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Transcript of Fauji Cement Company Limited
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FAUJI CEMENT COMPANY
LIMITEDCompany Introduction
A longtime leader in the cement manufacturing industry, Fauji Cement Company, headquartered
in Islamabad, operates a cement plant at Jhang Bahtar, Tehsil Fateh Jang, District Attock in theprovince of Punjab. The company has a strong and longstanding tradition of service, reliability,
and quality that reaches back more than 10 years. Sponsored by Fauji Foundation the Company
was incorporated in Rawalpindi in 1992.
The cement plant operating in the Fauji Cement is one of the most efficient and best maintainedin the country and has an annual production capacity of 1.165 million tons of cement. The
quality portland cement produced at this plant is the best in the Country and is preferred theconstruction of highways, bridges, commercial and industrial complexes, residential homes, anda myriad of other structures needing speedy strengthening bond, fundamental to Pakistan's
economic vitality and quality of life.
Company History
Fauji Cement Company Limited was sponsored by Fauji Foundation and incorporated as a public
limited company on 23 November 1992. It obtained the Certificate of Commencement ofBusiness on 22 May 1993. The company has been setup with primary objective of producing and
selling Ordinary Portland Cement. For the purpose of selection of sound process technology,
state of the art equipment, civil design and project monitoring, Local and Foreign Consultantswere engaged.
The company entered into a contract with World renowned cement plant manufacturers M/s F.L.Smith to carry out design , engineering, procurement, manufacturing, delivery, erection,
installation, testing and commissioning at site of a new, state of the art, cement plant including
all auxiliary and ancillary equipment, complete in all respects for the purpose of manufacturing a
minimum of 3,000 tdp clinker and corresponding quantity of Ordinary Portland Cement as per
Pakistan/British Standard Specifications.The contract came into force on January, 1, 1994. Physical work on the project started in August
1994. Commissioning activities started in May 1997 generally remained smooth and trouble free,which enabled first batch of clinker production on 26 September 1997 followed by cement
production in November 1997. Subsequently in 2005, the Plant Capacity has been raised to 3,700
tons of clinker per day i.e. 3,885 tons of cement per day.
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Corporate Profile
Board of Directors
Lt Gen Syed Arif Hasan, HI (M) (Retd) Chairman
Lt Gen Javed Alam Khan, HI (M) (Retd) Chief Executive
Mr. Qaiser Javed Director
Mr. Riyaz H. Bokhari, IFU Director
Brig Arif Rasul SI (M) (Retd) Qureshi, Director
Brig Rahat Khan, SI (M) (Retd) Director
Dr. Nadeem Inayat Director
Brig Liaqat Ali (Retd) Director
Brig Munawar Ahmed Rana (Retd) Director
Brig Shabbir Ahmed (Retd) Secretary
Human Resources Committee
Dr. Nadeem Inayat President
Mr. Qaiser Javed Member
Brig Liaqat Ali (Retd) Member
Brig Shabbir Ahmed (Retd) Secretary
Audit Committee
Mr. Qaiser Javed President
Mr. Riyaz H. Bokhari Member
Brig Rahat Khan (Retd) Member
Dr. Nadeem Inayat Member
Brig Shabbir Ahmed (Retd) Secretary
Technical Committee
Brig Rahat Khan (Retd) President
Brig Arif Rasul Qureshi (Retd) Member
Brig Liaqat Ali (Retd) Member
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Mir Khawar Saleem, Director (Project) Secretary
Mission Statement
FCCL while maintaining its leading position in quality of cement and through greater market
outreach will build up and improve its value addition with a view to ensuring optimum returns to
the shareholders.
Our Vision
To transform FCCL into a role model cement manufacturing Company fully aware of generally
accepted principles of corporate social responsibilities engaged in nation building through most
efficient utilization of resources and optimally benefiting all stake holders while enjoying publicrespect and goodwill.
Our Objective
The company has been set up with the primary objective of producing and selling ordinary
Portland cement. The finest quality of Cement is available for all type of customers whether for
Dams, Canals, industrial structures, highways, commercial or residential needs using latest state
of the art dry process Cement manufacturing process.
