2005 - 2006:
Operating Profit Margin = 69,154,847 X 100
9,097,843,616
Operating Profit Margin = 7.6 %
2004 - 2005:
Operating Profit Margin = 26,685,569 X 100
693,800,355
Operating Profit Margin = 3.84 %
Comparison over the years / Interpretation:
This used to show the profitability without concern for taxes and interest. In 2006the operating profit ratio was 5.05% and in 2007 the net profit ratio is 7.59 %. In 2006 operating profit ratio increased by 1.66 % and increased by 2.54% in 2007relative to 2006 Higher ratio shows firm’s capacity to with stand adverse economic condition without caring taxes and interest.
Net Profit Margin:
Net Profit Margin is equal to net profit divided by sales.
Net Profit Margin = Net Profit
Sales
2006 – 2007:
Net Profit Margin = 74,939,223 X 100
1,100,181,111
Net Profit Margin = 6.81 %
2005 - 2006:
Net Profit Margin = 91,866,039 X 100
909,784,346
Net Profit Margin = 10.09 %
2004 - 2005:
Net Profit Margin = 48,782,436 X 100
693,800,355
Net Profit Margin = 7.03 %
Comparison over the years / Interpretation:
This used to show the overall profitability and hence it useful to the proprietors. Higher the ratio betters for the organization .It shows the firm’s ability to turn each rupee of sale into profit. In 2006 the net profit ratio is 1.995 % and in 2007 the net profit ratio is 2.66%. In 2006 net profit ratio increased by 0.795 % relative to 2007 . Higher ratio shows firm’s capacity to with stand adverse economic condition.
Earning per share:
This ratio shows that how much amount per share does a common stock holder attains.
Earning per share = Earning Available for Common Stock Holders
No. Of Common Stock Shares
2006 – 2007:
Earning per share = (26,419,136)
13,552,569
Earning per share = Rs. (1.95) / share
2005 - 2006:
Earning per share = 23,556,157
13,552,569
Earning per share = Rs.1.74/share
2004 - 2005:
Earning per share = (3,079,733)
13,552,569
Earning per share = Rs. (0.23) /share
Comparison over the years / Interpretation:
This ratio shows the worth of the share. As we can see that the worth of the shares of SHTM has increased. EPS is almost twice to the 2003 in 2007
Price earning ratio:
It equals to the ratio of market price per share divided by earning per share.
Price Earning Ratio = Market price per share
Earning per share
2006 – 2007:
Price Earning Ratio = 13
(1.95)
Price Earning Ratio = (Rs.6.66)
2005 - 2006:
Price Earning Ratio = 19.95
1.74
Price Earning Ratio = Rs.11.465
2004 - 2005:
Price Earning Ratio = 22.25
(0.23)
Price Earning Ratio = (Rs.96.739)
Comparison over the years / Interpretation:
These ratios results show that in 2007Rs.7.91 were to be spent in order to earn Rs.1 profit. But in year 2006the position had improved a little bit showing that Rs. 6.91 have to be spent in order to earn Rs.1 of profit.
RATIO ANALYSIS
(Shaheen Cotton Mills Ltd.)
Types of Ratios Analysis:
Let us now have a detailed analysis of all the following four ratios for Shaheen Cotton Mills Ltd:
Ø
Liquidity RatiosØ
Leverage RatiosØ
Activity RatiosØ
Profitability Ratios
Liquidity Ratios:
Current Ratio:
Current Ratio = Current Assets
Current liabilities
2006 – 2007:
Current Ratio = 124,814,962
190,729,441
Current Ratio = 0.6544
2005 - 2006:
Current Ratio = 251,003,176
249,133,615
Current Ratio = 1.0075
2004 - 2005:
Current Ratio = 240,489,264
239,040,784
Current Ratio = 1.00605
Comparison over the years / Interpretation:
Current ratio is a general and quick measured of liquidity of firm. It represents the margin of safety or cushion available to the auditor. It is the index of the firm’s financial stability. It is also an index of the financial solvency and index of strength of working capital.
Firm's Current ratio has been increasing over the years right from the 2004 – 2007. Which shows that the current ratio of the firm has been increasing over the years.