Our Values
Customers: We listen to our customers and improve our product to meet their present and future
needs.
People: Our success depends upon high performing people working together in a safe and
healthy work place where diversity, development and team work are valued and recognized.
Accountability: We expect superior performance and results. Our leaders set clear goals and
expectations, are supportive and provide and seek frequent feed back.
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Citizen Ship: We support the communities where we do business, hold ourselves to the highest
standards of ethical conduct and environment responsibility, and communicate openly with
FCCL people and the public.
Financial Responsibility: We are prudent and effective in the use of the resources entrusted to
us.
ProductOrdinary Portland Cement
Clinker 94-95%
Gypsum 5-6%
28 days strength up to 8000 P.S.I
Fineness up to 3100 cm2/gm
Quality Policy
EMPHASIS ON 100% CUSTOMER SATISFACTION.
100 % EFFECTIVE UTILIZATION OF PLANT CAPACITIES.
EMPHASIS ON 100% TOP QUALITY HUMAN RESOURCES.
EMPHASIS ON 100% QUALITY CULTURE.
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Auditors Report to the MembersWe have audited the annexed balance sheet of Fauji Cement Company Limited ( the Company) as at30 June 2007 and the related profit and loss account, cash flow statement and statement of changes in
equity together with the notes forming part thereof, for the year then ended and we state that we haveobtained all the information and explanations which, to the best of our knowledge and belief,
werenecessary for the purposes of our audit.
It is the responsibility of the Companys management to establish and maintain a system ofinternal
control, and prepare and present the above said statements in conformity with the approved accounting
standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express anopinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
above said statements are free of any material misstatement. An audit includes examining on a testbasis, evidence supporting the amounts and disclosures in the above said statements. An audit also
includes assessing the accounting policies and significant estimates made by management, as well as,evaluating the overall presentation of the financial statements. We believe that our audit providesa
reasonable basis for our opinion and, after due verification, we report that:
(a) in our opinion, proper books of account have been kept by the Company as required bythe Companies Ordinance, 1984;
(b) in our opinion
(i) the balance sheet and profit and loss account together with the notes thereonhave been drawn up in conformity with the Companies Ordinance, 1984, and are
in agreement with the books of account and are further in accordance with
accounting polices consistently applied except for the change as indicated in
note 2.8 with which we concur;(ii) the expenditure incurred during the year was for the purpose of the Companysbusiness; and
(iii) the business conducted, investments made and the expenditure incurred during
the year were in accordance with the objects of the Company;(c) in our opinion and to the best of our information and according to the explanations given
to us, the balance sheet, profit and loss account, cash flow statement and statement of
Fauji CementCompany Limited
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Income Statement Analysis
Fauji Cement Co Ltd
Summarized Income StatementFor the Year Ended 30 June, 2003 To 2007
2003 2004 2005 2006 2007
Rupees Rupees Rupees Rupees Rupees
SALES 2,488,992 3,247,262 3,921,363 5,683,456 4,780,036
Less : Sales tax and excise duty 978,254 951,031 1,076,219 1,397,317 1,316,753
NET SALES 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283
Less: Cost of salesRaw Material 75,725 115,164 136,819 205,751 235,379
Direct Labor 65,299 91,289 87,091 142,070 133,780
Factory Overhead
Rent Rate & Taxes 882 952 1,378 2,562 2,213Fuel Consumed 472,772 564,591 699,818 843,909 979,044
Power Consumed 246,489 310,041 332,383 393,785 431,609
Depreciation 245,737 243,056 251,981 261,566 276,244
Other F.OH 192,730 238,876 245,183 325,001 355,819
Total F.OH 1,158,610 1,357,516 1,530,743 1,826,823 2,044,929
Total Manufacturing Cost 1,299,634 1,563,969 1,754,653 2,174,644 2,414,088
Work in Process 37,601 -21,944 16,137 -82,047 -21,550
Cost of goods manufactured 1,337,235 1,542,025 1,770,790 2,092,597 2,392,538
Finished goods -2,104 13,381 -7,223 2,430 -20,750
Cost of Sales 1,335,131 1,555,406 1,763,567 2,095,027 2,371,788
Gross Profit 175,607 740,825 1,081,577 2,191,112 1,091,495Less Operating Expenses
General & Admin Expenses
Salary, wages and benefits 15,408 21,817 21,835 35,663 42,439
Traveling and entertainment 2,933 2,053 3,320 4,769 3,487
Legal and Professional charges 12,117 1,655 3,148 3,490 2,281
Other General and Admin Expenses 7,917 14,542 13,991 22,706 23,095
Total 38,375 40,067 42,294 66,628 71,302
Selling and Distribution Expenses
Salary, wages and benefits 7,992 12,011 11,085 21,388 20,651
Rent Rate & Taxes 1,209 1,144 1,172 1,112 1,353
Communication Expenses 1,149 1,850 2,590 2,376 2,871Advertisement and sales Promotion 1,737 2,296 2,101 2,866 2,029
Other selling expenses 2,930 3,116 4,386 3,953 13,741
Total 15,017 20,417 21,334 31,695 40,645
Other Operating Expenses 0 0 40,493 94,127 58,098
Operating Profit(EBIT) 122,215 680,341 977,456 1,998,662 921,450
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Add Other income
Interest on Bank Accounts 6,795 9,517 3,821 34,600 68,079Interest on Long Term Advances 79 119 34 135 135
Gain on Disposal of Fixed Assets 1,259 378 4,750 1,301 100
Others 394 32,730 2,611 7,288 5,521
Total 8,527 42,744 11,216 43,324 73,835
Less Financial charges
Fee and charges on Loans 3,347 11,615 10,564 500 500
Interest on Long term loans 307,050 57,324 175,784 254,030 200,642
Mark up on Short term loans from Associations 0 873 3,185 456 0
Interest on short term loans 4,246 0 4,353 1,095 779
Others 148,763 134,410 35,748 8,215 5,184
Total 463,406 204,222 229,634 264,296 207,105
Less Amortization of Differed Cost 191,061 762,152 0 0 0
Profit/ Loss Before Taxation -523,725 -243,289 759,038 1,777,690 788,180
Less Taxation 7,650 557,439 248,548 573,951 141,857
Profit/loss after Taxation -516,075 314,150 510,490 1,203,739 646,323
Earning/ (Loss) per share - Basic -1.43 0.85 1.38 3.25 1.74
Earning/ (Loss) per share - Diluted -1.27 0.75 1.22 2.87 1.54
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Horizontal Analysis
Fauji Cement Co Ltd
Income Statement (Horizontal Analysis)
For the Year Ended 30 June, 2003 To 2007
2003 2004 2005 2006 2007
SALES 100.00% 130.46 157.55 228.34 192.05
Less: Sales tax and excise duty 100.00% 97.22 110.01 142.84 134.60
NET SALES 100.00% 151.99 188.33 283.71 229.24