Acid Test (Quick) Ratio:
Quick Ratio = Current assets – Inventories - Preapids
Current liabilities
2006 – 2007:
Quick Ratio = 124,814,962-75,496,998-13,622,386
190,724,441
Quick Ratio = 0.2511
2005 - 2006:
Quick Ratio = 251,003,176 -141,230,544-139,589
249,133,615
Quick Ratio = 0 .44005
2004 - 2005:
Quick Ratio = 240,489,264 - 100,915,021 – 839,298
239,040,784
Quick Ratio = 0.5803
Comparison over the years / Interpretation:
The quick test ratio is a very useful measuring of the liquidity position of the firm. It means that firm’s ability to pay its short-term obligations or current liabilities immediately and is a more rigorous test of liquidity than the current ratio.
The calculations above clearly shows that the quick ratio of the firm has been decreasing over the years due to the increase in prepaids and inventories which is a negative point for the company
Leverage / Debt ratios:
Debt Equity Ratio:
Debt Equity ratio = Long Term Debts
Stockholder’s equity
2006 – 2007:
Debt Equity ratio = 216,171,622
51,741,235
Debt Equity ratio = 4.177
2005 - 2006:
Debt Equity ratio = 254,355,262
62,565,620
Debt Equity ratio = 4.0654
2004 - 2005:
Debt Equity ratio = 272,265,545
53,055,841
Debt Equity ratio = 5.1316
Comparison over the years / Interpretation:
This ratio indicates the proprietor’s claims of owners and outsiders against the firm’s assets. The purpose is to get an idea of the cushion available to outsiders and the liquidity of the firm. The interpretation of the ratio depends upon the financial and business policy of the firm.
Debt Equity shows the relationship between the external equities or outside funds and internal equities and shareholder’s funds. The debt equity ratio of the firm has been fluctuating over the years right from 2004 – 2007 with maximum in the year 2004-05 thereby decreasing in the next year and increasing finally.
Debt Equity ratio increment is a negative point to management that the more of their business is financed by debts this will increase their financial charges or interest expense and firm’s liquidity and hence decreasing the company’s profit. The lower the ratio the higher the firm’s financing that is provided by the shareholders and larger the creditors cushion (margin of protection) in the extent of shrinkage of assets values or outright loss.
Debt Ratio:
Debt Ratio = Total liabilities
Total assets
2006 – 2007:
Debt Ratio= 406,896,063
664,277,855
Debt Ratio= 0.6125
2005 - 2006
Debt Ratio= 503,488,877
772,251,884
Debt Ratio= 0.6519
2004 - 2005
Debt Ratio= 511306,329
773,837,219
Debt Ratio= 0.6607
Comparison over the years / Interpretation:
It can be defined as how much sufficient our assets are in retrieving the total debts. We can observe in our analysis that the debt ratio of the firm is decreasing over the years which is a good sign for the company, that is, the company uses less of its total liabilities for its current assets.
Times Interest Earned (Coverage Ratio):
Times Interest Earned = Profit before Interest and Taxes
Interest expense
2006 – 2007:
Interest coverage Ratio = 21,871,47
6,072,316
Interest Coverage Ratio = 3.6 times
2005 - 2006:
Interest coverage Ratio = 35,366,081
8,150,380
Interest Coverage Ratio = 4.3391 times
2004 - 2005:
Interest coverage Ratio = 38,580,210
11,495,605
Interest Coverage Ratio = 3.356 times
Comparison over the years / Interpretation:
The interest coverage ratio is a very important from the lender point of view. It indicates the number of times interest is covered by the profit available to pay interest charges. It is an index of the financial strength of the enterprise. A high ratio assures the lender a regular and periodic interest income. But weakness of the ratio may create some problems for the firm’s financial manager in raising funds from the debts sources.
The no. of times the company earns its interest fluctuates from over the years right from 2004 – 2007. The times interest earned by the company in 2007 returns to the level where it was in 2004.
Activity Ratios:
Inventory Turnover Ratio:
Inventory Turnover ratio = Cost of Goods Sold
Avg Inventory
2006 – 2007:
Inventory Turnover Ratio = 873,405,530
8,884,430
Inventory Turnover Ratio = 98.30times
2005 - 2006:
Inventory Turnover Ratio = 810,116,680
9,789,488.5
Inventory Turnover Ratio = 82.75times
2004 - 2005:
Inventory Turnover Ratio = 577,778,273
12,363,273
Inventory Turnover Ratio = 46.732 times
Comparison over the years / Interpretation:
Inventory turn over ratio measures the velocity of conversion of stock into sales. In other words how rapidly inventory is turning into receivables through sales.
In 2006 it was 6.74 times and in 2007 it was 8.01 times. In 2006 the ratio was low because of over investment in inventories. In year 2007 it is better that is 8.01 times in the year, which is quite good because of good management and polices.
Inventory Holding Period in months:
Inventory Holding Period in months = No of days in a year
Inventory turnover ratio
2006 – 2007:
Inventory turnover in months = 12
98.30
Inventory turnover in months = 0.1220months
2005 - 2006:
Inventory turnover in months = 12
82.75
Inventory turnover in months = 0.1450months
2004 - 2005:
Inventory turnover in months = 9
(9 months ended) 46.73
Inventory turnover in months = 0.192 months
Comparison over the years / Interpretation:
Inventory turn over ratio measures the velocity of conversion of stock into sales. In other words how rapidly inventory is turning into receivables through sales.
In 2006 it was 54 days times and in 2007 it was 46 days. In year 2007 it is quite good and in 2006 it was better that is 56 days in a year to move inventory through sales, which is quite good because of good management and polices.
Net Fixed Assets Turnover Ratio:
Net Fixed Asset Turnover Ratio = Sales
Net Fixed assets
2006 – 2007:
Fixed asset turnover ratio= 931,308,945
283,063,160
Fixed asset turnover ratio = 3.29 times
2005 - 2006:
Fixed asset turnover ratio = 886,433,781
272,801,908
Fixed asset turnover ratio = 3.24 times
2004 - 2005:
Fixed asset turnover ratio = 644,748,123
299,753,028
Fixed asset turnover ratio = 2.15 times
Comparison over the years / Interpretation:
Fixed asset turnover ratio measures sales productivity and plant and equipment utilization. It is clear that this ratio is declining from 2006 which is 4.36 to 2.76 in 2007
Total Asset Turnover:
Total Asset Turnover Ratio = Sales
Total assets
2006 – 2007:
Total asset turnover ratio= 931,308,945
664,277,855
Total asset turnover ratio = 1.40 times
2005 - 2006:
Total asset turnover ratio = 886,433,781
772,251,884
Total asset turnover ratio = 1.14 times
2004 - 2005:
Total asset turnover ratio = 644,748,123
773,837,219
Total asset turnover ratio = 0.833 times
Comparison over the years / Interpretation:
It shows that firms must manage its total assets efficiently and should generate maximum sales through their proper utilization. As the ratio, increases there are more revenue generated per rupee of total investment in asset. The firm ability to produce a large volume of sales on a small total asset based is an important part of the firms overall performance in terms of profits. In 2007, 2006. The ratio was 1.51, 1.99 times respectively. In 2007, the ratio indicates that it is producing RS 1.51 sales per
rupees of investment in total assets. So as time is going by this ratio is decreasing which means company performance is not up to mark in terms of profits.
Receivables Turnover Ratio:
Receivables Turnover Ratio = Net credit Sales
Avg Receivables
2006 – 2007:
Receivables Turnover Ratio = 931,308,945
10,148,122
Receivables Turnover Ratio = 91.77 times
2005 - 2006:
Receivables Turnover Ratio = 886,433,781
4,035,115
Receivables Turnover Ratio = 219.677 times
2004 - 2005:
Receivables Turnover Ratio = 644,748,123
2,249,557.5
Receivables Turnover Ratio = 286.611 times
Comparison over the years / Interpretation:
Receivables turnover ratio measures the average length of time it takes a firm to collect credit sales in percentage terms. So Receivables is better in 2006 as compare to 2007 which is 18.19 times
Average Collection Period in months:
Average Collection Period in months = Days in a year
Receivables turnover ratio
2006 – 2007:
Receivables turnover ratio in months = 12
91.77
Receivables turnover ratio in months = 0.130 months
2005 - 2006:
Receivables turnover ratio = 12
219.678
Receivables turnover ratio = 0.0546months
2004 - 2005:
Receivables turnover ratio = 9
(9 months ended) 286.611
Receivables turnover ratio = 0.0314 months
Comparison over the years / Interpretation:
Average collection period shows the average length of time it takes affirm to collect credit sales in months. From above analysis it is clear that average collection period was 17 days respectively in year an2006. But it is best in 2007 which is 20 days.