Less: Cost of sales
Raw Material 100.00% 152.08 180.68 271.71 310.83
Direct Labor 100.00% 139.80 133.37 217.57 204.87
Factory Overhead
Rent Rate & Taxes 100.00% 107.94 156.24 290.48 250.91
Fuel Consumed 100.00% 119.42 148.02 178.50 207.09
Power Consumed 100.00% 125.78 134.85 159.76 175.10
Depreciation 100.00% 98.91 102.54 106.44 112.41
Other F.OH 100.00% 123.94 127.22 168.63 184.62
Total F.OH 100.00% 117.17 132.12 157.67 176.50
Total Manufacturing Cost 100.00% 120.34 135.01 167.33 185.75
Work in Process 100.00% -58.36 42.92 -218.20 -57.31
Cost of goods manufactured 100.00% 115.31 132.42 156.49 178.92
Finished goods 100.00% -635.98 343.30 -115.49 986.22
Cost of Sales 100.00% 116.50 132.09 156.92 177.64
Gross Profit 100.00% 421.87 615.91 1247.74 621.56
Less Operating Expenses
General & Admin Expenses
Salary, wages and benefits 100.00% 141.60 141.71 231.46 275.43
Traveling and entertainment 100.00% 70.00 113.19 162.60 118.89
Legal and Professional charges 100.00% 13.66 25.98 28.80 18.82
Other General and Admin Expenses 100.00% 183.68 176.72 286.80 291.71Total 100.00% 104.41 110.21 173.62 185.80
Selling and Distribution Expenses
Salary, wages and benefits 100.00% 150.29 138.70 267.62 258.40
Rent Rate & Taxes 100.00% 94.62 96.94 91.98 111.91
Communication Expenses 100.00% 161.01 225.41 206.79 249.87
Advertisement and sales Promotion 100.00% 132.18 120.96 165.00 116.81
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Other selling expenses 100.00% 106.35 149.69 134.91 468.98
Total 100.00% 135.96 142.07 211.06 270.66
Operating Profit 100.00% 556.68 799.78 1635.37 753.96
Add Other income
Interest on Bank Accounts 100.00% 140.06 56.23 509.20 1001.90
Interest on Long Term Advances 100.00% 150.63 43.04 170.89 170.89
Gain on Disposal of Fixed Assets 100.00% 30.02 377.28 103.34 7.94
Others 100.00% 8307.11 662.69 1849.75 1401.27
Total 100.00% 501.28 131.54 508.08 865.90
Less Financial charges
Fee and charges on Loans 100.00% 347.03 315.63 14.94 14.94
Interest on Long term loans 100.00% 18.67 57.25 82.73 65.35
Interest on short term loans 100.00% 0.00 102.52 25.79 18.35
Others 100.00% 90.35 24.03 5.52 3.48
Total 100.00% 44.07 49.55 57.03 44.69Less Amortization of Differed Cost 100.00% 398.91 0.00 0.00 0.00
Profit/ Loss Before Taxation 100.00% 46.45 -144.93 -339.43 -150.50
Less Taxation 100.00% 7286.78 3248.99 7502.63 1854.34
Profit/loss after Taxation 100.00% -60.87 -98.92 -233.25 -125.24
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Vertical Analysis
Fauji Cement Co Ltd
Income Statement ( Vertical Analysis)For the Year Ended 30 June, 200
2003 2004 2005 2006 2007
SALES 100.00% 100.00% 100.00% 100.00% 100.00%
Less : Sales tax and excise duty 39.30 29.29 27.45 24.59 27.55
NET SALES 60.70 70.71 72.55 75.41 72.45
Raw Material 3.04 3.55 3.49 3.62 4.92
Direct Labor 2.62 2.81 2.22 2.50 2.80
Factory Overhead
Rent Rate & Taxes 0.04 0.03 0.04 0.05 0.05
Fuel Consumed 18.99 17.39 17.85 14.85 20.48Power Consumed 9.90 9.55 8.48 6.93 9.03
Depreciation 9.87 7.48 6.43 4.60 5.78
Other F.OH 7.74 7.36 6.25 5.72 7.44
Total F.OH 46.55 41.80 39.04 32.14 42.78
Cost of Sales 53.64 47.90 44.97 36.86 49.62
Gross Profit 7.06 22.81 27.58 38.55 22.83
General & Admin Expenses
Salary, wages and benefits 0.62 0.67 0.56 0.63 0.89
Traveling and entertainment 0.12 0.06 0.08 0.08 0.07
Legal and Professional charges 0.49 0.05 0.08 0.06 0.05Other General and AdminExpenses