Payables Turnover Ratio:
Payables Turnover Ratio = Net credit Purchases
Avg payables
2006 - 2007:
Payable Turnover Ratio = 588,328,732
458,517,776
Payable Turnover Ratio = 1.283 times
2005 - 2006:
Payable Turnover Ratio = 651,080,849
507,397,603
Payable Turnover Ratio = 1.283 times
2004 - 2005:
Payable Turnover Ratio = 442,441,206
484,471,094.5
Payable Turnover Ratio = 0.9132 times
Comparison over the years / Interpretation:
The firm pays off its payables out of its cash 15.22 times in a year.
Avg Payment Period Ratio in months:
Avg Payment Period in months = No of Days in a year
Payables turnover ratio
2006 – 2007:
Payable Turnover Ratio in months = 12
1.283
Payable Turnover Ratio in months = 9.353months
2005 - 2006:
Payable Turnover Ratio in months = 12
1.283
Payable Turnover Ratio in months = 9.353months
2004 - 2005:
Payable Turnover Ratio in months = 9
(9 months ended) 0.9132
Payable Turnover Ratio in months = 9.8554 months
Comparison over the years / Interpretation:
It shows or represents the no of days taken by the firm to pay to its debtors. If it is higher than it is beneficial for the management.
.In 2006 it is 24 days and in year 2007 it was 33 days. In year 2006 the company was having low
ratio. In 2007 it is best which means that the company is taking the advantage of credit facilities allowed by the creditors.
Profitability Ratios:
Gross Profit Margin:
Gross Profit Margin = Gross Profit
Sales
2006 – 2007:
Gross profit margin = 57,903,415 * 100
931,308,945
Gross profit margin = 6.21 %
2005 - 2006:
Gross profit margin = 76,317,101 * 100
886,433,781
Gross profit margin = 8.60 %
2004 - 2005:
Gross profit margin = 66,969,850 X 100
644,748,123
Gross profit margin = 10.3 %
Comparison over the years / Interpretation:
Gross profit margin or gross profit ratio is the ratio of gross profit to net sales expressed as percentage. In 2006 it increased slightly to 7.73 % and in 2007 it increased to 10.22 %. The gross profit is sufficient to recover all operating expenses and to build up reserve after paying all fixed interest charges and all dividends.
Operating Profit Margin:
Operating Profit Margin = EBIT/Operating Profit
Sales
2006 – 2007:
Operating Profit Margin = 21,871,647 *100
931,308,945
Operating Profit Margin = 2.30%
2005 - 2006:
Operating Profit Margin = 35,366,081 * 100
886,433,781
Operating Profit Margin = 3.98 %
2004 - 2005:
Operating Profit Margin = 38,580,210 X 100
644,748,123
Operating Profit Margin = 5.98 %
Comparison over the years / Interpretation:
This used to show the profitability without concern for taxes and interest. In 2006the operating profit ratio was 5.05% and in 2007 the net profit ratio is 7.59 %. In 2006 operating profit ratio increased by 1.66 % and increased by 2.54% in 2007relative to 2006 Higher ratio shows firm’s capacity to with stand adverse economic condition without caring taxes and interest.
Net Profit Margin:
Net Profit Margin = Net Profit
Sales
2006 – 2007:
Net Profit Margin = (986,679,35) * 100
931,308,945
Net Profit Margin = (10.55%)
2005 - 2006:
Net Profit Margin = (113,961,110) * 100
886,433,781
Net Profit Margin = (12.85%)
2004 - 2005:
Net Profit Margin = (129,469,749) X 100
644,748,123
Net Profit Margin = (20.8) %
Comparison over the years / Interpretation:
This used to show the overall profitability and hence it useful to the proprietors. Higher the ratio betters for the organization .It shows the firm’s ability to turn each rupee of sale into profit. In 2006 the net profit ratio is 1.995 % and in 2007 the net profit ratio is 2.66%. In 2006 net profit ratio increased by 0.795 % relative to 2007 . Higher ratio shows firm’s capacity to with stand adverse economic condition.
Earning per share:
Earning per share = Earning Available for Common Stock Holders
No. Of Common Stock Shares
2006 – 2007:
Earning per share = (8,578,439)
14,729,344
Earning per share = Rs. (0.58)
2005 - 2006:
Earning per share = 5,018,031
14,729,344
Earning per share = Rs.0.34/share
2004 - 2005:
Earning per share = 12,380,355
13,706,473
Earning per share = Rs. 0.9 /share
Comparison over the years / Interpretation:
This ratio shows the worth of the share. As we can see that the worth of the shares of SHTM has increased. EPS is almost twice to the 2003 in 2007
Price earning ratio:
Price Earning Ratio = Market price per share
Earning per share
2006 – 2007:
Price Earning Ratio = 6
(0.58)
Price Earning Ratio = Rs.(10.344)
2005 - 2006:
Price Earning Ratio = 7
0.34
Price Earning Ratio = Rs.20.58
2004 - 2005:
Price Earning Ratio = 8.25
0.9
Price Earning Ratio = Rs.9.166
Comparison over the years / Interpretation:
These ratios results show that in 2007Rs.7.91 were to be spent in order to earn Rs.1 profit. But in year 2006the position had improved a little bit showing that Rs. 6.91 have to be spent in order to earn Rs.1 of profit.
INDUSTRY ANALYSIS (comparison through graphical interpretation)
Activity Ratios:
Current Ratio:
|
Current Ratio |
|||
|
2004-05 |
2005-06 |
2006-07 |
|
|
Shahzad |
1.118 |
0.867 |
0.6606 |
|
Shaheen |
1.00605 |
1.0075 |
0.6544 |
Comparison:
Quick Ratio:
|
Quick Ratio |
|||
|
2004-05 |
2005-06 |
2006-07 |
|
|
Shahzad |
0.7015 |
0.4408 |
0.3227 |
|
Shaheen |
0.5803 |
0.44005 |
0.2511 |
Inventory Turnover Ratio:
|
Inventory Turnover Ratio (Times) |
|||
|
2004-05 |
2005-06 |
2006-07 |
|
|
Shahzad |
49.4099 |
45.5011 |
45.973 |
|
Shaheen |
46.732 |
82.7537 |
98.3 |
Comparison:
Inventory Holding Period:
|
Inventory Holding Period (months) |
|||
|
2004-05 |
2005-06 |
2006-07 |
|
|
Shahzad |
0.182 |
0.2637 |
0.261 |
|
Shaheen |
0.192 |
0.145 |
0.122 |
Comparison:
Receivables Turnover Ratio:
|
Receivables Turnover Ratio (Times) |
|||
|
2004-05 |
2005-06 |
2006-07 |
|
|
Shahzad |
32.571 |
59.88 |
66.751 |
|
Shaheen |
286.61 |
219.677 |
91.77 |
Comparison:
Average Collection Period:
|
Average Collection Period (months) |
|||
|
2004-05 |
2005-06 |
2006-07 |
|
|
Shahzad |
0.2763 |
0.2 |
0.179 |
|
Shaheen |
0.0314 |
0.0546 |
0.13 |
Comparison:
Payables Turnover Ratio:
|
Payables Turnover Ratio (times) |
|||
|
2004-05 |
2005-06 |
2006-07 |
|
|
Shahzad |
0.949 |
1.051 |
1.2969 |
|
Shaheen |
0.9132 |
1.283 |