0.32 0.45 0.36 0.40 0.48
Total 1.54 1.23 1.08 1.17 1.49
Selling and Distribution Expenses
Salary, wages and benefits 0.32 0.37 0.28 0.38 0.43
Rent Rate & Taxes 0.05 0.04 0.03 0.02 0.03
Communication Expenses 0.05 0.06 0.07 0.04 0.06
Advertisement and sales Promotion 0.07 0.07 0.05 0.05 0.04
Other selling expenses 0.12 0.10 0.11 0.07 0.29
Total 0.60 0.63 0.54 0.56 0.85Operating Profit 4.91 20.95 24.93 35.17 19.28
Less Financial charges
Fee and charges on Loans 0.13 0.36 0.27 0.01 0.01
Interest on Long term loans 12.34 1.77 4.48 4.47 4.20
Mark up on Short term loans from
Associations
0.00 0.03 0.08 0.01 0.00
Interest on short term loans 0.17 0.00 0.11 0.02 0.02
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Others 5.98 4.14 0.91 0.14 0.11
Total 18.62 6.29 5.86 4.65 4.33
FAUJI CEMENT COMPANY
BALANCE SHEETFAUJI CEMENT COMPANY LIMITED
BALANCE SHEET
As On 2003 To 2007
2003 2004 2005 2006 2007
CURRENT
ASSETS: 721,338,365 574,461,034 1,113,721,603 1,579,381,610 1,953,527
Cash and Bank
Balance 193,992,231 19,708,814 603,109,660 847,590,378 423,133
Receivables 60,721,925 73,584,212 8,235,163 2,836,409 858,758
Stock in Trade: 47,962,326 61,599,838 55,931,122 145,090,210 183,309Raw Material 10,149,401 15,223,951 18,468,968 28,011,800 23,931
Work in process 5,816,672 27,760,995 11,624,101 93,670,852 115,221
Finished goods: 31,996,253 18,614,892 2,588,053 23,407,558 44,157
NON CURRENT
ASSETS: 5,591,918,365 5,335,892,506 5,110,066,731 4,576,776,382 4,447,161
Fixed assets 4,581,054,157 4,386,945,532 4,717,315,487 4,563,115,282 4,392,450
Long term Deposits,
Prepayments and
Deferred cost 21,600,000 36,600,000 46,611,000 46,611,000 46,611
Long Term Loans
and Advances 40,000,000 - 9,000,000 9,000,000 8,100CURRENT
LIABILITIES 472,332,789 372,116,351 1,137,589,149 1,207,427,336 1,393,957
Current portion of
long term loan 137,390,439 86,508,407 552,995,000 550,000,000 550,000
Short term loans 15,914,497 308,876,433 236,353,099 375,510
Other liabilities 319,027,853 285,607,944 275,717,716 421,074,237 468,447
Non Current
LIABILITIES 421,593,774 3,599,103,166 2,567,217,891 1,648,292,490 1,223,195
Long term loans 4,188,487,125 3,558,839,081 2,522,005,000 1,425,000,000 875,000
Provisions for staff 27,450,649 40,264,085 45,212,891 7,911,808 8,277
Share HoldersEquity 1,624,986,187 1,939,134,023 2,449,624,461 3,282,616,746 3,735,206
Paid up capital 1,624,986,187 1,939,134,023 2,449,624,461 3,282,616,746 3,735,206
Total Assets 6313256750 5910353540 6223788334 6198107892 6400688
Total Liabilities 4688270563 3971219517 3774163873 2915491146 2665482
Total Liabilities &
Owner's Equity 6313256750 5910353540 6223788334 6198107892 6400688
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FAUJI CEMENT COMPANY
BALANCE SHEET HORIZONTAL ANALYSIS
As On 2003 To 2007
FAUJI CEMENT COMPANY LIMITED
Balance Sheet Trend Analysis
2003 2004 2005 2006 2007
CURRENT
ASSETS: 100.00% 80.00% 154.00% 219.00% 0.27%
Cash and Bank
Balance 100.00% 102.00% 310.00% 437.00% 0.22%
Receivables 100.00% 121.00% 14.00% 5.00% 1.4%
Stock in Trade: 100.00% 128.00% 116.00% 302.00% 0.38%Raw Material 100.00% 150.00% 182.00% 276.00% 0.24%
Work in process 100.00% 477.00% 200.00% 1610.00% 2%
Finished goods: 100.00% 58.00% 81.00% 73.00% 14%
NON CURRENT
ASSETS: 100.00% 95.00% 91.00% 82.00% 0.08%
Fixed assets 100.00% 95.00% 103.00% 99.60% 0.09%
Long Term deposits 100.00% 169.00% 215.80% 215.80% 0.02%
Long Term Loans and
Advances 100.00% 0.00% 22.50% 22.50% 0.02%
CURRENT
LIABILITIES 100.00% 78.00% 255.00% 268.00% 0.31%
Current portion of
long term loan 100.00% 63.00% 402.00% 400.00% 0.40%
Short term loans 100.00% 0.00% 1941.00% 148.00% 2.4%
Other liabilities 100.00% 89.50% 86.40% 132.00% 0.15%
Non Current
LIABILITIES 100.00% 85.40% 61.00% 39.00% 0.03%
Long term loans 100.00% 85.00% 60.00% 34.00% 0.02%
Provisions for staff 100.00% 147.00% 164.70% 28.00% 0.03%Share Holders
Equity 100.00% 119.30% 150.74% 202.00% 0.23%
Paid up capital 100.00% 119.30% 150.74% 202.00% 0.23%
Total Assets 100.00% 93.60% 98.58% 98.17% 0.1013%
Total Liabilities 100.00% 84.70% 80.50% 62.00% 0.05%
Total Liabilities & 100.00% 93.60% 98.58% 98.17% 0.1013%
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Owner's Equity
Ratio Analysis
Liquidity ratios
Current Ratio
The current ratio determines short term debt paying ability and is computed as follows
Current Ratio = Current Assets / Current Liabilities
Current Ratio
Years 2003 2004 2005 2006 2007
Current Assets 721,338 574,461 1,113,721 1,579,382 1,953,527
Current Liabilities 472332 372116 1206946 1267199 1442287
Current Ratio in Times 1.53 1.54 0.92 1.25 1.35
InterpretationIn the above table the ratio is increasing in the first years that mean the company has more fundsto pay its current liabilities. But in the coming year there is a decrease in the ratio. That affects
the companys debt paying ability. In the last two years the ratio increased due to increase in the
current assets. So that is the positive sign for the company. It increases the short term, liquidityof the company and it attracts the short term loan providers on the cost of profitability.
1.53 1.54
0.92
1.25 1.35
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2003 2004 2005 2006 2007
Years
Series1
Current Ratio in Times
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Quick Ratio
Quick Ratio = (Current AssetsInventory) / Current Liabilities
Quick RatioYears 2003 2004 2005 2006 2007
Current Assets 721,338 574,461 1,113,721 1,579,382 1,953,527
Inventory 236,602 259,000 353,806 635,978 652,078
Current Liabilities 472332 372116 1206946 1267199 1442287
Acid Test Ratio 1.03 0.85 0.63 0.74 0.90
InterpretationIn the above table we can see that there is a decrease in the ratio. This ratio is taken on the basis
of quick assets The main reason of the decline is the increase in the current liabilities. The other
reason is increase in the inventory that decreases the required ratio.
1.03
0.85
0.63
0.74
0.90
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2003 2004 2005 2006 2007
Years
Acid Test Ratio (Times)
Series1
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Activity ratios Inventory turnover
This ratio indicates the liquidity of the inventory. The formula is as follow,
Inventory Turnover = Cost of Goods Sold / Average Inventory (Times/Year)
Inventory Turnover
Years 2003 2004 2005 2006 2007
Cost of Goods Sold 1,335,131 1,555,406 1,763,567 2,095,027 2,371,788
Ending Inventory 236,602 259,000 353,806 635,978 652,078
Inventory Turnover (Times) 5.64 6.01 4.98 3.29 3.64
InterpretationAs shown in the table there is an increase in 2004 as compared to the base year. Whereas there is
a decline in the inventory turnover in the following two years. On the other hand there is a slight
rise in the ratio in last year. It is better for the company to have a high inventory turnover ratio .