1.283 |
Comparison:
Net Fixed Assets:
|
|
Net Fixed Assets Ratio |
||
|
|
2004-05 |
2005-06 |
2006-07 |
|
Shahzad |
1.4437 |
1.5148 |
1.9397 |
|
Shaheen |
2.15 |
3.24 |
3.29 |
Comparison:
Average Payment Period:
|
Average Payment Period (months) |
|||
|
2004-05 |
2005-06 |
2006-07 |
|
|
Shahzad |
9.48 |
11.4 |
9.4 |
|
Shaheen |
9.8554 |
9.351 |
9.353 |
Comparison:
Total Assets Turnover:
|
|
Total Assets Turnover |
||
|
|
2004-05 |
2005-06 |
2006-07 |
|
Shahzad |
0.7377 |
0.8643 |
1.125 |
|
Shaheen |
0.833 |
1.147 |
1.4 |
Comparison:
Debt Ratio:
|
|
Debt Ratio |
||
|
|
2004-05 |
2005-06 |
2006-07 |
|
Shahzad |
0.5564 |
0.585 |
0.5799 |
|
Shaheen |
0.6607 |
0.6519 |
0.6129 |
Comparison:
Debt Equity Ratio:
|
|
Debt Equity Ratio |
||
|
|
2004-05 |
2005-06 |
2006-07 |
|
Shahzad |
1.6625 |
1.5888 |
1.5348 |
|
Shaheen |
5.1316 |
4.0654 |
4.177 |
Comparison:
Times Interest Earned:
|
|
Times Interest Earned (times) |
||
|
|
2004-05 |
2005-06 |
2006-07 |
|
Shahzad |
5.0049 |
10.923 |
1.65109 |
|
Shaheen |
3.356 |
4.3391 |
3.6 |
Comparison:
G.P.Margin:
|
|
G.P. Margin |
||
|
|
2004-05 |
2005-06 |
2006-07 |
|
Shahzad |
9.20% |
11.57% |
5.67% |
|
Shaheen |
10.30% |
8.60% |
6.21% |
Comparison:
Operating Profit Margin:
|
|
Operating Profit Margin |
||
|
|
2004-05 |
2005-06 |
2006-07 |
|
Shahzad |
3.84% |
7.60% |
1.78% |
|
Shaheen |
5.98% |
3.98% |
2.30% |
Comparison:
N.P. Margin:
|
|
N.P. Margin |
||
|
|
2004-05 |
2005-06 |
2006-07 |
|
Shahzad |
7.03% |
10.09% |
6.81% |
|
Shaheen |
20.08% |
-12.85% |
-10.50% |
Comparison:
Price Earning Ratio:
|
|
Price Earning Ratio |
||
|
|
2004-05 |
2005-06 |
2006-07 |
|
Shahzad |
-96.739 |
11.465 |
-6.66 |
|
Shaheen |
9.166 |
20.58 |
-10.344 |
Comparison:
EPS:
|
|
EPS (Rs) |
||
|
|
2004-05 |
2005-06 |
2006-07 |
|
Shahzad |
-0.23 |
1.74 |
-1.95 |
|
Shaheen |
0.9 |
0.34 |
-0.58 |
Comparison:
Recommendations and suggestions
After going through the an entire analysis of the two textile industries Shazad & Shaheen companies, quite evident results can be deduced about the financial situations of the industries. Each and every ration has been analyzed quite profoundly and the results have been provided along with the clear illustration of the graphs.
As far as current financial situation of Shahzad textile is concerned, it is going quite in a better condition as compared to the current financial situation of Shaheen & co, which is growing in its debt ratio and decreasing in its profitability and activity ratios, while Shahzad is depending lesser and lesser on its debtors.
But one thing that should be taken into notice by the management of Shahzad & co that their EPS and in fact the overall profitability isn't attaining a satisfactory position. So, they need to take into account their profitability.
As far as, Shaheen cotton mills & co is concerned, it needs to take some serious steps in its overall financial structure and needs a renewal of its strategy to compete in the market.
Conclusion
So, in the light of all the details given above about the financial analysis of both the industries, i.e. debt, activity, liquidity, & profitability, Shahzad & co surpasses the Shaheen co is respect to the overall financial structure. Thereby giving Shaheen & co a tough time in the textile market.
|