Average Age of Inventory
365/inventory turnover
AVERAGE AGE OF INVENTORY
Years 2003 2004 2005 2006 2007
days 365 365 365 365 365
Inventory turnover 5.64 6.01 4.98 3.29 3.64
Average age of inventory(Times) 64.71 60.73 73.29 110.9 100.2
InterpretationAs shown in the table in 2005 the average age of inventory is high as compared to base year.
Whereas the average age of turnover in 2004 is lowes
5.646.01
4.98
3.29 3.64
0.00
2.00
4.00
6.00
8.00
2003 2004 2005 2006 2007
Years
InventoryTurnover
(Times)
Series1
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Average collection period
= account Receivables / (Net Sales/365) Days
Average collection period
Years 2003 2004 2005 2006 2007
Account Receivable 79,492 23,833 25,021 27,042 27,906
Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283
Days Sale in Account
Receivable(Days)
19.21 3.79 3.21 2.30 2.94
Interpretation
This ratio gives an indication of the length of time that the receivables have been
outstanding at the end of the year. Shortening the credit terms indicates that there will
be less risk in the collection of future receivables and a lengthening of the credit
terms indicates a greater risk. In the above data we see that in year 2003 the dayssales in account receivable is very high and it was not good for the company but after
2003 there is a great decrease in the days sales in inventory which show the good
performance of the companys management and it shows a less risk in the collection
of future receivables.
19.21
3.793.212.302.94
0.00
5.00
10.0015.00
20.00
25.00
20032004200520062007
Years
Series1
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Total Asset Turnover
Total Assets Turnover= Net Sales/ Total Assets
Total Assets Turnover
2003 2004 2005 2006 2007Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283
Total Assets 6,313,256 5,910,353 6,223,788 6,198,107 6,400,688
Total Assets Turnover (Times) 0.24 0.39 0.46 0.69 0.54
InterpretationIt measures the activity of the assets and the ability of the firm to generate sales through the use
of assets. The ratio is increasing and we can conclude that the cement company is efficientlyusing its assets to generate more sales and more profits.
Financial Leverage Ratios Debt Ratio
The debt ratio indicates the firms long term debt paying ability. It is computed as follows
Debt Ratio = Total Liabilities/Total Assets
Debt Ratio
2003 2004 2005 2006 2007
Total Liabilities 4,688,270 3,971,219 3,774,164 2,915,491 2,665,482
Total Assets 6313256 5910353 6223788 6198107 6400688
Debt Ratio 74.26% 67.19% 60.64% 47.04% 41.64%
0.24
0.390.46
0.69
0.54
0.00
0.20
0.40
0.60
0.80
2003 2004 2005 2006 2007
Years
TotalAs
setsTurnover
(
Times)
Series1
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Interpretation
This table shows the current and past debt paying ratio of the company. The ratio in 2003 was
74.26% which was very high but after that till 2007 it is decreasing continuously and in 2007 it is41.64% this decreasing trend shows the company is in better position as compare to 2003.
Leverage Ratios
Times interest earned ratio
Times interest earned ratio = EBIT/Interest
Interest Earned Ratio
2003 2004 2005 2006 2007
EBIT 122,215 680,341 977,456 1,998,662 921,450
Interest Earned 6,874 9,636 3,855 34,735 68,214
Interest Earned Ratio
(Times)
18 71 254 58 14
74.26%
67.19%
60.64%
47.04%41.64%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
2003 2004 2005 2006 2007
Years
DebtRatio(%age
Series1
18
71
254
58
14
0
100
200
300
2003 2004 2005 2006 2007
Years
IntersetEarned
Ratio
(Times)
Series1
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19
InterpretationThe above table indicates the Time interest earned ratio which shows the firm will able
to meet his obligation or not in 2003 interest earned was 18 times of operating profit
but in 2004 it was 71 times and it increase further to 254 times in 2005 at that time
company was strong in meeting its obligation but after 2005 it was decreased to 58
times in 2006 and 14 times in 2007 this shows company losing its position to meet theobligation.
Fixed Charge Coverage Ratio
The Fixed charge coverage ratio indicates a firms long term debt paying ability fromthe income statement view. The fixed charge ratio indicates a firms ability to cover
fixed charges.
It is computed as follows:
Fixed Charge Coverage Ratio = EBIT + Lease payment/Interest + Lease payment
+ (Principle + preferred dividend) * 1/(1-T)
Profitability Ratios
Gross profit Margin
Gross profit equals the difference between net sales revenue and the cost of goods sold.
Gross profit Margin = Gross profit / Net sales
Gross profit margin analysis helps a number of users. Managers budget gross profit levelsinto their predictions of profitability. Gross profit margin is also use in cost control. Gross
profit margin can also be used to estimate inventory involved in insured loses.
Gross Profit Margin
2003 2004 2005 2006 2007
Gross Profit 175,607 740,825 1,081,577 2,191,112 1,091,495
Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283
Gross Profit Margin 11.62% 32.26% 38.01% 51.12% 31.52%
InterpretationIn this table the gross profit margin has inclined substantially over the 1st four years from2003 to 2006 after that in 2007 the Gross profit Margin decreased by 31.52%.The increase inGross profit margin is due to increase in Net sales and Gross profit.
Operating Income Margin
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Operating Income Margin=Operating Income/Net Sales
Operating Income Margin (Amounts in Rs. 000)
2003 2004 2005 2006 2007
Operating Income EBIT 122,215 680,341 977,456 1,998,662 921,450
Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283
Operating Income Margin 8.09% 29.63% 34.36% 46.63% 26.61%
InterpretationIt include only operating income in the numerator. After checking table we can say that there isan increasing trend in operating profit margin the coming three years. But it declined in the last
year due to increase in the cost of sales. Management must focus on the cost to control in order
earn more profits.
Net Profit Margin
Net Profit Margin= Net Income before Minority shares of Earnings /Net Sale
Net Profit Margin
2003 2004 2005 2006 2007
Net Income -516,075 314,150 510,490 1,203,739 646,323
Net Sales 1,510,738 2,296,231 2,845,144 4,286,139 3,463,283
Net Profit Margin(%age)
-34.16% 13.68% 17.94% 28.08% 18.66%
InterpretationThis ratio gives a measure of net income dollars generated by each dollar of sales. While it is
desirable for this ratio to be high, competitive forces within an industry, economic conditions,
use of debt financing, and operating characteristics such as high fixed cost will cause the net
profit margin to vary between and within industries.
Return on total Assets
Return on Assets= Net Income before Minority Share of Earning / Total Assets
Return on Assets
2003 2004 2005 2006 2007
Net Income -516,075 314,150 510,490 1,203,739 646,323
Total Assets 6,313,256 5,910,353 6,223,788 6,198,107 6,400,688
Return on Assets (%age) -8.17% 5.32% 8.20% 19.42% 10.10%
Interpretation
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It measures the firms ability to utilize its assets to create profits by comparing profits
With the assets which generate the profits. In the base year the ratio is negative that is the badsign for the company. But later wards it is increasing till the third year and it slope downwards in
the last year. The reason behind that increase is the effective use of assets. The cement company
is utilizing its assets in a better way to get more earnings.
Return on Total Equity
Return on Total Equity =Net income/
Total Equity
Return on Total Equity
2003 2004 2005 2006 2007
Net Income -516,075 314,150 510,490 1,203,739 646,323
Total Equity 1,624,986 1,939,134 2,449,624 3,282,616 3,735,206
Return on Total Equity -31.76% 16.20% 20.84% 36.67% 17.30%
InterpretationIn the above the Return on Total equity in 2003 is -31.76% but in 2004 to 2006 there is an
increasing trend but after that in 2007 it again decreases to 17.30% from 36.67%. the reason
behind this that companys long term debt decreases over five years. Also there is anincreasing trend in Total equity in five years. Net income also increases from 2003-06.